SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q
(Mark One)
[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended         March 31, 1997
                               --------------------------------

                                       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 Number 0-11889

                           FIRST FINANCIAL CORPORATION
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Wisconsin                                               39-1471963
-------------------------------                              -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

                1305 Main Street, Stevens Point, Wisconsin 54481
                ------------------------------------------------
                     (Address of principal executive office)

                                 (715) 341-0400
               ---------------------------------------------------
              (Registrant's telephone number, including area code)

   ---------------------------------------------------------------------------
   (Former name, address and former fiscal year, if changed since last report)

        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  the  number  of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date:

  Common Stock, par value $1.00 per share             36,188,002 Shares
  ---------------------------------------        -----------------------------
                 Class                           Outstanding at April 30, 1997


<PAGE>




                           FIRST FINANCIAL CORPORATION

                                 Form 10-Q Index




Part I -       Financial Information
               ----------------------

               Consolidated Balance Sheets as of March 31, 1997
                  (Unaudited) and December 31, 1996

               Unaudited Consolidated Statements of Income for
                  the Three Months Ended March 31, 1997 and 1996

               Unaudited Consolidated Statement of Changes In
                  Stockholders' Equity for the Three Months Ended
                  March 31, 1997

               Unaudited Consolidated Statements of Cash Flows
                  for the Three Months Ended March 31, 1997 and
                  1996

               Notes to Unaudited Consolidated Financial Statements

               Management's Discussion and Analysis:
                  Comparison of the Consolidated Balance Sheets
                  at March 31, 1997 (Unaudited) and December 31,
                  1996

                  Comparison of the Unaudited Consolidated Statements
                  of Income for the Three Months Ended March 31, 1997 and
                  1996


Part II -      Other Information
               -----------------

               Item 6.  Exhibits and Reports on Form 8-K

Signatures
----------

Exhibits
--------

                                       -1-

<PAGE>
<TABLE>
<CAPTION>



                                                    FIRST FINANCIAL CORPORATION
                                                    CONSOLIDATED BALANCE SHEETS

                                                              ASSETS
                                                                             March 31,
                                                                               1997                December 31,
                                                                            (Unaudited)                1996
                                                                            -----------            ------------
                                                                                      (In thousands)
<S>                                                                        <C>                    <C>       
Cash                                                                       $   82,347             $  133,529
Federal funds sold                                                             48,485                  2,513
Interest-earning deposits                                                       8,999                 18,043
                                                                           ----------             ----------
     Cash and cash equivalents                                                139,831                154,085

Securities available for sale (at fair value):
     Investment securities                                                    122,811                136,477
     Mortgage-related securities                                            1,217,366              1,048,085
Securities held to maturity (at amortized cost):
     Investment securities (fair value of
     $55,762,000--1997 and $57,996,000--1996)                                  56,394                 58,434
     Mortgage-related securities (fair value of
     $574,862,000--1997 and $597,106,000--1996)                               582,882                602,352
Loans receivable:
     Held for sale                                                             16,906                 19,119
     Held for investment                                                    3,485,783              3,493,700
Foreclosed properties and repossessed assets                                    4,356                  3,997
Real estate held for investment or sale                                         7,365                  7,431
Office properties and equipment                                                50,462                 50,428
Intangible assets, less accumulated amortization                               11,867                 12,739
Other assets                                                                  112,483                113,584
                                                                           ----------             ----------
                                                                           $5,808,506             $5,700,431
                                                                           ==========             ==========


                                               LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                   $4,493,105             $4,444,932
Borrowings                                                                    832,624                769,526
Advance payments by borrowers
     for taxes and insurance                                                   29,885                 13,382
Other liabilities                                                              47,196                 62,080
                                                                           ----------             ----------
        Total liabilities                                                   5,402,810              5,289,920

Stockholders' equity:
     Serial preferred stock, $1 par value:
       Authorized, 3,000,000 shares
       None issued
     Common stock, $1 par value:
       Authorized, 75,000,000 shares
       Issued, 37,601,063 (1997),
         37,450,879 (1996)
       Outstanding, 36,411,443 (1997)
         36,802,484 (1996)                                                     37,601                 37,451
     Additional paid-in capital                                                44,685                 43,668
     Net unrealized gain (loss) on
       securities available for sale                                           (3,833)                 1,300
     Treasury stock, 1,189,620 (1997) and
       648,395 (1996) shares, at cost                                         (28,909)               (14,447)
     Retained earnings                                                        356,152                342,539
                                                                           ----------             ----------
       Total stockholders' equity                                             405,696                410,511
                                                                           ----------             ----------
                                                                           $5,808,506             $5,700,431
                                                                           ==========             ==========
</TABLE>

See notes to unaudited consolidated financial statements.

                                                              -2-

<PAGE>
<TABLE>
<CAPTION>



                                                 FIRST FINANCIAL CORPORATION
                                              CONSOLIDATED STATEMENTS OF INCOME
                                                         (Unaudited)

                                                                                    Three Months Ended
                                                                                         March 31,
                                                                                 -------------------------
                                                                                 1997                 1996
                                                                                 ----                 ----
                                                                          (In thousands, except per share amounts)
<S>                                                                           <C>                   <C>   
Interest income:
   Mortgage loans                                                             $ 43,088              $ 45,879
   Other loans                                                                  30,628                31,659
   Mortgage-related securities                                                  30,357                21,829
   Investments                                                                   4,086                 4,255
                                                                              --------              --------
     Total interest income                                                     108,159               103,622
Interest expense:
   Deposits                                                                     49,771                50,367
   Borrowings                                                                   10,753                 7,286
                                                                              --------              --------
     Total interest expense                                                     60,524                57,653
                                                                              --------              --------
     Net interest income                                                        47,635                45,969
Provisions for losses on loans                                                   2,250                 1,900
                                                                              --------              --------
                                                                                45,385                44,069
Non-interest income:
   Deposit account service fees                                                  3,369                 3,142
   Loan fees and service charges                                                 3,220                 2,729
   Insurance and brokerage commissions                                           1,940                 1,832
   Service fees on loans sold                                                    1,401                 1,533
   Net gain on sales of loans and
     mortgage-related securities                                                 1,128                   261
   Net gain on sales of
     securities available for sale                                                 102                    13
   Other                                                                           837                   747
                                                                              --------              --------
     Total non-interest income                                                  11,997                10,257
                                                                              --------              --------
     Operating income                                                           57,382                54,326
Non-interest expense:
   Compensation, payroll taxes and benefits                                     12,810                12,083
   Occupancy                                                                     2,560                 2,458
   Marketing                                                                     1,896                 1,657
   Data processing                                                               1,837                 1,865
   Telephone and postage                                                         1,777                 1,698
   Loan expenses                                                                 1,453                 1,721
   Furniture and equipment                                                       1,137                 1,360
   Amortization of intangible assets                                               872                 1,264
   Federal deposit insurance premium                                               707                 2,561
   Net cost of (income from) foreclosed properties                                 (25)                   60
   Other                                                                         2,656                 2,668
                                                                              --------              --------
     Total non-interest expense                                                 27,680                29,395
                                                                              --------              --------
Income before income taxes and
   extraordinary item                                                           29,702                24,931
Income taxes                                                                    10,592                 7,597
                                                                              --------              --------
Income before extraordinary item                                                19,110                17,334
Extraordinary item                                                                  --                  (686)
                                                                              --------              --------
Net income                                                                    $ 19,110              $ 16,648
                                                                              ========              ========

Earnings per share:
   Primary and fully diluted:
     Income before extraordinary item                                         $   0.51              $   0.46
     Extraordinary item                                                             --                 (0.02)
                                                                              --------              --------
     Net income                                                               $   0.51              $   0.44
                                                                              ========              ========

Cash dividends per share                                                      $   0.15              $   0.12
                                                                              ========              ========

See notes to unaudited consolidated financial statements.


                                                             -3-
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                 FIRST FINANCIAL CORPORATION
                                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                                         (Unaudited)


                                                                 Net
                                                             Unrealized
                                                               Holding
                                          Common                Gain
                                         Stock and           (Loss) on
                                         Additional          Securities
                                          Paid-In             Available          Treasury        Retained       Stockholders'
                                          Capital             For Sale            Stock          Earnings          Equity
                                          -------             --------            -----          --------          ------
                                                                      (In thousands)

<S>                                      <C>                 <C>                <C>              <C>              <C>    
Balances at
  December 31, 1996                      $ 81,119            $  1,300           $(14,447)        $342,539         $410,511

Net income for the three
  months ended
  March 31, 1997                                                                                   19,110           19,110

Cash dividends paid -
  $0.15 per share                                                                                  (5,497)          (5,497)

Exercise of stock options                   1,167                                                                    1,167

Change in net unrealized
  holding gain (loss) on
  securities available
  for sale (net of taxes)                                      (5,133)                                              (5,133)

Treasury stock purchased                                                         (14,462)                          (14,462)
                                           --------           ---------         ---------         --------         --------

Balances at
  March 31, 1997                           $ 82,286         $  (3,833)         $ (28,909)        $356,152         $405,696
                                           ========         =========           =========        =========         ========

See notes to unaudited consolidated financial statements.

</TABLE>


                                                             -4-

<PAGE>
<TABLE>
<CAPTION>



                                                 FIRST FINANCIAL CORPORATION
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (Unaudited)
                                                                                                      Three Months Ended
                                                                                                           March 31,
                                                                                            ------------------------------------
                                                                                               1997                      1996
                                                                                            ----------                   -------
OPERATING ACTIVITIES                                                                                    (In thousands)

<S>                                                                                         <C>                     <C>      
   Net income                                                                               $   19,110              $  16,648
   Adjustments to reconcile net income to net cash provided
     by operating activities:
      Decrease (increase) in accrued interest on loans                                             (63)                 1,178
      Increase in accrued interest on deposits                                                   3,402                  3,180
      Loans originated for sale                                                                (23,713)               (88,605)
      Proceeds from sales of loans held for sale                                                31,866                 85,811
      Provision for depreciation                                                                 1,290                  1,394
      Provision for losses on loans and other assets                                             2,250                  1,900
      Amortization of intangible assets and servicing rights                                     1,400                  1,743
      Net gain on sales of loans and other assets                                               (1,221)                  (274)
      Other                                                                                     15,901                 (4,963)
                                                                                            -----------              --------
     Net cash provided by operating activities                                                  50,222                 18,012

INVESTING ACTIVITIES

   Proceeds from sales of investment securities available
     for sale                                                                                   10,295                  2,121
   Proceeds from sales of mortgage-related securities
     available for sale                                                                         20,610                 91,527
   Proceeds from maturities of investment securities held
     to maturity                                                                                 1,911                  6,000
   Proceeds from maturities of investment securities
     available for sale                                                                          1,013                  3,316
   Purchases of investment securities available for sale                                            --                (59,548)
   Purchases of mortgage-related securities                                                   (214,253)                    --
   Principal payments received on mortgage-related securities                                   41,604                 49,021
   Principal collected on loans receivable                                                     165,502                179,678
   Loans originated for portfolio                                                             (167,433)              (184,946)
   Additions to office properties and equipment                                                 (1,234)                (1,744)
   Proceeds from sales of foreclosed properties and
     repossessed assets                                                                          1,587                  1,449
                                                                                            ----------             ----------
     Net cash provided by (used in) investing activities                                      (140,398)                86,874

FINANCING ACTIVITIES

   Net increase in deposits                                                                     44,771                 67,330
   Net increase in advance payments by borrowers for
     taxes and insurance                                                                        16,503                 16,826
   Funding of official checks for borrower tax escrows                                         (29,658)               (35,692)
   Net increase in reverse repurchase agreements                                               116,723                 46,059
   Proceeds from borrowings                                                                    419,600                169,500
   Repayments of borrowings                                                                   (473,225)              (331,819)
   Proceeds from exercise of stock options                                                       1,167                  1,200
   Purchase of treasury stock                                                                  (14,462)                   --
   Payments of cash dividends to stockholders                                                   (5,497)                (4,482)
                                                                                            ----------             ----------
     Net cash provided by (used in) financing activities                                        75,922                (71,078)
                                                                                            ----------             ----------

Increase (decrease) in cash and cash equivalents                                               (14,254)                33,808
Cash and cash equivalents at beginning of period                                               154,085                172,109
                                                                                            ----------             ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                  $  139,831             $  205,917
                                                                                            ==========             ==========


See notes to unaudited consolidated financial statements.

                                                             -5-
</TABLE>


<PAGE>



                           FIRST FINANCIAL CORPORATION

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - PRINCIPLES OF CONSOLIDATION

        The unaudited consolidated financial statements include the accounts and
results  of  operations  of  First   Financial   Corporation   ("FFC")  and  its
wholly-owned   subsidiary,   First  Financial  Bank  ("FF  Bank").   Significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
FFC uses the calendar year as its fiscal year.

        The  financial  statements  reflect  adjustments,  all of which are of a
normal recurring nature, and in the opinion of management,  necessary for a fair
statement  of the results  for the  interim  periods,  and are  presented  on an
unaudited  basis.  In  preparing  the  consolidated   financial   statements  in
conformity with generally accepted accounting principles, management is required
to make  estimates  and  assumptions  that  affect the  amounts  reported in the
consolidated  financial  statements and accompanying notes. Actual results could
differ from those estimates. The operating results for the first three months of
1997 are not necessarily indicative of the results which may be expected for the
entire 1997 fiscal year. The December 31, 1996 balance sheet included  herein is
derived from the consolidated financial statements included in FFC's 1996 Annual
Report  to  Shareholders.  The  accompanying  unaudited  consolidated  financial
statements and related notes should be read in conjunction with the consolidated
financial  statements  and related notes included in FFC's 1996 Annual Report to
Shareholders.

NOTE B - FIRST FINANCIAL CORPORATION

        At March 31, 1997, FFC conducted  business as a  nondiversified  unitary
thrift holding  company and its principal  asset was all of the capital stock of
FF  Bank.  The  primary  business  of FFC  is the  business  of FF  Bank.  FFC's
activities are currently comprised of providing limited administrative  services
to FF Bank.

NOTE C - EARNINGS PER SHARE

        Primary and fully diluted earnings per share for the periods ended March
31, 1997 and 1996 have been determined  based on the weighted  average number of
common shares outstanding during each period and common equivalent shares, using
the treasury share method,  outstanding at the end of each period.  FFC's common
stock  equivalents  consist  entirely of stock  options.  See Exhibit 11 to this
Report for a detailed computation of earnings per share.

                                      -6-


<PAGE>

        In February  1997,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per
Share",  effective for periods ending after December 15, 1997. Early application
of SFAS No. 128 is not  permitted.  Pro forma  earnings  per share  ("EPS") data
using  the  criteria  set forth by SFAS No.  128,  would be as  follows  for the
periods presented:

                                                         Three Months Ended
                                                              March 31,
                                                       --------------------
                                                         1997          1996
                                                       --------      ------

     Basic EPS                                         $  0.52        $ 0.45
     Diluted EPS                                       $  0.51        $ 0.44



NOTE D - DIVIDENDS PAID OR DECLARED TO STOCKHOLDERS

        The Board of Directors of FFC on February 19, 1997, declared a $0.15 per
share  quarterly  cash  dividend  payable on March 31, 1997 to  shareholders  of
record of FFC common stock on March 14, 1997.

NOTE E - CONTINGENT LIABILITIES

        FF Bank has previously  entered into agreements  whereby,  for an annual
fee,  letters of credit are issued by FF Bank in connection with the issuance of
industrial  development  revenue bonds.  At March 31, 1997, bond issues totaling
$7.0 million are supported by such letters of credit. At March 31, 1997, each of
the outstanding  bonds for which FF Bank has issued letters of credit is current
with regard to debt service payments.

NOTE F - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                                           For The
                                                                      Three Months Ended
                                                                            March 31,
                                                                     --------------------
                                                                       1997          1996
                                                                     --------      ------
                                                                         (In thousands)

<S>                                                                  <C>          <C>   
Supplemental disclosure of cash flow information:
   Cash paid or credited to accounts during
      period for:
     Interest on deposits and borrowings                             $ 57,957     $ 54,697
     Income taxes                                                         696          710
   Non-cash investing activities:
     Mortgage loans transferred to held for sale
      portfolio                                                         5,754       15,453
     Loans receivable transferred to foreclosed
      properties                                                        1,844        1,525
     Mortgage loans securitized and transferred to
      mortgage-related securities available for sale                       --       41,448


</TABLE>



                                       -7-

<PAGE>



NOTE G - STOCK REPURCHASE PROGRAMS

        As part of a six-month 5%, or 1,875,000 share,  stock repurchase program
announced in October,  1996, FFC had  repurchased  541,225 shares of stock at an
average cost of $26.72 per share during the first quarter of 1997. After quarter
end, the company  acquired another 240,000 shares prior to the expiration of the
program on April 16, 1997. In connection with this expired  program,  a total of
1,429,620 shares were purchased at an average cost of $24.46 per share. On April
22, 1997, FFC announced its second stock repurchase  program whereby the company
would purchase up to an additional 1,850,000 shares over the period ending March
31, 1998.





                                       -8-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                  COMPARISON OF THE CONSOLIDATED BALANCE SHEETS
              AT MARCH 31, 1997 (UNAUDITED) WITH DECEMBER 31, 1996

GENERAL:

          Total assets increased to $5.809 billion at March 31, 1997 from $5.700
billion at December 31, 1996.  Deposits increased to $4.493 billion at March 31,
1997 from $4.445  billion at year-end  1996 and  borrowings  increased to $832.6
million  from $769.5  million  during the same time frame.  Advance  payments by
borrowers for taxes and insurance  increased by $16.5 million  between  December
31, 1996 and March 31, 1997 and other  liabilities  decreased $14.9 million from
December 31, 1996 to March 31, 1997.  Stockholders' equity at March 31, 1997 was
$405.7 million, down from $410.5 million at year-end 1996.

LIQUIDITY AND CAPITAL RESOURCES:

          At March 31, 1997, total consolidated  liquidity,  consisting of cash,
cash  equivalents,  and investment  securities  represented 5.49% of FFC's total
assets  compared with 6.12% at December 31, 1996. FF Bank is in compliance  with
requirements  relating  to  minimum  levels of liquid  assets as  defined by OTS
regulations.  The ongoing  management  of liquid  assets is an integral  part of
FFC's   overall   asset/liability   management   program  as   described   under
"Asset/Liability  Management." The cash and securities  portfolios are among the
most  flexible  assets  available  for shorter term  liability  matching.  Total
consolidated  liquidity at March 31, 1997 decreased by $30.0 million as compared
to December  31,  1996  liquidity  as a result of the net effect of  significant
changes in various  categories of assets and liabilities  during the three-month
interim  period.  Some of the more  significant  changes  in  these  categories,
including liquid assets, are summarized as follows:
<TABLE>
<CAPTION>


   Consolidated                                               Balance                                  Balance
   Balance Sheet                                            December 31,           Increases           March 31,
  Classification                                                1996              (Decreases)            1997
-------------------                                         ------------          -----------          --------
                                                                                  (In thousands)

<S>                                                         <C>                   <C>                 <C>       
Cash and cash equivalents                                   $  154,085            $  (14,254)         $  139,831
Securities available for sale:
  Investment securities                                        136,477               (13,666)            122,811
  Mortgage-related securities                                1,048,085               169,281           1,217,366
Securities held to maturity:
  Investment securities                                         58,434                (2,040)             56,394
  Mortgage-related securities                                  602,352               (19,470)            582,882
Loans receivable, including loans
   held for sale                                             3,512,819               (10,130)          3,502,689
Office properties                                               50,428                    34              50,462
Intangible assets                                               12,739                  (872)             11,867
Deposits                                                     4,444,932                48,173           4,493,105
Borrowings                                                     769,526                63,098             832,624
Advance payments by
 borrowers for taxes
 and insurance                                                  13,382                16,503              29,885
Other liabilities                                               62,080               (14,884)             47,196
Stockholders' equity                                           410,511                (4,815)            405,696

</TABLE>

                                      -9-


<PAGE>



        Changes  noted in the  "Increases  (Decreases)"  column of the preceding
table are discussed below in the related  sections of  "Management's  Discussion
and Analysis."

        Management  believes  liquidity  levels  are  proper  and that  adequate
capital and borrowings are available  through the capital  markets,  the Federal
Home Loan Bank  ("FHLB")  and other  sources.  For a  discussion  of  regulatory
capital requirements, see "Regulatory Capital."

        On an unconsolidated basis, FFC had cash of $26.1 million. The principal
sources  of  funds  for FFC are  dividends  from FF Bank  and  earnings  on cash
reserves.  Applicable  rules and  regulations  of the OTS impose  limitations on
capital   distributions  by  savings  institutions  such  as  FF  Bank.  Savings
institutions  such as FF Bank  which  have  capital  in  excess  of all  capital
requirements  before and after a proposed  capital  distribution  are permitted,
after giving prior  notice to the OTS, to make  capital  distributions  during a
calendar  year up to the  greater of (i) 100% of net  income to date  during the
calendar  year,  plus the amount that would reduce by 1/2 its  "surplus  capital
ratio" (the excess  capital over its capital  requirements)  at the beginning of
the  calendar  year,  or  (ii)  75% of its  net  income  over  the  most  recent
four-quarter period.

TOTAL LOANS RECEIVABLE AND HELD FOR SALE:

        Total loans,  including loans held for sale,  decreased $10.1 million to
$3.503  billion at March 31, 1997.  Total loans are  summarized  below as of the
dates indicated.
<TABLE>
<CAPTION>

                                                         March 31,            December 31,           Increase
                                                          1997                    1996              (Decrease)
                                                      -------------           ------------          ----------
                                                                            (In thousands)
<S>                                                   <C>                    <C>                  <C>  
Real estate loans:
    One- to four-family                               $ 1,880,779            $1,884,018           $  (3,239)
    Multi-family                                          233,418               238,766              (5,348)
    Commercial and non-residential                        174,808               176,911              (2,103)
                                                       ----------             ---------            ---------
       Total real estate loans                          2,289,005             2,299,695             (10,690)

Other loans:
    Consumer                                              420,797               415,155               5,642
    Home equity                                           295,107               296,749              (1,642)
    Education                                             273,682               269,633               4,049
    Credit cards                                          170,667               179,352              (8,685)
    Manufactured housing                                   97,607               104,783              (7,176)
    Business                                               10,759                11,728                (969)

Less net items to loans receivable                        (54,935)              (64,276)              9,341
                                                       ----------            ----------            ---------

Total loans (including loans held
    for sale)                                          $3,502,689            $3,512,819           $ (10,130)
                                                       ==========            ==========            =========

</TABLE>

                                      -10-

<PAGE>

          Consumer loan  balances  increased  $5.6 million and  education  loans
increased  $4.0 million in the first  quarter of 1997 as  originations  outpaced
repayments  for these product  lines.  Credit card loan balances  decreased $8.7
million in the first  quarter  of 1997  reflecting  a  seasonal  decline in this
portfolio.  Manufactured housing loan balances decreased $7.2 million as FFC had
previously  ceased  originating  manufactured  housing loans and borrowers  make
repayments.

          Mortgage  loans held for sale were $16.9 million at March 31, 1997, as
compared to $19.1 million at the end of 1996.  Off-balance  sheet commitments to
extend  credit  and to sell  mortgage  loans  totaled  $46.3  million  and $28.2
million, respectively, at March 31, 1997, as compared to $30.2 million and $20.7
million, respectively, at December 31, 1996. During the three months ended March
31, 1997,  market  interest rates  initially  moved slightly lower than year-end
1996 rates but then  trended  upward  from  year-end  levels.  The fair value of
on-balance sheet mortgage loans held for sale and off-balance  sheet commitments
to originate and sell mortgage loans can vary  substantially  depending upon the
movement of interest rates.  Management utilizes various methods to insulate FFC
from the  effects  of such  interest-rate  movements,  principally  by  securing
forward  commitments to sell loans in the secondary  mortgage  market.  However,
there can be no  assurance  that these means will be totally  effective.  Future
operations may be affected by the above-discussed risk factors.

MORTGAGE-RELATED SECURITIES:

          The  mortgage-related  securities  ("MBS") portfolio  increased $149.8
million  during the three months  ended March 31, 1997  primarily as a result of
the  net  effect  of i) the  purchase  of  $214.3  million  of  U.S.  Government
agency-backed  MBSs offset by ii) sales of MBSs having an aggregate par value of
$20.6 million and iii) principal  repayments of $41.6 million. At the end of the
first quarter, FF Bank had commitments to purchase U.S. Government agency-backed
MBSs having an aggregate par value of $41.0 million.

          The  following  tables  set  forth,  at  the  dates   indicated,   the
composition of the MBS portfolio  including issuer,  security type and financial
statement   carrying   value   as   well   as   classification    according   to
available-for-sale or held-to-maturity status:
<TABLE>
<CAPTION>

                                                             Carrying Value At
                                                    ----------------------------------
                                                     March 31,           December 31,
                                                        1997                 1996
                                                    -----------          -------------
                                                                (In thousands)

<S>                                                  <C>                  <C> 
ISSUER/SECURITY TYPE
--------------------
  U.S. Government agencies:
     Mortgage-backed certificates                    $1,262,281           $1,093,513
     Collateralized mortgage
      obligations ("CMOs")                              281,793              282,894
                                                     ----------           ----------
       Total agencies                                 1,544,074            1,376,407
                                                     ----------           ----------

  Private issuers:
     Mortgage-backed certificates                       255,895              273,595
     CMOs                                                   279                  435
                                                     ----------           ----------
       Total private issuers                            256,174              274,030
                                                     ----------           ----------

       Totals                                        $1,800,248           $1,650,437
                                                     ==========           ==========

FINANCIAL STATEMENT CLASSIFICATION
----------------------------------
  Available-for-sale portfolio                       $1,217,366           $1,048,085
  Held-to-maturity portfolio                            582,882              602,352
                                                     ----------           ----------

       Total carrying value                          $1,800,248           $1,650,437
                                                     ==========           ==========

                                      -11-

</TABLE>


<PAGE>


     During the first three months of 1997,  FFC reduced its holdings of private
issue MBSs by $17.8  million  from  $274.0  million at the end of 1996 to $256.2
million at March 31, 1997.

     FFC's  portfolio of MBSs totaled  approximately  $1.80 billion at March 31,
1997  and  were   either  i)  U.S.   Government   agency-backed   or  ii)  rated
investment-grade  quality  by at least  one  nationally  recognized  independent
rating agency except as noted below:

<TABLE>
<CAPTION>
                                                              Amortized              Fair               Carrying
                                                                 Cost                Value                Value
                                                             ----------           ----------           ----------
                                                                          (Dollars in thousands)

<S>                                                          <C>                 <C>                   <C>        
U.S. Government agencies                                     $ 1,545,077         $ 1,535,670           $ 1,544,074

Non-agency:
     Securities rated AA or above                                231,528             232,002               231,638
     Securities rated below AA, but
       of investment grade                                        10,651              10,086                10,066
     Securities rated below
       investment grade                                           16,601              14,470                14,470
                                                             -----------         -----------           -----------
                                                             $ 1,803,857         $ 1,792,228           $ 1,800,248
                                                             ===========         ===========           ===========
</TABLE>

The non-agency  securities rated below investment grade include four securities,
each  security  having been issued by an  unrelated  company,  with an aggregate
carrying value of $14.5 million.  Based upon i) the results of management's most
current review of the  performance  characteristics  of the underlying  mortgage
loans collateralizing these  below-investment-grade  securities and ii) the fact
that these securities  continue to perform,  management believes that these MBSs
have a net  realizable  value in excess of their  indicated  fair  value  and/or
amortized cost and that any indicated impairment in fair value is not permanent.
Management also has the intent and the ability to retain its investment in these
securities for a period of time sufficient to allow for any anticipated recovery
of market value.

LOAN DELINQUENCIES:

        FFC monitors the delinquency  status of its loan portfolio on a constant
basis and initiates  borrower  contact and additional  collection  procedures as
necessary at an early date.  Delinquencies  and past due loans are,  however,  a
normal part of the lending function.  When the delinquency reaches the status of
greater  than 90 days,  the loans are placed on a  non-accrual  basis until such
time as the  delinquency is reduced again to 90 days or less. Non- accrual loans
are presented separately in the following section. Loan delinquencies of 90 days
or less, for the dates indicated, are summarized in the following chart:


                                               March 31,          December 31,
                                                 1997                 1996
                                             -------------        ------------
                                                       (In thousands)

  Residential real estate loans                $ 5,514                $ 7,241
  Manufactured housing loans                     1,374                  2,314
  Credit card loans                              2,827                  2,863
  Commercial real estate loans                     440                    125
  Consumer and other loans                       1,027                  1,658
  Student loans                                 23,253                 23,034
                                               -------                -------
                                               $34,435                $37,235
                                               =======                =======

                                      -12-

<PAGE>




        At March 31,  1997,  the 90 days or less  delinquencies  decreased  $2.8
million to $34.4  million from $37.2  million at year-end  1996. As a percent of
total loans receivable, these loan delinquencies decreased from 1.06% at the end
of  1996  to  0.98%  at  March  31,  1997.  The  decrease  in 90  days  or  less
delinquencies  relates to the net effect of  changes of such  delinquencies  for
various  loan  categories,  including  the more  significant  as  follows,  i) a
decrease  of $1.7  million for  residential  mortgage  loans,  ii) a decrease of
$900,000  for  manufactured  housing  loans and iii) a decrease of $700,000  for
consumer and other loans.  These  decreases were  partially  offset with smaller
increases in  delinquencies  for commercial real estate loans and student loans.
The net decreases included $400,000 of transfers of various loans to non-accrual
status, as noted below.

        All  delinquent   loans  have  been  considered  by  management  in  its
evaluation of the adequacy of the allowances for loan losses.

NON-ACCRUAL AND IMPAIRED LOANS:

        FFC places loans into a non-accrual  status when loans are contractually
delinquent  more  than  90  days.  If  appropriate,  loans  may be  placed  into
non-accrual  status prior to becoming 90 days delinquent based upon management's
analysis.  Non-accrual  loans are summarized,  for the dates  indicated,  in the
following table:

                                               March 31,           December 31,
                                                 1997                  1996
                                             ------------          ------------
                                                      (In thousands)

One- to four-family residential                $ 6,244               $ 6,325
Multi-family residential                         1,654                 1,607
Commercial and other real estate                   402                    98
Credit cards                                     2,141                 2,106
Manufactured housing                               970                 1,164
Consumer and other                                 939                   688
                                               -------               -------
                                               $12,350               $11,988
                                               =======               =======


        Non-accrual  loans  increased by $400,000 to $12.4  million at March 31,
1997 versus $12.0  million at December 31,  1996.  As a percentage  of net loans
receivable, non-accrual loans increased slightly to 0.35% at March 31, 1997 from
0.34% at December 31, 1996. The net increase in non-accrual  loans is relatively
small  in the  aggregate  as well  as for  any  particular  loan  category.  The
increases or decreases are reasonable  fluctuations  distributed across all loan
types.

        The credit  card  non-accrual  loans  remained  stable  during the first
quarter of 1997. FFC is still showing credit card delinquencies  somewhat higher
than its historical  delinquency levels,  following national  delinquency trends
and  statistics  for  this  product.   However,   FFC  continues  to  experience
significantly  smaller  overall  credit  card  delinquencies  compared  to  such
national statistics.

        Impaired  loans as defined in SFAS No. 114,  "Impairment  of Loans," are
not  significant  at March 31, 1997.  FFC has had no  significant  troubled debt
restructurings  during  the  first  quarter  of  1997.  All  loans  included  in
non-accrual  status  have been  considered  by  management  in its review of the
adequacy of allowances for loan losses.


                                      -13-
<PAGE>


ALLOWANCES FOR LOAN LOSSES:

        FFC's loan  portfolios are evaluated on a continuing  basis to determine
the  additions  to the  allowances  for  losses and the  related  balance in the
allowances.  These  evaluations  consider  several  factors  including,  but not
limited to,  general  economic  conditions,  loan portfolio  compositions,  loan
collateral value, loan  delinquencies,  prior loss experience,  and management's
estimation of future  potential  losses.  The  evaluation of allowances for loan
losses  includes  a review of both known  loan  problems  as well as a review of
potential problems based upon historical trends and ratios.

        A summary of activity in the allowances  for loan losses,  for the three
months ended March 31, 1997 and 1996, follows:


                                                       Three Months Ended
                                                            March 31,
                                                      1997              1996
                                                    -------           ------
                                                         (In thousands)

Allowances at beginning of period                   $23,228           $25,235
Provisions                                            2,250             1,900
Charge-offs                                          (2,930)           (3,133)
Recoveries                                              378               234
                                                    -------           -------
Allowances at end of period                         $22,926           $24,236
                                                    =======           =======


        A discussion of loan loss  provisions  and  charge-offs  is presented in
"Management's  Discussion and Analysis--Comparison of the Unaudited Consolidated
Statements  of Income for the Three  Months  Ended  March 31, 1997 and 1996." An
analysis of allowances by loan category and the percentage of such allowances by
category  and in the  aggregate  to loans  receivable  at the  dates  indicated,
follows:

<TABLE>
<CAPTION>

                                                March 31, 1997                  December 31, 1996
                                         -------------------------------  -------------------------------
                                                         As Percentage                     As Percentage
                                         Allowance      Of Total Loans     Allowance       Of Total Loans
                                          Amount         In Category        Amount          In Category
                                        ----------      --------------      ------          -----------
                                                          (Dollars in thousands)

<S>                                      <C>               <C>             <C>                 <C>  
Credit cards                             $ 6,615           3.88%           $ 6,783             3.78%
Residential real estate                    6,612            .32              6,610              .31
Manufactured housing                       1,590           1.63              1,814             1.73
Commercial and non-resi-
    dential real estate                    3,659           2.09              3,621             2.00
Consumer                                   3,568            .85              3,462              .83
Home equity                                  572            .19                572              .19
Commercial business                          292           2.71                343             2.92
Education                                     18            .01                 23              .01
                                         -------                           -------
                                         $22,926            .65%           $23,228              .66%
                                         =======          =====            =======            =====

</TABLE>

        The  allowances  for loan losses were $22.9  million,  or 0.65% of loans
receivable,  at March 31, 1997 compared to $23.2 million,  or 0.66%, at December
31, 1996.  The allowances for losses  represented  186% of non-accrual  loans at
March 31,  1997 as  compared  to 194% at the end of 1996.  The  decrease  in the
aggregate  allowances  for losses from  year-end  1996 to March 31, 1997 relates
primarily to  manufactured  housing loans based upon the decreasing  size of the
portfolio for this product which is no longer  originated.  Management  believes
that  the  allowances   for  losses  are  sufficient   based  upon  its  current
evaluations.

                                      -14-
<PAGE>


CLASSIFIED ASSETS:

        For regulatory purposes, FF Bank utilizes a comprehensive classification
system for thrift  institution  problem assets.  In general,  classified  assets
include non-performing assets plus other loans and assets,  including contingent
liabilities   (see  Note  D),   meeting   the   criteria   for   classification.
Non-performing  assets include non-accrual loans,  non-performing MBSs or assets
i) which were previously loans which are not substantially  performing under the
contractual  terms of the  original  notes,  or ii) for which known  information
about possible  credit problems of borrowers  causes  management to have serious
doubts as to the ability of such  borrowers to comply with  current  contractual
terms.  This  non-performing  characteristic  impacts directly upon the interest
income normally expected from such assets.  Specifically  included are the loans
held on a non-accrual  basis,  non-performing  MBSs,  and real estate  judgments
subject to redemption and  foreclosed  properties for which FF Bank has obtained
title.

        Classified  assets,   including  non-performing  assets,  for  FF  Bank,
categorized by type of asset are set forth in the following table:


                                                    March 31,     December 31,
                                                       1997           1996
                                                   ------------   -----------
                                                         (In thousands)
CLASSIFIED ASSETS:
   Non-performing assets:
     Non-accrual loans                               $12,350      $11,988
     Foreclosed properties and other
        repossessed assets                             4,356        3,997
                                                     -------      -------
          TOTAL NON-PERFORMING ASSETS                 16,706       15,985

   Additional classified performing loans:
     Residential real estate                             564          545
     Commercial real estate                            4,926        6,105
     Consumer and other                                  210          580
   Other assets                                        2,277        2,491
   Other adjustments - net                            (2,003)      (1,638)
                                                     -------      -------
          TOTAL CLASSIFIED ASSETS                    $22,680      $24,068
                                                     =======      =======


          During  the three  months  ended  March 31,  1997,  classified  assets
decreased $1.40 million to $22.7 million from $24.1 million at December 31, 1996
primarily as the net result of the $400,000  increase in non-accrual  loans,  as
discussed in an earlier section,  a $400,000  increase in foreclosed  properties
and a $1.2 million  decrease in  additional  classified  commercial  real estate
loans,  including $300,000 which was added to non-accrual commercial real estate
loans  during  the  first  quarter  of  1997.  Other  additional  classification
categories  changed by smaller  amounts.  These additional  classifications  are
based on  certain  characteristics  identified  as  potential  weaknesses.  As a
percentage of total assets,  classified  assets decreased from 0.42% at year-end
1996 to 0.39% at March 31, 1997.

          All  adversely  classified  assets  and  off-balance  sheet  financial
guarantees  at March  31,  1997,  have  been  considered  by  management  in its
evaluation of the adequacy of allowances for losses.


                                      -15-
<PAGE>




DEPOSITS AND OTHER LIABILITIES:

          Deposits  increased  $48.2 million during the three months ended March
31, 1997  including  interest  credits of $38.5  million and net cash inflows of
$9.7 million.  The weighted  average cost of deposits of 4.50% at March 31, 1997
was slightly lower than the 4.59% reported at December 31, 1996.

          Advance  payments by borrowers  for taxes and  insurance  increased by
$16.5  million  during the first three  months of 1997 as a result of the normal
cumulative  monthly escrow  deposits made by borrowers less interim  payments of
taxes and insurance premiums.

          Other  liabilities  decreased  $14.9  million  from  $62.1  million at
December  31,  1996 to $47.2  million  at  March  31,  1997.  The  higher  other
liabilities  balance at year-end 1996 included  outstanding real estate property
tax checks of $29.7 million issued to  municipalities on behalf of the borrowers
and as those checks were paid during early 1997 other liabilities decreased.

BORROWINGS:

          At March 31,  1997,  FFC's  consolidated  borrowings  increased  $63.1
million to $832.6  million  from  $769.5  million at  December  31,  1996.  This
increase  was  primarily  due to a $116.7  million net  increase  in  short-term
reverse  repurchase  agreements  offset  by a  $53.1  million  net  decrease  in
shorter-term FHLB advances.

STOCKHOLDERS' EQUITY:

          Stockholders'  equity at March 31, 1997, was $405.7 million,  or 6.98%
of total assets,  as compared to $410.5  million,  or 7.20% of total assets,  at
December 31, 1996.  The major changes in  stockholders'  equity  included i) net
income of $19.1  million  earned during the first three months of 1997 offset by
ii) cash dividend payments to stockholders of $5.5 million, iii) the purchase of
treasury  stock at a cost of $14.5  million and iv) a decline of $5.1 million in
the  net  unrealized   holding  valuation  on   available-for-sale   securities.
Stockholders'  equity per share decreased from $11.15 per share at year-end 1996
to $11.14 per share at March 31, 1997.

REGULATORY CAPITAL:

          FF Bank is subject to various OTS  minimum  capital  measurements,  as
formulated under the Federal Deposit Insurance Corporation  Improvement Act, and
also is subject to additional FDIC "well capitalized"  institution  requirements
relative to deposit account insurance premiums.

                                      -16-

<PAGE>


          As of March 31, 1997, FF Bank had regulatory capital well in excess of
all such  requirements.  At that date, the following table  summarizes FF Bank's
capital amounts and capital ratios,  and the capital amounts and ratios required
by its regulators:

<TABLE>
<CAPTION>


                                                                  Minimum
                                                               Required For                 Minimum Required
                                                                  Capital                      To Be Well
                                                                 Adequacy                  Capitalized Under
                                        Actual                   Purposes                   OTS Requirement
                                 --------------------          ------------                 ---------------
                                 Amount         Ratio            Amount        Ratio        Amount    Ratio
                                 ------         -----            ------        -----        ------    -----
                                                              (Dollars in thousands)
<S>                            <C>             <C>             <C>             <C>          <C>              <C>
Tangible capital (to
  tangible assets)             $366,825         6.32%          $ 87,113        1.50%
Core leverage capital
  (to adjusted                  377,397         6.49%           171,544        3.00%        $290,907          5.00%
    tangible assets)
Risk-based capital
  (to risk-based                400,182        13.95%           229,424        8.00%         286,780         10.00%
    assets)
Core leverage capital
  (to risk-based                377,397        13.16%                                        172,068          6.00%
    assets)
</TABLE>

          The OTS has proposed an  interest-rate  risk  calculation such that an
institution with a measured  interest-rate  risk exposure greater than specified
levels must deduct an  interest-rate  risk  component when  calculating  the OTS
risk-based   capital   requirement.   Implementation  of  these  rules  remained
indefinitely  delayed at March 31,  1997.  Management  of FFC and FF Bank do not
believe these rules would  significantly  impact the capital  requirements of FF
Bank or cause FF Bank to fail to meet its regulatory capital requirements.

LOAN ORIGINATIONS:

          A comparison  of loan  originations  and  purchases,  including  loans
originated for sale but excluding  purchases of MBSs, for the first three months
of 1997 and 1996 is set forth below:
<TABLE>
<CAPTION>

                                                             Three Months Ended March 31,
                                                -------------------------------------------------------
                                                  1997              Percent        1996         Percent
                                                --------            -------      --------       -------
                                                                (Dollars in thousands)
LOAN TYPE
---------
<S>                                             <C>                <C>           <C>             <C>   
 Mortgage:
   One- to four-family                          $  103,122           56.6%       $ 161,156         60.1%
   Multi-family                                      4,596            2.5            9,554          3.6
   Commercial/non-residential                        5,615            3.1           17,885          6.7
                                                ----------          -----        ---------        -----
       Total mortgage origina-
         tions                                     113,333           62.2          188,595         70.4

 Consumer                                           54,997           30.2           57,981         21.6
 Student                                            13,732            7.5           20,973          7.8
 Commercial business                                    86             .1              509           .2
                                                ----------          -----        ---------        -----
       Total loans originated                      182,148          100.0%         268,058        100.0%
                                                                    =====                         =====
 Decrease in undisbursed
    loan proceeds                                    8,998                           5,493
                                                ----------                       ---------
       Total loans disbursed                    $  191,146                       $ 273,551
                                                ==========                       =========
</TABLE>


        Total loan originations  decreased to $182.1 million for the first three
months of 1997 from $268.1  million  for the same period in 1996.  This net 1997
decrease of $86.0 million was primarily attributable to a $75.3 million decrease
in mortgage loan originations.


                                      -17-

<PAGE>



        One- to four-family  mortgage loan originations  decreased $58.1 million
to $103.1  million  for the first  three  months of 1997 as  compared  to $161.2
million for the same period in 1996. The decrease in  originations  in 1997 from
1996 reflects decreased borrower demand as interest rates during the first three
months of 1997 were generally  higher than the market  interest rates during the
same  period in 1996.  Approximately  50% of  originations  for the first  three
months of 1997 were adjustable-rate mortgage loans which are held for investment
purposes.  Longer-term fixed-rate mortgages are normally sold into the secondary
market.  At March 31, 1997,  one- to four-family  mortgage loan  applications in
process and commitments  totaled $60.6 million and $36.8 million,  respectively,
as compared to $33.4 million and $20.8 million at December 31, 1996.

        Consumer loan  originations  decreased  $3.0 million to $55.0 million in
the first  three  months of 1997 as compared  to $58.0  million  during the same
period in 1996. Student loan originations  decreased to $13.7 million during the
first three months of 1997 from $21.0 million for the same period in 1996.  This
decrease of $7.3 million in student loan  originations  is due to the conversion
to direct lending of a major university in our marketing area.

ASSET/LIABILITY MANAGEMENT:

        The objective of FFC's asset/liability policy is to manage interest rate
risk so as to maximize net interest  income over time in changing  interest-rate
environments.  To this end,  management  believes that  strategies  for managing
interest-rate   risk  must  be  responsive  to  changes  in  the   interest-rate
environment and must recognize and accommodate the market demands for particular
types of deposit and loan products.

        Interest-bearing assets and liabilities can be analyzed by measuring the
magnitude by which such assets and liabilities are  interest-rate  sensitive and
by  monitoring an  institution's  interest-rate  sensitivity  "gap." An asset or
liability is determined  to be  interest-rate  sensitive  within a specific time
frame if it  matures or  reprices  within  that time  period.  An  interest-rate
sensitivity   "gap"  is  defined  as  the  difference   between  the  amount  of
interest-earning  assets anticipated to mature or reprice within a specific time
period and the amount of interest-costing  liabilities  anticipated to mature or
reprice  within the same time  period.  A gap is  considered  positive  when the
amount of  interest-rate  sensitive  assets exceeds the amount of  interest-rate
sensitive liabilities that mature or reprice within a given time frame. A gap is
considered  negative  when the  amount of  interest-rate  sensitive  liabilities
exceeds  the amount of  interest-rate  sensitive  assets  that mature or reprice
within a specified time period.

        The   table   on   page   20   sets   forth   the   combined   estimated
maturity/repricing  structure  of  FFC's  consolidated  interest-earning  assets
(including  net  items)  and  interest-costing  liabilities  at March 31,  1997.
Assumptions  regarding  prepayment  and  withdrawal  rates are based  upon FFC's
historical experience,  and management believes such assumptions are reasonable.
The table does not  necessarily  indicate  the impact of general  interest  rate
movements on FFC's net interest income because  repricing of certain  categories
of  assets  and  liabilities  through,  for  example,  prepayments  of loans and
withdrawals of deposits,  is beyond FFC's control.  As a result,  certain assets
and  liabilities  indicated  as  repricing  within a stated  period  may in 


                                      -18-

<PAGE>


fact reprice at different  times and at different rate levels.  Further,  in the
event of a change in interest rates,  prepayment and early withdrawal levels may
deviate significantly from those assumed in calculating the data in the table.

        FFC's consolidated one-year  interest-rate  sensitivity gap at March 31,
1997 was a  positive  $39.2  million  or 0.68% of total  assets.  This  one-year
positive gap position  compares to the December 31, 1996  negative gap of $102.6
million or 1.80% of total assets at that date.

        FFC's consolidated  one-year positive gap position of 0.68% at March 31,
1997 falls within management's operating range of a 10% positive gap position to
a 10% negative gap position.  In view of the current  interest-rate  environment
and the related  impact on customer  behavior,  management  believes  that it is
extremely   important  to  weigh  and  balance  the  effect  of  asset/liability
management  decisions in the  short-term in its efforts to maintain net interest
margins and acceptable future  profitability.  As such, management believes that
it has been able to achieve a consistent net interest margin while still meeting
its asset/liability management objectives.

        In this regard, FF Bank also measures and evaluates  interest-rate  risk
via a separate methodology pursuant to OTS regulations.  The net market value of
interest-sensitive  assets and  liabilities  is  determined by measuring the net
present  value of future cash flows under  varying  interest  rate  scenarios in
which  interest rates would  theoretically  increase or decrease up to 400 basis
points on a sudden and prolonged basis.  This theoretical  analysis at March 31,
1997 indicates  that FF Bank's  current  financial  position  should  adequately
protect FF Bank,  and thus FFC, from the effects of rapid rate changes.  The OTS
has proposed an  interest-rate  risk calculation such that an institution with a
measured  interest-rate  risk exposure greater than specified levels must deduct
an  interest-rate  risk component when  calculating  its OTS risk-based  capital
requirement.  The implementation of this rule remained  indefinitely  delayed at
the end of the first  quarter.  At March 31,  1997,  FF Bank would not have been
required  to  deduct  an  interest-rate   risk  component  under  this  proposed
regulation.

                                      -19-

<PAGE>
<TABLE>
<CAPTION>



                      FIRST FINANCIAL CORPORATION CONSOLIDATED GAP ANALYSIS AT MARCH 31, 1997



                                               Three                             Greater         Greater            Greater         
                                               Months         Four Months        Than One       Than Three         Than Five        
                                                and             Through          Through         Through            Through         
                                               Under           One Year         Three Years     Five Years         Ten Years        
                                             ---------        ----------       -----------      -----------        ----------       
                                                                                             (Dollars in thousands)

<S>                                          <C>              <C>               <C>             <C>                   <C>   
Rate-sensitive assets:
   Investments and interest-
     earning deposits, including
     federal funds (a)(b)                    $  109,760       $   19,760        $   37,558          $   40,200         $    401     
   Mortgage-related securities (b)              595,923          907,599            88,745              67,438           80,769     
   Mortgage loans:
     Fixed-rate (c)(d)                           56,637          134,540           287,644             207,928          221,401     
     Adjustable-rate (c)                        230,971          681,743           250,660                  --               --     
   Other loans                                  704,631          194,255           208,799              84,384           54,951     
                                             ----------       ----------        ----------          ----------         --------     
                                              1,697,922        1,937,897           873,406             399,950          357,522     

Rate-sensitive liabilities:
   Deposits (e)(f):
     Checking                                   121,379           25,602            63,948              49,991           78,323     
     Money market accounts                       97,525           65,641           125,482              47,018           39,731     
     Passbook                                   266,061          195,427            52,502              37,802           54,434     
     Certificates of deposit                    698,272        1,305,613           928,078              91,963            3,294     
   Borrowings                                   570,813          250,244             4,621               1,119              597     
                                             ----------       ----------        ----------          ----------         --------     
                                              1,754,050        1,842,527         1,174,631             227,893          176,379     
                                             ----------       ----------        ----------          ----------         --------     


GAP (repricing difference)                   $  (56,128)      $   95,370        $ (301,225)         $  172,057         $181,143     
                                             ==========       ==========        ==========          ==========         ========     


Cumulative GAP                               $  (56,128)      $   39,242        $ (261,983)         $ ( 89,926)        $ 91,217
                                             ==========       ==========        ==========          ==========         ========
                                                                                                  
                                                                                                  
Cumulative GAP/Total assets                       (0.97)%           0.68%            (4.51)%             (1.55)%           1.57%
                                             ==========       ==========        ==========          ===========        ========
                                                                                               

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                             
                                                    Greater                                     
                                                    Than Ten         Greater                     
                                                    Through            Than                      
                                                    20 Years         20 Years         Total      
                                                   ----------        --------       -------      
                                                                                               
                                                                                               
<S>                                               <C>              <C>            <C>    
Rate-sensitive assets:                                                                         
   Investments and interest-                                                                   
     earning deposits, including                                                               
     federal funds (a)(b)                         $ 36,229         $   29,010     $  272,918   
   Mortgage-related securities (b)                  59,326                448      1,800,248   
   Mortgage loans:                                                                             
     Fixed-rate (c)(d)                             168,203              1,673      1,078,026   
     Adjustable-rate (c)                                --                 --      1,163,374   
   Other loans                                      14,269                 --      1,261,289   
                                                  --------         ----------     ----------   
                                                   278,027             31,131      5,575,855   
                                                                                               
Rate-sensitive liabilities:                                                                    
   Deposits (e)(f):                                                                            
     Checking                                       71,238             39,161        449,642   
     Money market accounts                          10,085              1,121        386,603   
     Passbook                                       34,644              8,126        648,996   
     Certificates of deposit                            --                 --      3,027,220   
   Borrowings                                        1,910              3,320        832,624   
                                                  --------         ----------     ----------   
                                                   117,877             51,728      5,345,085   
                                                  --------         ----------     ----------   
                                                                                               
                                                                                               
GAP (repricing difference)                        $160,150         $  (20,597)    $  230,770   
                                                  ========         ==========     ==========   
                                                                                               
                                                                                               
Cumulative GAP                                    $251,367         $  230,770   
                                                  ========         ==========   
                                                                                
                                                                                
Cumulative GAP/Total assets                           4.33%              3.97%  
                                                  ========         ==========   
                                                                
                                   
</TABLE>



(a)      Investments  are adjusted to include FHLB stock  totaling $36.2 million
         as investments in the "Greater Than Ten Through 20 Years" category.

(b)      Investment  and  mortgage-related  securities are presented at carrying
         value,  including  net  unrealized  gain or loss on  available-for-sale
         securities.

(c)      Based upon 1) contractual  maturity,  2) repricing date, if applicable,
         3) scheduled  repayments of principal and 4) projected  prepayments  of
         principal  based upon  FFC's  historical  experience  as  modified  for
         current market conditions.

(d)      Includes loans held for sale.

(e)      Deposits include $29.9 million of advance payments by borrowers for tax
         and  insurance  and  exclude  accrued  interest  on  deposits  of $10.5
         million.

(f)      FFC has assumed that its passbook savings,  checking accounts and money
         market accounts would have projected  annual  withdrawal  rates,  based
         upon FFC's historical experience, of 26%, 34% and 42%, respectively.



                                      -20-

<PAGE>



                                COMPARISON OF THE
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                           FOR THE THREE MONTHS ENDED
                             MARCH 31, 1997 AND 1996

SELECTED INCOME STATEMENT INFORMATION:

         For the first quarter of 1997, FFC reported net income of $19.1 million
in comparison with net income,  before an extraordinary charge, of $17.3 million
for the first quarter of 1996. The 1996 extraordinary charge,  $686,000 or $0.02
per  share,  related  to costs  associated  with the early  redemption  of FFC's
outstanding subordinated notes originally scheduled to mature in 1999.

         Fully diluted earnings per share for the 1997 quarter amounted to $0.51
per share as compared to $0.46 per share prior to the  extraordinary  charge for
the 1996 quarter.  Excluding the 1996 extraordinary  item, the annualized return
on assets for the first quarter of 1997  increased to 1.33% from 1.28% for 1996,
while the  annualized  return on average  equity  for the first  quarter of 1997
increased to 18.50%, compared to 17.71% for the first quarter of 1996.

NET INTEREST INCOME:

         Net interest income  increased $1.6 million to $47.6 million during the
first  quarter  of 1997  from  $46.0  million  for the  first  quarter  of 1996,
primarily due to an increase in average balances of interest-earning  assets and
interest-bearing   liabilities   from  $5.175   billion   and  $4.942   billion,
respectively,  in 1996 to $5.496 billion and $5.232  billion,  respectively,  in
1997. The net interest  margin of 3.42% for the first quarter of 1997,  however,
was down from the 3.54%  reported for the first quarter of 1996. The decrease in
the margin in 1997 was offset by an improvement in the earning-asset  ratio from
104.71% in 1996 to 105.05% in 1997. The average yield on interest-earning assets
(8.01% in 1996 versus  7.89% in 1997)  decreased by 12 basis  points,  while the
average  cost of  interest-bearing  liabilities  (4.68% in 1996 versus  4.69% in
1997),  increased  one basis  point.  The decrease in the margin and the average
yield  on  earning  assets  relates  to  the  sale  of  credit  card  loans  and
mortgage-backed securities during the latter half of 1996.

INTEREST SPREAD:

         The  following  table sets forth the weighted  average  yield earned on
FFC's  interest-earning  assets,  the  weighted  average  interest  rate paid on
deposits and borrowings,  the net spread between yield earned and rates paid and
the net interest margin during the three


                                      -21-

<PAGE>



months ended March 31, 1997 and 1996. A comparison  of similar data at March 31,
1997 and 1996 is also shown.

<TABLE>
<CAPTION>
                                           For the
                                       Three Months Ended                   At
                                           March 31,                     March 31,
                                    -----------------------       -----------------------
                                      1997            1996          1997             1996
                                    -------         -------       --------         ------

<S>                                  <C>             <C>           <C>              <C>    
Weighted average yield on
  interest-earning assets            7.89%           8.01%         7.87%            7.97%

Weighted average rate paid
  on deposits and borrowings         4.69            4.68          4.67             4.63
                                    -----           -----         -----            -----

Interest spread                      3.20%           3.33%         3.20%            3.34%
                                    =====           =====         =====            =====

Net interest margin (net
  interest income divided
  by earning assets)                 3.42%           3.54%         3.41%            3.51%
                                    =====           =====         =====            =====

</TABLE>

         The  interest  spread was 3.20% for the three month  period ended March
31, 1997, as compared to 3.33% for the same period in 1996. The interest  margin
decreased  to 3.42% for the three month  period  ended March 31, 1997 from 3.54%
for the 1996 period, due to the factors noted above. The interest spread and the
net  interest  margin were 3.20% and 3.41%,  respectively,  at March 31, 1997 as
compared to 3.34% and 3.51%, respectively, at March 31, 1996.

PROVISIONS FOR LOSSES ON LOANS:

         Provisions for loan losses  increased  $400,000 to $2.3 million for the
first quarter of 1997 compared to $1.9 million for the 1996 quarter. Charge-offs
for the first  quarter of 1997  exceeded  related  period  provisions  due to i)
previously  provided  for  charge-offs  related  to  the  manufactured   housing
portfolio and ii) lower  provisions added to the loss allowances for residential
mortgage loans based on current evaluations of the portfolio.

         The  following  table  summarizes  FFC's net  charge-off  experience by
category for the three months ended March 31, 1997 and 1996.

                                               For the Three Months
                                                  Ended March 31,
                                      ---------------------------------
                                         1997                    1996
                                      -----------              --------
                                         Net                      Net
                                      Charge-offs            Charge-offs
                                      -----------            -----------
LOAN TYPE                                   (Dollars in thousands)
---------                                   

Credit cards                             $1,761              $2,116
Manufactured housing                        433                 192
Residential real estate                      84                 353
Consumer and other                          165                  69
Commercial business                         109                 169
                                         ------              ------
                                         $2,552              $2,899
                                         ======              ======
Net charge-offs as a
  percent of average loans
  outstanding (annualized)                 0.29%               0.32%
                                         ======              ======

                                      -22-
<PAGE>



        The $300,000 decrease in net charge-offs for the quarter ended March 31,
1997 versus the same period in 1996  reflects a similar  decrease of $300,000 in
credit card loan net charge-offs. Other increases and decreases for various loan
category net charge-offs were smaller and substantially offset. The $1.8 million
of net credit card loan  charge-offs  for 1997,  while  decreased  from the 1996
level,  remains higher than historical  levels.  The current  increased level of
credit card loan net charge-offs is following the national trend, however, FFC's
experience is at a somewhat lower percentage than the national averages.  During
the third  quarter of 1996,  FFC sold an affinity  group of the credit card loan
portfolio  that  was  experiencing   higher  than  average   delinquencies   and
charge-offs and that sale has helped reduce 1997 credit card losses.  Management
continues to closely monitor the provisions for losses  allocated to credit card
loss  allowances to keep pace with net charge-off  experience and that allowance
at March 31, 1997 is 3.88% of credit card loan balances  compared to 3.78% as of
December 31, 1996.

        The  OTS  and  the  FDIC,  as an  integral  part  of  their  supervisory
examination process,  periodically review FF Bank's allowances for losses. These
agencies may require FF Bank to recognize additions to the allowances based upon
their  judgment  of  information   available  to  them  at  the  time  of  their
examination.  A  regularly  scheduled  supervisory  examination  by the  OTS was
completed in early 1997 and no material corrective actions were required.

        Management  of FFC  and FF  Bank  believe  that  the  current  level  of
provisions  for losses are  sufficient  based upon its allowance  criteria.  See
"Allowances for Loan Losses" for further discussion.

Non-Interest Income:

Changes in non-interest income for the first quarter of 1997 as compared to 1996
are summarized below:

                                       Three Months Ended
                                             March 31                         
                                      -----------------------        Increase
                                         1997           1996        (Decrease)
                                      --------       --------      ----------

Deposit account service fees          $ 3,369        $ 3,142       $   227
Loan fees and service charges           3,220          2,729           491
Insurance and brokerage
  commissions                           1,940          1,832           108
Service fees on loans sold              1,401          1,533          (132)
Gain on sales of loans and MBSs         1,128            261           867
Gain on sales of investments              102             13            89
Other                                     837            747            90
                                      -------        -------       -------
                                      $11,997        $10,257       $ 1,740
                                      =======        =======       =======


         Non-interest  income  increased  $1.7 million for the first  quarter of
1997 as  compared to the 1996  quarter.  FFC's  fee-based  income  continued  to
increase  as i)  deposit-related  fees were up  $200,000,  ii) loan fees were up
$491,000 and iii) insurance/brokerage  sales commissions increased $100,000. Net
gains on the disposition of loans and MBSs increased $867,000 as a net result of
i) a  decrease  of  $720,000  in  gains  achieved  upon the sale of loans in the
secondary  mortgage  market and the realization of related  originated  mortgage
servicing  rights  ("OMSRs")  and ii) an increase of $1.6 million in the gain or
loss realized upon the sale or valuation of MBSs.  The 1997 decrease in gains on
sales of loans,  and the recognition of related OMSRs,  was related to the lower
level of production of fixed-rate mortgage loans


                                      -23-

<PAGE>

as general interest rates tended to rise during the course of the first quarter.
FFC  sells  long-  term,  fixed-rate  mortgage  loans in the  normal  course  of
interest-rate  risk management.  Gains or losses realized from the sale of loans
held for sale and the related  recognition of OMSRs can fluctuate  significantly
from period to period  depending  upon the  volatility of interest rates and the
volume of loan originations. Thus, results of sales in any one period may not be
indicative  of future  results.  FFC  realized  gains of $600,000 on the sale of
previously  securitized  MBSs in 1997  whereas  a net loss of $1.0  million  was
recognized  in  1996  due to  sales  of  MBSs  and an  impairment  writedown  of
non-agency MBSs.

Non-Interest Expense:

A summary of changes in non-interest  expense,  for the periods indicated and by
major categories, follows:

                                           Three Months Ended
                                               March 31 
                                        ----------------------       Increase
Expense Category                          1997          1996        (Decrease)
----------------                        --------      --------      ----------

Compensation and benefits               $12,810       $12,083       $   727
Occupancy                                 2,560         2,458           102
Marketing                                 1,896         1,657           239
Amortization of intangible assets           872         1,264          (392)
Federal deposit insurance premiums          707         2,561        (1,854)
All other                                 8,835         9,372          (537)
                                        -------       -------       -------
                                        $27,680       $29,395       $(1,715)
                                        =======       =======       =======


        Non-interest expense decreased  approximately $1.7 million for the first
quarter of 1997 as  compared  to the first  quarter of 1996.  This  decrease  is
directly related to the decrease in federal deposit  insurance  premiums in 1997
following  legislation  in 1996 to create  parity  between  the bank and  thrift
insurance funds of the Federal Deposit  Insurance  Corporation.  The decrease in
the  amortization  of intangible  assets relates to the change in accounting for
such assets in the latter part of 1996.

        Non-interest  expense  decreased  as a percentage  of average  assets to
1.93% for the first  quarter of 1997  compared  to 2.17% for 1996.  Controllable
non-interest  expenses,  which exclude the amortization of intangible assets and
one-time  expenditures  (if any),  decreased to 1.87% of average  assets for the
first  quarter  of 1997 as  compared  to 2.07%  for  1996.  In  addition,  FFC's
efficiency  ratio  (which  represents  the  ratio of  controllable  expenses  to
recurring  income)  improved to 45.95% for the 1997  quarter from 50.17% for the
1996 quarter.

Income Taxes:

        Income tax expense  increased $3.0 million for the first quarter of 1997
as compared to the first  quarter of 1996 as a result of i) a 16.1%  increase in
pretax income in 1997 and ii) the  realization  of a $1.4 million credit in 1996
upon the completion of a federal tax audit.  Upon  completion of the audit,  the
settlement of certain issues resulted either in refunds of taxes previously paid
or on which  deferred tax valuation  allowances  had been  previously  provided.
Excluding the impact of the refund,  the effective income tax rate, as a percent
of pre-tax  income,  increased to 36.1% for the first quarter of 1997 from 35.7%
in 1996.

                                      -24-

<PAGE>



                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


        This report contains certain  "forward-looking  statements." FFC desires
to take  advantage of the "safe  harbor"  provisions  of the Private  Securities
Litigation  Reform Act of 1995 and is including  this  statement for the express
purpose of availing itself of the protections of the safe harbor with respect to
all  of  such  forward-looking  statements.   These  forward-looking  statements
describe  future plans or strategies  and include FFC's  expectations  of future
financial  results.  The words "believe,"  "expect,"  "anticipate,"  "estimate,"
"project," and similar expressions identify  forward-looking  statements.  FFC's
ability  to  predict  results or the  effect of future  plans or  strategies  is
inherently uncertain.  Factors which could affect actual results include but are
not limited to i) general market rates,  ii) general economic  conditions,  iii)
legislative/regulatory  changes,  iv) monetary  and fiscal  policies of the U.S.
Treasury and the Federal  Reserve,  v) changes in the quality or  composition of
FFC's loan and investment portfolios, vi) demand for loan products, vii) deposit
flows, viii) competition, ix) demand for financial services in FFC's markets and
x) changes in  accounting  principles,  policies or  guidelines.  These  factors
should be considered in evaluating  the  forward-looking  statements,  and undue
reliance should not be placed on such statements.

        FFC does not undertake  and  specifically  disclaims  any  obligation to
update any  forward-looking  statements to reflect  occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.



                                      -25-

<PAGE>



                           PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K.


        a. Exhibits:

                  Exhibit 11 - Computation of Earnings Per Share

                  Exhibit 27 - Financial Data Schedule


        b. Reports on Form 8-K:

                            On January 14, 1997, the Registrant  filed a Current
                  Report on Form 8-K with the Securities and Exchange Commission
                  to report that FFC had  announced  earnings for the year ended
                  December 31, 1996.







                                      -26-

<PAGE>



                                   SIGNATURES



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



                                         FIRST FINANCIAL CORPORATION


Date: May 9, 1997                        /s/ John C. Seramur
                                         --------------------
                                         John C. Seramur, President
                                         (Chief Executive Officer) and Director





Date: May 9, 1997                        /s/ Thomas H. Neuschaefer
                                         --------------------------
                                         Thomas H. Neuschaefer
                                         Vice President, Treasurer and Chief
                                         Financial Officer









                                      -27-

<PAGE>


                                  EXHIBIT INDEX





              11     -        Computation of Earnings Per Share

              27     -        Financial Data Schedule