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    June 30, 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            36,217,543 Shares
   ---------------------------------------          -------------------------
                  Class                           Outstanding at July 31, 1997


<PAGE>




                           FIRST FINANCIAL CORPORATION

                                 FORM 10-Q INDEX




Part I -          Financial Information

               Consolidated Balance Sheets as of June 30, 1997
                  (Unaudited) and December 31, 1996

               Unaudited Consolidated Statements of Income for
                  the Three Months and Six Months Ended
                  June 30, 1997 and 1996

               Unaudited Consolidated Statement of Changes in
                  Stockholders' Equity for the Six Months Ended
                  June 30, 1997

               Unaudited Consolidated Statements of Cash Flows
                  for the Six Months Ended June 30, 1997 and 1996

               Notes to Unaudited Consolidated Financial Statements

               Management's Discussion and Analysis:
                  Comparison of the Consolidated Balance Sheets
                  at June 30, 1997 (Unaudited) and December 31,
                  1996

                  Comparison of the Unaudited Consolidated Statements
                  of Income for the Three Months and Six Months Ended
                  June 30, 1997 and 1996


Part II -         Other Information

               Item 6.  Exhibits and Reports on Form 8-K

Signatures

Exhibits

                                       -1-

<PAGE>
                           FIRST FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                             JUNE 30,
                                                                               1997               DECEMBER 31,
                                                                            (UNAUDITED)              1996
                                                                           ----------             ----------
                                                                                       (In thousands)
<S>                                                                        <C>                    <C>       
Cash                                                                       $   91,459             $  133,529
Federal funds sold                                                              2,616                  2,513
Interest-earning deposits                                                      31,328                 18,043
                                                                           ----------             ----------
     Cash and cash equivalents                                                125,403                154,085

Securities available for sale (at fair value):
     Investment securities                                                    154,716                136,477
     Mortgage-related securities                                            1,278,940              1,048,085
Securities held to maturity (at amortized cost):
     Investment securities (fair value of
     $55,929,000--1997 and $57,996,000--1996)                                  56,261                 58,434
     Mortgage-related securities (fair value of
     $540,488,000--1997 and $597,106,000--1996)                               563,742                602,352
Loans receivable:
     Held for sale                                                             19,467                 19,119
     Held for investment                                                    3,547,321              3,493,700
Foreclosed properties and repossessed assets                                    4,026                  3,997
Real estate held for investment or sale                                         7,407                  7,431
Office properties and equipment                                                50,470                 50,428
Intangible assets, less accumulated amortization                               10,995                 12,739
Other assets                                                                  112,753                113,584
                                                                           ----------             ----------
                                                                           $5,931,501             $5,700,431
                                                                           ==========             ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                   $4,517,674             $4,444,932
Borrowings                                                                    908,096                769,526
Advance payments by borrowers
     for taxes and insurance                                                   41,220                 13,382
Other liabilities                                                              41,786                 62,080
                                                                           ----------             ----------
        Total liabilities                                                   5,508,776              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, 37,658,986 (1997),
         37,450,879 (1996)
       Outstanding, 36,209,366 (1997)
         36,802,484 (1996)                                                     37,659                 37,451
     Additional paid-in capital                                                45,029                 43,668
     Net unrealized gain on
       securities available for sale                                            4,829                  1,300
     Treasury stock, 1,449,620 (1997) and
       648,395 (1996) shares, at cost                                         (35,495)               (14,447)
     Retained earnings                                                        370,703                342,539
                                                                           ----------             ----------
       Total stockholders' equity                                             422,725                410,511
                                                                           ----------             ----------
                                                                           $5,931,501             $5,700,431
                                                                           ==========             ==========
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       -2-

<PAGE>
                           FIRST FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                                    JUNE 30,                           JUNE 30,
                                                              ---------------------                 ---------------
                                                            1997               1996             1997             1996
                                                          --------          ---------         --------         ------
                                                                   (In thousands, except
                                                                     per share amounts)
<S>                                                       <C>                 <C>             <C>             <C>     
Interest income:
   Mortgage loans                                         $ 43,720            $ 43,406        $ 86,808        $ 89,285
   Other loans                                              30,803              31,374          61,431          63,033
   Mortgage-related securities                              32,128              20,658          62,485          42,487
   Investments                                               3,953               6,501           8,039          10,756
                                                          --------            --------        --------        --------
     Total interest income                                 110,604             101,939         218,763         205,561
Interest expense:
   Deposits                                                 50,513              49,678         100,284         100,045
   Borrowings                                               11,940               6,534          22,693          13,820
                                                          --------            --------        --------        --------
     Total interest expense                                 62,453              56,212         122,977         113,865
                                                          --------            --------        --------        --------
     Net interest income                                    48,151              45,727          95,786          91,696
Provision for losses on loans                                2,100               2,180           4,350           4,080
                                                          --------            --------        --------        --------
                                                            46,051              43,547          91,436          87,616
Non-interest income:
   Deposit account service fees                              3,747               3,334           7,116           6,476
   Loan fees and service charges                             3,476               3,020           6,696           5,749
   Insurance and brokerage sales
     commissions                                             1,938               1,779           3,878           3,611
   Service fees on loans sold                                1,310               1,564           2,711           3,097
   Net gain on disposition of loans
     and mortgage-related securities                           697                 447           1,825             708
   Net gain on sales of securities
     available for sale                                         --                 391             102             404
   Other                                                       979                 843           1,816           1,590
                                                          --------            --------        --------        --------
      Total non-interest income                             12,147              11,378          24,144          21,635
                                                          --------            --------        --------        --------
      Operating income                                      58,198              54,925         115,580         109,251
                                                          --------            --------        --------        --------
Non-interest expense:
   Compensation, payroll taxes
     and benefits                                           12,863              11,183          25,673          23,266
   Occupancy                                                 2,362               2,374           4,922           4,832
   Data processing                                           1,914               1,885           3,751           3,750
   Marketing                                                 1,668               1,613           3,564           3,270
   Telephone and postage                                     1,592               1,587           3,369           3,285
   Loan expenses                                             1,561               1,883           3,014           3,604
   Furniture and equipment                                   1,070               1,254           2,207           2,614
   Amortization of intangible assets                           872               1,265           1,744           2,529
   Federal deposit insurance premiums                          723               2,542           1,430           5,103
  Net income from foreclosed
     properties                                                (60)               (183)            (85)           (123)
   Other                                                     2,506               2,890           5,162           5,558
                                                          --------            --------        --------        --------
     Total non-interest expense                             27,071              28,293          54,751          57,688
                                                          --------            --------        --------        --------
Income before income taxes
  and extraordinary item                                    31,127              26,632          60,829          51,563
Income taxes                                                11,147               9,051          21,739          16,648
                                                          --------            --------        --------        --------
Income before extraordinary item                            19,980              17,581          39,090          34,915
Extraordinary item                                              --                  --              --            (686)
                                                          --------            --------        --------        --------

Net income                                                $ 19,980            $ 17,581        $ 39,090        $ 34,229
                                                          ========            ========        ========        ========
Earnings per share:
  Primary and fully diluted:
     Income before extraordinary
      item                                                $   0.54            $   0.46        $   1.05        $   0.92
     Extraordinary item                                         --                  --              --           (0.02)
                                                          --------            --------        --------        --------
     Net income                                           $   0.54            $   0.46        $   1.05        $   0.90
                                                          ========            ========        ========        ========

Cash dividends per share                                  $   0.15            $   0.12        $   0.30        $   0.24
                                                          ========            ========        ========        ========
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       -3-

<PAGE>
                           FIRST FINANCIAL CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  NET
                                              UNREALIZED
                               COMMON          HOLDING
                              STOCK AND         GAIN 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
  six months ended
  June 30, 1997                                                                   39,090              39,090

Cash dividends paid
  ($0.30 per share)                                                              (10,926)            (10,926)

Exercise of stock
  options                        1,569                                                                 1,569

Change in net un-
  realized holding
  gain on
  securities
  available for
  sale (net of
  taxes)                                          3,529                                                3,529

Treasury stock
  purchased                                                      (21,048)                            (21,048)
                              --------         --------         --------        --------             --------

BALANCES AT
  JUNE 30, 1997               $ 82,688         $  4,829         $(35,495)       $370,703            $422,725
                              ========         ========         ========        ========            ========

</TABLE>

See notes to unaudited consolidated financial statements.


                                                        -4-

<PAGE>
                           FIRST FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                       SIX MONTHS ENDED
                                                                                                           JUNE 30,
                                                                                            --------------------------------------
                                                                                               1997                          1996
                                                                                            ----------                     -------
OPERATING ACTIVITIES                                                                              (In thousands)
<S>                                                                                         <C>                     <C>      
   Net income                                                                               $   39,090              $  34,229
   Adjustments to reconcile net income to net cash provided
     by operating activities:
      Decrease (increase) in accrued interest on loans                                          (1,158)                   898
      Increase in accrued interest on deposits                                                   3,765                  2,706
      Loans originated for sale                                                                (61,850)              (138,695)
      Proceeds from sales of loans held for sale                                                74,374                172,115
      Provision for depreciation                                                                 2,538                  2,938
      Provision for losses on loans and other assets                                             4,350                  3,748
      Amortization of intangible assets and servicing rights                                     2,824                  3,436
      Net gain on sales of loans and other assets                                               (1,923)                (1,112)
      Other                                                                                      1,679                (27,303)
                                                                                            -----------              --------
     Net cash provided by operating activities                                                  63,689                 52,960

INVESTING ACTIVITIES

   Proceeds from sales of investment securities available
     for sale                                                                                   10,295                  2,513
   Proceeds from sales of mortgage-related securities
     available for sale                                                                         20,610                334,923
   Proceeds from maturities of investment securities held
     to maturity                                                                                 1,911                 54,309
   Proceeds from maturities of investment securities
     available for sale                                                                          2,818                  5,247
   Purchases of investment securities held to maturity                                              --                (29,849)
   Purchases of investment securities available for sale                                       (31,350)               (77,994)
   Purchases of mortgage-related securities                                                   (288,441)              (458,337)
   Principal payments received on mortgage-related securities                                   89,102                111,251
   Principal collected on loans receivable                                                     345,390                334,750
   Loans originated for portfolio                                                             (419,606)              (421,684)
   Additions to office properties and equipment                                                 (2,396)                (2,634)
   Proceeds from sales of foreclosed properties and
     repossessed assets                                                                          3,974                  4,269
                                                                                            ----------             ----------
     Net cash used in investing activities                                                    (267,693)              (143,236)

FINANCING ACTIVITIES

   Net increase in deposits                                                                     68,977                 18,821
   Net increase in advance payments by borrowers for
     taxes and insurance                                                                        27,838                 31,778
   Funding of official checks for borrower tax escrows                                         (29,658)               (35,692)
   Net increase (decrease) in reverse repurchase agreements                                     94,246                (11,297)
   Proceeds from borrowings                                                                  1,113,400                887,500
   Repayments of borrowings                                                                 (1,069,076)              (805,800)
   Proceeds from exercise of stock options                                                       1,569                  1,333
   Purchase of treasury stock                                                                  (21,048)                   --
   Payments of cash dividends to stockholders                                                  (10,926)                (8,968)
                                                                                            ----------             ----------
     Net cash provided by financing activities                                                 175,322                 77,675
                                                                                            ----------             ----------

Decrease in cash and cash equivalents                                                          (28,682)               (12,601)
Cash and cash equivalents at beginning of period                                               154,085                172,109
                                                                                            ----------             ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                  $  125,403             $  159,508
                                                                                            ==========             ==========
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       -5-

<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 six 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 June 30, 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 primarily 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 June
30, 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             SIX MONTHS ENDED
                                 JUNE 30,                     JUNE 30,
                         ----------------------        ----------------------
                           1997          1996            1997            1996
                         --------      --------        --------        ------

     Basic EPS           $  0.55        $  0.47        $  1.07         $  0.92
     Diluted EPS         $  0.54        $  0.46        $  1.05         $  0.90



NOTE D - DIVIDENDS PAID OR DECLARED TO STOCKHOLDERS

        The Board of  Directors  of FFC on May 21,  1997,  declared  a $0.15 per
share quarterly cash dividend payable on June 30, 1997 to shareholders of record
of FFC common stock on June 13, 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 June 30, 1997,  bond issues totaling
$6.9 million are supported by such letters of credit.  At June 30, 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

                                                             FOR THE
                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                        1997          1996
                                                      --------      ------
                                                          (In thousands)

Supplemental disclosure of cash flow information:
   Cash paid or credited to accounts during
      period for:
     Interest on deposits and borrowings              $118,321    $111,090
     Income taxes                                       20,452      16,877
   Non-cash investing activities:
     Mortgage loans transferred to held for sale
      portfolio                                         12,473      21,775
     Loans receivable transferred to foreclosed
      properties                                         3,772       3,214
     Mortgage loans securitized and transferred to
      mortgage-related securities available for sale        --     161,087

                                      -7-

<PAGE>


NOTE G - STOCK SPLIT

       On December 30, 1996,  FFC  distributed  a  five-for-four  stock split to
shareholders of record on December 16, 1996. All numbers of shares and per share
amounts included herein have been adjusted to reflect this distribution.

NOTE H - PENDING MERGER

       On May 14,  1997,  Associated  Banc-Corp  ("Associated")  of  Green  Bay,
Wisconsin  and  FFC  announced  the  signing  of a  definitive  agreement  for a
merger-of-equals  in a  stock-for-stock  transaction (the "Merger").  The merger
agreement  provides for each share of FFC common stock to be exchanged  for .765
shares of  Associated  common  stock on a  tax-free  basis.  The  merger,  which
requires approval by shareholders of both companies and regulatory  authorities,
is expected to be completed  later in 1997. This  transaction  will be accounted
for as a  pooling-of-interests.  The merged  company will retain the  Associated
name  and  Associated  will  be the  surviving  holding  company  for  FF  Bank.
Headquarters  has been designated to be in Green Bay and it is anticipated  that
significant operations will remain in both Stevens Point and Green Bay. Pursuant
to the execution of the definitive  agreement to merge,  each company executed a
stock option agreement providing for the purchase of 19.9% of the other's common
stock under specified  circumstances.  This Merger will result in an institution
with  combined  assets  of  approximately  $10.5  billion,   equity  capital  of
approximately  $900  million  and a  network  of over 220  full-service  banking
locations throughout Wisconsin and Illinois.

       Management of FFC anticipates  that,  following the Merger,  the combined
institution will develop a comprehensive  business plan. The development of this
plan will include the  re-evaluation  of interest rate risk and credit risk with
the intent to  implement  the current  policies,  procedures  and  practices  of
Associated,  which in some cases  differ from those of FFC.  Management  further
anticipates  that  these  evaluations  may  result in  changes  in i) the intent
regarding  the  holding  period  of  certain  securities  and ii) the  level  of
allowances for credit losses.

NOTE I - STOCK REPURCHASE PROGRAM

        In  conjunction  with  the  announcement  of its  proposed  merger  with
Associated, FFC immediately terminated its previously announced stock repurchase
program. Prior to the termination of the program, FFC repurchased 260,000 shares
of its  common  stock at an average  cost of $25.33 per share  during the second
quarter and 801,225 shares at an average cost of $26.27 per share during the six
months ended June 30,  1997.  At June 30, 1997,  FFC had  1,449,620  outstanding
treasury shares.



                                       -8-

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                  COMPARISON OF THE CONSOLIDATED BALANCE SHEETS
               AT JUNE 30, 1997 (UNAUDITED) WITH DECEMBER 31, 1996

GENERAL:

          Total assets  increased to $5.932 billion at June 30, 1997 from $5.700
billion at December 31, 1996.  Deposits  increased to $4.518 billion at June 30,
1997 from $4.445  billion at year-end  1996 and  borrowings  increased to $908.1
million  from $769.5  million  during the same time frame.  Advance  payments by
borrowers for taxes and insurance  increased by $27.8 million  between  December
31, 1996 and June 30, 1997 and other  liabilities  decreased  $20.3 million from
December  31, 1996 to June 30, 1997.  Stockholders'  equity at June 30, 1997 was
$422.7 million, up from $410.5 million at year-end 1996.

LIQUIDITY AND CAPITAL RESOURCES:

          At June 30, 1997, total  consolidated  liquidity,  consisting of cash,
cash  equivalents,  and investment  securities  represented 5.67% 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 the
Office of Thrift  Supervision  ("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 June 30, 1997 decreased by
$12.6 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 six-month  interim period.  Some of the more  significant  changes in
these categories, including liquid assets, are summarized as follows:


   CONSOLIDATED                         BALANCE                         BALANCE
   BALANCE SHEET                      DECEMBER 31,    INCREASES         JUNE 30,
  CLASSIFICATION                          1996       (DECREASES)          1997
-------------------                   ------------   -----------      --------
                                                     (In thousands)

Cash and cash equivalents             $  154,085     $  (28,682)     $  125,403
Securities available for sale:
  Investment securities                  136,477         18,239          154,716
  Mortgage-related securities          1,048,085        230,855        1,278,940
Securities held to maturity:
  Investment securities                   58,434         (2,173)          56,261
  Mortgage-related securities            602,352        (38,610)         563,742
Loans receivable, including loans
   held for sale                       3,512,819         53,969        3,566,788
Office properties                         50,428             42           50,470
Intangible assets                         12,739         (1,744)          10,995
Deposits                               4,444,932         72,742        4,517,674
Borrowings                               769,526        138,570          908,096
Advance payments by
 borrowers for taxes
 and insurance                            13,382         27,838           41,220
Other liabilities                         62,080        (20,294)          41,786
Stockholders' equity                     410,511         12,214          422,725

                                      -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
additional  working  capital and  borrowings  are available  through the capital
markets, the Federal Home Loan Bank ("FHLB") and other sources.

        On an unconsolidated basis, FFC had cash of $20.2 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 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. For a discussion
of regulatory capital requirements, see "Regulatory Capital."

TOTAL LOANS RECEIVABLE AND HELD FOR SALE:

        Total loans,  including loans held for sale,  increased $54.0 million to
$3.567  billion at June 30,  1997.  Total loans are  summarized  below as of the
dates indicated.

<TABLE>
<CAPTION>
                                           JUNE 30,             DECEMBER 31,        INCREASE
                                             1997                  1996            (DECREASE)
                                        -------------          ------------        ----------
                                                              (In thousands)
<S>                                     <C>                    <C>                  <C>      
Real estate loans:
    One- to four-family                 $ 1,914,769            $1,884,018           $  30,751
    Multi-family                            239,342               238,766                 576
    Commercial and non-residential          183,496               176,911               6,585
                                         ----------             ---------           ---------
       Total real estate loans            2,337,607             2,299,695              37,912

Other loans:
    Consumer                                446,824               415,155              31,669
    Home equity                             302,332               296,749               5,583
    Education                               277,546               269,633               7,913
    Credit cards                            169,632               179,352              (9,720)
    Manufactured housing                     90,464               104,783             (14,319)
    Business                                 10,395                11,728              (1,333)

Less net items to loans receivable          (68,012)              (64,276)             (3,736)
                                         ----------            ----------           ---------

Total loans (including loans held
    for sale)                            $3,566,788            $3,512,819           $  53,969
                                         ==========            ==========           =========
</TABLE>

          Total real estate loans  increased  $37.9 million to $2.338 billion at
June 30,  1997,  from  $2.300  billion at December  31,  1996  including a $30.8
million  increase in one- to four-family  real estate loans in the first half of
1997.

                                      -10-
<PAGE>

          Consumer loan  balances  increased  $31.7 million and education  loans
increased $7.9 million in the first six months of 1997 as originations  outpaced
repayments  for these product  lines.  Credit card loan balances  decreased $9.7
million  in the first six  months of 1997 which is  consistent  with  historical
seasonal  declines  in  this  portfolio.   Manufactured  housing  loan  balances
decreased $14.3 million as FFC had previously  ceased  originating  manufactured
housing loans and borrowers make repayments.

          Mortgage  loans held for sale were $19.5  million at June 30, 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  $54.0  million  and $26.8
million,  respectively, at June 30, 1997, as compared to $30.2 million and $20.7
million,  respectively,  at December 31, 1996.  During the six months ended June
30, 1997,  market interest rates initially moved higher than year-end 1996 rates
but then  trended  downward  back to 1996  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 $192.3
million  during the six months ended June 30, 1997  primarily as a result of the
net effect of i) the purchase of $288.4 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  $89.1  million.  At the end of the  second
quarter, FF Bank had commitments to purchase U.S. Government  agency-backed MBSs
having an aggregate par value of $61.0 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:

                                                  CARRYING VALUE AT
                                           JUNE 30,              DECEMBER 31,
                                             1997                   1996
                                         -----------               --------
                                                (In thousands)

ISSUER/SECURITY TYPE
  U.S. Government agencies:
     Mortgage-backed certificates         $1,323,218           $1,093,513
     Collateralized mortgage
      obligations ("CMOs")                   280,171              282,894
                                          ----------           ----------
       Total agencies                      1,603,389            1,376,407
                                          ----------           ----------

  Non-agency:
     Mortgage-backed certificates            238,913              273,595
     CMOs                                        380                  435
                                          ----------           ----------
       Total non-agency                      239,293              274,030
                                          ----------           ----------

       Totals                             $1,842,682           $1,650,437
                                          ==========           ==========

FINANCIAL STATEMENT CLASSIFICATION
  Available-for-sale portfolio            $1,278,940           $1,048,085
  Held-to-maturity portfolio                 563,742              602,352
                                          ----------           ----------

       Total carrying value               $1,842,682           $1,650,437
                                          ==========           ==========

                                      -11-
<PAGE>

     During the first six months of 1997, FFC reduced its holdings of non-agency
MBSs by $34.7 million from $274.0  million at the end of 1996 to $239.3  million
at June 30, 1997.

     FFC's  portfolio of MBSs totaled  approximately  $1.843 billion at June 30,
1997:
<TABLE>
<CAPTION>

                                              AMORTIZED            FAIR         CARRYING
                                                 COST              VALUE          VALUE
                                             -----------       -----------     -----------
                                                           (Dollars in thousands)
<S>                                          <C>               <C>             <C>        
U.S. Government agencies                     $ 1,592,943       $ 1,579,742     $ 1,603,389

Non-agency:
     Securities rated AA or above                215,724           216,313         215,939
     Securities rated below AA, but
       of investment grade                         9,814             9,300           9,281
     Securities rated below
       investment grade                           15,921            14,073          14,073
                                             -----------       -----------     -----------
                                             $ 1,834,402       $ 1,819,428     $ 1,842,682
                                             ===========       ===========     ===========
</TABLE>

The non-agency  securities are of investment  grade,  except for four securities
which are rated below investment  grade.  Each of these securities was issued by
an unrelated  company,  and have an aggregate  carrying  value of $14.1 million.
Based  upon i) the  results  of FFC  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 temporary.  FFC's 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:


                                          JUNE 30,     DECEMBER 31,
                                            1997            1996
                                       -------------    --------
                                               (In thousands)

  Residential real estate loans           $ 4,820         $ 7,241
  Manufactured housing loans                1,130           2,314
  Credit card loans                         2,630           2,863
  Commercial real estate loans                 --             125
  Consumer and other loans                  1,847           1,658
  Student loans                            22,621          23,034
                                          -------         -------
                                          $33,048         $37,235
                                          =======         =======

                                      -12-

<PAGE>
        At June  30,  1997,  the 90 days or less  delinquencies  decreased  $4.2
million to $33.0  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 0.93% at June 30, 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 $2.4
million for  residential  mortgage  loans and ii) a decrease of $1.2 million for
manufactured  housing  loans.  These  decreases were  supplemented  with smaller
decreases in delinquencies  for commercial real estate loans,  credit card loans
and student loans and offset by a small increase in consumer loan delinquencies.

        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:

                                          JUNE 30,                DECEMBER 31,
                                            1997                      1996
                                        ------------              --------
                                                    (In thousands)

One- to four-family residential           $ 5,714                   $ 6,325
Multi-family residential                    1,500                     1,607
Commercial and other real estate               83                        98
Credit cards                                2,208                     2,106
Manufactured housing                          943                     1,164
Consumer and other                            950                       688
                                          -------                   -------
                                          $11,398                   $11,988
                                          =======                   =======

        Non-accrual  loans  decreased  by $600,000 to $11.4  million at June 30,
1997 versus $12.0  million at December 31,  1996.  As a percentage  of net loans
receivable,  non-accrual loans decreased to 0.32% at June 30, 1997 from 0.34% at
December 31, 1996.

        The credit card non-accrual loans remained  relatively stable during the
first  six  months  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 June 30, 1997.  FFC has had no  significant  troubled  debt
restructurings  during the first half 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 and six months ended June 30, 1997 and 1996, follows:
<TABLE>
<CAPTION>

                                           THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                 JUNE 30,                          JUNE 30,
                                           -------------------               --------------
                                             1997       1996                 1997            1996
                                           --------   --------              ------         ------
                                                             (In thousands)
<S>                                        <C>            <C>             <C>             <C>    
Allowances at beginning of period          $22,926        $24,236         $23,228         $25,235
Provisions                                   2,100          2,180           4,350           4,080
Charge-offs                                 (2,417)        (2,937)         (5,347)         (6,070)
Recoveries                                     351            276             729             510
                                           -------        -------         -------         -------
Allowances at end of period                $22,960        $23,755         $22,960         $23,755
                                           =======        =======         =======         =======
</TABLE>


        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 and Six Months Ended June 30, 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>
                                                JUNE 30, 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                             $ 6,552                  3.86%           $ 6,783                   3.78%
Residential real estate                    6,486                   .31              6,610                    .31
Manufactured housing                       1,627                  1.80              1,814                   1.73
Commercial and non-resi-
    dential real estate                    3,764                  2.06              3,621                   2.00
Consumer                                   3,669                   .82              3,462                    .83
Home equity                                  575                   .19                572                    .19
Commercial business                          278                  2.67                343                   2.92
Education                                      9                    --                 23                    .01
                                         -------                                  -------
                                         $22,960                   .64%           $23,228                    .66%
                                         =======                 =====            =======                  =====
</TABLE>


        The  allowances  for loan losses were $23.0  million,  or 0.64% of loans
receivable,  at June 30, 1997 compared to $23.2 million,  or 0.66%,  at December
31, 1996.  The allowances for losses  represented  201% of non-accrual  loans at
June 30, 1997 as compared to 194% at the end of 1996.  The  decrease of $200,000
in the  aggregate  allowances  for losses from year-end 1996 to June 30, 1997 is
the net result of relatively  small increases and decreases for the various loan
categories.   FFC  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  E),   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  securities,  and  real  estate
judgments subject to redemption and foreclosed  properties for which FF Bank has
obtained title.

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


                                                JUNE 30,          DECEMBER 31,
                                                   1997               1996
                                               ------------       --------
                                                       (In thousands)
CLASSIFIED ASSETS: 
   Non-performing assets:
     Non-accrual loans                           $11,398            $11,988
     Foreclosed properties and other
        repossessed assets                         4,026              3,997
                                                 -------            -------
          TOTAL NON-PERFORMING ASSETS             15,424             15,985

   Additional classified performing loans:
     Residential real estate                         145                545
     Commercial real estate                        5,726              6,105
     Consumer and other                              345                580
   Other assets                                    2,094              2,491
   Other adjustments - net                        (1,493)            (1,638)
                                                 -------            -------
          TOTAL CLASSIFIED ASSETS                $22,241            $24,068
                                                 =======            =======


          During the six months ended June 30, 1997, classified assets decreased
$1.9 million to $22.2 million from $24.1 million at December 31, 1996  primarily
as the net result of the $600,000 decrease in non-accrual loans, as discussed in
an earlier section,  a combined $1.1 million  decrease in additional  classified
residential,  commercial real estate and consumer/other loans, and a decrease of
$400,000 in other classified assets. 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
0.37% at June 30, 1997.

          All  adversely  classified  assets  and  off-balance  sheet  financial
guarantees  at June 30, 1997,  have been  considered  by FFC  management  in its
evaluation of the adequacy of allowances for losses.

                                      -15-

<PAGE>

DEPOSITS AND OTHER LIABILITIES:

          Deposits  increased $72.8 million during the six months ended June 30,
1997 including  interest  credits of $80.4 million and net cash outflows of $7.6
million.  The  weighted  average  cost of deposits of 4.51% at June 30, 1997 was
down from the 4.59% reported at December 31, 1996.

          Advance  payments by borrowers  for taxes and  insurance  increased by
$27.8  million  during  the first six  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  $20.3  million  from  $62.1  million at
December  31,  1996 to  $41.8  million  at  June  30,  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, the other  liabilities  balance
decreased.

BORROWINGS:

          At June 30,  1997,  FFC's  consolidated  borrowings  increased  $138.6
million to $908.1  million  from  $769.5  million at  December  31,  1996.  This
increase was primarily due to a $94.2 million net increase in short-term reverse
repurchase  agreements  and a $45.4  million net increase in  shorter-term  FHLB
advances.  These  additional  borrowings  were used  primarily to fund loans and
purchases of U.S. Government agency MBSs.

STOCKHOLDERS' EQUITY:

          Stockholders' equity at June 30, 1997, was $422.7 million, or 7.13% 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 $39.1  million  earned  during the first six months of 1997 and ii) an
improvement  of  $3.5  million  in  the  net  unrealized  holding  valuation  on
available-for-sale   securities   offset  by  iii)  cash  dividend  payments  to
stockholders  of $10.9 million and iv) the purchase of treasury  stock at a cost
of $21.0 million. As indicated in Note I to the unaudited consolidated financial
statements,  FFC's stock  repurchase  program was  terminated  during the second
quarter of 1997 in conjunction with the announcement of its proposed merger with
Associated.  Stockholders'  equity per share  increased from $11.15 per share at
year-end 1996 to $11.67 per share at June 30, 1997.

REGULATORY CAPITAL:

          FF Bank is subject to various OTS minimum  capital  measurements.  The
level of FF Bank's deposit account  insurance  premiums also are impacted by the
amount of capital.

                                      -16-

<PAGE>

          As of June 30, 1997, FF Bank had regulatory  capital well in excess of
applicable 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)                         $380,689         6.43%          $ 88,823        1.50%
Core leverage capital
  (to adjusted
    tangible assets)                        390,451         6.58%           177,939        3.00%        $296,564          5.00%
Risk-based capital
  (to risk-based
    assets)                                 413,280        14.19%           233,077        8.00%         291,346         10.00%
Core leverage capital
  (to risk-based
    assets)                                 390,451        13.40%                                        174,808          6.00%
</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 June 30,  1997.  Management  of FFC and FF bank do not
believe  that  implementation  of 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 six months of
1997 and 1996 is set forth below:
<TABLE>
<CAPTION>

                                                                  SIX MONTHS ENDED JUNE 30,
                                                -------------------------------------------------------
                                                  1997              PERCENT        1996         PERCENT
                                                --------            -------      --------       -------
                                                                   (Dollars in thousands)
<S>                                             <C>                  <C>         <C>               <C>  
LOAN TYPE
 Mortgage:
   One- to four-family                          $  268,174           55.2%       $ 347,146         60.0%
   Multi-family                                     19,679            4.0           19,429          3.4
   Commercial/non-residential                       25,900            5.3           40,185          6.9
                                                ----------          -----        ---------        -----
       Total mortgage origina-
         tions                                     313,753           64.5          406,760         70.3

 Consumer                                          140,187           28.8          137,469         23.7
 Student                                            26,363            5.4           33,585          5.8
 Home equity-net                                     5,584            1.1              533           .1
 Commercial business                                   160             .2              579           .1
                                                ----------          -----        ---------        -----
       Total loans originated                      486,047          100.0%         578,926        100.0%
                                                                    =====                         ======
 Increase in undisbursed
    loan proceeds                                   (4,591)                        (18,547)
                                                ----------                       ---------
       Total loans disbursed                    $  481,456                       $ 560,379
                                                ==========                       =========
</TABLE>


        Total loan  originations  decreased to $486.0  million for the first six
months of 1997 from $578.9  million  for the same period in 1996.  This net 1997
decrease of $92.9 million was primarily attributable to a $93.0 million decrease
in mortgage loan originations.


                                      -17-
<PAGE>

        One- to four-family  mortgage loan originations  decreased $78.9 million
to $268.2 million for the first six months of 1997 as compared to $347.1 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 six months
of 1997 were  generally  higher than the market  interest  rates during the same
period in 1996.  Approximately  59% of originations  for the first six 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
June 30, 1997,  one- to four-family  mortgage loan  applications  in process and
loan  commitments  totaled $55.0  million and $40.4  million,  respectively,  as
compared to $33.4 million and $20.8 million at December 31, 1996.

        Student loan  originations  decreased to $26.4 million  during the first
six months of 1997 from $33.6 million for the same period in 1996. This decrease
of $7.2 million in student loan  originations is due to the conversion to direct
lending by a major university in FFC's market 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 June  30,  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 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.

                                      -18-
<PAGE>

        FFC's consolidated  one-year  interest-rate  sensitivity gap at June 30,
1997 was a  positive  $47.2  million  or 0.80% 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 0.80% at June 30,
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 June 30,
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 second quarter. Management of FFC and FF Bank do not believe that
implementation of this rule would significantly  impact the capital requirements
of FF Bank or cause FF Bank to fail to meet its capital requirements.

                                       -19-

<PAGE>

<TABLE>
<CAPTION>


                                          FIRST FINANCIAL CORPORATION CONSOLIDATED GAP ANALYSIS AT JUNE 30, 1997



                                        THREE                       GREATER         GREATER       GREATER     GREATER
                                        MONTHS      FOUR MONTHS     THAN ONE       THAN THREE    THAN FIVE    THAN TEN  
                                         AND          THROUGH       THROUGH         THROUGH       THROUGH     THROUGH   
                                        UNDER        ONE YEAR      THREE YEARS     FIVE YEARS    TEN YEARS    20 YEARS  
                                      ---------     ----------     -----------     -----------   ----------  ---------- 
                                                                    (Dollars in thousands)
<S>                                   <C>            <C>            <C>            <C>           <C>          <C>       
Rate-sensitive assets:
   Investments and interest-
     earning deposits, including
     federal funds (a)(b)             $   93,398     $   23,601     $   27,317     $   69,200    $    402     $ 39,299  
   Mortgage-related securities (b)     1,058,951        487,249         96,870         66,988      80,093       52,109  
   Mortgage loans:
     Fixed-rate (c)(d)                    51,354        131,290        285,294        198,641     218,938      151,059  
     Adjustable-rate (c)                 300,621        638,792        297,481            241          --           --  
   Other loans                           723,392        204,403        215,369         82,583      54,976        9,320  
                                      ----------     ----------     ----------     ----------    --------     --------  
                                       2,227,716      1,485,335        922,331        417,653     354,409      251,787  

Rate-sensitive liabilities:
   Deposits (e)(f):
     Checking                            123,285         25,804         64,467         50,469      79,185       72,797  
     Money market accounts                92,765         77,333        142,287         48,516      40,995       10,407  
     Passbook                            263,107        194,742         50,826         36,594      52,696       33,537  
     Certificates of deposit             562,083      1,429,800        979,382         65,087       2,768           --  
   Borrowings                            646,867        250,105          4,340            957         597        1,910  
                                      ----------     ----------     ----------     ----------    --------     --------  
                                       1,688,107      1,977,784      1,241,302        201,623     176,241      118,651  
                                      ----------     ----------     ----------     ----------    --------     --------  


GAP (repricing difference)            $  539,609     $ (492,449)    $ (318,971)    $  216,030    $178,168     $133,136  
                                      ==========     ==========     ==========     ==========    ========     ========  


Cumulative GAP                        $  539,609     $   47,160     $ (271,811)    $  (55,781)   $122,387     $255,523  
                                      ==========     ==========     ==========     ==========    ========     ========  


Cumulative GAP/Total assets                 9.10%          0.80%         (4.58)%        (0.94)%      2.06%        4.31% 
                                      ==========     ==========     ==========     ==========    ========     ========  
</TABLE>

<PAGE>
                                    
                                       GREATER
                                        THAN
                                       20 YEARS         TOTAL
                                       --------        -------
                                    

Rate-sensitive assets:
   Investments and interest-
     earning deposits, including
     federal funds (a)(b)             $   31,003     $  284,220
   Mortgage-related securities (b)           422      1,842,682
   Mortgage loans:
     Fixed-rate (c)(d)                     3,034      1,039,610
     Adjustable-rate (c)                      --      1,237,135
   Other loans                                --      1,290,043
                                      ----------     ----------
                                          34,459      5,693,690

Rate-sensitive liabilities:
   Deposits (e)(f):
     Checking                             40,048        456,055
     Money market accounts                 1,156        413,459
     Passbook                              7,866        639,368
     Certificates of deposit                  --      3,039,120
   Borrowings                              3,320        908,096
                                      ----------     ----------
                                          52,390      5,456,098
                                      ----------     ----------


GAP (repricing difference)            $  (17,931)    $  237,592
                                      ==========     ==========


Cumulative GAP                        $  237,592
                                      ==========


Cumulative GAP/Total assets                 4.01%
                                      ==========

(a)  Investments  are adjusted to include FHLB stock  totaling  $39.3 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 $41.2 million of advance payments by borrowers for tax and
     insurance and exclude accrued interest on deposits of $10.9 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 AND SIX MONTHS ENDED
                             JUNE 30, 1997 AND 1996

SELECTED INCOME STATEMENT INFORMATION:

         For the  second  quarter  of 1997,  FFC  reported  net  income of $20.0
million,  up from the $17.6  million  reported  for the second  quarter of 1996.
Fully  diluted  earnings  per share for the 1997  quarter  amounted to $0.54 per
share as compared to $0.46 per share for the 1996 quarter. The annualized return
on assets for the second quarter of 1997 increased to 1.37% from 1.29% for 1996,
while the  annualized  return on average  equity for the second  quarter of 1997
increased to 19.44% as compared to 17.41% for the second quarter of 1996.

         For the first half of 1997, FFC reported net income of $39.1 million in
comparison with income, before an extraordinary charge, of $34.9 million for the
first half 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 1997 amounted to $1.05 per share as compared to $0.92 per
share  prior  to  the  extraordinary   charge  for  1996.   Excluding  the  1996
extraordinary  item, the annualized  return on assets for the first half of 1997
increased to 1.35% from 1.28% for 1996,  while the annualized  return on average
equity for the first half of 1997  increased  to 18.92%,  compared to 17.55% for
the first half of 1996.

NET INTEREST INCOME:

         Net interest income  increased $2.5 million to $48.2 million during the
second  quarter  of 1997 from  $45.7  million  for the  second  quarter of 1996,
primarily due to an increase in average balances of interest-earning  assets and
interest-bearing   liabilities   from  $5.186   billion   and  $4.938   billion,
respectively,  in 1996 to $5.629 billion and $5.357  billion,  respectively,  in
1997. The net interest margin of 3.41% for the second quarter of 1997,  however,
was down from the 3.52% reported for the second quarter of 1996. The decrease in
the margin in 1997 was offset by an improvement in the earning-asset  ratio from
105.01% in 1996 to 105.08% in 1997. The average yield on interest-earning assets
(7.87% in 1996  versus  7.86% in 1997)  decreased  by 1 basis  point,  while the
average  cost of  interest-bearing  liabilities  (4.57% in 1996 versus  4.67% in
1997), increased ten basis points, reflecting a higher cost of funds in 1997.

         Net interest income  increased $4.1 million to $95.8 million during the
first half of 1997 from $91.7 million for the first half of 1996,  primarily due
to  an   increase   in  average   balances   of   interest-earning   assets  and
interest-bearing   liabilities   from  $5.180   billion   and  $4.940   billion,
respectively,  in 1996 to $5.563 billion and $5.295  billion,  respectively,  in
1997.  The net  interest  margin of 3.42%  reported  for the first half of 1997,
however,  was down  from the 3.53%  reported  for the  first  half of 1996.  The
decrease in the margin in 1997 was offset by an improvement in the earning-asset
ratio  from  104.86%  in  1996  to  105.06%  in  1997.   The  average  yield  on
interest-earning  assets (7.95% in 1996 versus 7.87% in 1997) decreased by eight
basis points,  while the average cost of interest-bearing  liabilities (4.63% in
1996 versus 4.68% in 1997),  increased  five basis  points.  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.

                                      -21-
<PAGE>


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 quarter and the six months  ended June 30,
1997 and 1996.  A  comparison  of similar data at June 30, 1997 and 1996 is also
shown.

<TABLE>
<CAPTION>
                                FOR THE              FOR THE
                          THREE MONTHS ENDED     SIX MONTHS ENDED            AT
                                JUNE 30,            JUNE 30,              JUNE 30,
                          ------------------     ----------------    -------------------
                             1997     1996        1997      1996        1997      1996
                             ----     ----        ----      ----        ----      ----
<S>                         <C>       <C>         <C>       <C>        <C>       <C>  
Weighted average yield
   on interest-earning
  assets                    7.86%     7.87%       7.87%     7.95%      7.84%     7.98%

Weighted average rate
   paid on deposits and
  borrowings                4.67      4.57        4.68      4.63       4.71      4.61
                           -----     -----       -----     -----      -----     -----

Interest spread             3.19%     3.30%       3.19%     3.32%      3.13%     3.37%
                           =====     =====       =====     =====      =====     =====

Net interest margin
   (net interest income
   as a percentage of
  earning assets)           3.41%     3.52%       3.42%     3.53%      3.34%     3.50%
                           =====     =====       =====     =====      =====     =====
</TABLE>


       The  interest  spread was 3.19% for both the three  months and six months
ended June 30, 1997, as compared to 3.30% and 3.32%, respectively,  for the same
periods in 1996. The interest margin decreased to 3.42% for the six month period
ended June 30, 1997 from 3.53% for the 1996  period,  due to the  factors  noted
above.  The interest  spread and the net  interest  margin were 3.13% and 3.34%,
respectively,  at June 30, 1997 as compared to 3.37% and 3.50%, respectively, at
June 30, 1996.

PROVISIONS FOR LOSSES ON LOANS:

       Provisions  for loan losses  decreased  $100,000 to $2.1  million for the
second  quarter of 1997  compared to $2.2 million for the 1996 quarter while the
provisions for loan losses  increased  $300,000  between the 1996 and 1997 first
six-month  periods.  Net charge-offs for the second quarter of 1997 approximated
related  period  provisions.  Net  charge-offs  for the first six months of 1997
exceeded the related period provisions by $200,000 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.

                                      -22-

<PAGE>

       The  following  table  summarizes  FFC's  net  charge-off  experience  by
category for the three months and six months ended June 30, 1997 and 1996.

<TABLE>
<CAPTION>
                                 FOR THE THREE MONTHS            FOR THE SIX MONTHS
                                    ENDED JUNE 30,                   ENDED JUNE 30,
                             -------------------------        ---------------------------
                               1997            1996              1997            1996
                             -----------    -----------       -----------     -----------
                                 NET             NET              NET             NET
                             CHARGE-OFFS    CHARGE-OFFS       CHARGE-OFFS     CHARGE-OFFS
                             -----------    -----------       -----------     -----------
LOAN TYPE                                     (Dollars in thousands)

<S>                             <C>           <C>                 <C>            <C>   
Credit cards                    $1,656        $1,832              $3,417         $5,006
Manufactured housing               152           233                 585            924
Residential real estate             62           172                 146            736
Consumer and other                 194           139                 359            232
Commercial business                  2             9                 111            216
                                ------        ------              ------         ------
                                $2,066        $2,385              $4,618         $7,114
                                ======        ======              ======         ======

Net charge-offs as a
  percent of average loans
  outstanding (annualized)        0.23%         0.27%               0.26%          0.27%
                                ======        ======              ======         ======
</TABLE>


        The $300,000  decrease in net charge-offs for the quarter ended June 30,
1997 versus the same period in 1996  reflects the net decreases for various loan
category net charge-offs with the exception of a small increase in consumer loan
net charge-offs as this portfolio  continues to expand.  The $1.7 million of net
credit card loan  charge-offs  for the three months  ended June 30, 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
national  trends;  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 to reduce
1997  credit  card  losses.  FFC  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 June 30, 1997 is 3.86% 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 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.

                                      -23-
<PAGE>
NON-INTEREST INCOME:

Changes in non-interest income for the periods indicated are summarized below:

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED                                      SIX MONTHS ENDED
                                            JUNE 30,                                                JUNE 30,
                                -----------------------------------------            --------------------------------------
                                                                 INCREASE                                         INCREASE
                                  1997            1996          (DECREASE)             1997         1996         (DECREASE)
                                --------        --------        ----------           -------       -------       ----------
                                                                      (In thousands)
<S>                             <C>             <C>               <C>                <C>           <C>           <C>     
INCOME CATEGORY

Deposit account
 service fees                   $ 3,747         $ 3,334           $  413             $ 7,116       $ 6,476       $    640
Loan fees and
 service charges                  3,476           3,020              456               6,696         5,749            947
Insurance and
 brokerage
 commissions                      1,938           1,779              159               3,878         3,611            267
Service fees on
 loan sold                        1,310           1,564             (254)              2,711         3,097           (386)
Gain on sales
 of loans and MBSs                  697             447              250               1,825           708          1,117
Gain on sales of
 investments                         --             391             (391)                102           404           (302)
Other                               979             843              136               1,816         1,590            226
                                -------         -------         --------             -------       -------       --------
                                $12,147         $11,378         $    769             $24,144       $21,635       $  2,509
                                =======         =======         ========             =======       =======       ========
</TABLE>


         Non-interest  income increased  $800,000 for the second quarter of 1997
as compared to the 1996 quarter. FFC's fee-based income continued to increase as
i)  deposit-related  fees were up  $400,000,  ii) loan fees were up $500,000 and
iii) insurance/brokerage  sales commissions increased $200,000. Net gains on the
disposition  of loans  and  MBSs  increased  $300,000  as a net  result  of i) a
decrease of $500,000 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) a decrease of $800,000 in the loss  realized upon the
disposition  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 as general interest rates fluctuated during the course
of the second quarter and borrowers selected fixed-rate loans less often than in
1996.  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 $2.2 million on the sale of
MBSs in the second  quarter of 1996 offset by a loss of $3.0 million  recognized
in the same quarter on sales of MBSs and an  impairment  writedown of non-agency
MBSs.

         Non-interest  income  increased $2.5 million for the first half of 1997
as compared to the 1996.  FFC's  fee-based  income  continued  to increase as i)
deposit-related fees were up $600,000,  ii) loan fees were up $900,000, and iii)
insurance/brokerage  sales  commissions  increased  $300,000.  Net  gains on the
disposition  of loans and MBSs  increased  $1.1  million as a net result of i) a
decrease  of $1.2  million  in  gains  achieved  upon  the  sale of loans in the
secondary  mortgage  market  and the  realization  of related  OMSRs,  and ii) a
decrease of $2.3 million in losses  realized upon the  disposition  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 as
general interest rates fluctuated during the course of the first half.

                                      -24-

<PAGE>

NON-INTEREST EXPENSE:

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

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED                                   SIX MONTHS ENDED
                                                JUNE 30,                                            JUNE 30,
                                ------------------------------------------           ---------------------------------------
                                                                 INCREASE                                         INCREASE
                                  1997            1996          (DECREASE)             1997         1996         (DECREASE)
                                --------        --------        ----------           -------       -------       ----------
                                                                   (Dollars in thousands)
<S>                             <C>             <C>               <C>                <C>           <C>           <C>    
EXPENSES CATEGORY

Compensation and
 benefits                       $12,863         $11,183           $1,680             $25,673       $23,266       $ 2,407
Occupancy                         2,362           2,374              (12)              4,922         4,832            90
Marketing                         1,668           1,613               55               3,564         3,270           294
Amortization of
 intangible assets                  872           1,265             (393)              1,744         2,529          (785)
Federal deposit
 insurance premium                  723           2,542           (1,819)              1,430         5,103        (3,673)
All other                         8,583           9,316             (733)             17,418        18,688        (1,270)
                                -------         -------         --------             -------       -------       -------
                                $27,071         $28,293         $ (1,222)            $54,751       $57,688       $(2,937)
                                =======         =======         ========             =======       =======       =======
</TABLE>


         Non-interest  expense  decreased  approximately  $1.2  million and $2.9
million for the quarter and six months  ended June 30, 1997 as compared to 1996.
These  decreases  are  primarily  related to the  decrease  in  federal  deposit
insurance  premiums in 1997  following  legislation  in 1996 to create  relative
parity  between  the bank and  thrift  insurance  funds of the  Federal  Deposit
Insurance  Corporation.  Compensation and benefits increased in 1997 compared to
1996  primarily  due to  benefits  realized  by FFC in 1996  from the use of its
Employee Stock Ownership Plan ("ESOP"), acquired in a 1995 acquisition, in place
of FFC's  normal  profit  sharing  contribution.  The ESOP  shares,  which  were
purchased in 1992,  were  grandfathered  from Statement of Position  ("SOP") No.
93-6 issued by the American Institute of Certified Public  Accountants.  Expense
for ESOP shares  allocated to FFC  employees  was recorded at cost as opposed to
market value as required by SOP No. 93-6 for shares  acquired  after 1992. As of
year end 1996,  all ESOP shares were fully  allocated  to FFC  employees  and no
further  grandfathered  benefit  will be  available.  FFC  realized a benefit of
$800,000  and $1.1  million,  respectively,  for the  quarter and the six months
ended  June 30,  1996,  relative  to the use of the ESOP.  The  decrease  in the
amortization  of intangible  assets  relates to a change in accounting  for such
assets in the latter part of 1996.

         Non-interest  expense  decreased as a percentage  of average  assets to
1.85% and 1.89% for the quarter and six months  ended June 30, 1997  compared to
2.07%  and  2.12%,  respectively,  for the same  periods  in 1996.  Controllable
non-interest  expenses,  which exclude the amortization of intangible assets and
significant  one-time  expenditures  (if any),  decreased  to 1.80% and 1.83% of
average assets for the quarter and six months ended June 30, 1997 as compared to
2.00% and 2.03% for 1996. In addition,  FFC's efficiency ratio (which represents
the ratio of controllable  expenses to recurring  income) improved to 44.06% and
44.99%,  respectively,  for the  quarter  and six months  ended June 30, 1997 as
compared to 48.36% and 49.26% for the same periods in 1996.

                                      -25-

<PAGE>

INCOME TAXES:

         Income tax expense increased $5.1 million for the first half of 1997 as
compared to 1996.  This increase is related to i) the 18.0%  increase in pre-tax
income in 1997, and ii) the  realization  during 1996 of $2.2 million in credits
upon the  completion  of a federal tax audit for the taxable  years 1989 through
1991 as well as the  resolution  of other  tax  matters.  These  latter  factors
resulted in either refunds of taxes  previously  paid or a reduction in deferred
tax asset  allowances  which had been  previously  provided.  As a result of the
above factors,  FFC's  effective tax rate increased from 32.3% in 1996 to $35.7%
in 1997.

                                      -26-

<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 protection 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.



                                      -27-

<PAGE>
                           PART II. OTHER INFORMATION

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

          a.   On April 22,  1997,  the  Corporation  held an Annual  Meeting of
               Shareholders (the "Annual  Meeting").  Matters put to vote at the
               Annual Meeting included i) the election of three  directors,  and
               ii) a proposal to amend FFC's Articles of Incorporation to reduce
               the minimum size of FFC's Board of Directors from 12 directors to
               7 directors.

          b.   Set  forth  below  is  certain  information  with  respect  to i)
               individuals  nominated  for  election as  directors at the Annual
               Meeting and ii)  continuing  directors  whose terms do not expire
               until future annual meetings.

                  Nominated for                                      For Term
                  Three-Year Terms                                  To Expire
                  ----------------                                  ---------

                  Robert S. Gaiswinkler                                2000
                  Dr. George R. Leach                                  2000
                  John C. Seramur                                      2000

                  Continuing Directors

                  James O. Heinecke                                    1998
                  Robert T. Kehr                                       1999
                  Robert P. Konopacky                                  1999
                  Ignatius H. Robers                                   1998
                  John H. Sproule                                      1998
                  Ralph R. Staven                                      1999
                  Norman L. Wanta                                      1998
                  Arlyn G. West                                        1999

          c.   Set forth below are i) a description of the matters voted upon at
               the Annual Meeting and ii) the number of votes cast for, withheld
               or abstained relative to these matters:

                    1.   Three directors were elected for a term of three years.
                         A list of these  directors  (including the votes for or
                         withheld) is noted below:

                                                  Votes for      Votes Withheld
                                                  ---------      --------------

                           Robert S. Gaiswinkler  32,452,045         126,797
                           Dr. George R. Leach    32,351,083         227,759
                           John C. Seramur        32,461,759         117,084

                    2.   FFC's articles of incorporation  were amended to reduce
                         the minimum  size of FFC's Board of  Directors  from 12
                         directors to 7 directors with 31,741,187 votes for this
                         action,   586,394   votes  against  and  251,262  votes
                         abstaining.

          d.   Not applicable.

                                      -28-
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


        a.  Exhibits:

                  Exhibit 3(a) - Articles of Incorporation, as amended on April
                                 22, 1997

                  Exhibit 11   - Computation of Earnings Per Share

                  Exhibit 27   - Financial Data Schedule


        b. Reports on Form 8-K:

                  On April 22, 1997,  FFC announced its second stock  repurchase
                  agreement  following the  expiration  of its first  repurchase
                  program.   Under  the  second  program,  up  to  5%  of  FFC's
                  outstanding   shares  (up  to  1,850,000   shares)   could  be
                  repurchased  (see Form 8-K filed May 29,  1997  regarding  the
                  termination of this program).

                  On May 29, 1997,  FFC filed a Current  Report on Form 8-K with
                  the   Securities   and  Exchange   Commission  to  report  the
                  announcement  on May 14, 1997 that i) FFC had entered  into an
                  Agreement  and Plan of Merger  with  Associated  Banc-Corp  of
                  Green Bay,  Wisconsin,  ii) in connection  with the Agreement,
                  each of the companies  entered into separate Option Agreements
                  to purchase newly-issued shares of common stock equal to 19.9%
                  of the  outstanding  shares of the other company under certain
                  circumstances,   and  iii)  FFC  had   terminated   its  stock
                  repurchase program in conjunction with the Agreement.





                                      -29-

<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: August 14, 1997                 /s/ John C. Seramur
                                     --------------------
                                      John C. Seramur, President
                                      (Chief Executive Officer) and Director





Date: August 14, 1997                 /s/ Thomas H. Neuschaefer
                                     --------------------------
                                      Thomas H. Neuschaefer
                                      Vice President, Treasurer and Chief
                                      Financial Officer





                                      -30-

<PAGE>








                                  EXHIBIT INDEX





            3(a)   -        Articles of Incorporation, as amended on
                            April 22, 1997

            11     -        Computation of Earnings Per Share

            27     -        Financial Data Schedule