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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from              to             

Commission File No. 0-14354

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(317) 269-1200

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

Common Stock, $.01 par value

Preferred Share Purchase Rights

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

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act). Yes x No ¨

State the aggregate market value of the common stock held by non-affiliates of the registrant: $215.7 million as of June 30, 2003.

On February 12, 2004, the registrant had 15,605,180 shares of common stock outstanding, $0.01 par value.

Documents Incorporated by Reference: Portions of the definitive proxy statement for the 2004 Annual Meeting of Shareholders (Part III).

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FIRST INDIANA CORPORATION

Form 10-K

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FINANCIAL REVIEW

Statements contained in this Annual Report on Form 10-K that are not historical facts may constitute forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) which involve significant risks and uncertainties. First Indiana Corporation intends such forward-looking statements to be covered by the safe-harbor provisions in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe-harbor provisions. First Indiana’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain, and involves a number of risks and uncertainties. In particular, among the factors that could cause actual results to differ materially are changes in interest rates, loss of deposits and loan demand to other financial institutions, substantial changes in financial markets in general or the loan market in particular, changes in the real estate market, statutory or regulatory changes, or unanticipated results in pending legal proceedings. The fact that there are various risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements.

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

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OVERVIEW

First Indiana Corporation (“First Indiana” or the “Corporation”) is the holding company for First Indiana Bank, N.A. (the “Bank”), the largest commercial bank headquartered in Indianapolis; and Somerset Financial Services, LLC (“Somerset”), an accounting and consulting firm.

The Corporation’s lines of business include community banking, consumer finance, trust and investment advisory services, and accounting and consulting services. The community banking segment is engaged primarily in the business of attracting deposits from the general public and originating business, construction, and commercial real estate loans. The consumer finance segment originates home equity loans for sale and for the Bank’s portfolio. Through Somerset and a division of the Bank, FirstTrust Indiana, First Indiana offers an array of financial services, including tax planning and preparation, accounting services, retirement and estate planning, investment advisory and trust services, and consulting services.

The Bank offers a full range of banking services through 33 offices in Central Indiana. The Bank also originates home equity loans in 47 states through Bank loan officers and an independent agent network. The Bank has construction and consumer loan offices in Indiana, Arizona, Florida, Illinois, North Carolina, and Ohio. Somerset provides services to clients located primarily in the state of Indiana.

First Indiana’s net income depends substantially upon its net interest income. Net interest income is income that remains after deducting the interest expense attributable to the funds required to support total assets from total interest income generated by earning assets. Income from earning assets includes income from loans, investment securities, and short-term investments. The amount of interest income is dependent on many factors, including the volume of earning assets, the general level of interest rates, and yields on a variety of earning assets, from investments to loans. The cost of funds varies with the amount of funds necessary to support total assets, the rates paid to attract and hold deposits, the rates paid on borrowed funds, and the levels of interest-free funds.

The Corporation’s success is largely dependent on its ability to manage interest rate risk, which is defined as the exposure of net interest income, net earnings, and equity to changes in interest rates. First Indiana manages risk from changes in market interest rates, in part, by controlling the mix of interest rate-sensitive assets and interest rate-sensitive liabilities. However, since the Corporation is currently in an asset-sensitive position (where assets reprice faster than liabilities), significant improvement in net interest margin is unlikely until market interest rates increase. Although further interest rate reductions are not expected to occur, with interest rates currently at historic lows, deposit rates would be unable to fully absorb additional market interest rate reductions and net interest income would be reduced.

Net income is also affected by the provision for loan losses. Making loans is an essential element of the Bank’s business, and there is a risk that loans will not be repaid. The risk of loss on a loan is affected by a number of factors, including the duration of the loan; credit risks of a particular borrower; changes in economic or industry conditions; and in the case of a collateralized loan, uncertainties about the future value of the collateral. A further economic downturn could contribute to the deterioration in the quality of the loan portfolio. Loans made up 83 percent of the Corporation’s assets at year-end 2003. If a further economic downturn occurs in the economy as a whole, or in Indiana where First Indiana has approximately one-half of its loans, borrowers may be unable to repay their loans as scheduled and the value of real estate or other collateral that may secure the loans could be adversely affected.

The risks and challenges that management sees to improved profitability in 2004 are continued weak loan demand in its markets; yield compression as competition for loan growth intensifies; price and sales competition for deposits by new market entrants; and continued high levels of non-performing assets and loan charge-offs. In 2003, the Corporation focused on rebuilding and positioning for 2004 and beyond. Particularly in the area of credit quality, management identified specific areas for improvement and addressed internal policies and

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procedures. As a result, the Corporation has seen improvement in credit quality and expects it to continue. In order to compete more effectively for new loans and deposits and better serve existing clients, the Bank has built or updated nine of its 27 branches in the past four years. Two branches are expected to be opened in 2004 to replace three outdated branches. In addition, the acquisition of MetroBanCorp in 2003 added six new branches in Hamilton County, one of the fastest-growing counties in the Midwest. Opportunities in 2004 include interest rate increases, increased asset demand by purchasers of consumer finance bank loans, and increased loan demand resulting from a recovery in the economy.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Corporation and its subsidiaries conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. A summary of the Corporation’s significant accounting policies is contained in Note 1 of the Notes to Consolidated Financial Statements. In fulfilling its responsibilities, the Audit Committee of the Board of Directors has reviewed the accounting and reporting policies of the Corporation. In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, assumptions used to value loan servicing rights, goodwill, and the determination of the valuation allowance for deferred taxes.

Allowance for Loan Losses

The allowance for loan losses is maintained at the level deemed adequate to cover losses inherent in the loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The determination of the adequacy of the allowance for loan losses is based on projections and estimates concerning portfolio trends and credit losses, national and local economic trends, portfolio management and trends, the assessment of credit risk of performing and non-performing loans, and qualitative management factors. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and historical loss experience. In addition, various regulatory agencies, as an integral part of their examination process, periodically review this allowance and may require the Corporation to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The allowance for loan losses is included in the community bank segment.

Loan Servicing Rights

As of December 31, 2003, First Indiana serviced for others a $433 million portfolio of consumer and mortgage loans and has capitalized the associated servicing rights. Loan servicing rights represent the present value of the future servicing fees to be collected from the loans serviced for others. The Corporation accounts for loan servicing rights under the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Consumer loan servicing rights are stratified based on lien position and year of origination. Mortgage loan servicing rights are stratified based on loan type (fixed or adjustable rate), investor type (FHLMC, GNMA, private), term, and note rate. Fair values for individual strata are based on the present value of estimated future cash flows using a discount rate commensurate with the risks involved. Estimates of fair value include assumptions about prepayment rates, servicing cost, ancillary servicing income, conversion costs, float and escrow earnings, delinquency rates, and other factors, which are subject to change over time. Changes in these underlying assumptions could cause the estimated fair value of loan servicing rights, and the related valuation allowance, to change significantly in the future. The most significant assumptions in the determination of fair value are prepayment speeds and the discount rate. The value of loan servicing rights is significantly affected by interest

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rates available in the market which influence loan prepayment speeds. Generally, during periods of declining interest rates, the value of loan servicing rights declines due to increasing prepayments attributable to increased refinance activity. Conversely, during periods of rising interest rates, the value of loan servicing rights generally increases due to lower prepayments. Capitalized loan servicing rights are included in the consumer finance bank segment.

Goodwill

The Corporation accounts for goodwill under the provisions of FASB Statement No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and other intangible assets with indefinite useful lives be tested for impairment at least annually. Assets and liabilities, including goodwill, are assigned to reporting units. Reporting units with assigned goodwill are corporate banking, retail banking, and Somerset. Impairment tests indicated that the fair value of each reporting unit with assigned goodwill exceeded its recorded investment (thus goodwill was not impaired). Risk factors considered in determining reporting unit fair value include future loan and deposit originations (and related revenues generated from this activity), future fee revenues and costs associated with the services provided by each reporting unit, and the continued commitment of Corporation resources to each reporting unit. Future tests for impairment will also use this method. Should any of these risk factors change, the fair value of a reporting unit could deteriorate, resulting in goodwill impairment. Goodwill is included in the community bank and Somerset segments.

Valuation Allowance for Deferred Taxes

Deferred income tax assets and liabilities result from temporary differences in the recognition of income and expense for income tax and financial reporting purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Corporation will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

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STATEMENT OF EARNINGS ANALYSIS

Earnings Summary

First Indiana reported net income of $2,529,000, or $0.16 per diluted share, in 2003, compared with $21,180,000, or $1.34 per diluted share, in 2002. Net income in 2001 was $20,009,000, or $1.25 per diluted share. Earnings in 2003 were affected by an increase of $18,218,000 in the provision for loan losses over 2002. The increase in the provision for loan losses reflects an increased level of charge-offs, results from the findings of an independent evaluation of the commercial loan portfolio, the continued evaluation of risks in the portfolio, and the Bank’s revised approach for calculating the allowance for loan losses. Earnings in 2002 were affected by an increase of $5,528,000 in the provision for loan losses over 2001 due to increased levels of non-performing loans and charge-offs and the uncertainty of the economic environment in Indiana. Non-interest expense in 2001 was unfavorably affected by the charge-off of $4,066,000 of overdrafts by a construction loan client.

On January 13, 2003, First Indiana acquired MetroBanCorp through a merger. MetroBanCorp had $196,000,000 in assets. The acquisition was accounted for using the purchase method of accounting, and, accordingly, the financial results of the acquired entity are included in First Indiana’s consolidated financial statements from the January 13, 2003 acquisition date.

Net Interest Income

Net interest income was $76,900,000 in 2003, compared with $73,780,000 in 2002 and $74,049,000 in 2001. Earning assets averaged $2,083,300,000 in 2003, compared with $1,976,936,000 in 2002 and $2,006,008,000 in 2001. The acquisition of MetroBanCorp in January 2003 added approximately $126,685,000 in earning assets. Net interest margin is calculated as the percentage of net interest income to average earning assets. Net interest margin was 3.69 percent in 2003, compared to 3.73 percent in 2002 and 3.69 percent in 2001. Historically low interest rates continue to compress net interest margin and net interest income, as deposit rates have been unable to fully absorb reductions in market interest rates over the past several years. Increases in lower-cost demand and savings deposits in excess of ten percent in both of the past two years helped to partially offset the impact of interest rate reductions on net interest margin. It is not expected that further interest rate cuts will occur. Since First Indiana continues to be positioned to benefit from increasing rates, significant improvement in net interest margin is unlikely until market interest rates increase. See “Asset/Liability Management” for a more detailed discussion of the Corporation’s management of interest rate risk.

The Federal Reserve Open Market Committee reduced interest rates 11 times in 2001, and rapidly falling interest rates, combined with a net asset-sensitive position within a one-year time period, put downward pressure on net interest income and net interest margin in 2001. An 11 percent increase in lower-cost demand and savings deposits on average in 2001 helped to partially offset the impact of the rate reductions on net interest margin.

Net interest margin consists of two components: interest rate spread and the contribution of interest-free funds (primarily non-interest-bearing demand deposits and shareholders’ equity). Interest rate spread is the difference between the yield on total earning assets and the cost of total interest-bearing liabilities. The interest rate spread for 2003 was 3.36 percent, compared with 3.25 percent in 2002 and 3.02 percent in 2001.

The contribution of interest-free funds to net interest margin varies depending on the level of interest-free funds and the level of interest rates. Interest-free funds averaged $334,547,000 in 2003, $306,678,000 in 2002, and $280,101,000 in 2001. Interest-free funds provided 33 basis points to the margin in 2003, compared with 48 basis points in 2002 and 67 basis points in 2001. Although interest-free funds increased on average during the past two years, their impact has been declining as interest rates have decreased. As a result of the decrease in contribution from interest-free funds, even though interest rate spread improved, the net interest margin declined.

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Net Interest Margin