<PAGE>
                                                                               .
                                                                               .
                                                                               .

                               2003 ANNUAL REPORT

FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
(Dollar amounts in thousands,
except per share amounts)            2003                 2002                 2001                 2000                 1999
--------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                  <C>                  <C>                  <C>                  <C>
BALANCE SHEET DATA:
Total assets                      $2,223,057           $2,169,748           $2,041,905           $2,043,267           $1,905,201
Securities                           567,733              511,548              463,509              568,405              594,319
Net loans                          1,429,525            1,432,564            1,348,461            1,298,006            1,191,898
Deposits                           1,479,347            1,434,654            1,313,656            1,322,559            1,256,115
Borrowings                           451,862              457,645              480,674              507,771              445,821
Shareholders' equity                 255,279              241,971              217,511              191,223              168,682

INCOME STATEMENT DATA:
Interest income                      122,661              136,262              144,673              146,417              133,576
Interest expense                      48,225               58,086               74,125               80,583               66,815
Net interest income                   74,436               78,176               70,548               65,834               66,761
Provision for loan losses              7,455                9,478                6,615                4,392                4,725
Other income                          30,819               30,468               21,468               13,610               12,012
Other expenses                        62,461               63,317               53,329               42,703               43,543
Net income                            26,493               28,640               24,196               23,213               21,622

PER SHARE DATA:
Net income                              1.95                 2.10                 1.78                 1.72                 1.55
Cash dividends                           .70                  .62                  .57                  .54                  .47

PERFORMANCE RATIOS:
Net income to average assets            1.21%                1.30%                1.19%                1.18%                1.16%
Net income to average
    shareholders' equity               10.57                12.01                11.33                12.98                12.55
Average total capital
    to average assets                  12.45                11.73                11.38                 9.97                10.13
Average shareholders' equity
    to average assets                  11.43                10.80                10.46                 9.10                 9.28
Dividend payout                        35.88                29.57                32.28                31.19                30.10
</TABLE>

<PAGE>

                           FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                ---------------------------------
(Dollar amounts in thousands, except per share data)                                2003                  2002
-----------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                   <C>
ASSETS
Cash and due from banks                                                         $    94,198           $    96,043
Federal funds sold                                                                    5,850                    50
Available-for-sale securities                                                       567,733               511,548
Loans, net of allowance of $21,239 in 2003 and $21,249 in 2002                    1,408,286             1,411,315

Accrued interest receivable                                                          13,073                15,199
Premises and equipment, net                                                          29,322                29,809
Bank-owned life insurance                                                            50,279                47,736
Goodwill                                                                              7,102                 7,102
Other intangible assets                                                               3,651                 4,289
Other real estate owned                                                               6,424                 5,006
Other assets                                                                         37,139                41,651
                                                                                -----------           -----------
   TOTAL ASSETS                                                                 $ 2,223,057           $ 2,169,748
                                                                                ===========           ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
 Non-interest-bearing                                                           $   179,517           $   146,585
 Interest-bearing:
   Certificates of deposit of $100 or more                                          192,185               200,325
   Other interest-bearing deposits                                                1,107,645             1,087,744
                                                                                -----------           -----------
                                                                                  1,479,347             1,434,654

Short-term borrowings                                                                68,629                34,355
Other borrowings                                                                    383,233               423,290
Other liabilities                                                                    36,569                35,478
                                                                                -----------           -----------
   TOTAL LIABILITIES                                                              1,967,778             1,927,777

Shareholders' equity

  Common stock, $.125 stated value per share,
   Authorized shares -- 40,000,000
   Issued shares -- 14,450,966
   Outstanding shares -- 13,578,770 in 2003 and 13,618,890 in 2002                    1,806                   903
  Additional capital                                                                 67,181                66,809
  Retained earnings                                                                 194,294               178,209
  Accumulated other comprehensive income                                             11,463                14,276
  Less: Treasury shares at cost -- 872,196 in 2003 and 832,076 in 2002              (19,465)              (18,226)
                                                                                -----------           -----------

   TOTAL SHAREHOLDERS' EQUITY                                                       255,279               241,971
                                                                                -----------           -----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $ 2,223,057           $ 2,169,748
                                                                                ===========           ===========
</TABLE>

See accompanying notes.


<PAGE>

                               2003 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                        --------------------------------------------
(Dollar amounts in thousands, except per share data)                      2003              2002              2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>               <C>               <C>
INTEREST AND DIVIDEND INCOME:
  Loans, including related fees                                         $ 96,536          $105,566          $108,658
  Securities:
    Taxable                                                               15,714            19,129            24,622
    Tax-exempt                                                             7,816             8,326             8,326
  Other                                                                    2,595             3,241             3,067
                                                                        --------          --------          --------
     TOTAL INTEREST AND DIVIDEND INCOME                                  122,661           136,262           144,673

INTEREST EXPENSE:
  Deposits                                                                26,925            34,607            47,208
  Short-term borrowings                                                      431               687             2,514
  Other borrowings                                                        20,869            22,792            24,403
                                                                        --------          --------          --------
     TOTAL INTEREST EXPENSE                                               48,225            58,086            74,125
                                                                        --------          --------          --------
     NET INTEREST INCOME                                                  74,436            78,176            70,548
  Provision for loan losses                                                7,455             9,478             6,615
                                                                        --------          --------          --------
     NET INTEREST INCOME AFTER
       PROVISION FOR LOAN LOSSES                                          66,981            68,698            63,933

NON-INTEREST INCOME:
  Trust and financial services                                             3,762             3,419             3,545
  Service charges and fees on deposit accounts                             8,066             6,183             5,470
  Other service charges and fees                                           8,063             5,369             4,327
  Securities gains                                                           237               154               180
  Insurance commissions                                                    6,282             6,136             3,763
  Gain on sale of mortgage loans                                           2,027             2,767             2,209
  Gain on life insurance benefit                                              --             3,916                --
  Other                                                                    2,382             2,524             1,974
                                                                        --------          --------          --------
     TOTAL NON-INTEREST INCOME                                            30,819            30,468            21,468

NON-INTEREST EXPENSES:
  Salaries and employee benefits                                          36,696            36,528            30,544
  Occupancy expense                                                        3,830             3,707             3,692
  Equipment expense                                                        3,224             3,306             3,448
  Other                                                                   18,711            19,776            15,645
                                                                        --------          --------          --------
     TOTAL NON-INTEREST EXPENSE                                           62,461            63,317            53,329
                                                                        --------          --------          --------
     INCOME BEFORE INCOME TAXES                                           35,339            35,849            32,072
Provision for income taxes                                                 8,846             7,209             7,876
                                                                        --------          --------          --------
     NET INCOME                                                         $ 26,493          $ 28,640          $ 24,196
                                                                        ========          ========          ========
EARNINGS PER SHARE:

     NET INCOME                                                         $   1.95          $   2.10          $   1.78
                                                                        ========          ========          ========
  Weighted average number of shares outstanding (in thousands)            13,588            13,652            13,600
                                                                        ========          ========          ========
</TABLE>

See accompanying notes.


<PAGE>

                           FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
(Dollar amounts in thousands, except per share     Common   Additional   Retained   Comprehensive   Treasury
data)                                              stock      Capital    Earnings       Income       Stock       Total
------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>         <C>         <C>            <C>         <C>
BALANCE, JANUARY 1, 2001                         $     903   $  66,680  $ 141,653     $   3,900    $ (21,913)  $ 191,223
Comprehensive income:
   Net income                                            -           -     24,196             -            -      24,196
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                    -           -          -         4,399            -       4,399
                                                                                                               ---------
        Total comprehensive income                                                                                28,595

Issuance of treasury stock (365,344 shares)              -           -          -             -        6,801       6,801
Treasury stock purchase (65,298 shares)                  -           -          -             -       (1,297)     (1,297)
Cash dividends, $ .57 per share                          -           -     (7,811)            -            -      (7,811)
                                                 ---------   ---------  ---------     ---------    ---------   ---------

BALANCE, DECEMBER 31, 2001                             903      66,680    158,038         8,299      (16,409)    217,511

Comprehensive income:
   Net income                                            -           -     28,640             -            -      28,640
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                    -           -          -         5,977            -       5,977
                                                                                                               ---------
        Total comprehensive income                                                                                34,617

Contribution of 41,500 shares to ESOP                    -         129          -             -          909       1,038
Treasury stock purchase (111,130 shares)                 -           -          -             -       (2,726)     (2,726)
Cash dividends, $ .62 per share                          -           -     (8,469)            -            -      (8,469)
                                                 ---------   ---------  ---------     ---------    ---------   ---------

BALANCE, DECEMBER 31, 2002                             903      66,809    178,209        14,276      (18,226)    241,971

Comprehensive income:
   Net income                                            -           -     26,493             -            -      26,493
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                    -           -          -        (2,813)           -      (2,813)
                                                                                                               ---------
        Total comprehensive income                                                                                23,680

Two-for-one stock split                                903           -       (903)            -            -           -
Contribution of 40,000 shares to ESOP                    -         372          -             -          884       1,256
Treasury stock purchase (80, 120 shares)                 -           -          -             -       (2,123)     (2,123)
Cash dividends, $ .70 per share                          -           -     (9,505)            -            -      (9,505)
                                                 ---------   ---------  ---------     ---------    ---------   ---------

BALANCE, DECEMBER 31, 2003                       $   1,806   $  67,181  $ 194,294     $  11,463    $ (19,465)  $ 255,279
                                                 =========   =========  =========     =========    =========   =========
</TABLE>

See accompanying notes.

<PAGE>

                               2003 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                                                                -------------------------------------------------
 (Dollar amounts in thousands, except per share data)                              2003                2002                2001
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                      $  26,493           $  28,640           $  24,196
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Net (accretion) amortization on securities                                      558                (941)             (2,128)
      Provision for loan losses                                                     7,455               9,478               6,615
      Securities gains                                                               (237)               (154)               (180)
      Depreciation and amortization                                                 2,883               2,950               3,500
      Provision for deferred income taxes                                            (252)               (827)                110
      Net change in accrued interest receivable                                     2,126               1,036               2,855
      Contribution of shares to ESOP                                                1,256               1,038                   -
      Other, net                                                                    4,527              (6,342)             (4,202)
                                                                                ---------           ---------           ---------
        NET CASH FROM OPERATING ACTIVITIES                                         44,809              34,878              30,766
                                                                                ---------           ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Sales of available-for-sale securities                                            8,308               9,736               1,097
  Maturities and principal reductions on available-for-sale securities            189,049             131,304             156,938
  Purchases of available-for-sale securities                                     (258,551)           (140,015)            (43,499)
  Loans made to customers, net of repayments                                       (5,844)              6,237             (57,521)
  Net change in federal funds sold                                                 (5,800)             43,326             (39,201)
  Purchase of Forrest Sherer Inc.                                                       -                   -              (1,699)
  Purchase of Community Financial Corp.                                                 -              14,554                   -
  Additions to premises and equipment                                              (1,758)             (2,442)             (2,548)
                                                                                ---------           ---------           ---------
        NET CASH FROM INVESTING ACTIVITIES                                        (74,596)             62,700              13,567
                                                                                ---------           ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in deposits                                                           44,693             (25,638)             (8,903)
  Net change in other short-term borrowings                                        34,274             (25,379)             35,888
  Dividends paid                                                                   (8,845)             (8,209)             (7,586)
  Purchases of treasury stock                                                      (2,123)             (2,726)             (1,297)
  Proceeds from other borrowings                                                   18,013              21,006              78,923
  Repayments on other borrowings                                                  (58,070)            (28,794)           (141,908)
                                                                                ---------           ---------           ---------
        NET CASH FROM FINANCING ACTIVITIES                                         27,942             (69,740)            (44,883)
                                                                                ---------           ---------           ---------
        NET CHANGE IN CASH AND CASH EQUIVALENTS                                    (1,845)             27,838                (550)

        CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                               96,043              68,205              68,755
                                                                                ---------           ---------           ---------
        CASH AND CASH EQUIVALENTS, END OF YEAR                                  $  94,198           $  96,043           $  68,205
                                                                                =========           =========           =========

  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
    Interest                                                                    $  48,791           $  58,925           $  76,049
                                                                                =========           =========           =========
    Income taxes                                                                $   8,016           $  11,388           $   7,533
                                                                                =========           =========           =========
</TABLE>

See accompanying notes.

<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

     BUSINESS

     ORGANIZATION: The consolidated financial statements of First Financial
     Corporation and its subsidiaries (the Corporation) include the parent
     company and its wholly-owned subsidiaries, First Financial Bank, N.A. of
     Vigo County, Indiana (First Financial Bank, formerly known as Terre Haute
     First), The Morris Plan Company of Terre Haute (Morris Plan), First State
     Bank of Clay County, Indiana (State), First Citizens State Bank of
     Vermillion County, Indiana (Citizens), First Farmers State Bank of Sullivan
     County, Indiana (Farmers), First Parke State Bank of Parke County, Indiana
     (Parke), First Crawford State Bank of Crawford County, Illinois (Crawford),
     First Community Bank, N.A. of Richland County, Illinois (Community), First
     Financial Reinsurance Company, a corporation incorporated in the country of
     Turks and Caicos Islands (FFRC) and Forrest Sherer Inc., a full-line
     insurance agency headquartered in Terre Haute, Indiana. Inter-company
     transactions and balances have been eliminated.

     First Financial Bank also has two investment subsidiaries, Portfolio
     Management Specialists A (Specialists A) and Portfolio Management
     Specialists B (Specialists B), which were established to hold and manage
     certain securities as part of a strategy to manage taxable income and
     reduce tax expense. Specialists A and Specialists B subsequently entered
     into a limited partnership agreement, Global Portfolio Limited Partners. At
     December 31, 2003, $230.9 million of securities were owned by these
     subsidiaries.

     The Corporation, which is headquartered in Terre Haute, Indiana, offers a
     wide variety of financial services including commercial, mortgage and
     consumer lending, lease financing, trust account services and depositor
     services through its ten subsidiaries.

     First Financial Bank is the largest bank in Vigo County. It operates 12
     full-service banking branches within the county and one each in Ridge Farm,
     Illinois and Marshall, Illinois. It also has a main office in downtown
     Terre Haute and an operations center/office building in southern Terre
     Haute.

     The Corporation operates 46 branches in west-central Indiana and
     east-central Illinois. The Corporation's primary source of revenue is
     derived from loans to customers, primarily middle-income individuals, and
     investment activities.

     REGULATORY AGENCIES: First Financial Corporation is a multi-bank holding
     company and as such is regulated by various banking agencies. The holding
     company is regulated by the Seventh District of the Federal Reserve System.
     The national bank subsidiaries are regulated by the Office of the
     Comptroller of the Currency. The state bank subsidiaries are jointly
     regulated by their respective state banking organizations and the Federal
     Deposit Insurance Corporation.

     SIGNIFICANT ACCOUNTING POLICIES

     USE OF ESTIMATES: To prepare financial statements in conformity with
     accounting principles generally accepted in the United States of America,
     management makes estimates and assumptions based on available information.
     These estimates and assumptions affect the amounts reported in the
     financial statements and disclosures provided, and actual results could
     differ. The allowance for loan losses, carrying value of intangible assets,
     loan servicing rights and the fair values of financial instruments are
     particularly subject to change.

     CASH FLOWS: Cash and cash equivalents include cash and demand deposits with
     other financial institutions. Net cash flows are reported for customer loan
     and deposit transactions and short-term borrowings.

     SECURITIES: The Corporation classifies all securities as "available for
     sale." Securities are classified as available for sale when they might be
     sold before maturity. Securities available for sale are carried at fair
     value with unrealized holdings gains and losses, net of taxes, reported in
     other comprehensive income within shareholders' equity. Other securities,
     such as Federal Home Loan Bank stock, are carried at cost.

     Interest income includes amortization of purchase premium or discount.
     Realized gains and losses on sales are based on the amortized cost of the
     security sold. Securities are written down to fair value if and when a
     decline in fair value is not temporary.

     LOANS: Loans that management has the intent and ability to hold for the
     foreseeable future until maturity or pay-off are reported at the principal
     balance outstanding, net of unearned interest, deferred loan fees and
     costs, and allowance for loan losses. Loans held for sale are reported at
     the lower of cost or market, on an aggregate basis.

     Interest income is reported on the interest method and includes
     amortization of net deferred loan fees and costs over the loan term.
     Interest income is not reported when full loan repayment is in doubt,
     typically when the loan is impaired or payments are significantly past due.
     Payments received on such loans are reported as principal reductions.

     All interest accrued but not received for loans placed on nonaccrual is
     reversed against interest income. Interest received on such loans is
     accounted for on the cash-basis or cost-recovery method, until qualifying
     for return to accrual. Loans are returned to accrual status when all the
     principal and interest amounts contractually due are brought current and
     future payments are reasonably assured.

<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
     allowance for probable incurred credit losses, increased by the provision
     for loan losses and decreased by charge-offs less recoveries. Management
     estimates the allowance balance required using past loan loss experience,
     the nature and volume of the portfolio, information about specific borrower
     situations and estimated collateral values, economic conditions and other
     factors. Allocations of the allowance may be made for specific loans, but
     the entire allowance is available for any loan that, in management's
     judgment, should be charged off. Loan losses are charged against the
     allowance when management believes the uncollectibility of a loan balance
     is confirmed.

     A loan is impaired when full payment under the loan terms is not expected.
     Impairment is evaluated in total for smaller-balance loans of similar
     nature such as residential mortgages, consumer and credit card loans, and
     on an individual basis for other loans. If a loan is impaired, a portion of
     the allowance is allocated so that the loan is reported, net, at the
     present value of estimated future cash flows, using the loan's existing
     rate, or at the fair value of collateral if repayment is expected solely
     from the collateral.

     FORECLOSED ASSETS: Assets acquired through or instead of loan foreclosures
     are initially recorded at fair value when acquired, establishing a new cost
     basis. If fair value declines, a valuation allowance is recorded through
     expense. Costs after acquisition are expensed.

     PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
     accumulated depreciation. Depreciation is computed over the useful lives of
     the assets, which range from three to 39 years.

     SERVICING RIGHTS: Servicing rights are recognized as assets for the
     allocated value of retained servicing rights on loans sold. Servicing
     rights are expensed in proportion to, and over the period of, estimated net
     servicing revenues. Impairment is evaluated based on the fair value of the
     rights, using groupings of the underlying loans as to interest rates and
     then, secondarily, as to geographic and prepayment characteristics. Any
     impairment of a grouping is reported as a valuation allowance.

     GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill results from prior business
     acquisitions and represents the excess of the purchase price over the fair
     value of acquired tangible assets and liabilities and identifiable
     intangible assets. Upon adopting new accounting guidance in 2002, the
     Corporation ceased amortizing goodwill. Goodwill is assessed at least
     annually for impairment and any such impairment will be recognized in the
     period identified. The effect on net income of ceasing goodwill
     amortization in 2002 was $513 thousand.

     Other intangible assets consist of core deposit and acquired customer
     relationship intangible assets arising from the whole bank, insurance
     agency and branch acquisitions. They are initially measured at fair value
     and then are amortized on an accelerated method over their estimated useful
     lives, which are 12 and 10 years, respectively.

     LONG-TERM ASSETS: Premises and equipment and other long-term assets are
     reviewed for impairment when events indicate their carrying amount may not
     be recoverable from future undiscounted cash flows. If impaired, the assets
     are recorded at fair value.

     REPURCHASE AGREEMENTS: Substantially all repurchase agreement liabilities
     represent amounts advanced by various customers. Securities are pledged to
     cover these liabilities, which are not covered by federal deposit
     insurance. The Corporation maintains possession of and control over these
     securities.

     BENEFIT PLANS: Pension expense is the net of service and interest cost,
     return on plan assets and amortization of gains and losses not immediately
     recognized. The amount contributed is determined by a formula as decided by
     the Board of Directors.

     INCOME TAXES: Income tax expense is the total of the current year income
     tax due or refundable and the change in deferred tax assets and
     liabilities. Deferred tax assets and liabilities are the expected future
     tax amounts for the temporary differences between carrying amounts and tax
     bases of assets and liabilities, computed using enacted tax rates. A
     valuation allowance, if needed, reduces deferred tax assets to the amount
     expected to be realized.

     FINANCIAL INSTRUMENTS: Financial instruments include credit instruments,
     such as commitments to make loans and standby letters of credit, issued to
     meet customer financing needs. The face amount for these items represents
     the exposure to loss, before considering customer collateral or ability to
     repay. Such financial instruments are recorded when they are funded.

     DERIVATIVES: All derivative instruments are recorded at their fair values.
     If derivative instruments are designated as fair value hedges, both the
     change in the fair value of the hedge and in the fair value of the hedged
     item are included in current earnings. Fair value adjustments related to
     cash flow hedges are recorded in other comprehensive income and
     reclassified to earnings when the hedged transaction is reflected in
     earnings. Ineffective portions of hedges are reflected in income currently.

     EARNINGS PER SHARE: Earnings per common share is net income divided by the
     weighted average number of common shares outstanding during the period. The
     Corporation does not have any potentially dilutive securities. Earnings and
     dividends per share are restated for stock splits and dividends through the
     date of issue of the financial statements.

<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
     comprehensive income. Other comprehensive income includes unrealized gains
     and losses on securities available for sale, which are also recognized as
     separate components of equity.

     LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
     arising in the ordinary course of business, are recorded as liabilities
     when the likelihood of loss is probable and an amount of range of loss can
     be reasonably estimated. Management does not believe there are currently
     such matters that will have a material effect on the financial statements.

     DIVIDEND RESTRICTION: Banking regulations require maintaining certain
     capital levels and may limit the dividends paid by the bank to the holding
     company or by the holding company to shareholders.

     FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments
     are estimated using relevant market information and other assumptions, as
     more fully disclosed in a separate note. Fair value estimates involve
     uncertainties and matters of significant judgment regarding interest rates,
     credit risk, prepayments and other factors, especially in the absence of
     broad markets for particular items. Changes in assumptions or market
     conditions could significantly affect the estimates.

     OPERATING SEGMENT: While the Corporation's chief decision-makers monitor
     the revenue streams of the various products and services, the identifiable
     segments are not material and operations are managed and financial
     performance is evaluated on a corporate-wide basis. Accordingly, all of the
     Corporation's financial service operations are considered by management to
     be aggregated in one reportable operating segment, which is banking.

     ADOPTION OF NEW ACCOUNTING STANDARDS: During 2003, the Corporation adopted
     FASB Statement 143, Accounting for Asset Retirement Obligations; FASB
     Statement 145, Rescission of FASB Statement 4, 44 and 64, Amendment of FASB
     13 and Technical Corrections; FASB Statement 146, Accounting for Cost
     Associated with Exit or Disposal Activities; FASB Statement 149, Amendment
     of Statement 133 on Derivative Investments and Hedging Activities; FASB
     Statement 150, Accounting for Certain Financial Instruments with
     Characteristics of both Liabilities and Equities; FASB Statement 132
     (revised 2003), Employers' Disclosures about Pensions and Other
     Postretirement Benefits; FASB Interpretation 45, Guarantor's Accounting and
     Disclosure Requirements for Guarantees; and FASB Interpretation 46,
     Consolidation of Variable Interest Entities. Adoption of the new standards
     did not materially affect the Corporation's operating results or financial
     condition.

     RECLASSIFICATIONS: Some items in prior year financial statements were
     reclassified to conform to the current presentation.

2.   FAIR VALUES OF FINANCIAL INSTRUMENTS:

     Carrying amount is the estimated fair value for cash and due from banks,
     federal funds sold, short-term borrowings, Federal Home Loan Bank stock,
     accrued interest receivable and payable, demand deposits, short-term debt
     and variable-rate loans or deposits that reprice frequently and fully.
     Security fair values are based on market prices or dealer quotes, and if no
     such information is available, on the rate and term of the security and
     information about the issuer. For fixed-rate loans or deposits, variable
     rate loans or deposits with infrequent repricing or repricing limits, and
     for longer-term borrowings, fair value is based on discounted cash flows
     using current market rates applied to the estimated life and credit risk.
     Fair values for impaired loans are estimated using discounted cash flow
     analysis or underlying collateral values. Fair value of debt is based on
     current rates for similar financing. The fair value of derivatives is based
     on the current fees or cost that would be charged to enter into or
     terminate such arrangements.

     The carrying amount and estimated fair value of financial instruments are
     presented in the table below and were determined based on the above
     assumptions:

<TABLE>
<CAPTION>
                                                                         December 31,
                                          -----------------------------------------------------------------------------
                                                         2003                                        2002
                                          ---------------------------------           ---------------------------------
                                            Carrying                Fair                Carrying                Fair
(Dollar amounts in thousands)                Value                 Value                 Value                 Value
-----------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                   <C>                   <C>                   <C>
Cash and due from banks                   $    94,198           $    94,198           $    96,043           $    96,043
Federal funds sold                              5,850                 5,850                    50                    50
Available-for-sale securities                 567,733               567,733               511,548               511,548
Loans                                       1,430,084             1,432,640             1,433,212             1,438,723
Accrued interest receivable                    13,073                13,073                15,199                15,199
Deposits                                   (1,479,347)           (1,488,240)           (1,434,654)           (1,446,483)
Short-term borrowings                         (68,629)              (68,629)              (34,355)              (34,355)
Federal Home Loan Bank advances              (358,633)             (363,413)             (397,190)             (399,145)
Other borrowings                              (24,600)              (24,600)              (26,100)              (26,100)
Accrued interest payable                       (3,435)               (3,435)               (4,001)               (4,001)
Derivative financial instruments                    -                     -                     3                     3
</TABLE>

<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   RESTRICTIONS ON CASH AND DUE FROM BANKS:

     Certain affiliate banks are required to maintain average reserve balances
     with the Federal Reserve Bank that do not earn interest. The amount of
     those reserve balances was approximately $28.5 million and $23.7 million at
     December 31, 2003 and 2002, respectively.

4.   SECURITIES:

     The fair value of available-for-sale securities and related gains and
     losses recognized in accumulated other comprehensive income were as
     follows:

<TABLE>
<CAPTION>
                                                                       December 31, 2003
                                             --------------------------------------------------------------------
                                                                          Unrealized
                                             Amortized          -----------------------------             Fair
(Dollar amounts in thousands)                   Cost              Gains               Losses              Value
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>                 <C>                 <C>
U.S. Government and its agencies             $ 269,228          $   4,143           $  (1,362)          $ 272,009
Collateralized mortgage obligations             18,022                 31                 (29)             18,024
State and municipal                            152,719              9,421                (150)            161,990
Corporate obligations                          113,736              2,097                (123)            115,710
                                             ---------          ---------           ---------           ---------
  TOTAL                                      $ 553,705          $  15,692           $  (1,664)          $ 567,733
                                             =========          =========           =========           =========
</TABLE>

<TABLE>
<CAPTION>
                                                                        December 31, 2002
                                             --------------------------------------------------------------------
                                                                          Unrealized
                                             Amortized          -----------------------------             Fair
(Dollar amounts in thousands)                   Cost              Gains               Losses              Value
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>                 <C>                 <C>
U.S. Government and its agencies             $ 204,114          $   8,451           $     (15)          $ 212,550
Collateralized mortgage obligations             29,049                400                  (3)             29,446
State and municipal                            162,897              9,151                (316)            171,732
Corporate obligations                           96,250              1,808                (238)             97,820
                                             ---------          ---------           ---------           ---------
  TOTAL                                      $ 492,310          $  19,810           $    (572)          $ 511,548
                                             =========          =========           =========           =========
</TABLE>

     The Corporation invests in the equity securities of financial services
     companies. These investments are considered to be available-for-sale and
     are included in other assets on the consolidated balance sheet. Cost was
     $4.1 million and $3.9 million, and fair value was $9.2 million and $8.4
     million at December 31, 2003 and 2002, respectively.

     The Corporation invested in bank-owned life insurance for an initial
     premium of $45 million in 2000. The policies cover officers at the bank
     subsidiaries and the Corporation is the beneficiary. These policies are
     designated as separate account policies by the issuing insurance companies.
     The Corporation records its investment in the policies at their current
     surrender value, which is the fair value of the separate account assets
     plus or minus the value/obligation under stable value guarantees issued by
     the insurance companies. The stable value guarantees serve to set the
     annual change in surrender value of the policies at annually agreed upon
     levels by guaranteeing the period end value of the separate account assets.

     As of December 31, 2003, the Corporation does not have any securities from
     any issuer, other than the U.S. Government, with an aggregate book or fair
     value that exceeds ten percent of shareholders' equity. Securities with a
     carrying value of approximately $31.3 million and $98.5 million at December
     31, 2003 and 2002, respectively, were pledged as collateral for short-term
     borrowings and for other purposes.
<PAGE>

                           FIRST FINANCIAL CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    Below is a summary of the gross gains and losses realized by the Corporation
    on investments during the years ended December 31, 2003, 2002 and 2001,
    respectively.

<TABLE>
<CAPTION>
(Dollar amounts in thousands)   2003    2002   2001
-----------------------------  ------  ------  ------
<S>                            <C>     <C>     <C>
Proceeds                       $8,308  $9,736  $1,097
Gross gains                       237     154     180
Gross losses                       --      --      --
</TABLE>

    Contractual maturities of debt securities at year-end 2003 were as follows.
    Securities not due at a single maturity date, primarily mortgage-backed
    securities, are shown separately. Also shown are the tax equivalent yields,
    computed using a 35% rate based on weighted average yields of securities
    maturing during each time period.

<TABLE>
<CAPTION>
                                                           Available-for-Sale
                                                      -----------------------------
                                                      Amortized    Fair     Average
     (Dollar amounts in thousands)                      Cost       Value    Yields
     -----------------------------                    ---------  ---------  -------
<S>                                                   <C>        <C>        <C>
Due in one year or less                               $  19,191  $  19,476   7.32%
                                                                             ====
Due after one but within five years                      65,958     69,144   6.83%
                                                                             ====
Due after five but within ten years                      64,578     70,179   7.52%
                                                                             ====
Due after ten years                                     135,669    138,191   5.13%
                                                                             ====
Mortgage-backed securities, primarily issued by U.S.
 Government agencies                                    268,309    270,743   3.91%
                                                                             ====
                                                      ---------  ---------
    TOTAL                                             $ 553,705  $ 567,733
                                                      =========  =========
</TABLE>

    The following table shows the securities' gross unrealized losses and fair
    value, aggregated by investment category and length of time that individual
    securities have been in continuous unrealized loss position, at December 31,
    2003.

<TABLE>
<CAPTION>
                                           Less Than 12 Months      More Than 12 Months             Total
                                         ----------------------   ----------------------   ----------------------
                                                     Unrealized               Unrealized               Unrealized
 (Dollar amounts in thousands)           Fair Value    Losses     Fair Value    Losses     Fair Value    Losses
---------------------------------------  ----------  ---------    ----------  ----------   ----------  ----------
<S>                                      <C>         <C>          <C>         <C>          <C>         <C>
U.S. Government and its agencies         $   87,414  $   (1,354)  $      121  $       (8)  $   87,535  $   (1,362)
Collateralized mortgage obligations          18,021         (29)          --          --       18,021         (29)
State and municipal obligations               4,140         (51)         484         (99)       4,624        (150)
Corporate obligations                        25,453         (71)         945         (52)      26,398        (123)
                                         ----------  ----------   ----------  ----------   ----------  ----------
  Total temporarily impaired securities  $  135,028  $   (1,505)  $   (1,550) $     (159)  $  136,578  $   (1,664)
                                         ==========  ==========   ==========  ==========   ==========  ==========
</TABLE>

    These losses represent negative adjustments to market value relative to the
    rate of interest paid on the securities and not losses related to the
    creditworthiness of the issuer. Management believes the full amount of
    principal will be received upon maturity of these securities.

5.  LOANS:

    Loans are summarized as follows:

<TABLE>
<CAPTION>
                                              December 31,
                                        -------------------------
     (Dollar amounts in thousands)        2003           2002
--------------------------------------  ----------     ----------
<S>                                     <C>            <C>
Commercial, financial and agricultural  $  374,638     $  331,316
Real estate - construction                  35,361         42,930
Real estate - mortgage                     766,911        789,618
Installment                                248,290        268,067
Lease financing                              4,884          1,281
                                        ----------     ----------
 Total gross loans                       1,430,084      1,433,212
 Less: unearned income                        (559)          (648)
  allowance for loan losses                (21,239)       (21,249)
                                        ----------     ----------
     TOTAL                              $1,408,286     $1,411,315
                                        ==========     ==========
</TABLE>


<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    In the normal course of business, the Corporation's subsidiary banks make
    loans to directors and executive officers and to their associates. These
    related party loans are consistent with sound banking practices and are
    within applicable bank regulatory lending limitations. In 2003 the aggregate
    dollar amount of these loans to directors and executive officers who held
    office at the end of the year amounted to $65.6 million at the beginning of
    the year. During 2003, advances of $29.0 million and repayments of $55.6
    million were made with respect to related party loans for an aggregate
    dollar amount outstanding of $39.0 million at December 31, 2003.

    Loans serviced for others, which are not reported as assets, total
    $374.9 million and $282.9 million at year-end 2003 and 2002.

    Activity for capitalized mortgage servicing rights and the related valuation
    allowance was as follows:

<TABLE>
<CAPTION>
                                              December 31,
                                        -------------------------
     (Dollar amounts in thousands)         2003           2002
--------------------------------------  ----------     ----------
<S>                                     <C>            <C>
Servicing rights:
 Beginning of year                      $    2,548     $    1,478
 Additions                                   1,961          2,229
 Amortized to expense                       (1,395)        (1,159)
                                        ----------     ----------
 End of year                            $    3,114     $    2.548
                                        ==========     ==========

Valuation allowance:
 Beginning of year                      $      500     $        -
 Additions expensed                              -            500
 Reductions credited to expense               (300)             -
                                        ----------     ----------
 End of year                            $      200     $      500
                                        ==========     ==========
</TABLE>

    Third party valuations are conducted periodically for mortgage servicing
    rights. Based on these valuations, fair values approximate carrying values.

6.  ALLOWANCE FOR LOAN LOSSES:

    Changes in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>
                                                      December 31,
                                            ---------------------------------
      (Dollar amounts in thousands)           2003        2002         2001
------------------------------------------  ---------   ---------   ----------
<S>                                         <C>         <C>         <C>
Balance at beginning of year                $  21,249   $  18,313   $  19,072
Addition resulting from acquisition                 -       1,711           -
Provision for loan losses                       7,455       9,478       6,615
Recoveries of loans previously charged off      1,475       1,885       1,669
Loans charged off                              (8,940)    (10,138)     (9,043)
                                            ---------   ---------   ---------
  BALANCE AT END OF YEAR                    $  21,239   $  21,249   $  18,313
                                            =========   =========   =========
</TABLE>

    Impaired loans were as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                            --------------------
              (Dollar amounts in thousands)                   2003        2002
----------------------------------------------------------  ---------   --------
<S>                                                         <C>         <C>
Year-end loans with no allocated allowance for loan losses  $   3,254   $      -
Year-end loans with allocated allowance for loan losses         5,914      8,812
                                                            ---------   --------
  TOTAL                                                         9,168      8,812
                                                            =========   ========

Amount of the allowance for loan losses allocated           $   2,835   $  3,283
Average of impaired loans during the year                       8,992      5,288
Nonperforming loans:
  Loans past due over 90 days still on accrual                  5,384      5,899
  Non-accrual loans                                             8,429     11,807
</TABLE>


<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  PREMISES AND EQUIPMENT:

    Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                               December 31,
                                           --------------------
       (Dollar amounts in thousands)         2003        2002
----------------------------------------   --------    --------
<S>                                        <C>         <C>
Land                                       $  4,501    $  4,512
Building and leasehold improvements          34,135      33,615
Furniture and equipment                      26,542      25,368
                                           --------    --------
                                             65,178      63,495
Less accumulated depreciation               (35,856)    (33,686)
                                           --------    --------
  TOTAL                                    $ 29,322    $ 29,809
                                           ========    ========
</TABLE>

8.  GOODWILL AND INTANGIBLE ASSETS:

    The Corporation has goodwill totaling $7.1 million associated with the
    acquisitions of The Morris Plan Company of Terre Haute in 1998 and Forrest
    Sherer Inc. in 2001. No additional goodwill was recorded during 2003 or
    2002. The Corporation completed its annual impairment testing of goodwill
    during the second quarter and management does not believe any amount of the
    goodwill is impaired. The $7.1 million of goodwill is net of accumulated
    amortization of $737 thousand.

    Goodwill is no longer amortized starting in 2002. Had this accounting
    treatment been effective in 2001, net income for the year would not have
    included goodwill amortization of $399 thousand and would have been $24.6
    million. Earnings per share would have been $1.81.

    Intangible assets subject to amortization at December 31, 2003 and 2002 are
    as follows:

<TABLE>
<CAPTION>

                                       2003                  2004
                               --------------------  ---------------------
                               Gross   Accumulated    Gross   Accumulated
(Dollar amounts in thousands)  Amount  Amortization   Amount  Amortization
-----------------------------  ------  ------------  -------  ------------
<S>                            <C>     <C>           <C>      <C>
Customer list intangible       $3,108   $    1,086   $ 3,108   $    730
Core deposit intangible         2,193          775     2,193        605
Non-compete agreements            500          289       500        177
                               ------   ----------   -------   ---------
                               $5,801   $    2,150   $ 5,801   $  1,512
                               ======   ==========   =======   =========
</TABLE>

    Aggregate amortization expense was $638 thousand, $692 thousand and $826
    thousand for 2003, 2002 and 2001, respectively.

    Estimated amortization expense for the next five years is as follows:

<TABLE>
<CAPTION>
                                  In thousands
<S>                               <C>
2004                                $ 565
2005                                  533
2006                                  463
2007                                  392
2008                                  392
</TABLE>

9.  DEPOSITS AND SHORT-TERM BORROWINGS:

    Scheduled maturities of time deposits were as follows:

<TABLE>
<CAPTION>
                                  In thousands
<S>                               <C>
2004                                $ 383,822
2005                                  184,527
2006                                   43,337
2007                                   61,541
2008                                   18,983
Thereafter                                513
                                    ---------
                                    $ 692,723
                                    =========
</TABLE>


<PAGE>

                               2003 ANNUAL REPORT

Notes TO CONSOLIDATED FINANCIAL STATEMENTS

    Year-end short-term borrowings were comprised of the following:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)     2003      2002
------------------------------  --------  --------
<S>                             <C>       <C>
Federal funds purchased         $ 61,524  $ 16,311
Repurchase agreements              5,130    13,237
Note payable - U.S. government     1,975     4,807
                                --------  --------
                                $ 68,629  $ 34,355
                                ========  ========
</TABLE>

    Federal funds purchased are generally due in one day and bear interest at
    market rates. Note payable - U.S. government is due on demand, secured by a
    pledge of securities and bears interest at market rates.

10. OTHER BORROWINGS:

    Other borrowings at December 31, 2003 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                  (Dollar amounts in thousands)                    2003      2002
---------------------------------------------------------------  --------  --------
<S>                                                              <C>       <C>
FHLB advances                                                    $358,633  $397,190
Note payable to a financial institution                            18,000    19,500
City of Terre Haute, Indiana economic development revenue bonds     6,600     6,600
                                                                 --------  --------
  TOTAL                                                          $383,233  $423,290
                                                                 ========  ========
</TABLE>

    The aggregate minimum annual retirements of other borrowings are as follows:

<TABLE>
<S>                            <C>
2004                           $ 49,659
2005                                 --
2006                                273
2007                                387
2008                             52,419
Thereafter                      280,495
                               --------
                               $383,233
                               ========
</TABLE>

    All of the Corporation's Indiana subsidiary banks are members of the Federal
    Home Loan Bank (FHLB) of Indianapolis and, accordingly, are permitted to
    obtain advances. The advances from the FHLB, aggregating $358.6 million at
    December 31, 2003, accrue interest, payable monthly, at annual rates varying
    from 3.64% to 6.6%. The advances are due at various dates through August
    2017. FHLB advances are, generally, due in full at maturity. They are
    secured by eligible securities totaling $193.0 million and a blanket pledge
    on real estate loan collateral. Certain advances may be prepaid, without
    penalty, prior to maturity. The FHLB can adjust the interest rate from fixed
    to variable on certain advances, but those advances may then be prepaid,
    without penalty.

    On December 31, 2003, the Corporation entered into a revolving credit loan
    agreement (Note) with a financial institution. The total principal amount of
    loans outstanding at one time under this Note may not exceed $20 million.
    The Note matures on December 31, 2004, but is renewable annually, and
    requires quarterly payments of interest and a commitment fee of 0.15% on the
    average daily amount of the commitment. The Note bears an interest rate
    equal to the average daily federal funds rate plus 0.875% and adjusts daily.
    At December 31, 2003, the interest rate was 1.87%. The Note is unsecured but
    requires the Corporation to meet certain financial covenants. The
    Corporation was in compliance with all its debt covenants. The proceeds from
    this loan were used to repay an outstanding line of credit with similar
    terms.

    The economic development revenue bonds (bonds) require periodic interest
    payments each year until maturity or redemption. The interest rate, which
    was 1.2% at December 31, 2003, and 1.6% at December 31, 2002, is determined
    by a formula which considers rates for comparable bonds and is adjusted
    periodically. The bonds are collateralized by a first mortgage on the
    Corporation's headquarters building. The bonds mature December 1, 2015, but
    bondholders may periodically require earlier redemption.

    The Corporation maintains a letter of credit with another financial
    institution, which could be used to repay the bonds, should they be called.
    The letter of credit expires November 1, 2004, and will be automatically
    extended for one year should the bonds still be outstanding. Assuming
    redemption will be funded by the letter of credit, or by other similar
    borrowings, there are no anticipated principal maturities of the bonds
    within the next five years.

    The debt agreement for the bonds requires the Corporation to meet certain
    financial covenants. These covenants require the Corporation to maintain a
    Tier I capital ratio of at least 6.2% and net income to average assets of
    0.6%. At December 31, 2003 and 2002, the Corporation was in compliance with
    all of its debt covenants.


<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. INCOME TAXES:

    Income tax expense is summarized as follows:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)    2003      2002      2001
-----------------------------  --------   -------   -------
<S>                            <C>        <C>       <C>
Federal:
  Currently payable            $  8,046   $ 6,880   $ 6,413
  Deferred                         (544)     (960)       68
                               --------   -------   -------
                                  7,502     5,920     6,481
State:
  Currently payable               1,052     1,156     1,353
  Deferred                          292       133        42
                               --------   -------   -------
      TOTAL                       1,344     1,289     1,395
                               --------   -------   -------
                               $  8,846   $ 7,209   $ 7,876
                               ========   =======   =======
</TABLE>

    The reconciliation of income tax expense with the amount computed by
    applying the statutory federal income tax rate of 35% to income before
    income taxes is summarized as follows:

<TABLE>
<CAPTION>
          (Dollar amounts in thousands)                2003       2002       2001
---------------------------------------------------  --------   --------   --------
<S>                                                  <C>        <C>        <C>
Federal income taxes computed at the statutory rate  $ 12,369   $ 12,547   $ 11,225
Add (deduct) tax effect of:
   Tax exempt income                                   (3,738)    (5,705)    (3,683)
   State tax, net of federal benefit                      873        838        907
   Affordable housing credits                            (507)      (604)      (604)
   Other, net                                            (151)       133         31
                                                     --------   --------   --------
     TOTAL                                           $  8,846   $  7,209   $  7,876
                                                     ========   ========   ========
</TABLE>

    The tax effects of temporary differences that give rise to significant
    portions of the deferred tax assets and liabilities at December 31, 2003 and
    2002, are as follows:

<TABLE>
<CAPTION>
              (Dollar amounts in thousands)                2003        2002
-------------------------------------------------------  --------    ---------
<S>                                                      <C>         <C>
Deferred tax assets:
  Loan losses provision                                  $  8,480    $   8,340
  Deferred compensation                                     2,792        2,173
  Compensated absences                                        467          468
  Post-retirement benefits                                    721          594
  State net operating loss carry forward                      348          602
  Other                                                       641          131
                                                         --------    ---------
    GROSS DEFERRED ASSETS                                  13,449       12,308
                                                         --------    ---------

Deferred tax liabilities:
  Net unrealized gains on available-for-sale securities    (7,644)      (9,518)
  Depreciation                                             (1,184)      (1,144)
  Federal Home Loan Bank stock dividends                     (821)          --
  Originated servicing rights                              (1,158)        (803)
  Pensions                                                 (1,339)      (1,652)
  Other                                                    (2,185)      (2,199)
                                                         --------    ---------
    GROSS DEFERRED LIABILITIES                            (14,331)     (15,316)
                                                         --------    ---------
    NET DEFERRED TAX ASSETS (LIABILITIES)                $   (882)   $  (3,008)
                                                         ========    =========
</TABLE>


<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND DERIVATIVE
    INSTRUMENTS:

    The Corporation is a party to financial instruments with off-balance-sheet
    risk in the normal course of business to meet the financing needs of its
    customers. These financial instruments include conditional commitments and
    standby letters of credit. The financial instruments involve to varying
    degrees, elements of credit and interest rate risk in excess of amounts
    recognized in the financial statements. The Corporation's maximum exposure
    to credit loss in the event of nonperformance by the other party to the
    financial instrument for commitments to make loans is limited generally by
    the contractual amount of those instruments. The Corporation follows the
    same credit policy to make such commitments as is followed for those loans
    recorded in the consolidated financial statements.

    The Corporation's customers had unused lines of credit of $235.3 million and
    $230.8 million as of December 31, 2003 and 2002. In addition, the
    Corporation had outstanding commitments of $5.6 million and $5.8 million
    under standby letters of credit as of December 31, 2003 and 2002,
    respectively. The majority of these commitments bear variable interest
    rates. The Corporation is exposed to credit loss in the event the
    counterparties to such agreements do not perform in accordance with the
    agreements.

    During 2001 the Corporation purchased an interest rate cap contract with a
    notional principal balance of $50 million. The agreement requires the
    counterparty to pay the Corporation the excess of the 3-month LIBOR over
    6.00%. The cap has a 36-month term which runs through March 2004. No
    payments are currently required under the agreement. The agreement was
    entered into to help protect the Corporation's net interest income should
    interest rates increase in excess of the cap's trigger amount. The interest
    rate cap had no value at December 31, 2003.

13. RETIREMENT PLANS:

    Substantially all employees of the Corporation are covered by a retirement
    program that consists of a defined benefit plan and an employee stock
    ownership plan (ESOP). Plan assets consist primarily of the Corporation's
    stock and obligations of U.S. Government agencies. Benefits under the
    defined benefit plan are actuarially determined based on an employee's
    service and compensation, as defined, and funded as necessary.

    Assets in the ESOP are considered in calculating the funding to the defined
    benefit plan required to provide such benefits. Any shortfall of benefits
    under the ESOP are to be provided by the defined benefit plan. The ESOP may
    provide benefits beyond those determined under the defined benefit plan.
    Contributions to the ESOP are determined by the Corporation's Board of
    Directors. The Corporation made contributions to the defined benefit plan of
    $1.55 million, $1.32 million and $1.15 million in 2003, 2002 and 2001. The
    Corporation contributed $1.26 million, $1.04 million and $350 thousand to
    the ESOP in 2003, 2002 and 2001.

    The Corporation uses a measurement date of December 31, 2003.

    Pension expense included the following components:

<TABLE>
<CAPTION>

      (Dollar amounts in thousands)              2003      2002     2001
---------------------------------------------  -------   -------   -------
<S>                                            <C>       <C>       <C>
Service cost - benefits earned                 $ 2,166   $ 2,065   $   698
Interest cost on projected benefit obligation    2,025     1,880     1,766
Expected return on plan assets                  (2,334)   (2,062)   (1,679)
Net amortization and deferral                      240       181       296
                                               -------   -------   -------
Total pension expense                          $ 2,097   $ 2,064   $ 1,081
                                               =======   =======   =======
</TABLE>

    The information on the next page sets forth the projected change in benefit
    obligation, reconciliation of plan assets, and the funded status of the
    Corporation's retirement program. Actuarial present value of benefits is
    based on service to date and present pay levels.


<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
       (Dollar amounts in thousands)              2003       2002
--------------------------------------------   ---------   --------
<S>                                            <C>         <C>
Change in benefit obligation:
Benefit obligation at January 1                $  31,274   $ 30,293
Service cost                                       2,166      2,065
Interest cost                                      2,025      1,880
Actuarial (gain) loss                              4,057     (2,349)
Benefits paid                                     (3,222)      (615)
                                               ---------   --------
Benefit obligation at December 31                 36,300     31,274
                                               ---------   --------

Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1            29,296     25,887
Actual return on plan assets                       5,790      1,665
Employer contributions                             2,801      2,359
Benefits paid                                     (3,222)      (615)
                                               ---------   --------
Fair value of plan assets at December 31          34,665     29,296
                                               ---------   --------
Funded status:
Funded status at December 31                      (1,635)    (1,978)
Unrecognized prior service cost                     (195)      (213)
Unrecognized net actuarial cost                    6,839      6,496
                                               ---------   --------
Prepaid pension asset recognized in the
  consolidated balance sheets                  $   5,009   $  4,305
                                               =========   ========
</TABLE>

    The accumulated benefit obligation for the defined benefit pension plan was
    $30,788 and $25,943 at year end 2003 and 2002.

    Principal assumptions used:

<TABLE>
<S>                                                        <C>            <C>
Discount rate                                              6.00%          6.50%
Rate of increase in compensation levels                    4.00           4.00
Expected long-term rate of return on plan assets           8.00           8.00
</TABLE>

    The expected long-term rate of return was estimated using market benchmarks
    for equities and bonds applied to the plan's target asset allocation.
    Management estimated the rate by which plan assets would perform based on
    historical experience as adjusted for changes in asset allocations and
    expectations for future return on equities as compared to past periods.

    PLAN ASSETS -- The Corporation's pension plan weighted-average asset
    allocation for the years 2003 and 2002 by asset category are as follows:

<TABLE>
<CAPTION>
                                                                 Pension Plan                ESOP
                     Pension Plan            ESOP         Percentage of Plan Assets   Percentage of Plan
                   Target Allocation   Target Allocation         at December 31,     Assets at December 31,
Asset Category           2004                2004            2003           2002       2003         2002
--------------           ----                ----            ----           ----       ----         ----
<S>                <C>                 <C>                <C>               <C>      <C>            <C>
Equity securities       63-63%              99-99%            61%            54%        98%          99%
Debt services           35-35                 0-0             30             35          0            0
Real estate               0-0                 0-0              0              0          0            0
Other                     2-2                 1-1              9             11          2            1
                                                             ---            ---        ---          ---
 TOTAL                                                       100%           100%       100%         100%
</TABLE>

    The investment objective for the retirement program is to maximize total
    return without exposure to undue risk. Asset allocation favors equities,
    with a target allocation of approximately 88%. This target includes the
    Corporation's ESOP, which is 98% invested in corporate stock. Other
    investment allocations include 8% in fixed income securities and 4% in cash.

    Equity securities include First Financial Corporation common stock in the
    amount of $25.9 million (75 percent of total plan assets) and $21.2 million
    (72 percent of total plan assets) at December 31, 2003, and 2002,
    respectively.


<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         CONTRIBUTIONS -- The Corporation expects to contribute $1.57 million to
         its pension plan and $1.2 million to ESOP in 2004.

         The Corporation also provides medical benefits to its employees
         subsequent to their retirement. The Corporation uses a measurement date
         of December 31, 2003. Accrued post-retirement benefits as of December
         31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                  December 31,
                                             ---------------------
     (Dollar amounts in thousands)             2003         2002
     -----------------------------           --------      -------
<S>                                          <C>           <C>
Change in benefit obligation:
Benefit obligation at January 1              $  4,081      $ 3,430
  Service cost                                    102           76
  Interest cost                                   252          226
  Plan participants' contributions                 90           58
  Actuarial (gain) loss                           256          647
  Actual benefits paid                           (497)        (356)
                                             --------      -------
  Benefit obligation at December 31          $  4,284      $ 4,081
                                             ========      =======

Reconciliation of funded status:
  Funded status                              $  4,284      $ 4,081
  Unrecognized transition obligation             (603)        (663)
  Unrecognized net gain (loss)                 (2,167)      (2,031)
                                             --------      -------
  Accrued benefit cost                       $  1,514      $ 1,387
                                             ========      =======
</TABLE>

         The post-retirement benefits paid in 2003 and 2002 of $497 thousand and
         $356 thousand, respectively, were fully funded by company and
         participant contributions. There were no other changes to plan assets
         in 2003 and 2002.

         Weighted-average assumptions as of December 31:

<TABLE>
<CAPTION>
                                                  December 31,
                                               ------------------
                                               2003          2002
                                               ----          ----
<S>                                            <C>           <C>
Discount rate                                  6.00%         6.50%
Initial weighted health care cost trend rate   7.50          7.50
Ultimate health care cost trend rate           5.00          5.00
</TABLE>

         Post-retirement health benefit expense included the following
         components:

<TABLE>
<CAPTION>
                                          Years Ended December 31,
                                          ------------------------
    (Dollar amounts in thousands)          2003     2002     2001
    -----------------------------         ------   ------   ------
<S>                                       <C>      <C>      <C>
Service cost                              $  102   $   76   $   63
Interest cost                                252      226      215
Amortization of transition obligation         60       60       60
Recognized actuarial loss                    120       80       54
                                          ------   ------   ------
Net periodic benefit cost                 $  534   $  442   $  392
                                          ======   ======   ======
</TABLE>

         Assumed health care cost trend rates have a significant effect on the
         amounts reported for the health care plans. A one-percentage-point
         change in the assumed health care cost trend rates would have the
         following effects:

<TABLE>
<CAPTION>
                                                              1% Point    1% Point
                                                              Increase    Decrease
                                                              --------    --------
<S>                                                           <C>         <C>
Effect on total of service and interest cost components        $   26      $  (20)
Effect on post-retirement benefit obligation                      302        (235)
</TABLE>

CONTRIBUTIONS -- The Corporation expects to contribute $233 thousand to its
other post-retirement benefit plan in 2004.

<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.      OTHER COMPREHENSIVE INCOME:

         Other comprehensive income components and related taxes were as
         follows:

<TABLE>
<CAPTION>
                 (Dollar amounts in thousands)                                   December 31,
                 -----------------------------                           -----------------------------
                                                                          2003       2002       2001
                                                                         -------    -------    -------
<S>                                                                      <C>        <C>        <C>
Unrealized holding gains and losses on available-for-sale securities     $(4,450)   $10,116    $ 7,512
Reclassification adjustments for gains and losses later
  recognized in income                                                      (237)      (154)      (180)
                                                                         -------    -------    -------
Net unrealized gains and losses                                           (4,687)     9,962      7,332
Tax effect                                                                 1,874     (3,985)    (2,933)
                                                                         -------    -------    -------
Other comprehensive income                                               $(2,813)   $ 5,977    $ 4,399
                                                                         =======    =======    =======
</TABLE>

15.      REGULATORY MATTERS:

         The Corporation and its bank affiliates are subject to various
         regulatory capital requirements administered by the federal banking
         agencies. Failure to meet minimum capital requirements can initiate
         certain mandatory -- and possibly additional discretionary -- actions
         by regulators that, if undertaken, could have a direct material effect
         on the Corporation's financial statements.

         Further, the Corporation's primary source of funds to pay dividends to
         shareholders is dividends from its subsidiary banks and compliance with
         these capital requirements can affect the ability of the Corporation
         and its banking affiliates to pay dividends. At December 31, 2003,
         approximately $57.2 million of undistributed earnings of the subsidiary
         banks, included in consolidated retained earnings, were available for
         distribution to the Corporation without regulatory approval.

         Under capital adequacy guidelines and the regulatory framework for
         prompt corrective action, the Corporation must meet specific capital
         guidelines that involve quantitative measures of the Corporation's
         assets, liabilities, and certain off-balance-sheet items as calculated
         under regulatory accounting practices. The Corporation's capital
         amounts and classification are also subject to qualitative judgments by
         the regulators about components, risk weightings and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Corporation to maintain minimum amounts and ratios
         of Total and Tier I Capital to risk-weighted assets, and of Tier I
         Capital to average assets. Management believes, as of December 31, 2003
         and 2002, that the Corporation meets all capital adequacy requirements
         to which it is subject.

         As of December 31, 2003, the most recent notification from the
         respective regulatory agencies categorized the Corporation and its
         subsidiary banks as well capitalized under the regulatory framework for
         prompt corrective action. To be categorized as adequately capitalized
         the Corporation must maintain minimum total risk-based, Tier I
         risk-based and Tier I leverage ratios as set forth in the table. There
         are no conditions or events since that notification that management
         believes have changed the Corporation's category.

         The following table presents the actual and required capital amounts
         and related ratios for the Corporation and the lead bank, First
         Financial Bank, N.A., at year end 2003 and 2002.

<PAGE>

                               2003 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                          To Be Well Capitalized
                                                               For Capital                Under Prompt Corrective
                                           Actual           Adequacy Purposes                Action Provisions
                                           ------           -----------------                -----------------
(Dollar amounts in thousands)         Amount   Ratio       Amount           Ratio           Amount           Ratio
-----------------------------         ------   -----       ------           -----           ------           -----
<S>                                  <C>       <C>     <C>                <C>           <C>               <C>
TOTAL RISK-BASED CAPITAL
 Corporation - 2003                  $252,924  15.67%  > or = $129,081    > or = 8.0%   > or = $161,351   > or =10.0%
 Corporation - 2002                   235,985  14.83%  > or =  127,296    > or = 8.0%   > or =  159,120   > or =10.0%
 First Financial Bank - 2003          169,725  16.35%  > or =   83,039    > or = 8.0%   > or =  103,799   > or =10.0%
 First Financial Bank - 2002          149,778  15.56%  > or =   76,992    > or = 8.0%   > or =   96,241   > or =10.0%

TIER I RISK-BASED CAPITAL
 Corporation - 2003                  $232,746  14.43%  > or = $ 64,540    > or = 4.0%   > or = $ 96,811   > or = 6.0%
 Corporation - 2002                   216,078  13.58%  > or =   63,648    > or = 4.0%   > or =   95,472   > or = 6.0%
 First Financial Bank - 2003          157,920  15.21%  > or =   41,520    > or = 4.0%   > or =   62,280   > or = 6.0%
 First Financial Bank - 2002          139,590  14.50%  > or =   38,496    > or = 4.0%   > or =   57,744   > or = 6.0%

TIER I LEVERAGE CAPITAL
 Corporation - 2003                  $232,746  10.67%  > or = $ 87,278    > or = 4.0%   > or = $109,097   > or = 5.0%
 Corporation - 2002                   216,078   9.79%  > or =   88,323    > or = 4.0%   > or =  110,404   > or = 5.0%
 First Financial Bank - 2003          157,920  11.78%  > or =   53,605    > or = 4.0%   > or =   67,006   > or = 5.0%
 First Financial Bank - 2002          139,590  10.85%  > or =   51,446    > or = 4.0%   > or =   64,308   > or = 5.0%
</TABLE>

16.      PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:

         The parent company's condensed balance sheets as of December 31, 2003
         and 2002, and the related condensed statements of income and cash flows
         for each of the three years in the period ended December 31, 2003, are
         as follows:

         CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          December 31,
                                                    -----------------------
          (Dollar amounts in thousands)               2003           2002
          -----------------------------             --------       --------
<S>                                                 <C>            <C>
ASSETS
  Cash deposits in affiliated banks                 $  7,629       $  5,037
  Investments in subsidiaries                        269,062        256,608
  Land and headquarters building, net                  6,351          6,516
  Other                                               10,137         10,688
                                                    --------       --------
      TOTAL ASSETS                                  $293,179       $278,849
                                                    ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Borrowings                                        $ 28,636       $ 29,900
  Dividends payable                                    4,891          4,229
  Other liabilities                                    4,373          2,749
                                                    --------       --------
      TOTAL LIABILITIES                               37,900         36,878

SHAREHOLDERS' EQUITY                                 255,279        241,971
                                                    --------       --------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $293,179       $278,849
                                                    ========       ========
</TABLE>

<PAGE>

                           FIRST FINANCIAL CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                    ------------------------------------
         (Dollar amounts in thousands)                2003           2002         2001
         -----------------------------              --------       --------     --------
<S>                                                 <C>            <C>          <C>
Dividends from subsidiaries                         $ 12,418       $  5,676     $ 10,485
Other income                                           1,006            913          971
Interest on borrowings                                  (663)          (673)        (314)
Other operating expenses                              (2,759)        (2,953)      (2,801)
                                                    --------       --------     --------

Income before income taxes and equity
   in undistributed earnings of subsidiaries          10,002          2,963        8,341
   Income tax benefit                                    907          1,074          863
                                                    --------       --------     --------
Income before equity in
   undistributed earnings of subsidiaries             10,909          4,037        9,204
Equity in undistributed earnings of subsidiaries      15,584         24,603       14,992
                                                    --------       --------     --------
Net income                                          $ 26,493       $ 28,640     $ 24,196
                                                    ========       ========     ========
</TABLE>

         CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                                    ------------------------
(Dollar amounts in thousands)                                    2003        2002        2001
-----------------------------                                    ----        ----        ----
<S>                                                            <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                     $ 26,493    $ 28,640    $ 24,196
  Adjustments to reconcile net income to net cash
    provided by operating activities:
       Provision for depreciation and amortization                  215         258         360
       Equity in undistributed earnings of subsidiaries         (15,584)    (24,603)    (14,992)
       Contribution of shares to ESOP                             1,256       1,038           -
       Increase (decrease) in other liabilities                   1,626        (202)        571
       (Increase) decrease in other assets                          852        (127)     (1,009)
                                                               --------    --------    --------
         NET CASH FROM OPERATING ACTIVITIES                      14,858       5,004       9,126

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of furniture and fixtures                                (34)        (49)        (55)
  Purchase of Community Financial Corp.                               -     (14,699)          -
  Purchase of Forrest Sherer Inc.                                     -           -      (1,699)
                                                               --------    --------    --------
         NET CASH FROM INVESTING ACTIVITIES                         (34)    (14,748)     (1,754)
                                                               --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                                       18,236      22,300       1,500
  Principal payments on long-term borrowings                    (19,500)       (500)       (180)
  Purchase of treasury stock                                     (2,123)     (2,726)     (1,297)
  Dividends paid                                                 (8,845)     (8,209)     (7,586)
                                                               --------    --------    --------
         NET CASH FROM FINANCING ACTIVITIES                     (12,232)     10,865      (7,563)
                                                               --------    --------    --------
         NET (DECREASE) INCREASE IN CASH                          2,592       1,121        (191)
         CASH, BEGINNING OF YEAR                                  5,037       3,916       4,107
                                                               --------    --------    --------
         CASH, END OF YEAR                                     $  7,629    $  5,037    $  3,916
                                                               ========    ========    ========
     Supplemental disclosures of cash flow information:
     Cash paid during the year for:
       Interest                                                $    663    $    644    $    314
                                                               ========    ========    ========
       Income taxes                                            $  8,016    $ 11,388    $  7,533
                                                               ========    ========    ========
</TABLE>


<PAGE>

                               2002 ANNUAL REPORT

RESPONSIBILITY FOR FINANCIAL STATEMENTS

To the Shareholders and Board of Directors of First Financial Corporation:

         The management of First Financial Corporation has prepared and is
responsible for the preparation and accuracy of the financial statements and
other information included in this report. The financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and where appropriate, include amounts based on
judgments and estimates by management.

         To fulfill its responsibility, the Corporation maintains and continues
to refine a system of internal accounting controls and procedures to provide
reasonable assurance that (i) the Corporation's assets are safeguarded; (ii)
transactions are executed in accordance with proper management authorization;
and (iii) financial records are reliable for the preparation of financial
statements. The design, monitoring and revision of internal accounting control
systems involve, among other things, management judgments with respect to the
relative costs and expected benefits of such control procedures.

         Management assessed First Financial Corporation's internal control
structure over financial reporting as of December 31, 2003. This assessment was
based on criteria for effective internal control over financial reporting
described in "Internal Control -- Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management believes that the Corporation maintained an effective
internal control structure over financial reporting as of December 31, 2003.

         Crowe Chizek and Company LLC performs an independent audit of the
Corporation's financial statements for the purpose of determining that such
statements are presented in conformity with accounting principles generally
accepted in the United States of America and their report appears below. The
independent accountants are appointed based upon recommendations by the Audit
Committee and approved by the Board of Directors.

         The Audit Committee of the Board of Directors, composed of three
outside directors, meets periodically with the Corporation's management and the
independent accountants to discuss the audit scope and findings as well as
address internal control systems and financial reporting matters. The
independent accountants have direct access to the Audit Committee.

/s/ Norman L. Lowery                       /s/ Michael A. Carty
Chief Executive Officer                    Treasurer

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of First Financial Corporation:

         We have audited the accompanying consolidated balance sheets of First
Financial Corporation as of December 31, 2003 and 2002, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Financial Corporation as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

                                                /s/ Crowe Chizek and Company LLC

Indianapolis, Indiana
January 16, 2004

<PAGE>

                           FIRST FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis reviews the financial condition of First
Financial Corporation at December 31, 2003 and 2002, and the results of its
operations for the three years ended December 31, 2003. Where appropriate,
factors that may affect future financial performance are also discussed. The
discussion should be read in conjunction with the accompanying consolidated
financial statements, related footnotes and selected financial data.

A cautionary note about forward-looking statements: In its oral and written
communication, First Financial Corporation from time to time includes
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements can include
statements about estimated cost savings, plans and objectives for future
operations and expectations about performance, as well as economic and market
conditions and trends. They often can be identified by the use of words such as
"expect," "may," "could," "intend," "project," "estimate," "believe" or
"anticipate." First Financial Corporation may include forward-looking statements
in filings with the Securities and Exchange Commission, in other written
materials such as this Annual Report and in oral statements made by senior
management to analysts, investors, representatives of the media and others. It
is intended that these forward-looking statements speak only as of the date they
are made, and First Financial Corporation undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which the forward-looking statement is made or to reflect the occurrence of
unanticipated events.

By their nature, forward-looking statements are based on assumptions and are
subject to risks, uncertainties and other factors. Actual results may differ
materially from those contained in the forward-looking statement. The discussion
in this "Management's Discussion and Analysis of Results of Operations and
Financial Condition" lists some of the factors which could cause actual results
to vary materially from those in any forward-looking statements. Other
uncertainties which could affect First Financial Corporation's future
performance include the effects of competition, technological changes and
regulatory developments; changes in fiscal, monetary and tax policies; market,
economic, operational, liquidity, credit and interest rate risks associated with
First Financial Corporation's business; inflation; competition in the financial
services industry; changes in general economic conditions, either nationally or
regionally, resulting in, among other things, credit quality deterioration; and
changes in securities markets. Investors should consider these risks,
uncertainties and other factors in addition to those mentioned by First
Financial Corporation in its other filings from time to time when considering
any forward-looking statement.

First Financial Corporation (the Corporation) is a financial services company.
The Corporation, which is headquartered in Terre Haute, Indiana, offers a wide
variety of financial services including commercial, mortgage and consumer
lending, lease financing, trust account services and depositor services through
its ten subsidiaries. At the close of business in 2003 the Corporation and its
subsidiaries had 834 full-time equivalent employees.

First Financial Bank is the largest bank in Vigo County. It operates 12
full-service banking branches within the county, one branch in Marshall,
Illinois, and one branch in Ridge Farm, Illinois. In addition to its branches,
it has a main office in downtown Terre Haute and a 50,000-square-foot commercial
building on South Third Street in Terre Haute, which serves as the Corporation's
operations center and provides additional office space.

First State has five branch locations in Clay County, a county contiguous to
Vigo County. Citizens has four branches, all of which are located in Vermillion
County, a county contiguous to Vigo County. Farmers has eight branches, of which
five are located in Sullivan County, two in Knox County and one in Greene
County. Sullivan County is contiguous to Vigo County. Morris Plan has one office
and is located in Vigo County. Parke has five branches in Parke County, a county
contiguous to Vigo County. Crawford has two branches in Crawford County,
Illinois, and one branch in Lawrence County, Illinois. Community has six
branches, of which two are located in Richland County, Illinois; one in Lawrence
County, Illinois; one in Wayne County, Illinois; one in Jasper County, Illinois;
and one in Coles County, Illinois.

First Financial Bank and Morris Plan face competition from other financial
institutions in Vigo County. These competitors consist of three commercial
banks, a mutual savings bank and other financial institutions, including
consumer finance companies, insurance companies, brokerage firms and credit
unions. The six other bank subsidiaries have similar competition in their
primary market areas. The number of competitors of each subsidiary is as
follows:

-    FIRST STATE -- Three commercial banks, two credit unions and one brokerage
     firm in Clay County, Indiana.

-    CITIZENS -- Three commercial banks and two credit unions in Vermillion
     County, Indiana.

-    FARMERS -- Two commercial banks and one brokerage firm in Sullivan County,
     Indiana, and three commercial banks, one savings and loan, and one credit
     union in Greene County, Indiana.

-    PARKE -- Two commercial banks, five credit unions and two brokerage firms
     in Parke County, Indiana.

-    CRAWFORD -- Four commercial banks, two credit unions and four brokerage
     firms in Crawford County, Illinois, and seven commercial banks and one
     credit union in Lawrence County, Illinois.

<PAGE>

                               2003 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

-    COMMUNITY -- Four commercial banks, three brokerage firms and three
     consumer finance companies in Richland County, Illinois; eight commercial
     banks, one credit union and two consumer finance companies in Lawrence
     County, Illinois; five commercial banks, one brokerage firm and one
     consumer finance company in Wayne County, Illinois; three commercial banks,
     one insurance company and two brokerage firms in Jasper County, Illinois;
     seven commercial banks, three savings and loans, six credit unions, two
     insurance companies; five brokerage firms and six consumer finance
     companies in Coles County, Illinois.

The Corporation's business activities are centered in west-central Indiana and
east-central Illinois. The Corporation has no foreign activities other than
periodically investing available funds in time deposits held in foreign branches
of domestic banks.

Forrest Sherer Inc. is a premier regional supplier of insurance, surety and
other financial products. The Forrest Sherer brand is well recognized in the
Midwest, with more than 60 professionals and 80 years of successful service to
both small and large businesses and to households in their market area. The
agency has representation agreements with more than 40 regional and national
insurers to market their products of property and casualty insurance, surety
bonds, employee benefit plans, life insurance and annuities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Management's Discussion and Analysis of Financial Condition and Results of
Operations, as well as disclosures found elsewhere in this report are based upon
First Financial Corporation's consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Corporation to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues, and expenses. Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses, the valuation of the mortgage
servicing rights and goodwill. Actual results could differ from those estimates.

     ALLOWANCE FOR LOSSES. The allowance for loan losses is maintained at a
     level believed adequate by management to absorb probable losses inherent in
     the consolidated loan portfolio. Management's evaluation of the adequacy of
     the allowance is an estimate based on reviews of individual loans,
     assessments of the impact of current and anticipated economic conditions on
     the portfolio, and historical loss experience. The allowance represents
     management's best estimate, but significant downturns in circumstances
     relating to loan quality and economic conditions could result in a
     requirement for additional allowance in the near future. Likewise, an
     upturn in loan quality and improved economic conditions may result in a
     decline in the required allowance. In either instance unanticipated changes
     could have a significant impact on operating earnings.

     The allowance is increased through a provision charged to operating
     expense. Uncollectible loans are charged-off through the allowance.
     Recoveries of loans previously charged off are added to the allowance. A
     loan is considered impaired when it is probable that contractual interest
     and principal payments will not be collected either for the amounts or by
     the dates as scheduled in the loan agreement. The Corporation's policy for
     recognizing income on impaired loans is to accrue interest unless a loan is
     placed on nonaccrual status.

     MORTGAGE SERVICING RIGHTS. Servicing rights are recognized as separate
     assets when loans are sold with servicing retained. Capitalized servicing
     rights are amortized into noninterest income in proportion to, and over the
     period of, the estimated future net servicing income of the underlying
     financial assets. Servicing rights are valued based upon their estimated
     fair value. The Corporation periodically utilizes the services of a third
     party to determine the fair value of these assets. Negative adjustments to
     value (referred to as impairment), if any, are recognized through a
     valuation allowance by charges against mortgage servicing income. Valuation
     of mortgage servicing rights is depended on many factors, including
     anticipated life, prepayment speeds, economic conditions and discount
     rates. A change in these and other factors could result in higher or lower
     amortization and impairment.

     GOODWILL. The carrying value of goodwill requires management to use
     estimates and assumptions about the fair value of the reporting unit
     compared to its book value. An impairment analysis is prepared on an annual
     basis. Fair values of the reporting units are determined by an analysis
     which considers cash flows streams, profitability and estimated market
     values of the business unit. The majority of the Corporation's goodwill is
     recorded at Forest Sherer, Inc.

Management believes the accounting estimates related to the allowance for loan
losses, the capitalization, amortization and valuations of mortgage servicing
rights and the valuation of goodwill are "critical accounting estimates"
because: (1) the estimates are highly susceptible to change from period to
period because they require management to make assumptions concerning, among
other factors, the changes in the types and volumes of the portfolios, rates of
future prepayments, valuation assumptions, and anticipated economic conditions,
and (2) the impact of recognizing an impairment or loan loss could have a
material effect on the Corporation's assets reported on the balance sheet as
well as net income.

<PAGE>

                           FIRST FINANCIAL CORPORATION

RESULTS OF OPERATIONS -- SUMMARY FOR 2003

     Net income through the fourth quarter of 2003 was $26.5 million, or $1.95
     per share. This represents a 7.5% reduction in net income and a 7.14%
     decrease in earnings per share. 2002 net income was favorably affected by
     $3.9 million in life insurance proceeds received in the fourth quarter,
     which increased 2002 earnings per share by $ .29. Comparing 2003
     performance against 2002 net income before the insurance proceeds would
     have shown a $1.6 million or 6.4% increase while earnings per share would
     have shown a $ .12 or 6.6.% increase.

     Net interest income of $74.4 million was down by $3.8 million for 2003, the
     result of a $29.5 million decrease in average earning assets and an 8 basis
     point decrease in the net interest margin.

NET INTEREST INCOME

     The principal source of the Corporation's earnings is net interest income,
     which represents the difference between interest earned on loans and
     investments and the interest cost associated with deposits and other
     sources of funding.

     Total average interest-earning assets decreased to $2.04 billion in 2003
     from $2.07 billion in 2002. The tax-equivalent yield on these assets
     decreased to 6.38% in 2003 from 6.90% in 2002. Total average
     interest-bearing liabilities of $1.74 billion in 2003 was essentially the
     same in 2002. The average cost of these interest-bearing liabilities
     decreased to 2.78% in 2003 from 3.34% in 2002.

     On a tax equivalent basis, net interest income decreased $2.9 million from
     $84.9 million in 2002 to $82.0 million in 2003. The net interest margin
     decreased from 4.10% in 2002 to 4.02% in 2003. This decrease is primarily
     the result of the decreased yield on earning assets having a larger impact
     than the decreased cost of interest-bearing liabilities, both of which
     decreased in excess of 50 basis points.

     The following table sets forth the components of net interest income due to
     changes in volume and rate. The table information compares 2003 to 2002 and
     2002 to 2001.

<TABLE>
<CAPTION>
                                           2003 Compared to 2002                         2002 Compared to 2001
                                         Increase (Decrease) Due to                    Increase (Decrease) Due to
                                      ---------------------------------            ---------------------------------
                                                          Volume/                                     Volume/
 (Dollar amounts in thousands)    Volume       Rate         Rate      Total      Volume      Rate      Rate      Total
 -----------------------------    ------       ----         ----      -----      ------      ----      ----      -----
<S>                              <C>         <C>          <C>        <C>        <C>        <C>        <C>       <C>
Interest earned on
  interest-earning assets:
     Loans (1) (2)               $ (1,132)   $  (6,632)   $   71     $(7,693)   $  9,653   $(11,340)  $(1,005)  $ (2,692)
     Taxable investment
           securities                 362       (3,706)      (70)     (3,414)      1,193     (6,378)     (309)    (5,494)
     Tax-exempt investment
           securities (2)            (252)      (1,045)       15      (1,282)        153        (48)        -        105
     Federal funds sold              (295)        (134)      107        (322)        277        (84)      (87)       106
                                 --------    ---------    ------     -------    --------   --------   -------   --------
Total interest income              (1,317)     (11,517)      123     (12,711)     11,276    (17,850)   (1,401)    (7,975)
                                 --------    ---------    ------     -------    --------   --------   -------   --------

Interest paid on
  interest-bearing liabilities:
     Transaction accounts             789       (2,786)      (331)    (2,328)      1,517     (4,296)     (647)    (3,426)
     Time deposits                 (1,217)      (4,326)      188      (5,355)      2,852    (11,169)     (858)    (9,175)
     Short-term borrowings             10         (262)        (4)      (256)     (1,112)    (1,282)      567     (1,827)
     Other borrowings              (1,837)         (93)        8      (1,922)       (622)    (1,015)       26     (1,611)
                                 -------     ---------    --------   -------    --------   --------   -------   --------
 Total interest expense            (2,255)      (7,467)      (139)    (9,861)      2,635    (17,762)     (912)   (16,039)
                                 -------     ---------    --------   -------    --------   --------   -------   --------
 Net interest income             $    938    $  (4.050)   $ 262      $(2,850)   $  8,641   $    (88)  $  (489)  $  8,064
                                 ========    =========    =====      =======    ========   ========   =======   ========
</TABLE>

     (1) For purposes of these computations, nonaccruing loans are included in
     the daily average loan amounts outstanding.

     (2) Interest income includes the effect of tax equivalent adjustments using
     a federal tax rate of 35%.

<PAGE>

                               2003 ANNUAL REPORT

RESULTS OF OPERATIONS -- SUMMARY FOR 2003

PROVISION FOR LOAN LOSSES

     The provision for loan losses is established by charging current earnings
     with an amount which will maintain the allowance for loan losses at a level
     sufficient to provide for probable incurred losses in the Corporation's
     loan portfolio. Management considers several factors in determining the
     provision, including loss experience, changes in the composition of the
     portfolio, the financial condition of borrowers, economic trends, and
     general economic conditions. The provision for loan losses totaled $7.4
     million and $9.5 million for 2003 and 2002, respectively. During the fourth
     quarter of 2003 management improved the Corporation's position in three
     classified credits thereby allowing a reduction in the provision expense
     during that period to $607 thousand from the $2.3 million expensed during
     the third quarter. This also contributed to a reduction of non-performing
     loans from $17.7 million in 2002 to $13.8 million in 2003.

     Net charge-offs for 2003 decreased to $7.5 million from $8.3 million in
     2002. At December 31, 2003, the resulting allowance for loan losses was
     $21.2 million or 1.49% of total loans, net of unearned income. A year
     earlier the allowance was $21.2 million or 1.48% of total loans.

NON-INTEREST INCOME

     Non-interest income of $30.8 million increased $300 thousand from the $30.5
     million earned in 2002. Service charges and fees on deposit accounts and
     other service charges and fees increased $1.9 million and $2.7 million,
     respectively. These increases are the result of a focused effort to
     increase fee-based income.

     Trust and financial services commissions increased by $300 thousand.

     Non-interest income for 2002 included a $3.9 million life insurance benefit
     payment from bank-owned life insurance policies.

NON-INTEREST EXPENSES

     Non-interest expenses totaled $62.5 million for 2003 compared to $63.3
     million for 2002. This represents a decrease of $800 thousand or 1.3% for
     2003. Salaries and related benefits, the largest component of this group,
     increased from $36.5 million to $36.9 million, less than 1%. Occupancy
     expense increased 3.3% or $100 thousand while equipment expense decreased
     by $100 thousand. All other non-interest expense decreased by $1.1 million
     to $18.7 million from $19.8 million in 2002.

INCOME TAXES

     The Corporation's federal income tax provision was $8.8 million in 2003
     compared to a provision of $7.2 million in 2002. The overall effective tax
     rate in 2003 of 25.0% compares to a 2002 effective rate of 20.1%. Over the
     past three years management has implemented a strategy which focuses on the
     taxability of income on securities. This strategy has benefitted the
     Corporation as state income tax expense has declined every year, despite
     increased income before tax. The life insurance benefit received in 2002
     was not subject to income tax, thereby further reducing the effective tax
     rate for 2002.

COMPARISON OF 2002 TO 2001

     Net income for 2002 was $28.6 million or $2.10 per share compared to $24.2
     million in 2001 or $1.78 per share. This increased income was primarily the
     result of increased net interest income of $7.6 million. Total average
     interest-earning assets increased to $2.07 billion in 2002 from $1.92
     billion in 2001. The net interest margin increased from 4.00% in 2001 to
     4.10% in 2002. This increase is primarily the result of funding costs
     decreasing faster than the yield on earning assets.

     The provision for loan losses increased $2.9 million, from $6.6 million in
     2001 to $9.5 million in 2002, and net charge-offs increased to $8.2 million
     in 2002 from $7.4 million in 2001. The majority of the increased provision
     was the result of an increase in underperforming loans.

     There was a $988 thousand negative change in net non-interest income and
     expense from 2001 to 2002. The increase primarily relates to the salary and
     related benefit costs with the addition of First Community Bank, N.A. and
     Forrest Sherer Inc.

     The provision for income taxes fell $667 thousand from 2001 to 2002,
     reducing the effective tax rate from 24.6% in 2001 to 20.1% in 2002. The
     year 2002 was the second year of a new tax strategy focusing on the
     taxability of income and securities described above in the income tax
     section and was further impacted by the receipt of a non-taxable $3.9
     million life insurance benefit.
<PAGE>

                          FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

         The Corporation's total assets increased 2.4% or $53.3 million at
         December 31, 2003, from a year earlier. Available-for-sale securities
         increased $56.2 million at December 31, 2003, from the previous year.
         Loans, net of unearned income, decreased by $3.0 million, to $1.4
         billion. This decrease was the result of selling approximately $185.0
         million of real estate loans in the secondary market. This decreased
         real estate mortgage loans by $22.7 million. Stronger demand for
         commercial loans resulted in a $43.3 million increase, while economic
         and competitive pressures resulted in a decrease of $19.8 million in
         installment loans outstanding.

         Total shareholders' equity increased to $255.3 million at December 31,
         2003, compared to $242.0 million a year earlier. Higher net income was
         offset by increased dividends and the continued repurchase of corporate
         stock. During 2003, 80,120 shares were acquired at a cost of $2.1
         million. There were also 40,000 shares from the treasury with a value
         of $1.2 million that were contributed to the ESOP plan. In addition,
         during 2003, the Corporation recorded a net unrealized loss on
         available-for-sale securities of $2.8 million. While this fluctuation
         in fair value decreased shareholders' equity, no loss is recognized in
         net income unless the security is actually sold.

         Following is an analysis of the components of the Corporation's balance
         sheet. Information describing the components of the Corporation's
         securities portfolio, and the market value, maturities and weighted
         average yields of the securities is included in Note 4 of the notes to
         the consolidated financial statements.

 LOAN PORTFOLIO

     Loans outstanding by major category as of December 31 for each of the last
     five years and the maturities at year-end 2003 are set forth in the
     following analyses.

<TABLE>
<CAPTION>
 (Dollar amounts in thousands)                 2003            2002            2001            2000            1999
 -----------------------------                 ----            ----            ----            ----            ----
<S>                                        <C>             <C>             <C>             <C>             <C>
LOAN CATEGORY

Commercial, financial and agricultural     $    374,638    $    331,316    $    302,496    $    282,904    $    247,949
Real estate - construction                       35,361          42,930          34,610          41,325          44,782
Real estate - mortgage                          766,911         789,618         757,345         732,387         671,972
Installment                                     248,290         268,067         249,710         237,527         223,459
Lease financing                                   4,884           1,281           5,023           4,810           5,723
                                           ------------    ------------    ------------    ------------    ------------
          TOTAL                            $  1,430,084    $  1,433,212    $  1,349,184    $  1,298,953    $  1,193,885
                                           ============    ============    ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                          After One
                                              Within      But Within    After Five
    (Dollar amounts in thousands)            One Year     Five Years       Years       Total
--------------------------------------       ---------    ----------    ----------  ----------
MATURITY DISTRIBUTION
<S>                                          <C>          <C>           <C>         <C>
Commercial, financial and agricultural       $ 228,396    $ 107,434      $ 38,808   $  374,638
Real estate - construction                      13,773       15,053         6,535       35,361
                                             ---------    ---------      --------   ----------
       TOTAL                                 $ 242,169    $ 122,487      $ 45,343      409,999
                                             =========    =========      ========

Real estate - mortgage                                                                 766,911
Installment                                                                            248,290
Lease financing                                                                          4,884
                                                                                    ----------
       TOTAL                                                                        $1,430,084
                                                                                    ==========
Loans maturing after one year with:
   Fixed interest rates                                   $  50,596      $ 41,823
   Variable interest rates                                   71,891         3,520
                                                          ---------      --------
       TOTAL                                              $ 122,487      $ 45,343
                                                          =========      ========
</TABLE>



<PAGE>

                               2003 ANNUAL REPORT

FINANCIAL CONDITION -- SUMMARY

ALLOWANCE FOR LOAN LOSSES

The activity in the Corporation's allowance for loan losses is shown in the
following analysis:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                        2003             2002             2001             2000             1999
-----------------------------                        ----             ----             ----             ----             ----
<S>                                              <C>              <C>              <C>              <C>              <C>
Amount of loans outstanding
    at December 31,                              $  1,430,084     $  1,433,212     $  1,349,184     $  1,298,953     $  1,193,885
                                                 ============     ============     ============     ============     ============
Average amount of loans by year                  $  1,417,026     $  1,432,290     $  1,315,725     $  1,256,505     $  1,151,968
                                                 ============     ============     ============     ============     ============
Allowance for loan losses
    at beginning of year                         $     21,249     $     18,313     $     19,072     $     17,949     $     16,429
    Addition resulting from acquisition                     -            1,711                -                -                -
    Loans charged off:
    Commercial, financial and agricultural              2,253            4,627            4,079            1,055              344
    Real estate - mortgage                              1,101              892              557              406              932
    Installment                                         5,586            4,619            4,395            3,196            3,034
    Leasing                                                 -                -               12                6                -
                                                 ------------     ------------     ------------     ------------     ------------
        Total loans charged off                         8,940           10,138            9,043            4,663            4,310
                                                 ------------     ------------     ------------     ------------     ------------
Recoveries of loans previously charged off:
    Commercial, financial and agricultural                432              840              819              578              170
    Real estate - mortgage                                166              110               60               28              142
    Installment                                           877              935              790              788              788
    Leasing                                                 -                -                -                -                5
                                                 ------------     ------------     ------------     ------------     ------------
        Total recoveries                                1,475            1,885            1,669            1,394            1,105
                                                 ------------     ------------     ------------     ------------     ------------
Net loans charged off                                   7,465            8,253            7,374            3,269            3,205
    Provision charged to expense                        7,455            9,478            6,615            4,392            4,725
                                                 ------------     ------------     ------------     ------------     ------------

Balance at end of year                           $     21,239     $     21,249     $     18,313     $     19,072     $     17,949
                                                 ============     ============     ============     ============     ============
Ratio of net charge-offs during period
    to average loans outstanding                          .53%             .58%             .56%             .26%             .28%
                                                 ============     ============     ============     ============     ============
</TABLE>

The allowance is maintained at an amount management believes sufficient to
absorb probable incurred losses in the loan portfolio. Monitoring loan quality
and maintaining an adequate allowance is an ongoing process overseen by senior
management and the loan review function. On at least a quarterly basis, a formal
analysis of the adequacy of the allowance is prepared and reviewed by management
and the Board of Directors. This analysis serves as a point in time assessment
of the level of the allowance and serves as a basis for provisions for loan
losses. The loan quality monitoring process includes assigning loan grades and
the use of a watch list to identify loans of concern.

The analysis of the allowance for loan losses includes the allocation of
specific amounts of the allowance to individual problem loans, generally based
on an analysis of the collateral securing those loans. Portions of the allowance
are also allocated to loan portfolios, based upon a variety of factors including
historical loss experience, trends in the type and volume of the loan
portfolios, trends in delinquent and non-performing loans, and economic trends
affecting our market. These components are added together and compared to the
balance of our allowance at the evaluation date. The following table presents
the allocation of the allowance to the loan portfolios at year-end.

<PAGE>

                           FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                              --------------------------------------------------------------
(Dollar amounts in thousands)                   2003         2002         2001         2000         1999
-----------------------------                   ----         ----         ----         ----         ----
<S>                                           <C>          <C>          <C>          <C>          <C>
Commercial, financial and agricultural        $  13,844    $  12,993    $  11,151    $  10,771    $   6,990
Real estate -- mortgage                           1,254        1,471        1,330        1,060        1,348
Installment                                       6,141        5,856        4,489        3,509        3,506
Leasing                                               -           15           17            8            3
Unallocated                                           -          914        1,326        3,724        6,102
                                              ---------    ---------    ---------    ---------    ----------
    TOTAL ALLOWANCE FOR LOAN LOSSES           $  21,239    $  21,249    $  18,313    $  19,072    $  17,949
                                              =========    =========    =========    =========    ==========
</TABLE>

UNDER-PERFORMING LOANS

         Management monitors the components and status of under-performing loans
         as a part of the evaluation procedures used in determining the adequacy
         of the allowance for loan losses. It is the Corporation's policy to
         discontinue the accrual of interest on loans where, in management's
         opinion, serious doubt exists as to collectibility. The amounts shown
         below represent non-accrual loans, loans which have been restructured
         to provide for a reduction or deferral of interest or principal because
         of deterioration in the financial condition of the borrower and those
         loans which are past due more than 90 days where the Corporation
         continues to accrue interest. The interest income for non-accrual and
         restructured loans that would have been recorded in 2003, 2002 and
         2001, under the original terms of the loans is $1.3 million, $1.4
         million and $1.1 million, respectively. The Corporation recorded
         interest income on such loans in the amounts of $583 thousand, $643
         thousand and $535 thousand for 2003, 2002 and 2001, respectively.

<TABLE>
<CAPTION>
  (Dollar amounts in thousands)                2003         2002         2001         2000         1999
  ----------------------------                 ----         ----         ----         ----         ----
<S>                                         <C>          <C>          <C>          <C>          <C>
Non-accrual loans                           $   8,429    $  11,807    $   8,854    $   8,316    $   2,879
Restructured loans                                542          546          590          735          959
                                            ---------    ---------    ---------    ---------    ---------
                                                8,971       12,353        9,444        9,051        3,838
Accruing loans past due over 90 days            5,384        5,899        4,925        5,499        5,229
                                            ---------    ---------    ---------    ---------    ---------
                                            $  14,355    $  18,252    $  14,369    $  14,550    $   9,067
                                            =========    =========    =========    =========    =========
</TABLE>

         The ratio of the allowance for loan losses as a percentage of
         under-performing loans was 148% at December 31, 2003, compared to 116%
         in 2002. This results from the $3.9 million decrease in
         under-performing loans while maintaining the allowance at $21.2
         million. The following loan categories comprise significant components
         of the under-performing loans at December 31, 2003:

<TABLE>
<CAPTION>
 (Dollar amounts in thousands)
 -----------------------------
<S>                              <C>                <C>
Non-accrual loans:
  1-4 family residential         $  2,155           26%
  Commercial loans                  4,697           56
  Installment loans                 1,577           18
  Other, various                        -            -
                                 --------          ---
                                 $  8,429          100%
                                 ========          ===

Past due 90 days or more:
  1-4 family residential         $  2,321           44%
  Commercial loans                  1,530           28
  Installment loans                 1,533           28
  Other, various                        -            -
                                 --------          ---
                                 $  5,384          100%
                                 ========          ===
</TABLE>

         There are no material concentrations by industry within the
         under-performing loans.

<PAGE>

                               2003 ANNUAL REPORT
FINANCIAL CONDITION -- SUMMARY

         An element of the Corporation's asset quality management process is the
         ongoing review and grading of each affiliate's commercial loan
         portfolio. At December 31, 2003, approximately $70.4 million of
         commercial loans are graded doubtful or substandard, including the $4.4
         million of non-accrual and past-due commercial loans listed above. This
         compares to $51.4 million in 2002, which included $9.7 million of
         non-performing loans. The classification of these loans, however, does
         not imply that management expects losses on each of these loans, but
         believes that a higher level of scrutiny is prudent under the
         circumstances. Many of these loans are still accruing and are,
         generally, performing in accordance with their loan agreements.
         However, for reasons such as previous payment history, bankruptcy
         proceedings, industry concerns or information specific to that
         borrower, it is the opinion of management that these loans require
         close monitoring.

DEPOSITS

         Total deposits increased to $1.48 billion at December 31, 2003, from
         $1.43 billion at December 31, 2002. The Corporation experienced a
         fluctuation between deposit types due to a rate-sensitive market
         environment. The information below presents the average amount of
         deposits and rates paid on those deposits for 2003, 2002 and 2001.

<TABLE>
<CAPTION>
                                                   2003                   2002                  2001
                                         --------------------     -------------------    -------------------
(Dollar amounts in thousands)               Amount       Rate         Amount     Rate      Amount      Rate
--------------------------------         ------------    ----     ------------   ----    ----------    -----
<S>                                      <C>             <C>      <C>            <C>     <C>           <C>
Non-interest-bearing
  demand deposits                        $    177,712             $    202,438           $  148,931
Interest-bearing demand deposits              231,590     .63%         198,503    .97%      170,990    1.28%
Savings deposits                              357,989     .80%         328,506   1.43%      287,012    2.74%
Time deposits:
$100,000 or more                              197,946    2.87%         193,504   3.07%      198,575    5.32%
Other time deposits                           517,364    3.27%         554,341   3.97%      495,940    5.36%
                                         ------------             ------------           ----------
    TOTAL                                $  1,482,601             $  1,477,292           $1,301,448
                                         ============             ============           ==========
</TABLE>

         The maturities of certificates of deposit of $100 thousand or more
         outstanding at December 31, 2003, are summarized as follows:

<TABLE>
<S>                                       <C>
3 months or less                          $ 41,229
Over 3 through 6 months                     25,033
Over 6 through 12 months                    12,596
Over 12 months                             113,327
                                          --------
   TOTAL                                  $192,185
                                          ========
</TABLE>

SHORT-TERM BORROWINGS

         A summary of the carrying value of the Corporation's short-term
         borrowings at December 31, 2003, 2002 and 2001 is presented below:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)         2003           2002          2001
-----------------------------         ----           ----          ----
<S>                                 <C>           <C>            <C>
Federal funds purchased             $ 61,524      $  16,311      $  9,920
Repurchase agreements                  5,130         13,237        37,400
Other short-term borrowings            1,975          4,807         7,276
                                    --------      ---------      --------
                                    $ 68,629      $  34,355      $ 54,596
                                    =======-      =========      ========
</TABLE>

         The amounts and interest rates related to federal funds purchased and
         repurchase agreements are presented below:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                         2003          2002          2001
-----------------------------                         ----          ----          ----
<S>                                                <C>            <C>            <C>
Average amount outstanding                         $  32,153      $ 24,857       $ 59,603
Maximum amount outstanding at a month end             91,376        66,485         81,330
Average interest rate during year                       1.45%         2.73%          4.46%
Interest rate at year-end                               1.15%         1.63%          2.32%
</TABLE>

<PAGE>

                           FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

OTHER BORROWINGS

         Advances from the Federal Home Loan Bank decreased to $358.6 million in
         2003 compared to $397.2 million in 2002. Increased deposits funded the
         reduction in advances and generally had a lower cost. The
         Asset/Liability Committee reviews these investments and considers the
         related strategies on a weekly basis. See Interest Rate Sensitivity and
         Liquidity below for more information. The Corporation borrowed $20
         million from a financial institution during 2002 to purchase Community
         Financial Corp. The outstanding balance on this loan at year end was
         $18.0 million.

CAPITAL RESOURCES

         Bank regulatory agencies have established capital adequacy standards
         which are used extensively in their monitoring and control of the
         industry. These standards relate capital to level of risk by assigning
         different weightings to assets and certain off-balance-sheet activity.
         As shown in the footnote to the consolidated financial statements
         ("Regulatory Matters"), the Corporation's capital exceeds the
         requirements to be considered well capitalized at December 31, 2003.

         First Financial Corporation's objective continues to be to maintain
         adequate capital to merit the confidence of its customers and
         shareholders. To warrant this confidence, the Corporation's management
         maintains a capital position which they believe is sufficient to absorb
         unforeseen financial shocks without unnecessarily restricting dividends
         to its shareholders. The Corporation's dividend payout ratio for 2003
         and 2002 was 35.9% and 29.6%, respectively. The Corporation expects to
         continue its policy of paying regular cash dividends, subject to future
         earnings and regulatory restrictions and capital requirements.

INTEREST RATE SENSITIVITY AND LIQUIDITY

         First Financial Corporation has established risk measures, limits and
         policy guidelines for managing interest rate risk and liquidity.
         Responsibility for management of these functions resides with the Asset
         Liability Committee. The primary goal of the Asset Liability Committee
         is to maximize net interest income within the interest rate risk limits
         approved by the Board of Directors.

         INTEREST RATE RISK: Management considers interest rate risk to be the
         Corporation's most significant market risk. Interest rate risk is the
         exposure to changes in net interest income as a result of changes in
         interest rates. Consistency in the Corporation's net interest income is
         largely dependent on the effective management of this risk.

         The Asset Liability position is measured using sophisticated risk
         management tools, including earnings simulation and market value of
         equity sensitivity analysis. These tools allow management to quantify
         and monitor both short-and long-term exposure to interest rate risk.
         Simulation modeling measures the effects of changes in interest rates,
         changes in the shape of the yield curve and the effects of embedded
         options on net interest income. This measure projects earnings in the
         various environments over the next three years. It is important to note
         that measures of interest rate risk have limitations and are dependent
         on various assumptions. These assumptions are inherently uncertain and,
         as a result, the model cannot precisely predict the impact of interest
         rate fluctuations on net interest income. Actual results will differ
         from simulated results due to timing, frequency and amount of interest
         rate changes as well as overall market conditions. The Committee has
         performed a thorough analysis of these assumptions and believes them to
         be valid and theoretically sound. These assumptions are continuously
         monitored for behavioral changes.

         The Corporation from time to time utilizes derivatives to manage
         interest rate risk. Management continuously evaluates the merits of
         such interest rate risk products but does not anticipate the use of
         such products to become a major part of the Corporation's risk
         management strategy.

         The table on the following page shows the Corporation's estimated
         sensitivity profile as of December 31, 2003. The change in interest
         rates assumes a parallel shift in interest rates of 100 and 200 basis
         points. Given a 100 basis point increase in rates, net interest income
         would increase 1.72% over the next 12 months and increase 3.83% over
         the following 12 months. Given a 100 basis point decrease in rates, net
         interest income would decrease 3.78% over the next 12 months and
         decrease 6.45% over the following 12 months. These estimates assume all
         rate changes occur overnight and management takes no action as a result
         of this change.

<PAGE>

                               2003 ANNUAL REPORT

 FINANCIAL CONDITION -- SUMMARY

<TABLE>
<CAPTION>
                             Percentage Change in Net Interest Income
                             ----------------------------------------
Basis Point
Interest Rate Change         12 months      24 months       36 months
--------------------         ---------      ---------       ---------
<S>                          <C>            <C>             <C>
Down 200                      -10.00%          -16.65%         -22.36%
Down 100                      - 3.78            -6.45           -9.66
Up 100                          1.72             3.83            7.04
Up 200                          3.66             7.78           14.49
</TABLE>

         Typical rate shock analysis does not reflect management's ability to
         react and thereby reduce the effects of rate changes, and represents a
         worst-case scenario.

         LIQUIDITY RISK: Liquidity is measured by each bank's ability to raise
         funds to meet the obligations of its customers, including deposit
         withdrawals and credit needs. This is accomplished primarily by
         maintaining sufficient liquid assets in the form of investment
         securities and core deposits. The Corporation has $10.2 million of
         investments that mature throughout the coming 12 months. The
         Corporation also anticipates $48.8 million of principal payments from
         mortgage-backed securities. Given the current rate environment, the
         Corporation anticipates $26.3 million in securities to be called within
         the next 12 months.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE
SHEET ARRANGEMENTS

         The Corporation has various financial obligations, including
         contractual obligations and commitments, that may require future cash
         payments.

         CONTRACTUAL OBLIGATIONS: The following table presents, as of December
         31, 2003, significant fixed and determinable contractual obligations to
         third parties by payment date. Further discussion of the nature of each
         obligation is included in the reference note to the consolidated
         financial statements.

<TABLE>
<CAPTION>
                                                                 Payments Due In
                                     -----------------------------------------------------------------------
                                                                One to     Three to      Over
                                       Note      One Year       Three      Five          Five
(Dollar amounts in thousands)        Reference    or Less       Years      Years         Years       Total
-----------------------------        ---------   ---------    ---------    -----        --------   ---------
<S>                                  <C>         <C>          <C>          <C>          <C>        <C>
Deposits without a stated maturity               $ 786,624    $       -    $      -     $      -   $ 786,624
Consumer certificates of deposit         9         383,822      227,864      80,524          513     692,723
Short-term borrowings                    9          68,629            -           -            -      68,629
Other borrowings                        10          49,659          660      52,419      280,495     383,233
</TABLE>

         COMMITMENTS: The following table details the amount and expected
         maturities of significant commitments as of December 31, 2003. Further
         discussion of these commitments is included in Note 12 to the
         consolidated financial statements.

<TABLE>
<CAPTION>
                                           Total Amount    One Year     Over One
(Dollar amounts in thousands)               Committed      or Less        Year
-----------------------------              ------------   ----------   ----------
<S>                                        <C>            <C>          <C>
Commitments to extend credit:
Unused loan commitments                    $    235,328   $  101,428   $  133,900
Standby letters of credit                         5,619        5,604           15
</TABLE>

         Commitments to extend credit, including loan commitments, standby
         letters of credit and commercial letters of credit do not necessarily
         represent future cash requirements, in that these commitments often
         expire without being drawn upon.

OUTLOOK

         The Corporation's primary market, the Wabash Valley, has experienced an
         improved economic climate similar to that of the national economy
         during 2003. Historically, the Wabash Valley has not grown as fast as
         the state or national economy and conversely, it has not slowed as much
         as the state or national economy. The local economy continues to be
         driven by retail, higher education and health-related industries.
         During 2003 the area unemployment rate declined, and there continues to
         be a number of new projects being developed. There are, however, no
         significant growth opportunities currently available in our primary
         market area.

         The Corporation also continues to look for merger or acquisition
         opportunities throughout the Wabash Valley that share First Financial's
         mission of quality service to their customers. These smaller
         institutions increasingly realize the need to align with an
         organization that has the resources to compete on a regional level.
         With the largest retail presence in the Wabash Valley, First Financial
         is poised to provide these resources.

<PAGE>

                           FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES

<TABLE>
<CAPTION>
                                                                     December 31,
                                   ----------------------------------------------------------------------------------------------
                                                2003                            2002                             2001
                                   -----------------------------  ------------------------------   ------------------------------
                                     Average              Yield/   Average                Yield/    Average                Yield/
(Dollar amounts in thousands)        Balance   Interest   Rate     Balance     Interest    Rate     Balance     Interest   Rate
-----------------------------      ----------  --------  -------  ----------   --------   ------   ----------   --------   ------
<S>                                <C>         <C>       <C>      <C>          <C>        <C>      <C>          <C>        <C>
ASSETS
Interest-earning assets:
  Loans (1) (2)                    $1,417,026    98,565     6.96% $1,432,290    106,258     7.42%  $1,315,725    108,950     8.28%
  Taxable investment securities       416,403    15,714     3.77     408,666     19,128     4.68      389,776     24,622     6.32
  Tax-exempt investments (2)          203,021    15,938     7.85     206,034     17,220     8.36      204,205     17,115     8.38
  Federal funds sold                    5,129        52      .99      24,129        374     1.55       11,877        268     2.26
                                   ----------  --------  -------  ----------   --------   ------   ----------   --------   ------
  Total  interest-earning assets    2,041,579   130,269     6.38%  2,071,119    142,980     6.90%   1,921,583    150,955     7.86%
                                               --------  =======               --------   ======                --------   ======
Non-interest earning assets:
  Cash and due from banks              80,261                         67,319                           58,703
  Premises and equipment, net          29,634                         29,763                           26,624
  Other assets                         63,753                         60,356                           53,168
  Less allowance for loan losses      (22,242)                       (20,487)                         (18,796)
                                   ----------                     ----------                       ----------
   TOTALS                          $2,192,985                     $2,208,070                       $2,041,282
                                   ==========                     ==========                       ==========

LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Transaction accounts             $  589,579     4,315      .73% $  527,009      6,643     1.26%  $  458,002     10,069     2.20%
  Time deposits                       715,310    22,610     3.16     747,845     27,964     3.74      694,515     37,139     5.35
  Short-term borrowings                35,262       431     1.22      34,759        687     1.98       62,321      2,514     4.03
  Other borrowings                    392,540    20,869     5.32     426,961     22,792     5.34      438,123     24,403     5.57
                                   ----------  --------  -------  ----------   --------   ------   ----------   --------   ------
  Total interest-bearing
    liabilities:                    1,732,691    48,225     2.78%  1,736,574     58,086     3.34%  1,652 ,961     74,125     4.48%
                                               --------  =======               --------   ======                --------   ======
  Non interest-bearing
  liabilities:
  Demand deposits                     177,712                        202,438                          148,931
  Other                                30,441                         30,643                           25,871
                                   ----------                     ----------                       ----------
                                    1,940,844                      1,969,655                        1,827,763

  Shareholders' equity                252,141                        238,415                          213,519
                                   ----------                     ----------                       ----------
        TOTALS                     $2,192,985                     $2,208,070                       $2,041,282
                                   ==========                     ==========                       ==========

  Net interest earnings                        $ 82,044                        $ 84,894                         $ 76,830
                                               ========                        ========                         ========
  Net yield on
  interest-earning assets                                   4.02%                           4.10%                            4.00%
                                                         =======                          ======                           ======
</TABLE>

(1)      For purposes of these computations, nonaccruing loans are included in
         the daily average loan amounts outstanding.

(2)      Interest income includes the effect of tax equivalent adjustments using
         a federal tax rate of 35%.
<PAGE>

                               2003 ANNUAL REPORT

MARKET AND DIVIDEND INFORMATION

         At year-end 2003 shareholders owned 13,578,770 shares of the
         Corporation's common stock. The stock is traded over-the-counter under
         the NASDAQ National Market System with the symbol THFF. Such
         over-the-counter market quotations reflect inter-dealer prices, without
         retail mark-up, mark-down or commission and may not necessarily
         represent actual transactions.

         Historically, the Corporation has paid cash dividends semi-annually and
         currently expects that comparable cash dividends will continue to be
         paid in the future. The following table gives quarterly high and low
         trade prices and dividends per share during each quarter for 2003 and
         2002.

<TABLE>
<CAPTION>
                                        2003                             2002
                          --------------------------------   --------------------------------
                             Bid Quotation         Cash         Bid Quotation         Cash
                                                 Dividends                          Dividends
  Quarter ended            High         Low      Declared      High        Low      Declared
  -------------            ----         ---      --------      ----        ---      ---------
<S>                       <C>         <C>         <C>        <C>          <C>       <C>
March 31                  $ 31.50     $ 28.77                $  22.42     $21.35
June 30                   $ 32.25     $ 27.50     $  .34     $  25.71     $21.68     $  .31
September 30              $ 28.74     $ 23.56                $  26.50     $22.28
December 31               $ 24.65     $ 23.36     $  .36     $  26.84     $24.30     $  .31
</TABLE>

SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    2003
                                 --------------------------------------------------------------------------
                                                              Net       Provision
                                 Interest     Interest     Interest     for Loan      Net        Net Income
(Dollar amounts in thousands)     Income      Expense       Income       Losses      Income      Per Share
----------------------------     --------     ---------    ---------    ---------   --------     ----------
<S>                              <C>          <C>          <C>          <C>         <C>          <C>
March 31                         $ 31,666     $  12,737    $  18,929    $   2,227   $  7,033      $   .52
June 30                          $ 30,776     $  12,098    $  18,678    $   2,303   $  6,174      $   .46
September 30                     $ 30,400     $  11,869    $  18,531    $   2,318   $  6,443      $   .47
December 31                      $ 29,819     $  11,521    $  18,298    $     607   $  6,843      $   .50
</TABLE>

<TABLE>
<CAPTION>
                                                                    2002
                                 --------------------------------------------------------------------------
                                                              Net       Provision
                                 Interest     Interest     Interest     for Loan      Net        Net Income
(Dollar amounts in thousands)     Income      Expense       Income       Losses      Income      Per Share
----------------------------     --------     ---------    ---------    ---------   --------     ----------
<S>                              <C>          <C>          <C>          <C>         <C>          <C>

March 31                         $  34,305    $  14,839    $  19,466    $   1,932   $  6,728      $   .49
June 30                          $  34,840    $  14,760    $  20,080    $   2,416   $  6,552      $   .48
September 30                     $  33,835    $  14,542    $  19,293    $   2,273   $  6,171      $   .45
December 31                      $  33,282    $  13,945    $  19,337    $   2,857   $  9,189      $   .68
</TABLE>