SOMERSET GROUP INC, DEF 14A, 1997-04-14

SOMERSET GROUP INC
DEF 14A, 1997-04-14
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934

Filed by Registrant [ X ]
Filed by Party other than the Registration [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

THE SOMERSET GROUP, INC.
(Name of Registrant as Specified in its Charter)

THE SOMERSET GROUP, INC.
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[ X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) & 0-11.

1) Title of each class of securities to which transaction applies:
..................................................................
2) Aggregate number of securities to which transaction applies:
..................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
..................................................................
4) Proposed maximum aggregate value of transaction:
..................................................................
5) Total fee paid:
..................................................................

[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
..................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................
3) Filing Party:
...............................................................
4) Date Filed:
..................................................................

March 21, 1997

Dear Shareholder:

The Directors and Officers of The Somerset Group, Inc. (the "Corporation") join
me in extending to you a cordial invitation to attend the annual meeting of our
shareholders. This meeting will be held on Wednesday, April 23, 1997, at 9:00
a.m., EST, in the First Indiana Plaza Conference Center, Ohio and Pennsylvania
Streets, Seventh Floor, Indianapolis, Indiana.

We hope you plan to attend the annual meeting where we will review our past
performance and our plans for the future.

The formal notice of the annual meeting and the proxy statement appear on the
following pages. After reading the proxy statement, please mark, sign, and
return the enclosed proxy card to assure that your votes on the business
matters of the meeting will be recorded. Returning the proxy does not affect
your right to vote in person on all matters brought before the meeting.

Sincerely,

Robert H. McKinney
Chairman

FIRST INDIANA PLAZA
135 NORTH PENNSYLVANIA STREET
SUITE 2800
INDIANAPOLIS, IN 46204
(317) 269-1285

THE SOMERSET GROUP, INC.
135 North Pennsylvania Street
Suite 2800
Indianapolis, Indiana 46204

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders of The Somerset Group, Inc.:

NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of The
Somerset Group, Inc. (the "Corporation") will be held on Wednesday, April 23,
1997, at 9:00 a.m., EST, in the First Indiana Plaza Conference Center, Ohio and
Pennsylvania Streets, Seventh Floor, Indianapolis, Indiana, to consider and
take action on the following matters:

1. Election of Directors. The election of directors as set forth in the Proxy
Statement.

2. Other Business. The transaction of such other business as properly may
come before the meeting and any adjournments thereof.

Only shareholders of record at the close of business on February 26, 1997 are
entitled to vote at the meeting or any adjournment thereof.

By order of the Board of Directors

Sharon J. Sanford
Secretary

March 21, 1997

IMPORTANT

PLEASE MARK, SIGN AND RETURN THE ENCLOSED PROXY. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.

THE SOMERSET GROUP, INC.

135 North Pennsylvania Street
Suite 2800
Indianapolis, Indiana 46204
(317) 269-1285

PROXY STATEMENT

The accompanying proxy is solicited by the Board of Directors of The
Somerset Group, Inc. (the "Corporation") for use at the annual meeting of share-
holders to be held on Wednesday, April 23, 1997, at 9:00 a.m., EST, in the First
Indiana Plaza Conference Center, Ohio and Pennsylvania Streets, Seventh Floor,
Indianapolis, Indiana, and any adjournments thereof (the "Annual Meeting"). The
Notice of Annual Meeting of Shareholders, this Proxy Statement and accompanying
form of proxy are first being sent or given to shareholders on or about March
21, 1997.

The election of directors will be determined by a plurality of the shares
present in person or represented by proxy. The holder of each outstanding share
of Common Stock is entitled to vote for as many persons as there are directors
to be elected. Any other matters to come before the Annual Meeting will be
determined by a majority of the shares present in person or represented by proxy
. An abstention, non-vote, or broker non-vote will not change the number of
votes cast for or against the election of any director or for or against any
other matter to come before the Annual Meeting.

A proxy in the enclosed form, if properly executed, duly returned to the
Corporation and not revoked, will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies will
be voted FOR the four persons nominated for election as directors referred to
herein. If any other matters are properly brought before the Annual Meeting, the
persons named in the enclosed form of proxy will vote the shares represented
thereby on such matters in accordance with their best judgment. Other than the
election of directors, the Board of Directors has no knowledge of any matters to
be presented for action by the shareholders at the Annual Meeting.

Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend and to vote in person at the Annual Meeting.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke the proxy. Any shareholder giving a proxy may revoke it at any
time before it is voted by giving notice thereof to the Corporation in writing
or at the Annual Meeting or by providing a proxy bearing a later date.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

Only shareholders of record as of the close of business on February 26,
1997 will be entitled to vote at the Annual Meeting. On March 14, 1997, the
Corporation distributed one additional share of stock for every four shares
owned by shareholders of record on February 26, 1997 (the "Stock Split"). As a
result, shares issued in the Stock Split may be voted by the recipients thereof
at the Annual Meeting. All share information pertaining to the Corporation's
shares of stock has been restated to reflect the Stock Split. The Corporation
has only one class of stock, its common stock, of which 2,573,202 shares were
outstanding as of the close of business on February 26, 1997.

The following table shows, as of February 26, 1997, the number and
percentage of shares of common stock owned beneficially by (i) each person who
owned beneficially more than 5% of the issued and outstanding common stock of
the Corporation and (ii) executive officers and directors as a group:

Name and Address Percent
of Beneficial Amount and Nature of of
Owner Beneficial Ownership Class

Robert H. McKinney
135 N. Pennsylvania St., Suite 2800
Indianapolis, Indiana 46204 1,216,541 (1) 45.6%

Marni McKinney
135 N. Pennsylvania St., Suite 2800
Indianapolis, Indiana 46204 1,216,541 (1) 45.6%

Marvin C. Schwartz
c/o Neuberger & Berman
605 Third Avenue
New York, New York 10158 186,718 (2) 7.3%

William L. Elder
Southern Indiana Railway, Inc.
320 N. Meridian Street, Suite 911
Indianapolis, Indiana 46204 130,508 (3) 5.1%

All executive officers and directors
as a group (8 persons) 1,442,312 (4) 53.0%

Unless otherwise noted, the above named persons have sole voting power and
sole investment power.

(1) These shares are beneficially owned by a group consisting of Robert H.
McKinney and Marni McKinney. Robert H. McKinney is deemed to be a
beneficial owner as specified in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of 556,233
shares held by a limited partnership established by Mr. McKinney for
the benefit of his children, including Marni McKinney and Kevin K.
McKinney. The total held by the group also includes 22,861 shares
owned directly by Mr. McKinney, 28,362 shares owned of record by his
wife, and 60,469 shares subject to options granted under the
Corporation's Stock Incentive Plans. The total held by the group also
includes 477,038 shares held in two irrevocable trusts of which Marni
McKinney is the Trustee and which were established by Mr. McKinney for
the benefit of his children. The above number also includes 36,422
shares which Ms. McKinney owns individually and 35,156 shares subject
to options granted under the Corporation's Stock Incentive Plans.

(2) This information is taken from the Schedule 13D Report dated February
26, 1992, and filed by the shareholder with the Securities and Exchange
Commission concerning shares held by it. It does not reflect any
changes in those shareholdings which may have occurred since the date
of such filing.

(3) Includes 128,946 shares which Mr. Elder owns individually and 1,562
shares subject to options granted under the 1991 Director Stock Option
Plan.

(4) Includes 123,688 shares subject to options granted under the
Corporation's Stock Incentive Plans and 25,000 shares subject to
options granted under the 1991 Director Stock Option Plan.

PROPOSAL NO. 1: ELECTION OF DIRECTORS

Four directors are to be elected. Douglas W. Huemme, Malcolm Archibald Leslie
and Kevin K. McKinney have been nominated for a term of three years and until
their successors are elected and qualified. Gary L. Light has been nominated
for a term of one year and until his successor is elected and qualified. Mr.
Huemme and Mr. McKinney are members of the present Board of Directors. The
other directors listed in the table below will continue in office until
expiration of their terms. If, at the time of the 1997 Annual Meeting any of
such nominees should be unable or decline to serve, the discretionary authority
provided in the proxy may be exercised to vote for a substitute or substitutes.
The Board of Directors has no reason to believe that any substitute nominee or
nominees will be required.

The Board of Directors unanimously recommends the election of the following
nominees:

Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since February 26, 1997 Class

The NOMINEES for election are:

For terms which expire
in 2000:

Douglas W. Huemme, Age 55 1990 9,375(1) (2)
Chairman, President and Chief
Executive Officer, Lilly Industries,
Inc., industrial coatings; Director
of First Indiana Corporation;
formerly Vice President and Group
Executive - Chemicals Group,
Whittaker Corporation.

Malcolm Archibald Leslie, Age 47 N/A -- --
Private investor; formerly General
Partner of CID Equity Partners, private
venture capital firm; formerly Director -
International Treasury, Cummins Engine
Company, Inc., manufacturer of
diesel engines.

Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since February 26, 1997 Class

Kevin K. McKinney, Age 39 1990 23,288 (3) (2)
Vice President of the Corporation;
Publisher of NUVO Newsweekly
and Chairman and President of
NUVO, Inc.; formerly President,
Mid America Media; formerly
Chairman, Indianapolis Extra, Ltd.

For a term which expires
in 1998:

Gary L. Light, Age 59 N/A -- --
President, E.V.A. Investors, Inc.;
formerly Vice Chairman and Chief
Financial Officer of Sofmor Danck,
Inc.; Trustee of PIMCO Mutual
Fund Group.

The Other Directors are:

Directors whose terms expire
in 1998:

Robert H. McKinney, Age 71 1985 1,216,541(4) 45.6%
Chairman of the Corporation;
Chairman and Chief Executive
Officer of First Indiana Corporation,
a savings and loan holding company;
Chairman of First Indiana Bank;
formerly, Chief Executive Officer of
the Corporation (1984-1995); retired
Partner of Bose McKinney & Evans,
attorneys; Director of First Indiana
Corporation; Chairman, Federal Home
Loan Bank Board (1977-1979).

Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since February 26, 1997 Class
Michael L. Smith, Age 48 1988 9,530 (1) (2)
President and Chief Operating
Officer of American Health Network;
formerly President of Somerset Financial
Services, a division of the Corporation;
formerly Chairman, Director, President
and Chief Executive Officer, Mayflower
Group, Inc., diversified transportation
services; Director of First Indiana
Corporation and Acordia, Inc.

Directors whose terms expire in 1999:

H. J. Baker, Age 69 1986 11,327(1) (2)
Chairman Emeritus, BMW
Constructors, Inc., industrial
mechanical contractors; Director
of First Indiana Corporation and
Lilly Industries, Inc.

William L. Elder, Age 74 1986 130,508(5) 5.1%
Formerly Chairman of Southern
Indiana Commerce Corporation;
formerly President of Southern
Indiana Railway, Inc.; formerly
Director of Merchants National
Corporation, a bank holding company,
and Merchants National Bank and
Trust Company.

Marni McKinney, Age 40 1987 1,216,541(6) 45.6%
President and Chief Executive
Officer of the Corporation; Vice
Chairman and Director of First Indiana
Corporation and First Indiana Bank;
formerly President and Chief Operating
Officer of the Corporation (1993-1995)
and Executive Vice President of the
Corporation (1987-1992); Vice
Chairman of, and formerly Vice
President and Director of Strategic
Planning of, First Indiana Bank; formerly
Vice President of First Indiana Corporation.

(1) Includes 7,812 shares subject to options granted under the 1991 Director
Stock Option Plan.

(2) The number of shares represents less than 1% of the outstanding shares of
the Corporation.

(3) Includes 15,537 shares owned directly and 7,751 shares subject to options
granted under the Corporation's Stock Incentive Plans. Mr. McKinney is
a son of Robert H. McKinney and a brother of Marni McKinney.

(4) See note (1) to the table under heading "Voting Securities and Principal
Holders Thereof" above.

(5) See note (3) to the table under heading "Voting Securities and Principal
Holders Thereof" above.

(6) See note (1) to the table under heading "Voting Securities and Principal
Holders Thereof" above. Ms. McKinney is a daughter of Robert H. McKinney
and a sister of Kevin K. McKinney.

The Board of Directors met four times during the Corporation's last fiscal
year. All directors attended in excess of 75% of the aggregate of (1) the total
number of meetings of the Board of Directors and (2) the total number of
meetings held by all committees on which he or she served.

Nominees for election as a director of the Corporation are selected by the
Board of Directors.

Certain Committees of the Board of Directors

Among other committees, the Board of Directors has an Audit Committee, a
Compensation and Policy Committee and a Stock Administration Committee.

The functions of the Audit Committee are: (1) to review audits of the
accounting records of the Corporation and its financial statements performed by
independent auditors, (2) to confer with the independent auditors and officers
of the Corporation regarding accounting and financial statements and internal
controls, (3) to recommend to the Board the engagement or discharge of the
independent auditors and (4) to perform such other functions as the Committee
deems necessary or desirable. The members of the Audit Committee are: H. J.
Baker (Chairman) and Michael L. Smith. The Committee met twice during the last
fiscal year of the Corporation.

The functions of the Compensation and Policy Committee are to review and make
recommendations to the Board of Directors with respect to the compensation of
the officers and key employees of the Corporation and its subsidiaries and
review other policy matters. The members of the Compensation and Policy
Committee are: William L. Elder (Chairman), Douglas W. Huemme and Michael L.
Smith. The Committee met once during the last fiscal year of the Corporation.

The functions of the Stock Administration Committee are to administer and
grant stock options, stock appreciation rights and performance shares under the
Corporation's 1986 and 1991 Stock Incentive Plans. Members of the Stock
Administration Committee are: Michael L. Smith (Chairman) and Douglas W. Huemme
. The Committee met once during the last fiscal year of the Corporation.

Certain Transactions

In May 1996, the Corporation extended from June 1, 1996 to June 1, 1997 the
maturity date of a promissory note payable to the Corporation by NUVO, Inc. The
promissory note resulted from the sale of assets by the Corporation to Nuvo,
Inc. in 1990. Robert H. McKinney, Marni McKinney, and Kevin K. McKinney are
shareholders and directors of NUVO, Inc., and Kevin K. McKinney is the Chairman
and President of NUVO, Inc. The principal amount of the promissory note is
approximately $79,000, and the promissory note bears interest at the rate of
eight and one-quarter percent (8.25%) per annum. The promissory note is secured
by a security interest in substantially all of the assets of NUVO, Inc., and the
note is current as of the date hereof.

On June 17, 1996, the Corporation purchased from First Indiana Bank (the
"Bank") all of the outstanding capital stock of One Investment Corporation ("One
Investment"), a wholly owned subsidiary of the Bank that owned all of the
outstanding capital stock of One Insurance Agency, Inc. ("One Insurance").
Prior to the transaction, the Bank had used One Investment and One Insurance to
provide Bank customers with certain insurance and investment products and
services. As a result of this transaction, and through a multi-year operating
agreement that the Corporation entered into with First Indiana Corporation and
the Bank on the same day, the Corporation is providing non-FDIC-insured invest-
ment and insurance products and services to the Bank's customers, and the Bank
is focusing its efforts on delivering traditional banking services. Robert H.
McKinney and Marni McKinney are officers, directors and shareholders of First
Indiana Corporation and/or the Bank, the Corporation is a substantial
shareholder of First Indiana Corporation, and H.J. Baker, Douglas Huemme and
Michael Smith are directors of First Indiana Corporation and the Bank. The
transaction, including entering into the operating agreement, was approved by a
committee of the Board of Directors of the Corporation that consisted solely of
directors who were not employees, officers, directors, or significant
shareholders of First Indiana Corporation or the Bank. This independent
committee determined that the transaction was in the best interests of the
Corporation, and negotiated the transaction with a joint committee of the
Board of Directors of First Indiana Corporation and the Bank that consisted of
directors of those entities that were not employees, officers, directors or
substantial shareholders of the Corporation. Prior to the consummation of the
transaction, the committee received an opinion from an independent appraiser
that the transaction, which involved a $1.4 million purchase price, was fair to
the shareholders of the Corporation.

COMPENSATION OF DIRECTORS
AND EXECUTIVE COMPENSATION

(a) Summary Compensation Table.

The following table sets forth the compensation awarded to, earned by, or
paid by the Corporation during the last three fiscal years to Ms. McKinney as
President and Chief Executive Officer of the Corporation during that period, and
to the one executive officer whose cash compensation in 1996 exceeded $100,000.
The numbers of stock options set forth below have been adjusted to reflect the
Stock Split.
<TABLE>
<C> <C> <C> <C> <C> <C>
Long Term
Compensation
Annual Compensation Awards
Restricted Securities All
Name and Stock Underlying Other
Principal Salary Bonus Awards Options Comp.
Position Year ($) ($) ($) (#) ($)

Marni McKinney 1996 $80,000 -- 9,375 $2,963(1)
President and Chief1995 $50,000 -- 5,468 $ 441
Executive Officer 1994 $50,000 $122,500(2) 5,468 $ 655

Joseph M. Richter 1996 $97,000 $ 5,000 -- 6,250 $4,374(1)
Executive Vice 1995 $95,300 $ 16,256 -- 3,906 $ 810
President and Chief1994 $95,300 $ 40,000 -- 3,906 $1,464
Financial Officer of
the Corporation
</TABLE>
___________________
(1) Consists of premiums during 1996 for term life insurance policies for
Ms. McKinney and Mr. Richter in the amounts of $163 and $979,
respectively, and the Corporation's contributions to the Corporation's
retirement plan during 1996 for the accounts of Ms. McKinney and Mr.
Richter in the amounts of $2,800 and $3,395, respectively.

(2) Represents the market value on the date of grant of 15,625 shares of
restricted stock granted to Ms. McKinney under the 1991 Stock Incentive
Plan. The restricted stock had a market value of $200,000 on December
31, 1996. The restricted stock will vest on March 31, 1997 if the
Corporation attains certain performance targets and receives dividends
in the same manner and to the same extent as unrestricted shares of
the Corporation's Common Stock.

(b) Options Tables.

The following table sets forth the grants of stock options made during fiscal
year 1996 to Ms. McKinney and Mr. Richter. The number of stock options and
exercise prices set forth below have been adjusted to reflect the Stock Split.

Number
of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price
Name (#) Year 1996 ($/Share) Expiration Date

Marni McKinney 9,375 33.3% $11.20 February 13, 2001
Joseph M. Richter 6,250 22.2% $11.20 February 13, 2001

The following table sets forth on an aggregate basis each exercise of stock
options during fiscal year 1996 by Ms. McKinney and Mr. Richter, and the
December 31, 1996 value of the unexercised options of each such executive
officer. The numbers of shares and stock options set forth below have been
adjusted to reflect the Stock Split.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES

Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired On Value December 31, 1996 December 31, 1996
Name Exercise Realized Exercise Unexercise Exercise Unexercise

Marni McKinney 3,125 $19,250 30,468 -- $139,324 $ --
Joseph M. Richter 3,125 $20,250 11,718 10,156 $ 78,124 $ 26,875

During the Corporation's last fiscal year, directors who are not salaried
officers received a quarterly fee of $1,250 per quarter, a fee of $500 for each
Board meeting attended, and a fee of $300 for each Board committee meeting
attended.

The Corporation's 1991 Director Stock Option Plan provides for the issuance
of non-qualified options to purchase 1,562 shares to each outside director of
the Corporation on August 14, 1991 and thereafter on the date of each annual
meeting of shareholders. No option is exercisable during the period of one year
following the date of grant of such option, and options granted under the plan
must specify an exercise price of not less than 100% of the market price of the
shares at the date of grant.

SHAREHOLDER PROPOSALS

Proposals of Shareholders intended to be presented at the next annual
meeting must be received by the Corporation for inclusion in the proxy statement
and form of proxy relating to that meeting no later than November 20, 1997. Any
such proposals should be sent to the attention of the Secretary of the
Corporation. Shareholder proposals not included in the Corporation's 1998 proxy
solicitation materials must, in order to be considered at the 1998 Annual
Meeting, be submitted in writing to the Secretary of the Corporation at least
sixty days before the date of the 1998 Annual Meeting, or, if the 1998 Annual
Meeting is held prior to March 23, 1998, within ten days after notice of the
Annual Meeting is mailed to shareholders. The Board of Directors of the
Corporation will review any shareholder proposals that are filed as required,
and will determine whether such proposals meet applicable criteria for inclusion
in its 1998 proxy solicitation materials or consideration at the 1998 Annual
Meeting.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
certain of the Corporation's officers, and its directors and persons who own
more than 10% of the Corporation's Common Stock, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Such
officers, directors and greater than 10% shareholders are required by Securities
and Exchange Commission regulations to furnish the Corporation with copies of
all Section 16(a) forms they file.

Based solely on review of the copies of such forms furnished to the Corp-
oration, the Corporation believes that during 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were met.

FINANCIAL STATEMENTS AND OTHER INFORMATION

The Corporation's financial statements for the fiscal year ended December 31
1996, were audited by KPMG Peat Marwick LLP ("Peat Marwick"). The Corporation
has selected Peat Marwick as its independent auditor for the fiscal year ending
December 31, 1997. Representatives of Peat Marwick are expected to attend the
Annual Meeting, with the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.

The Annual Report of the Corporation for the year ended December 31, 1996,
including audited financial statements, has been mailed to the shareholders.
The Annual Report is not to be considered as proxy solicitation material.

OTHER MATTERS

The Board of Directors knows of no other matters to be brought before this
Annual Meeting. However, if other matters should come before the meeting, it is
the intention of each person named in the proxy to vote such proxy in accordance
with his or her judgment on such matters.

EXPENSES OF SOLICITATION

The entire expense of preparing, assembling, printing and mailing the proxy
form and material used in the solicitation of proxies will be paid by the Corp-
oration. The solicitation will not be made by specially engaged employees or
paid solicitors. In addition to the use of the mails, solicitation may be made
by employees of the Corporation by telephone, telegraph, cable or personal
interview.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. Therefore, shareholders
who do not expect to attend in person are urged to execute and return the proxy.

For the Board of Directors

Sharon J. Sanford
Secretary

March 21, 1997

[FRONT]

THE SOMERSET GROUP, INC. This proxy is solicited on behalf of the Board of
Directors of the Corporation
135 North Pennsylvania Street
Indianapolis, Indiana 46204 The undersigned hereby appoints Robert H
McKinney and Marni McKinney, and each of
them, attorneys-in-fact and proxies,
with full power of substitution, to
vote as designated below all shares of
The Somerset Group, Inc. (the
"Corporation") which the undersigned
would be entitled to vote if personally
present at the Annual Meeting of
Shareholders to be held on April 23,
1997, at 9:00 a.m., EST, and at any
adjournment thereof.

1. ELECTION OF DIRECTORS

FOR all nominees listed below
(except as marked to the contrary below)

Nominees for a term of three years:
Douglas W. Huemme, Malcolm Archibald Leslie
and Kevin K. McKinney

WITHHOLD AUTHORITY
to vote for all nominees

Nominee for a term of one year:
Gary L. Light

(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

2. In their discretion, the Proxies are authorized to vote such other business
as may properly come before the meeting.

(Continued and to be signed on other side.)

[BACK]

This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR Proposal 1.

The undersigned acknowledges receipt from The Somerset Group, Inc., prior to the
execution of this proxy, of notice of the meeting, a proxy statement, and an
Annual Report to Shareholders.

Please sign exactly as name appears below. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

Signature _____________________

(Signature if held jointly)_____________________

Dated:__________________, 1997

REVOCABLE PROXY

MESSAGE TO SHAREHOLDERS

During 1996, we made significant progress on our strategies for expanding the
Financial Services Division of The Somerset Group, Inc.

In May 1996, we acquired One Investment Corporation from our affiliate, First
Indiana Bank, and commenced operations as One Investment Corporation and One
Insurance Agency. In accordance with an operating agreement with First Indiana
Bank, these operations offer insurance and non-FDIC-insured investments to the
Bank's customers.

In February, 1997, the Company formed Somerset Wealth Management. This division
will offer investment advisory and financial counseling services to individual
clients. The investment advisory services include asset allocation advice,
investment management, and portfolio monitoring. Financial counseling services
include tax, estate, and retirement planning strategies and other counseling
services tailored to meet specific client needs. We expect that Somerset Wealth
Management will be in operation by April 1.

Earnings from operations during this transitional year were comparable to 1995,
after giving consideration to one-time events. Net income for 1996 amounted to
$2,039,000, or $.78 per share, and included a one-time FDIC special assessment
imposed on First Indiana Bank that reduced our after-tax equity earnings by
$515,000, or $.20 per share. Excluding this one-time expense, net income for
1996 amounted to $2,554,000, or $.98 per share. In 1995, the company recognized
a gain from the sale of the assets of former construction operations that after
- -tax contributed $782,000, or $.30 per share to net income. Excluding this one-
time gain, earnings for 1995 were $2,576,000, or $.99 per share.

The one-time FDIC special assessment was imposed on all banks whose customers'
deposits are insured by its Savings Association Insurance Fund to recapitalize
the fund. The assessment is expected to reduce First Indiana's future deposit
insurance premium rate by 72 percent.

Revenue and earnings from One Investment Corporation and One Insurance Agency
exceeded our expectations during the first eight months of our ownership. We
are confident that earnings will continue to improve as we add products and
enhance customer convenience and satisfaction.

First Indiana Corporation's 1996 earnings were a record, excluding the one-time
FDIC assessment. The Corporation's net interest margin rose to record levels in
1996. For the year ended December 31, 1996, the margin was 4.37%, compared with
4.12% in 1995. The higher margin results from high-yielding business,
construction, and home equity loans funded with low-cost or non-interest-bearing
savings and checking deposits. Net interest income amounted to $61.7 million in
1996, a 6.4% increase over 1995 net interest income of $58.0 million.

First Indiana has positioned itself as a comprehensive provider of real estate
and business services. The Bank will be examining the importance of market
segments in determining the Corporation's long-range strategies. First
Indiana's continued success in the marketplace depends on bringing something
different to the market in an industry with increasingly homogeneous and
commoditized products.

Generally Accepted Accounting Principles (GAAP) require Somerset to record
income tax expense at full corporate rates on a portion of its equity income
from First Indiana. GAAP also requires us to record our investment in First
Indiana at a net carrying value which represents our acquisition cost of First
Indiana shares, plus our equity share of First Indiana's net income. Under
certain circumstances, the tax liability recorded in this manner (approximately
$6.8 million) may not be paid, and the market value of our investment in First
Indiana is approximately $48 million, or $19 million greater than the amounts
reflected in our balance sheet at December 31, 1996.<PAGE>

Our desire to enhance shareholder value has been the driving force behind our
plan of expansion in the financial service industry. We are pleased that a
proven veteran of this industry recently joined Somerset to lead the expansion
effort. Robert S. Kaspar recently accepted appointment as President of the
Financial Services Division. Mr. Kaspar has twelve years of experience in the
industry, most recently serving as President of an Indiana-based comprehensive
provider of trust services, securities brokerage, and financial counseling to
individuals and corporations throughout the Midwest.

As an indication of its confidence in Somerset's growth, the Board of Directors
declared a five-for-four stock split payable on March 14, 1997 to shareholders
of record on February 26, 1997. A semi-annual cash dividend of $.09 per share
will be paid on shares outstanding after the split, resulting in a 12 1/2%
increase in annual cash dividend payments.

We look forward to reporting on our progress in the development of the Financial
Services Division of the Company, and we appreciate your continued support.

Sincerely,

Robert H. McKinney Marni McKinney
Chairman President and Chief Executive
Officer
<PAGE>

FINANCIAL HIGHLIGHTS
At and for the Years Ended December 31,

1996 1995 1994
Revenue and income $4,449,000 $7,434,000 $7,065,000
Income from operations, before
income taxes and minority interest $2,926,000 $5,548,000 $4,132,000
Net Income $2,039,000 $3,358,000 $2,617,000
Net income per share $.78 $1.29 $1.01

Assets:
Investment in First Indiana Corp. $29,746,000 $27,549,000 $24,265,000
All other 8,466,000 11,177,000 15,539,000
Total assets $38,212,000 $38,726,000 $39,804,000
Shareholders' equity $31,236,000 $29,498,000 $26,429,000
Return on revenue and income 45.8% 45.2% 37.0%
Return on average assets 5.3% 8.6% 7.0%
Return on average shareholders' equity 6.7% 12.0% 10.4%
Book value per share $12.22 $11.56 $10.32

All per share amounts have been adjusted for five-for-four stock splits that
were effective February 26, 1997 and February 29, 1996.

SHAREHOLDER INFORMATION

Annual Meeting
The Annual Meeting of Shareholders will be held
Wednesday, April 23, 1997 at 9:00 a.m. EST at
First Indiana Plaza, 7th Floor Conference Center,
135 N. Pennsylvania St., Indianapolis, Indiana

Capital Stock
The Somerset Group, Inc. stock is traded on the
NASDAQ
National Market System under the symbol
"SOMR"
Registrar and Transfer Agent
Harris Trust and Savings Bank
311 West Monroe Street, 11th Floor
Chicago, Illinois 60606
800/573-4048

Independent Auditors
KPMG Peat Marwick LLP
Indianapolis, Indiana

STATEMENT OF MANAGEMENT RESPONSIBILITY

Management of The Somerset Group, Inc. has prepared and is responsible for
the financial statements and for the integrity and consistency of other related
information contained in the Annual Report. In the opinion of management, the
financial statements, which necessarily include amounts based on management's
estimates and judgments, have been prepared in conformity with generally
accepted accounting principles appropriate to the circumstances.

The Corporation maintains a system of internal accounting controls designed
to provide reasonable assurance that assets are safeguarded, that transactions
are executed in accordance with the Corporation's authorizations and policies,
and that transactions are properly recorded so as to permit preparation of
financial statements that fairly present the financial position and results of
operations in conformity with generally accepted accounting principles.
Internal accounting controls are augmented by written policies covering
standards of personal and business conduct and an organizational structure
providing for division of responsibility and authority.

Management believes the system of controls has prevented any occurrences
that could be material to the financial statements.

The Corporation engaged the firm of KPMG Peat Marwick LLP, independent
certified public accountants, to render an opinion on the financial statements.
The accountants have advised management that they were provided with access to
all information and records necessary to render their opinion.

The Board of Directors exercises its responsibility for the financial
statements and related information through the Audit Committee, which is
composed entirely of outside directors. The Audit Committee meets regularly
with management and KPMG Peat Marwick LLP to assess the scope of the annual
audit plan, to review the Annual Report and Form 10-K, including major changes
in accounting policies and reporting practices, and to approve non-audit
services rendered by the independent auditors.

KPMG Peat Marwick LLP also meets with the Audit Committee, without
management present, to afford the Committee the opportunity to express its
opinion on the adequacy of compliance with established corporate policies and
procedures and the quality of financial reporting.

February 19, 1997

Robert H. McKinney Marni McKinney Joseph M. Richter
Chairman President and Chief Financial
Chief Executive Officer Officer

FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 - For the fiscal year ended December 31, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number: 0-14227

THE SOMERSET GROUP, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1647888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

135 N. Pennsylvania Street, #2800, Indianapolis, IN 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317/269-1285
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:

Title of each class Name of each exchange on which registered
Common stock without par value Over-the-Counter: NASDAQ National
Market System

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $39,739,410 as of February 26, 1997.

As of February 26, 1997, there were 2,515,152 outstanding shares of the Capital
Stock of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the year ended December 31, 1996 are
incorporated by reference into Part III.

Portions of the Form 10-K of First Indiana Corporation for the year ended
December 31, 1996 are incorporated by reference into Part I.

-1-
THE SOMERSET GROUP, INC.

INDEX

PART I

Item 1. Business .. . . .. . . . . . . . . . . . . . 3

Item 2. Properties . . . . . . . . . . . . . . . . . 4

Item 3. Legal Proceedings . . . . . . . . . . . . . . 4

Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 4

PART II

Item 5. Market for the Registrant's Common Equity
and Related Security Holder Matters . .. . . . 4

Item 6. Selected Financial Data .. . . . . . . . . . . 4

Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition and Liquidity. . . . . 4

Item 8. Financial Statements and Supplementary Data . . 4

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . 4

PART III

Item 10. Directors and Officers of the Registrant . . . 5

Item 11. Executive Compensation . . . . . . . . . . . . 5

Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 6

Item 13. Certain Relationships and Related Transactions 6

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . 6

Signatures . . . . . . . . . . . . . . . . . 7

-2-

PART I

ITEM 1 - BUSINESS

General Description of Business

The Somerset Group, Inc. ("the Registrant" or "the Company"), is an Indiana
corporation with its principal executive offices located at 135 N. Pennsylvania
Street, Suite 2800, Indianapolis, Indiana 46204.

During 1996, the Registrant conducted business in two business segments within
the financial services industry: sales and brokerage of insurance and investment
products and banking. During 1995, the Registrant conducted business in two
industry segments: construction products and services and banking. The
construction products and services businesses were sold in 1995. The proceeds
from the sales were partially redeployed in 1996 in the financial services
industry, and the Company intends to expand further in this industry. The
banking segment is conducted through ownership of 2,264,973 shares of the common
stock of First Indiana Corporation ("First Indiana"), a holding company which
owns 100% of First Indiana Bank. The 2,264,973 shares represented 21.8% of the
issued and outstanding First Indiana common shares.

Financial Information About Business Segments

Described below are the operations of the Company's segments. Financial
information about the segments is incorporated by reference to Note 10 of the
Company's consolidated financial statements on page C-11 of this report.
Narrative Description of Business

I. Insurance and Investment Products Segment

The Company sells insurance and non-insured investment products through two
divisions: One Insurance Agency and One Investment Corporation. One Insurance
Agency's products consist of tax-deferred, fixed- rate annuities,life insurance,
and property and casualty insurance. One Investment Corporation's products
consist primarily of mutual funds and variable-rate annuities. These products
are marketed to customers of First Indiana Bank and to the general public in the
state of Indiana.

II. Banking Segment

Information on the Registrant's bank affiliate, First Indiana Corporation, is
incorporated into this Report by reference to Item 1 of the 1996 Report on Form
10-K for First Indiana Corporation for the year ended December 31, 1996, filed
separately under Commission file number 0-14354.

III. Construction Products and Services Segment (Operations Sold During 1995)

The Registrant manufactured precast/prestressed concrete products primarily in
the seven-state area of Illinois, Indiana, Kentucky, Michigan, Ohio,
Pennsylvania, and West Virginia. Products were distributed from the
Indianapolis, Indiana; Westfield, Indiana; and Columbus, Ohio manufacturing
sites via commercial carrier, broker drivers or company-operated trucks to the
job site. The customers for these products were real estate developers, general
contractors and businesses which own and occupy their own structures.

-3-

ITEM 2 - PROPERTIES

The Registrant's property consists of office equipment and furniture in leased
office space. The leased office space consists of 1,244 square feet located at
Suite 2800, First Indiana Plaza, Indianapolis, Indiana, and 1,225 square feet
located at 2138 E. 116th Street, Carmel, Indiana.

ITEM 3 - LEGAL PROCEEDINGS

Information relative to this item is incorporated into this Report by reference
to Note 15 of the Notes to Consolidated Financial Statements, on page C-17 of
this report.

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

No matters were submitted to a vote of security holders during the final quarter
of the fiscal period covered by this report.

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS

This information is set forth under the caption "Market for the Registrant's
Common Stock" on page A-1 of this Report.

ITEM 6 - SELECTED FINANCIAL DATA

This information is set forth under the caption "Selected Financial Data" on
page A-1 of this Report.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION AND LIQUIDITY

This information is set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition and Liquidity" on
pages B-1 through B-5 of this Report.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This information is contained in the Consolidated Financial Statements, Notes to
Consolidated Financial Statements and Independent Auditors' Report on pages C-1
through C-17 of this Report. Information on the Registrant's bank affiliate,
First Indiana, is incorporated by reference to Item 8 of the 1996 Report on Form
10-K for First Indiana, filed separately under Commission file number 0-14354.

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

The Registrant had no changes in and no disagreements with its accountants
regarding accounting and financial disclosure.

-4-

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

Information regarding Directors of the Registrant is incorporated into this
Report by reference to the definitive proxy statement of the Registrant for the
Annual Meeting of Shareholders to be held April 23, 1997, under the caption
"Proposal No. 1: Election of Directors", filed separately under Commission file
number 0-14227.

Executive Officers

Name Office Held Relationship Age
Robert H. McKinney Chairman Father of President 71
and Director and Vice President

Marni McKinney President, CEO Daughter of 40
and Director Chairman

Joseph M. Richter Executive V. P., None 54
CFO, and Treasurer

Robert S. Kaspar President of Somerset None 38
Financial Services, a division

The term of office for all officers of the Registrant continues until the first
meeting of the Board of Directors following the Annual Meeting of Shareholders
on April 23, 1997.

A brief account of the business experience of each Executive Officer during the
past five years is as follows:

Robert H. McKinney - Chairman of the Registrant; Chief Executive Officer until
January 1996; Chairman and Chief Executive Officer of First Indiana Corporation;
Chairman of First Indiana Bank; Chief Executive Officer until May 1992; retired
Partner of Bose McKinney & Evans, attorneys; a Director of First Indiana
Corporation; Chairman, Federal Home Loan Bank Board (1977-1979).

Marni McKinney - President, Chief Executive Officer, and a Director of the
Registrant; Vice Chairman and a Director of First Indiana Corporation and First
Indiana Bank; formerly Executive Vice President (1987 - 1992), Chief Operating
Officer of the Registrant (1992-1995); formerly Vice President and Director of
Strategic Planning of First Indiana Bank.

Joseph M. Richter - Executive Vice President, Chief Financial Officer and
Treasurer of the Registrant.

Robert S. Kaspar - President of Somerset Financial Services, a division;
formerly President and Director of Irwin Union Investor Services, a subsidiary
of Irwin Financial Corporation (1990 - 1996).

ITEM 11 - EXECUTIVE COMPENSATION

Information relative to this item is incorporated into this Report by reference
to the definitive proxy statement of the Registrant for the Annual Meeting of
Shareholders to be held April 23, 1997, under the caption "Compensation of
Directors and Executive Compensation".

-5-

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. The financial statements listed in the accompanying
Index to Selected Financial Data, Management's
Discussion and Analysis of Results of Operations and
Financial Condition and Liquidity, Financial Statements
and Financial Statement Schedules are filed as part of
this report.

2. The financial statement schedules listed in the
accompanying Index to Selected Financial Data,
Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity,
Financial Statements and Financial Statement Schedules
are filed as part of this report.

3. Exhibits - The following exhibits are attached to this
Form 10-K.

Exhibit
Number Exhibit
3 Amended Articles of Incorporation and Amended and
Restated By-Laws thereto.

22 Subsidiaries of the Registrant.

23 Definitive Proxy Statement for Annual Meeting of
Shareholders to be held April 23, 1997.

24 Consent of Independent Certified Public Accountants, of
report dated March 17, 1997, for incorporation into Form S-8
registration statement.

99 First Indiana Corporation's Form 10-K for the year ended
December 31, 1996.

All other exhibits are not attached since they are not applicable to
the Registrant:

(b) Reports on Form 8-K.

-6-

SIGNATURES

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

THE SOMERSET GROUP, INC.

By s/ Robert H. McKinney 3/17/97
Robert H. McKinney, Chairman

By s/ Marni McKinney 3/17/97
Marni McKinney, President and
Principal Executive Officer

By s/ Joseph M. Richter 3/17/97
Joseph M. Richter, Executive Vice
President and Principal Financial Officer

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

Signatures Title Date

s/ Robert H. McKinney Director, Chairman 3/17/97
Robert H. McKinney

s/ Marni McKinney Director, President 3/17/97
Marni McKinney and Principal Executive Officer

s/ Kevin K. McKinney Director and Vice President 3/17/97
Kevin K. McKinney

s/ H. J. Baker Director 3/17/97
H. J. Baker

s/ William L. Elder Director 3/17/97
William L. Elder

s/ Douglas W. Huemme Director 3/17/97
Douglas W. Huemme

s/ Michael L. Smith Director 3/17/97
Michael L. Smith

-7-

THE SOMERSET GROUP, INC.

Form 10-K for the Year Ended December 31, 1996
Items 5, 6, 7, 8, 14(a) (1) and (2), and 14(c)

Index to Selected Financial Data,
Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity,
Financial Statements and Financial Statement Schedules

Selected Financial Data, Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity, Financial Statements and
Schedules of the Registrant and its subsidiaries, required to be included in
Items 5, 6, 7, 8, 14(a) (1) and (2), and 14(c) are listed below:
Page
MARKET FOR THE REGISTRANT'S COMMON STOCK A-1
SELECTED FINANCIAL DATA A-1
MANAGEMENT'S DISCUSSION AND ANALYSIS B-1
FINANCIAL STATEMENTS:

- - Independent Auditors' Report C-1

- - Consolidated Statements of Income for the years ended December 31, 1996,
1995, and 1994 C-2

- - Consolidated Balance Sheets as of December 31, 1996 and 1995 C-3
- - Consolidated Statements of Shareholders' Equity for the years ended
December 31,1996, 1995, and 1994 C-4

- - Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995, and 1994 C-5

- - Notes to Consolidated Financial Statements C-6
- - Summarized Consolidated Statements of Subsidiary, Not
Consolidated with Registrant C-18

FINANCIAL STATEMENT SCHEDULES:

Financial statement schedules have been omitted because the required
information is contained in the notes to the financial statements or because
such schedules are not required or are not applicable.

The individual financial statements of the Registrant have been omitted since
the Registrant is primarily an operating company and all subsidiaries included
in the consolidated statements being filed, in the aggregate, do not have
minority equity interest and/or indebtedness to any person other than the
Registrant or its consolidated subsidiaries in amounts which together exceed 25%
of consolidated net assets as shown by the most recent consolidated balance
sheet. All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.

-8-

THE SOMERSET GROUP, INC.
MARKET FOR THE REGISTRANT'S COMMON STOCK

The Company's common stock trades on The NASDAQ National Market System under the
symbol SOMR. The quarterly range of prices for the Company's common stock for
the years ended December 31, 1996 and 1995 is presented below:
1996 1995
Quarter High Low High Low
First - ended March 31, $19.50 $14.88(a) $14.00 $12.75
Second - ended June 30, $16.50 $14.75 $14.50 $13.25
Third - ended September 30, $16.50 $15.00 $17.50 $13.50
Fourth - ended December 31, $17.50 $16.25 $18.25 $16.75

As of February 26, 1997, there were 216 shareholders of record and approximately
801 beneficial owners.

__________________

(a) A five-for-four stock split was effective February 29, 1996.

SELECTED FINANCIAL DATA

(in thousands except per share amounts)
Years Ended December 31,
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Equity income of First Indiana $3,002 $3,938 $2,616 $3,614 $3,080
Commissions, fees, investment income 1,447 554 70 95 93
Gross profit of const. operations (1) --- 1,649 4,303 2,544 2,235
Income from operations before taxes 2,926 5,548 4,132 3,631 2,744
Net income 2,039 3,358 2,617 2,219 44
Net income per share (2) .78 1.29 1.01 .88 .02

As of December 31,

1996 1995 1994 1993 1992
Working capital $5,835 $9,104 $6,852 $4,885 $4,897
Carrying value-in First Indiana 29,746 27,549 24,265 21,873 18,731
Market value-in First Indiana 48,470 38,882 23,782 24,890 19,221
Total assets 38,212 38,726 39,804 34,995 30,649
Long-term debt --- 2,500 5,500 5,500 5,587
Total liabilities 6,976 9,228 13,375 11,091 9,009
Shareholders' equity 31,236 29,498 26,429 23,904 21,640
Cash dividends per share (2) .16 .128 .064 --- ---
Book value per share (2) 12.22 11.56 10.32 9.53 8.63
</TABLE>
___________________

(1) The construction operations were sold in June 1995.

(2) Per share amounts have been adjusted for five-for-four stock splits that
were effective February 26, 1997, and February 29, 1996.

A-1

THE SOMERSET GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

The Somerset Group earned $2,039,000 in 1996, compared to $3,358,000 in 1995 and
$2,617,000 in 1994. Net income, after allocation of selling, general and
administrative expenses and income taxes, during the three years ended December
31, 1996, was provided as follows:

All Amounts are After Income Taxes

1996 1995 1994
Equity in earnings of First Indiana $2,137,000 $2,382,000 $1,583,000
Commissions, fees and net
investment income 425,000 162,000 (225,000)
--------- --------- ---------
2,562,000 2,544,000 1,358,000

Gain on sale of assets --- 782,000 46,000
Operating income - construction products
and services --- 616,000 1,752,000
--------- --------- ---------
2,562,000 3,942,000 3,156,000
General corporate expenses (523,000) (584,000) (539,000)
--------- --------- ---------
$2,039,000 $3,358,000 $2,617,000

Equity in earnings of First Indiana decreased 10% in 1996 compared to 1995
($2,137,000 vs. $2,382,000), and were 35% above 1994 ($2,137,000 vs.
$1,583,000). Net income from commissions, fees and net investment income rose
162% in 1996 compared to 1995 ($425,000 vs. $162,000), and were $650,000 above
the loss of 1994. The Company had no gains from the sale of assets during 1996,
nor any operating income from the construction industry assets that were sold
during 1995. General corporate expenses were 10% below those of 1995 and 3%
lower that the 1994 amount.

Equity in Earnings of First Indiana Corporation

Equity earnings from First Indiana were lower primarily as a result of a special
assessment by the Federal Deposit Insurance Corporation ("FDIC") that was
imposed on all banks, including First Indiana Bank, whose customers' deposits
are insured by the Savings Association Insurance Fund of the FDIC. The effect
of this assessment on the Company's net income from First Indiana was a
reduction of $515,000 ($852,000 before income taxes) or 19%. Had the special
assessment not occurred, the Company's net income from First Indiana would have
been $2,652,000, an 11% increase over the 1995 amount of $2,382,000, and 67%
above the $1,588,000 recorded in 1994.

The one-time assessment is considered by the Bank's management as a very
positive event for future operations. The payment is expected to reduce the
Bank's deposit insurance premium rate by 72%, to $.064 per $100 of deposits from
the current rate of $.23 per $100 of deposits. Excluding the one-time ass-
essment, 1996 earnings were the highest ever recorded by First Indiana.

Income came from three principal businesses serving three distinct
market segments:

1.) Residential mortgage lending focusing on home buyers throughout the
Midwest and Southeast.

2.) Construction and business lending centering on builder lines of
credit and loans to small and medium-sized businesses in the
Midwest and the Southeast.

3.) Home equity lending throughout all of First Indiana's retail markets
and through a nationwide network of loan originators.
B-1

First Indiana's net interest margin rose to record levels in 1996. For the year
ended December 31, 1996, the Bank's margin was a 4.37%, compared with 4.12% in
1995. The higher margin results from high-yielding business, construction, and
home equity loans funded with low-cost or non-interest bearing savings and
checking deposits. Net interest income amounted to $61.7 million in 1996, a
6.4% increase over 1995 net interest income of $58.0 million.

First Indiana's strategies contributed to total loan originations of $985
million in 1996, compared with $1 billion in 1995. Total assets were $1.5
billion in 1996 and 1995, and First Indiana's shareholders' equity increased
over 7% to $139 million from $129 million last year.

First Indiana has implemented strategies for increasing outstanding loans in
product lines typical of commercial banks, including business, construction,
commercial real estate, and home equity lending. These businesses entail
greater risks than First Indiana's traditional first-mortgage lending business.
As a result, First Indiana continued increasing its loan loss allowance
throughout the year. At December 31, 1996, the loan loss allowance was $18.8
million, compared with $16.2 million one year earlier, or 84 percent of non-
performing loans, compared with 68 percent one year earlier. The loan loss
allowance reflects amounts necessary to protect First Indiana against normal
losses from highly profitable but riskier business ventures.

First Indiana continued to develop its retail delivery channels. Checking
accounts were vigorously pursued, with enhanced sales training and new products,
including Frequent Flyer Checking. Frequent Flyer Checking rewards customers
with frequent flyer miles on several airlines every time they use First
Indiana's check card. First Indiana recognizes that consumers want accuracy,
convenience, and streamlined service so that they can think about more important
things than going to the bank. Toward that end, First Indiana established a
home page on the World Wide Web in 1996 and plans to have a full range of inter-
active banking services via personal computer available before the end of 1997.

First Indiana has positioned itself as a comprehensive provider of real estate
and business services. It will be examining the importance of market segments
in determining its long-range strategies. First Indiana's continued success in
the marketplace depends on bringing something different to the market in an
industry with increasingly homogenous and commoditized products.

A special team of First Indiana's managers is examining market and consumer
trends in full detail as the groundwork for First Indiana's strategies for 1997
and beyond. These strategies including further development of acquisition
strategies, continuing a trend that has led to First Indiana's acquisition of
six other banks since 1980, most recently First Federal Savings and Loan of
Rushville and Mooresville Savings Bank in 1992. These two banks, along with the
Evansville's Mid-West Federal Savings Bank, adopted First Indiana's name in
1996. The name change enables First Indiana to advertise its services more
consistently and at lower costs while expanding the range of branded products
and services into those markets.

Commissions, Fees and Investment Income

Commissions, fees and investment income increased during 1996 as the Company
expanded operations in the financial services industry. The most significant
expansion became effective on April 30, 1996, when the Company acquired, for
cash, all of the outstanding common stock of One Investment Corporation from
First Indiana Bank. Operations commenced May 1, 1996, as One Insurance Agency
and One Investment Corporation. The two divisions primarily serve individual
customers of First Indiana Bank with insurance and non-FDIC insured investments
under a marketing contract with the First Indiana Bank, but also markets
products to the general public in the state of Indiana.

B-2

One Insurance Agency is an independent agent, representing several national
underwriting insurance companies that specialize in life and disability
insurance, property and casualty insurance and fixed-rate annuities. One
Investment Corporation, in association with Liberty Financial Corporation,
markets mutual funds, variable-rate annuities and other securities regulated by
the Securities and Exchange Commission.

Commissions and fees from these services amounted to $1,006,000 for the eight
months of operation during 1996, with no such amounts in prior years. Revenue
and earnings from the two entities exceeded management's expectations, and
management is confident that future financial results will be improved, as the
addition of new products and an expanded marketing program will enhance customer
awareness, convenience and satisfaction.

Net investment income consists of interest income, net of interest expense and
realized gains and losses from the sale of short term investments. Gross
revenue from investment activity declined 20%, or $113,000, to $441,000 in
1996, from $554,000 in 1995. The decline primarily results from a reduction of
investable cash that was used to retire $2,500,000 of long-term debt and
$1,415,000 expended for the acquisition of One Investment Corporation.
Investment income for 1996 was 600% greater than that of 1994, because the funds
used for investment purposes were not generated until the 1995 sale of assets of
the construction products and services divisions.

The decline in gross revenue from investments was more than offset by a
reduction in interest expense. Interest expense decreased $148,000 in 1996 to
$25,000, compared to $173,000 in 1995, and was the direct result of the
retirement of $2,500,000 of long-term debt. Compared to 1994, interest expense
during 1996 decreased $243,000, as a result of a 1995 retirement of $3,000,000
of long-term debt and the cancellation of a short-term line of credit. Income
from investments is expected to decline in the future as the Company uses cash
for expansion of operations of the financial services division.

In February 1997, the Company formed Somerset Wealth Management, an activity
that is expected to be operational by April 1, 1997. The Company will be
offering investment advisory and financial counseling services to individual
clients on a fee only basis. The investment advisory services include asset
allocation advice, investment management, and portfolio monitoring services.
Financial counseling services include tax, estate, and retirement planning
strategies and other counseling services tailored to meet specific client needs.
Management expects the commencement of this activity to have a modest negative
impact on earnings during a 18-month start-up period. However, management also
expects the operation will grow and provide significant improvement of revenue
and earnings over the longer term.

Gain on Sale of Assets - Operating Income - Construction Products and Services

When comparing the Company's net income for 1996 to that of 1995 and 1994, the
gain on sale of assets and the income generated from the former construction
products and services division in 1995 and 1994 should be considered, since they
are non-recurring. The sale of assets commenced in 1994 and was completed in
1995 and produced net income of $782,000 in 1995, and $46,000 in 1994 with no
comparable amounts in 1996. Net income generated from operations in the
construction industry was $616,000 in 1995 and $1,752,000 in 1994.

The assets were sold as part of a long-term strategy to redirect all activities
into financial services. Much of the cash generated from the sale and the
conversion of working capital deployed in the construction industry has been
redeployed to retire $2,500,000 of long-term debt, and to acquire One Investment
Corporation for $1,415,000. However, income produced by these activities in
1996 was less than the prior year's income from construction operations and sale
of the assets. Removing these two amounts from the prior year's net income
results in the following comparison.

B-3

Year Ended December 31
1996 1995 1994
Net income as reported $2,039,000 $3,358,000 $2,617,000
Comparative adjustments:
Gain on sale of assets --- (782,000) (46,000)
Construction operations net income --- (616,000) (1,752,000)
--------- --------- ---------
Net income after adjustments $2,039,000 $1,960,000 $819,000

Net income per share after adjustments $.78 $ .78 $ . 32
Net income per share as reported $.78 $1.29 $1.01

General Corporate Expenses

General corporate expenses were lower in 1996 compared to 1995 and 1994
primarily as a result of reduction of expenses associated with the sale of the
construction products and services divisions.

Impact of Accounting Standards

Pronouncements of the Financial Accounting Standards Board during 1996 and to
the date of this report are not applicable to the Company's consolidated
financial statements.

FINANCIAL CONDITION AND LIQUIDITY

Management considers the financial condition and liquidity of the Company to be
excellent at December 31, 1996. The Company was also in a very sound position
at the end of 1995. Because of the 1995 sale of all construction industry
operating assets and the conversion of the related net current assets to cash,
and after giving effect to funding new operations in 1996, the Company's balance
sheet contains a large percentage of liquid assets. These liquid assets are
being invested temporarily and are intended for use in additional acquisitions
and the commencement of new businesses in the financial services industry.

At December 31, 1996, the Company had a very high ratio of current assets to
current liabilities of 40.2 to one, compared to 12.4 to one at December 31,
1995. In addition, 97% of the current assets consisted of cash, cash equiv-
alents and short-term investments. Net working capital was $5,835,000 at
December 31, 1996, compared to $9,104,000 at the end of 1995. The decrease is
attributable to cash having been used to retire long-term debt and the acqui-
sition of non-current operating assets.

The Company had no long-term debt at December 31, 1996, compared to $2,500,000
at December 31, 1995. The long-term debt-to-equity ratio at December 31, 1995
was .08 to one.

Shareholders' equity increased to $31,236,000 at December 31, 1996 from
$29,498,000 at the end of 1995. Adjusted for the February 26, 1997 five-for-
four stock split, the per share amounts were $12.22 compared to $11.56; an
increase of 5.7%.

The Company's investment in First Indiana is stated at original cost, plus the
Company's share of undistributed earnings, as required by Generally Accepted
Accounting Practices. Such treatment does not give effect to the market value
of this investment within the consolidated financial statements. At December
31, 1996, the market value of the Company's investment in First Indiana, as
determined from the closing price on the NASDAQ National Market System, was
$18,724,000 greater than the carrying value in the consolidated financial
statements. At December 31, 1995, such market value was $11,333,000 greater
than the carrying value.
B-4

Operating activities during 1996 provided $1,401,000 of cash, compared to
$5,258,000 provided in 1995. The primary causes of this difference were the
decrease in net income in 1996 compared to 1995, and a modest decrease in
working capital requirements during 1996. The 1995 decrease in working capital
was a result of the discontinuance of the construction industry operations,
which required significant amounts of working capital.

The Company used cash of $1,415,000 to acquire all the outstanding common stock
of One Investment Corporation. It also used $2,500,000 of cash to retire its
long-term bank debt before it was due. The retirement was made after the yield
on temporary investments fell below the interest rate on the long-term debt.

The Company paid $409,000 in cash dividends to its shareholders in 1996; $.20
per share annually. On February 19, 1997, the Board of Directors declared a
five-for-four stock split to be effective February 26, 1997 (a 25% increase
in the shares outstanding). In addition, a regular semi-annual dividend of $.09
per share was declared on the post stock-split shares. On an annual basis, this
results in a 12 1/2% increase in projected cash dividends for 1997.

In February 1997, the Company formed Somerset Wealth Management, which is a
start-up operation offering investment advisory and financial counseling
services. The Company has committed cash of $500,000 to fund this new business.

The Company is also seeking additional acquisitions in selected financial
service industries. The Somerset Group, Inc. is a registered savings bank
holding company and subject to regulations of permitted activities defined in
the National Housing Act and administered by the Office of Thrift Supervision.

B-5

THE SOMERSET GROUP, INC. CONSOLID

Year Ended December 31
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Revenue and income:
Equity in earnings of First Indiana Corporation:
Earnings before FDIC assessment 3,854,000 3,938,000 2,616,000
FDIC special assessment (852,000) --- --
--------- --------- ---------
3,002,000 3,938,000 2,616,000
Commissions and fees 1,006,000 --- ---
Investment income 441,000 554,000 70,000
--------- --------- ---------
4,449,000 4,492,000 2,686,000
Gross profit from construction --- 1,649,000 4,303,000
Gain on sale of assets --- 1,293,000 76,000
--------- --------- ---------
Total revenue and income 4,449,000 7,434,000 7,065,000

Expenses:
Selling expenses 460,000 210,000 568,000
General and administrative expenses 1,021,000 1,390,000 1,927,000
Interest expense 42,000 286,000 438,000
--------- --------- ---------
Total expenses 1,523,000 1,886,000 2,933,000

Income before taxes and minority Int. 2,926,000 5,548,000 4,132,000
Income tax expense 887,000 2,190,000 1,608,000
--------- --------- ---------
2,039,000 3,358,000 2,524,000
Minority interest in loss of sub --- --- 93,000
--------- --------- ---------
Net income 2,039,000 3,358,000 2,617,000
========== ========== ==========
Income per share $0.78 $1.29 $1.01

Average shares outstanding 2,618,693 2,605,726 2,597,273

</TABLE>

See accompanying Notes to Consolidated Financial Statements.

C-2

THE SOMERSET GROUP, INC. CONSOLIDATED BALANCE SHEETS
As of December 31,
<TABLE>
<S> <C> <C> <C>

ASSETS 1996 1995
Current assets
Cash and cash equivalents $1,060,000 $1,699,000
Short term investments 4,724,000 7,194,000
Trade accounts, notes and other receivables
less allowance for doubtful accounts 187,000 1,005,000
Prepaid expenses 13,000 3,000
---------- ----------
Total current assets 5,984,000 9,901,000
Investments
First Indiana Corporation (market values of
$48,470,000 and $38,882,000) 29,746,000 $27,549,000

Office furniture and equipment 226,000 241,000
Less accumulated depreciation 86,000 196,000
---------- ----------
140,000 45,000
Other assets
Notes receivable 740,000 771,000
Goodwill, net of accumulated amortization 1,142,000
Other 460,000 460,000
---------- ----------
2,342,000 1,231,000
Total Assets $38,212,000 $38,726,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $37,000 $221,000
Accrued compensation 64,000 36,000
Taxes, other than income taxes 9,000 15,000
Income taxes 16,000 191,000
Other accrued expenses 23,000 334,000
---------- ----------
Total current liabilities 149,000 797,000

Long-term notes payable - banks --- 2,500,000
Deferred income taxes 6,827,000 5,931,000
Shareholders' equity
Common stock without par value, authorized
4,000,000 shares, issued 2,858,317 shares 1,829,000 1,829,000
Capital in excess of stated value 5,181,000 4,986,000
Unrealized gains (losses) on short-term
investments, net of deferred income taxes --- 72,000
Retained earnings 25,962,000 24,230,000
---------- ----------
32,972,000 31,117,000
Less 303,165 and 306,766, treasury shares,
at cost 1,736,000 1,619,000
Total shareholders' equity 31,236,000 29,498,000
---------- ----------
Total Liabilities and Shareholders' Equity $38,212,000 $38,726,000
========== ==========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
C-3

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
January 1, 1994 to December 31, 1996
<TABLE>
<S> <C> <S> <C> <C> <C> <C>
Capital Unrealized
in Excess Gains
Common of Stated (Losses) Retained Treasury
Stock Value Investme Earnings Shares Total
Balance January 1, 1994 $1,829,000 $4,887,000 $ $18,751,000 ($1,563,000)$23,904,000
Net Income --- --- --- 2,617,000 --- 2,617,000
Shares of common stock issued in
connection with restricted stock grants,
401(k) plan & exercise of options --- 92,000 --- (176,000) 311,000 227,000
Purchase of treasury shares --- --- --- --- (126,000) (126,000)
Cash dividends paid --- --- --- (164,000) --- (164,000)
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- (29,000) --- (29,000)
Balance, December 31, 1994 1,829,000 4,979,000 --- 20,999,000 (1,378,000) 26,429,000

Net Income --- --- --- 3,358,000 --- 3,358,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- 7,000 84,000 176,000 267,000
Purchase of Treasury shares --- --- --- --- (417,000) (417,000)
Cash dividends paid --- --- --- (327,000) --- (327,000)
Unrealized gains on short-term
investments, net of deferred
income taxes --- --- 72,000 --- --- 72,000
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- 116,000 --- 116,000
Balance, December 31, 1995 1,829,000 4,986,000 72,000 24,230,000 (1,619,000) 29,498,000

Net income --- --- --- 2,039,000 --- 2,039,000
Shares of common stock issued in
connection with restricted grants,
& exercise options --- 195,000 --- 64,000 120,000 379,000
Purchase of Treasury shares --- --- --- --- (237,000) (237,000)
Cash dividends paid --- --- --- (409,000) --- (409,000)
Unrealized gains on short-term
investments, net of deferred
income taxes --- --- (72,000) --- --- (72,000)
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- 38,000 --- 38,000
Balance, December 31, 1996 $1,829,000 $5,181,000 $25,962,000 ($1,736,000)$31,236,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements
C-4

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
Year Ended December 31,
Cash flows from operating activities: 1996 1995 1994
Net income $2,039,000 $3,358,000 $2,617,000
Add (deduct) items not affecting cash
Depreciation and amortization 67,000 252,000 685,000
Deferred income taxes 896,000 1,404,000 1,265,000
Gain on sale of assets --- (1,293,000) (76,000)
Equity in earnings of First Indiana Corp. (3,002,000) (3,938,000) (2,616,000)
Dividends received, First Indiana Cor. 1,015,000 846,000 782,000
Other, net 15,000 (28,000) (70,000)
Changes in operating assets and liabilities:
Trade accounts, notes, and receivables 1,029,000 5,065,000 (3,955,000)
Contracts in progress, and inventories --- 2,159,000 (953,000)
Prepaid expenses (10,000) 106,000 (18,000)
Accounts payable and accrued expenses (473,000) (2,427,000) 2,184,000
Accrued and refundable income taxes (175,000) (246,000) ---
--------- --------- ---------
Net cash provided(used) operating activities 1,401,000 5,258,000 (155,000)

Cash flows from investing activities:
Proceeds from sale of assets --- 5,222,000 1,437,000
Increase in investment First Indiana Corp. --- (595,000)
Purchase of property, plant and equipment (89,000) (44,000) (1,250,000)
Payment for purchase of One Investment Corp. (1,415,000) --- ---
Decrease (increase) in notes receivable 31,000 (190,000) (352,000)
Decrease(increase)in short-term investments 2,470,000 (7,076,000) ---
--------- --------- ---------
Net cash used by investing activities 997,000 (2,088,000) (760,000)

Cash flows from financing activities:
Principal payments on long-term borrowings (2,500,000) (3,000,000) ---
Proceeds from minority investment in sub. --- 525,000
Proceeds from reissue of treasury shares 109,000 267,000 227,000
Purchase of treasury shares (237,000) (417,000) (126,000)
Cash dividends paid (409,000) (327,000) (164,000)
--------- --------- ---------
Net cash provided(used) by financing activity (3,037,000) (3,477,000) 462,000

Decrease in cash and cash equivalents (639,000) (307,000) (453,000)

Cash and equivalents at beginning of period 1,699,000 2,006,000 2,459,000
--------- --------- ---------
Cash and cash equivalents at end of period $1,060,000 $1,699,000 $2,006,000
========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements
C-5

THE SOMERSET GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Summary of Significant Accounting Policies

The Somerset Group, Inc. (The "Company") is a registered savings bank holding
company. Its major asset is a 21.8% ownership interest in First Indiana
Corporation ("First Indiana"), which owns 100% of First Indiana Bank (the
"Bank"). The Company also operated in the construction industry during the
years 1995 and 1994 shown in the accompanying financial statements. During
these two years the Company sold substantially all assets of its construction
industry operations for a combination of cash and notes receivable. The Company
formed a new financial services division and in 1996 commenced expansion into
the financial service industry.

(a) Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its 100%-owned subsidiaries for all
periods and a 51%-owned subsidiary through its sale on October 31, 1994.

(b) Commissions and Fees: Commissions and fees represent revenue of the
financial services division and are recognized on an accrual basis.

(c) Cash and Cash Equivalents: For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, cash in banks, and money market
funds immediately available.

(d) Short-Term Investments: The investments are valued at market price on the
statement date. They are available-for-sale and proceeds are available on
three days notice. Unrealized holding gains and losses are excluded from
earnings and are reported net of deferred income taxes as a separate
component of shareholders' equity until realized.

(e) Investment in First Indiana Corporation: First Indiana Corporation is a
bank holding company whose primary subsidiary is a savings bank which
operates in Indiana, North Carolina, and Florida through its mortgage
banking division. The Company's investment in First Indiana Corporation
is stated at cost, adjusted for the Company's share of undistributed
earnings, and includes adjustments under the purchase method of
accounting. Capital changes of First Indiana Corporation are reflected as
a separate component of consolidated retained earnings.

(f) Construction Contracts: The Company used the percentage-of-completion
method for reporting profits from construction contracts for financial
statement purposes during the periods it conducted such business. The
units-of-production method was utilized in the computation.

(g) Office Furniture and Equipment: Office furniture and equipment are stated
at historical cost for financial reporting purposes. Depreciation is
determined using the straight-line method based upon the estimated useful
lives of the individual assets. Both straight-line and accelerated
methods are used for income tax purposes.

(h) Employee Benefit Plans: The Company maintained a non-contributory,
trusteed, defined-benefit Pension Plan and an Employee Savings and
Investment Plan which was qualified for tax deferred employee
contributions under section 401(k) of the Internal Revenue Code. The
Employee Savings and Investment Plan was terminated on June 30, 1995, and
the Pension Plan was terminated on November 30, 1995.

The Company adopted a Salary Reduction Simplified Employee Pension Plan (SAR-
SEP) in 1996, with the Company matching a portion of the employee's
contribution.

C-6

<PAGE>

(i) Income Taxes: The Company uses the asset and liability method to account
for income taxes. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their tax basis. The principal temporary difference between the
financial statement carrying amounts and the tax basis that result in
deferred taxes is the investment in First Indiana, accounted for under the
equity method of accounting. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the effective date.

(j) Income Per Share: Income per share is based on the average number of
common shares and common share equivalents (stock options) outstanding
during the year. The effect of outstanding stock options on income per
share on a fully diluted basis is not material. All share and per share
amounts have been adjusted for a five-for-four stock split that was
effective February 26, 1997 and February 29, 1996.

(k) Treasury Shares: Treasury shares issued to fund employee benefit plans are
valued at average cost of all treasury shares at the date of issuance.

Note 2. Sale of Assets

The Company sold all assets of its construction products and services operations
during 1995 and 1994 and ceased doing business in the construction industry.
The results of these operations are included in the consolidated financial
statements through the dates of sale. The total sale price of the assets was
$5,522,000 and $1,437,000 for 1995 and 1994, respectively. After consideration
of expenses relating to the sales, the Company recorded gains on sale before
income taxes of $1,293,000 and $76,000, respectively.

Sales, costs of sales and gross profit from construction products and services
for the periods contained in the consolidated statements of income were as
follows:
1995 1994
Sales $11,178,000 $23,467,000
Cost of Sales 9,529,000 19,164,000
--------- ----------
Gross Profit $ 1,649,000 $ 4,303,000

Note 3. Short-Term Investments

Short-term investments are valued at market price and are available-for-sale.
The Company is actively seeking new businesses in the financial services
industry and expects to utilize these funds for that purpose.
The investments at December 31, 1996, consisted of bond mutual funds as follows:

Unrealized Market
December 31, 1996 Cost Gains Value
MFS Limited Maturity Bond Fund $2,593,000 ($34,000) $2,559,000
Fidelity Advisor Municipal Bond Fund 2,131,000 34,000 2,165,000
--------- ------ ---------
$4,724,000 $ 0 $4,724,000
========= ====== =========
December 31, 1995
MFS Limited Maturity Bond Fund $3,022,000 $13,000 $3,035,000
Armada Fixed Income Fund 4,053,000 106,000 4,159,000
--------- ------- ---------
$7,075,000 $119,000 $7,194,000
========= ======= =========
C-7

Note 4. Trade Accounts, Notes and Other Receivables

Trade accounts, notes and other receivables are net of allowances for doubtful
accounts of $100,000 and $105,000 at December 31, 1996 and 1995. Activity
concerning the allowances for doubtful accounts for the three years ended
December 31, 1996 was as follows:
1996 1995 1994
Balance at beginning of period $105,000 $8,000 $25,000
Additions charged to costs and expenses ----- 105,000 -----
Uncollectible accounts written off,
net of recoveries (5,000) (8,000) (17,000)
------ ------- ------
Balance at end of period $100,000 $105,000 $8,000
======= ======= ======

Note 5. Investment in First Indiana Corporation

The Company's percentage ownership in First Indiana was as follows (Shares have
been adjusted for First Indiana's five-for-four stock split effective March 3,
1997 and a six-for-five stock split effective February 29, 1996):

First Indiana
Shares Shares Percentage
As of: Owned Outstanding Ownership
December 31, 1996 2,264,973 10,379,267 21.8%
December 31, 1995 2,264,973 10,340,403 21.9%
December 31, 1994 2,264,973 10,812,377 20.9%

The Company's equity in earnings of First Indiana was as follows:

Year Ended December 31,
1996 1995 1994
Equity in earnings of First Indiana based
on percentage of ownership $2,886,000 $3,624,000 $2,169,000

Equity in First Indiana's gain on sale of
subsidiary sold to the Company,
contained in equity in earnings (147,000) ---- ----

Purchase price adjustments:
The Company's equity ownership
of First Indiana's net assets exceeds
actual cost of its shares. Under
the purchase accounting method,
these purchase price adjustments
are being amortized to income using
both the declining balance and straight
line methods and amortization periods
of 3 to 10 years 263,000 314,000 447,000
--------- --------- ---------
Total equity in earnings $3,002,000 $3,938,000 $2,616,000
========= ========= =========

At December 31, 1996, the unamortized balance of the purchase price adjustments
was $504,000. C-8

The $852,000 FDIC special assessment shown in the Consolidated Income Statement
for the year ended December 31, 1996 represents the Company's equity in the net
earnings effect of the total assessment paid by First Indiana. The one-time
charge was the result of a special assessment by the Federal Deposit Insurance
Corporation imposed on all banks, including First Indiana Bank, whose customers'
deposits are insured by its Savings Association Insurance Fund ("SAIF"), and is
intended to recapitalize the Fund. The one-time charge is expected to reduce
First Indiana's future insurance premiums rate by 72%.

The changes to retained earnings for equity in other capital changes of First
Indiana primarily represents dilution of the Company's percentage share of First
Indiana's net worth that resulted from shares of common stock issued, treasury
shares acquired, and unrealized investment gains and losses of First Indiana.
Equity in undistributed earnings and capital changes of First Indiana of
$16,537,000 and $14,603,000 are included in consolidated retained earnings at
December 31, 1996 and 1995.

First Indiana is not subject to any regulatory restrictions on the payment of
dividends to its stockholders. However, the Office of Thrift Supervision has
promulgated regulations governing dividend payments, stock redemptions, and
other capital distributions, including upstreaming of dividends by a savings
institution to a holding company. Under these regulations, the Bank may make
distributions to First Indiana of up to 100 percent of the Bank's net earnings
over the most recent four-quarter period, less distributions made during such
four-quarter period. The Bank is required to give the Office of Thrift
Supervision 30 days' advance notice before declaring a dividend.

Note 6. Other Assets

Notes receivable consisted of the following:
December 31,
1996 1995
Long-term note receivable in connection with the
sale of discontinued radio broadcasting properties $440,000 $471,000

Long-term note receivable in connection
with the sale of construction assets 300,000 300,000
------- -------
$740,000 $771,000
======= =======

Goodwill is net of accumulated amortization of $46,000. The original amount of
$1,188,000 is being amortized over 15 years. The amount represents the cost of
the assets purchased from First Indiana Bank in excess of their market value.
The purchase price includes consideration for an operating agreement for the
future marketing and sales of non-FDIC-insured insurance and investment products
to customers of First Indiana Bank.

Other consists of an investment in split-dollar life insurance contracts for a
key officer of the Company, secured by cash value and a contractual guarantee of
yield.

Note 7. Long-Term Debt

The long-term debt of the Company was retired early on March 28, 1996. At
December 31, 1995, the debt consisted of a $2,500,000 note payable to a bank at
6.85%, with a final due date of January 2, 1997.

C-9

Note 8. Financial Instruments

The estimated fair value of the Company's financial instruments at December 31,
1996 approximate their carrying value as reflected in the Consolidated Balance
Sheets. The Company's financial instruments include cash and cash equivalents,
short-term investments, receivables, other assets, and trade accounts payable
and accrued expenses. Financial instruments also include the investment in
First Indiana that has a fair value of $48,470,000.

Note 9. Purchase Business Combinations

Effective April 30, 1996, the Company acquired all the outstanding common stock
of One Investment Corporation for $1,415,000 in cash from the Company's
affiliate, First Indiana Bank. One Investment Corporation and its wholly-owned
subsidiary, One Insurance Agency, Inc., engage in the sale of insurance and non-
FDIC-insured investment products.

The acquisition has been accounted for by the purchase method and, accordingly,
the results of operations on One Investment Corporation have been included in
the Company's consolidated financial statements from April 30, 1996. The excess
of the purchase price over the fair value of the net identifiable assets
acquired of $1,188,000 has been recorded as goodwill and is being amortized on a
straight-line basis over 15 years.

The purchase agreement also provides for additional payments over a three-year
period contingent on future operating income of One Investment Corporation. The
additional payments, if any, will be accounted for as additional goodwill.

The following unaudited pro forma financial information presents the combined
results of operations of the Company and One Investment Corporation as if the
acquisition had occurred as of the beginning of 1996 and 1995, after giving
effect to certain adjustments, including amortization of goodwill, additional
depreciation expense, and related income tax effects.

The pro forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company and One Investment
Corporation constituted a single entity during such periods.

(Unaudited)

Year Ended December 31,
1996 1995

Revenue and income $4,977,000 $9,400,000
Net income $2,169,000 $3,789,000
Income per share $.83 $1.45

The Company purchased all of the capital stock of One Investment Corporation for
$1,415,000. In conjunction with the acquisition, liabilities were assumed as
follows:

Fair value of assets acquired $1,473,000
Cash paid for the capital stock (1,415,000)
---------
Liabilities Assumed $ 58,000
========

C-10

Note 10. Business Segments

Year Ended December 31,
1996 1995 1994

Commissions and fees, insurance and
investment products $1,006,000 --- ---
11,178,000 23,467,000

Operating Profit 382,000 1,019,000 2,715,000
Add (deduct):
Equity in earnings of First Indiana 3,002,000 3,938,000 2,616,000
Investment Income 441,000 554,000 70,000
Gain on sale of assets --- 1,293,000 76,000
Interest expense (42,000) (286,000) (438,000)
Corporate general&administrative expense(857,000) (970,000) (907,000)
-------- ------- -------
Income from operations before taxes $2,926,000 $5,548,000 $4,132,000
========= ========= =========

Identifiable assets:
Insurance and investment products $1,467,000 $ --- $ ----
Construction products and services --- --- 11,834,000
Investment in First Indiana Corp 29,746,000 27,549,000 24,265,000
Corporate assets 6,999,000 11,177,000 3,705,000
---------- --------- ---------
Total assets $38,212,000 $38,726,000 $39,804,000
========== ========= ===========

Depreciation and amortization:
Insurance and investment products $54,000 $ --- $ ---
Construction products and services --- 237,000 670,000
Corporate assets 13,000 15,000 15,000
------ ------- -------
Total depreciation and amortization $67,000 $252,000 $685,000
====== ======= =======

Capital expenditures:
Insurance and investment products $63,000 $ --- $ ---
Construction products and services --- 44,000 1,250,000
Corporate assets 53,000 --- ---
------ ------ --------
$116,000 $44,000 $1,250,000
======= ====== ========

C-11

Note 11. Income Taxes

Total income tax expense for the three years ended December 31, 1996 was
allocated as follows:

Year Ended December 31,
1996 1995 1994
Income from operations $887,000 $2,190,000 $1,608,000
Retained earnings for:
Unrealized investment gains(losses) (46,000) 46,000 ---
Equity in other capital changes
Of First Indiana 25,000 76,000 (9,000)
------- -------- --------
Total income tax expense $866,000 $2,312,000 $1,599,000
======= ========= ========

Income tax expense attributable to income from operations consisted of:

Current:
Federal ($26,000) $637,000 $273,000
State and local (4,000) 149,000 70,000
------ ------- ------
Total (30,000) 786,000 343,000
====== ====== =======

Deferred:
Federal 797,000 1,138,000 997,000
State and local 120,000 266,000 268,000
------- -------- -------
Total 917,000 1,404,000 1,265,000
======= ======== ========
Total:
Federal 771,000 1,775,000 1,270,000
State and local 116,000 415,000 338,000
------- -------- --------
Total income tax expense on income
from operations $887,000 $2,190,000 $1,608,000

Income tax expense attributable to income from operations differed from the
amounts computed by applying the federal income tax rate of 34% to pretax income
from operations as a result of the following:

Year Ended December 31,
1996 1995 1994
Federal income tax at statutory rate of 34% $995,000 $1,886,000 $1,405,000
Add (deduct) tax effect of:
State and local income taxes,
net of federal income tax benefit 168,000 304,000 203,000
Dividends received deduction (276,000) --- ---
------- ------- -------
$887,000 $2,190,000 $1,608,000
======= ========= =========

The Company made income tax payments of $235,000, $1,168,000, and $24,000 during
the years ended December 31, 1996, 1995, and 1994.

C-12

The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 1996 and 1995 are presented
below:
December 31,
Deferred tax assets: 1996 1995
Compensated absences (principally vacation earned)
accrued for financial reporting purposes $4,000 $7,000
Pension benefits accrued for financial
reporting purposes --- 42,000
Provision for doubtful accounts 39,000 78,000
------ ------
Total deferred assets $43,000 $127,000
====== ======

Deferred tax liabilities:
Investment in First Indiana $6,858,000 $6,000,000
Unrealized investment gain --- 46,000
Plant and equipment 12,000 12,000
--------- ---------
Total deferred liabilities $6,870,000 $6,058,000
--------- ---------
Net deferred tax liability $6,827,000 $5,931,000
========= ==========
Note 12. Interim Quarterly Results (Unaudited)

First Second Third Fourth
(Dollars in thousands, except Quarter Quarter Quarter Quarter
Per share data)
1996
Equity in earnings of First Indiana $1,012 $930 $70 $990
Commissions, fees and investment income 163 313 461 510
Operating expenses 255 192 457 619
Income before income taxes 920 1,051 74 881
Net income 638 715 51 635
Income per share .24 .27 .03 .24

1995
Equity in earnings of First Indiana $964 $1,083 $961 $930
Commissions, fees and investment income 55 172 181 146
Construction products gross profit and
Gain on sale 1,337 1,605 --- ---
Operating expenses 726 590 268 302
Income before income taxes 1,630 2,270 874 774
Net income 985 1,376 527 470
Income per share .38 .53 .21 .17

Note 13. Stock-Based Compensation

Stock-Based Compensation

The Company has two types of stock-based compensation plans: stock options and
stock grants, as described below. The Company has applied APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock options. Accordingly, no compensation cost has been
recognized for such stock options. Compensation cost for stock grants issued
has been charged against income and amounts to $270,000, $82,000 and $62,000 in
1996, 1995, and 1994.

C-13

Had compensation cost for the incentive stock options been determined based on
the fair value at the grant date consistent with the methods of FASB Statement
No. 123, "Accounting for Stock-Based Compensation", the Company's net income and
earnings per share would have been reduced as shown in the pro forma amounts
below.

Year Ended December 31,
1996 1995
Net Income:
As reported $2,039,000 $3,358,000
Pro forma $1,972,000 $3,321,000

Earnings per share:
As reported $.78 $1.29
Pro forma $.75 $1.27

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: dividend yield of 1.5% for both
years, expected volatility of 24% for both years, weighted-average risk-free
interest rates of 5.55% and 7.05% for 1996 and 1995 grants respectively, and a
seven-year expected life of the grants for both years.

The effects of applying FASB Statement No. 123 in the above pro forma are not
indicative of future amounts. The statement does not apply to awards prior to
1995, and the Company expects that grants will be made in the future.

Stock Options

The Company's 1986 and 1991 Stock Incentive Plans provide for granting of
qualified and non-qualified stock options to officers and other key employees at
the quoted market value of the Company's common stock on the date of the grant.
The terms and conditions of both the 1986 and 1991 Plans are identical.
Qualified options are exercisable during a period of two to five years after the
date of grant, and expire five years from the date of the grant. Non-qualified
options are exercisable during a period of six months to ten years after the
date of the grant and expire ten years from the date of the grant. The 1986
Plan authorized 146,484 shares for granting options, and the 1991 Plan
authorized 156,250 shares for granting options, with or without stock
appreciation rights.
The Company also maintains a 1991 Director Stock Option Plan, which authorized
78,125 shares. The plan provides for the granting of stock options to non-
employee directors of the Company. Grants issued are non-qualified stock
options, which do not afford favorable tax treatment to recipients and which
normally result in tax deductions to the Company. Options are granted annually
at the time of the annual meeting of the shareholders, at the quoted market
price on that date. The plan allows no more than the grant of 15,625 shares
annually. Director options have a term of five years and are exercisable at any
time during that term.

C-14

The following summary reflects changes in the options outstanding during the
three years ended December 31, 1996.
Weighted
Officers' and Key Average
Employees' Directors' Price
Plans Plan Per Share
Balance at December 31, 1993 146,954 23,438 $4.70
Options granted 36,875 6,250 $8.22
Options expired --- (4,688) $5.04
Options exercised (35,781) --- $4.18
------- ------ ----
Balance at December 31, 1994 148,048 25,000 $5.85
Options granted 17,187 6,250 $8.48
Options expired (24,375) --- $6.24
Options exercised (37,266) --- $4.84
------- ------ ----
Balance at December 31, 1995 103,594 31,250 $6.26
Options granted 28,125 7,812 $8.92
Options exercised (10,000) (12,500) $4.86
------ ------ ----
Balance at December 31, 1996 121,719 26,562 $7.82
======= ====== ====

Outstanding option shares at December 31, 1996, by exercise price per share,
were as follows:

Officers' and Key
Price Per Employees' Directors'
Share Plans Plan
$4.00 4,687 ---
4.16 11,562 ---
4.24 6,562 ---
4.66 10,156 ---
4.80 --- 4,688
5.84 17,188 ---
5.92 --- 4,688
6.00 4,375 ---
7.60 --- 4,688
8.32 17,188 ---
8.48 17,188(1) 4,688
10.88 4,688 ---
11.20 18,750(2) ---
12.32 9,375(2) ---
12.80 --- 7,810(2)
------ ------ -----
121,719 26,562

All options were exercisable at December 31, 1996 except as noted below:
(1) 6,250 option shares not exercisable.
(2) 100% not exercisable.

Stock Grants
The Company's 1986 and 1991 Stock Incentive Plans also provide for the issuance
of stock grants to key individuals for achievement of specific results over a
three-year period. On April 1, 1994, the Company awarded 15,625 shares of stock
to each of two executive officers. These shares are subject to recall by the
Company in the event that certain specific employment and performance objectives
are not met by March 31, 1997.

C-15

Reserved for future stock options and stock grants at December 31, 1996 are
66,250 shares under the Officers and Key Employees' Plan and 39,063 shares under
the Directors' Stock Option Plan.

All shares and price per share amounts shown have been adjusted for a five-for-
four stock split that was effective February 26, 1997 and February 29, 1996.

Note 14. Retirement Plans

The Company sponsored an Employee Savings and Investment Plan that was qualified
for tax-deferred employee contributions under Internal Revenue Code Section
401(k). The trusteed plan was terminated on June 30, 1995. The Company also
maintained a non-contributory, trusteed, defined-benefit pension plan covering
non-bargaining unit employees. The defined-benefit pension plan was terminated
on November 30, 1995. Both plan terminations occurred as a result of the sale
of the assets of the construction products and services divisions and the
related termination of employment of the divisions' employees. These employees
constituted the major portion of all participants of the plans.

Benefits of the Pension Plan were based on years of service and the employee's
compensation. The Company had provided for contributions to the plan equal to
the estimated value of all participants' benefits. The Employee Savings and
Investment Plan was a trusteed, defined-contribution plan with the Company
matching a portion of the employee's contribution in the form of shares of the
Company's common stock.

Both plans were fully liquidated during 1996, and all participant obligations
were satisfied. Plan assets in excess of benefit obligation were distributed to
plan participants and to pay expenses of the plan termination and liquidation.
No plan assets were returned to the Company and no gain or loss was recognized.

Net periodic pension expense of the defined-benefit pension plan for the years
ended December 31, 1995 and 1994 consisted of the following:

1995 1994
Service cost benefits earned during the year $150,000 $153,000
Interest cost on projected benefit obligation 321,000 303,000
Return on plan assets (298,000) 40,000
Net amortization and deferral (22,000) (375,000)
Gain on termination of plan (344,000) ---
------- -------
Net pension expense (benefit) $(193,000) $121,000
======== ========

Plan assets consisted primarily of U.S. Government Agency obligations. On the
date of plan termination, the plan assets exceeded the actuarial estimated value
of benefit obligations by $67,000. The plan termination was approved by the
Pension Benefit Guarantee Corporation and the Internal Revenue Service.

During the years ended December 31, 1995 and 1996 the Company made contributions
to multi-employer pension plans under contracts with various construction trade
unions. Amounts contributed for the two years ended December 31, 1995 and 1994
for operations to the dates of sale of the construction operations were $136,000
and $156,000. All contracts with unionized employees were assumed by the
purchasers of the construction assets.

C-16

The Company adopted a new retirement plan for all employees during 1996 as a
replacement for the plans terminated. The plan is a Salary Reduction Simplified
Employee Pension Plan (SAR-SEP), and is qualified for income tax deferral under
Internal Revenue Service Code Section 408(k). Under the plan, employee
contributions and employer matching contributions are deferred for income tax
purposes. All amounts are contributed to trusteed Individual Retirement
Accounts established by the participant.

The Company made matching contributions for participants of 100% of each
employee's contributions, to a maximum of 6% of salary, plus an additional
$1,000. The cost of such matching contributions was $34,000 since inception of
the plan on June 1, 1996 to December 31, 1996.

Note 15. Commitments and Contingencies

The Company, in the normal course of business, is involved in various claims and
contingencies. After taking into consideration legal counsel's evaluation and
the extent of insurance coverage, management is of the opinion that the outcome
of claims and contingencies will not result in any ultimate liability material
to the consolidated financial statements.

Note 16. Subsequent Event

On February 19, 1997, the Board of Directors declared a five-for-four stock
split to be issued March 14, 1997, to shareholders of record on February 26,
1997. All per share amounts shown in the financial statement have been adjusted
accordingly.

C-17

FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

1996 1995

Assets
Cash and cash equivalents $73,618 $74,894
Investments 106,895 102,656
Mortgage-backed securities - net 36,412 49,498
Loans receivable - net 1,215,550 1,250,726
Premises and equipment 13,705 13,157
Accrued interest receivable 10,696 11,645
Real estate owned 4,285 1,877
Prepaid expenses and other assets 35,260 37,390
------ ------
Total Assets $1,496,421 $1,541,843
========= =========
Liability and Shareholders's Equity Liabilities
Deposits $1,095,486 $1,136,980
Federal Home Loan Bank Advances 215,466 214,781
Short-term borrowings 30,055 38,642
Accrued interest payable 2,018 2,715
Advances by borrowers for taxes and insurance 1,120 2,107
Other liabilities 7,933 10,688
------ ------
Total Liabilities 1,352,078 1,405,913

Negative Goodwill 5,685 6,633

Shareholders' Equity 138,658 129,297

Total Liabilities and Shareholders' Equity $1,496,421 $1,541,843
========= =========

Summarized financial information is presented above and on the following two
pages for First Indiana Corporation. This 21.8 percent-owned subsidiary
represents a significant part of The Somerset Group, Inc.'s income and financial
strength. Summary discussions of the operating and financial results for First
Indiana Corporation appear in the Management's Discussion and Analysis section
of the report. A complete 1996 annual report for First Indiana Corporation is
available upon request.

C-18

FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in Thousands)
1996 1995 1994

Interest Income $125,468 $124,061 $97,572

Interest Expense
Deposits 52,077 50,533 39,342
Federal Home Loan Bank Advances 10,706 12,891 6,952
Short-term borrowings 1,002 2,593 330
Mortgage-backed bonds --- --- 1,719
------ ----- -----
Total Interest Expense 63,785 66,017 48,343

Net Interest Income 61,683 58,044 49,229

Provision for Loan Losses 10,794 7,900 3,900
------ ----- -----

Net Interest Income After Provision 50,889 50,144 45,329
For Loan Losses ====== ====== ======

Non-Interest Income
Sale of loans 3,075 2,749 (706)
Loan servicing income 2,908 2,645 2,861
Loan fees 2,302 2,206 2,378
Dividends on FHLB Stock 1,033 996 602
Other 8,530 7,655 5,190
----- ----- -----
Total Non-Interest Income 17,848 16,251 10,325

Non-Interest Expense
Salary and benefits 18,094 20,890 19,465
Net occupancy 3,087 3,069 2,989
Deposit insurance 9,186 2,298 2,318
Real estate owned operations - net 598 (3,060) (26)
Other 16,288 15,450 13,756
------ ------ ------
Total Non-Interest Expense 47,253 38,647 38,502

Earnings Before Income Taxes 21,484 27,748 17,152
Income Taxes 7,780 10,481 6,516
------ ------ ------
Net Earnings $13,704 $17,267 $10,636

C-19

FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

1996 1995 1994
Cash Flows from Operating Activities
Net Earnings $13,704 $17,267 $10,636

Adjustments to Reconcile Net Earnings to Net
Cash Provided (Used) by Operating Activities

(Gain) Loss on sales of assets and
Deposits (4,524) (4,307) 1,051
Amortization 1,325 2,197 1,609
Depreciation 1,958 1,909 1,922
Provision for loan losses 10,794 7,900 3,900
Net proceeds from trading investments --- --- (335)
Net sale of loans held for resale 32,585 (41,116) 62,766
Net change in all other assets and
And libilities (3,265) (4,742) 1,222
------ ------ ------
Net Cash Provided by Operating Activity 52,577 (20,892) 82,771

Cash Flows from Investing Activities
Proceeds-sales of investments 35,703 72,857 ---
Proceeds-sales of investment securities --- 2,993 ---
Proceeds-maturity of invest.securities 27,611 6,018 28,525
Purchase of investment securities (68,225) (35,388) (66,381)
Origination of loans and mortgage-backed
securities-net of collections (27,964) (240,820) (135,640)
Proceeds-sale of installment portfolio 32,756 --- ---
Proceeds from sale of loans 3,501 125,313 1,819
Purchase of premises and equipment (2,653) (1,750) (1,615)
Other - net 150 32 10
------ ------ -------
Net Cash Provided by Investing Activities 879 (70,745) (173,282)

Cash Flows from Financing Activities
Proceeds from sale of deposits --- (25,462) ---
Net change in deposits (41,494) 132,028 1,654
Net change in short-term borrowings (8,587) 2,720 35,922
Net change in FHLB Advances 685 13,626 94,278
Purchase of treasury stock --- (6,203) ---
Maturity of other debt --- --- (50,000)
Other - net (5,336) (3,610) (3,298)
------ ------ ------
Net Cash Provided by Financing Activity (54,732) 113,099 78,556
------- ------- -------
Increase in Cash and Cash Equivalents ($1,276) $21,462 ($11,955)
======= ====== ========

C-20

OPERATING COMPANIES AND MANAGEMENT

CORPORATE OFFICE

135 N. Pennsylvania Street
Suite 2800
Indianapolis, IN 46204
Telephone 317/269-1285

CORPORATE OFFICERS

Robert H. McKinney
Chairman

Marni McKinney
President and
Chief Executive Officer

Joseph M. Richter
Executive Vice President,
Chief Financial Officer
and Treasurer

Kevin K. McKinney
Vice President

Sharon J. Sanford
Secretary

FINANCIAL SERVICES DIVISION

Robert S. Kaspar
President

BANKING

Robert H. McKinney
Chairman and Chief Executive Officer
of the Corporation and Chairman of
the Bank

Marni McKinney
Vice Chairman of the Corporation and
Vice Chairman of the Bank

Owen B. Melton, Jr.
President and Chief Operating
Officer of the Corporation and
President and Chief Executive
Officer of the Bank

David L. Gray
Internal Support Services Division
Senior Vice President, Chief
Financial Officer
and Treasurer

David A. Lindsey
Consumer Banking Sales Division
Senior Vice President

Merrill E. Matlock
Commercial Banking Division
Senior Vice President

Timothy J. O'Neill
Consumer Banking Services Division
Senior Vice President

Kenneth L. Turchi
Retail Banking, Marketing, and
Strategic Planning Division
Senior Vice President

BOARD OF DIRECTORS

DIRECTORS

Robert H. McKinney
Chairman, The Somerset Group, Inc.;
Chairman & Chief Executive Officer,
First Indiana Corporation

Marni McKinney
President and Chief Executive
Officer,
The Somerset Group, Inc.; Vice
Chairman,
First Indiana Corporation

H. J. Baker
Chairman (emeritus)
BMW Constructors, Inc.

William L. Elder
Chairman (emeritus)
Southern Indiana Commerce
Corporation

Douglas W. Huemme
Chairman, President and
Chief Executive Officer,
Lilly Industries, Inc.

Kevin K. McKinney
Vice President, The Somerset Group,
Inc.;
Publisher, NUVO Newsweekly

Michael L. Smith
President and Chief Operating
Officer,
American Health Network, Inc.

<PAGE>

KPMG Peat Marwick LLP
2400 First Indiana Plaza
Indianapolis, IN 46204-2452

The Board of Directors and Shareholders
The Somerset Group, Inc.:

We have audited the accompanying consolidated balance sheets of The
Somerset Group, Inc. And subsidiaries as of December 31, 1996 and 1995
and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of The Somerset Group, Inc.'s management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
represent fairly, in all material respects, the financial position of
The Somerset Group, Inc. And subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity
with generally accepted accounting principles.

S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

January 31, 1997, except note 16,
which is as of February 19, 1997

C-1

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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,060,000
<SECURITIES> 4,724,000
<RECEIVABLES> 1,187,000
<ALLOWANCES> 100,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,984,000
<PP&E> 226,000
<DEPRECIATION> 86,000
<TOTAL-ASSETS> 38,212,000
<CURRENT-LIABILITIES> 149,000
<BONDS> 0
0
0
<COMMON> 1,829,000
<OTHER-SE> 29,407,000
<TOTAL-LIABILITY-AND-EQUITY> 38,212,000
<SALES> 1,006,000
<TOTAL-REVENUES> 4,449,000
<CGS> 0
<TOTAL-COSTS> 1523,000
<OTHER-EXPENSES> 0
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<INCOME-TAX> 887,000
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