<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended                                Commission file number
  December 31, 2000                                               0-16759

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

         INDIANA                                             35-1546989
(State of Incorporation)                    (I.R.S. Employer Identification No.)

       One First Financial Plaza                                   47807
            Terre Haute, IN
(Address of principal executive offices)                         (Zip Code)

                  Registrant's telephone number:(812) 238-6000

           Securities registered pursuant to Section 12(b) of the Act:


    TITLE OF EACH CLASS                NAME OF EACH EXCHANGE ON WHICH REGISTERED
    -------------------                -----------------------------------------
 Common Stock, no par value                                Nasdaq

        Securities registered pursuant to Section 12(g) of the Act: None

     Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

     Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of regulation 8-K is not contained herein, and will not be contained, to the
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
form 10-K.  X
           ---

     As of January 31, 2001 the aggregate market value of the voting stock held
by nonaffiliates of the registrant based on the average bid and ask prices of
such stock was $190,296,060. (For purposes of this calculation, the Corporation
excluded the stock owned by certain beneficial owners and management and the
Corporation's ESOP.)

     Shares of Common Stock outstanding as of January 31, 2001-6,694,237 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the 2000 Annual Report to Shareholders are incorporated by
reference into Parts I and II. Portions of the Definitive Proxy Statement for
the First Financial Corporation Annual Meeting to be held April 18, 2001 are
incorporated by reference into Part III.




<PAGE>   2

                         FORM 10-K CROSS-REFERENCE INDEX


<TABLE>
<CAPTION>
                                                                                                         PAGE
PART I
<S>      <C>                                                                                              <C>
    Item 1   Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

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

    Item 3   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..2

    Item 4   Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . ..2

PART II

    Item 5   Market for Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . . . .3

    Item 6   Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..3

    Item 7   Management's Discussion and Analysis of Financial Conditions and Results of Operations . . . .3

    Item 8   Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . ..3

    Item 9   Changes in and Disagreement with Accountants on Accounting and Financial Disclosures . . . . .3

PART III

    Item 10  Directors and Executive Officers of Registrant . . . . . . . . . . . . . . . . . . . . . . . .3

    Item 11  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

    Item 12  Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . .3

    Item 13  Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . .3

PART IV

    Item 14  Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . ..4

             Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,5

             Subsidiaries of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

             Predecessor Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

</TABLE>

                                        1


<PAGE>   3

                                     PART I
ITEM 1. BUSINESS

     First Financial Corporation (the Corporation) became a multi-bank holding
company in 1984. For more information on the Corporation's business, please
refer to the following sections of the 2000 Annual Report to Shareholders:

     1.  Description of services, affiliations, number of employees, and
         competition, on page 28.
     2.  Information regarding supervision of the Corporation, on page 14.
     3.  Details regarding competition, on page 28.

ITEM 2. PROPERTIES

     First Financial Corporation is located in a four-story office building in
downtown Terre Haute that was occupied in June 1988. It is leased to Terre Haute
First National Bank, a wholly-owned subsidiary (the Bank). The Bank also owns
two other facilities in downtown Terre Haute. One is leased to another party and
the other is a 50,000-square-foot building housing operations and administrative
staff and equipment. In addition, the Bank holds in fee four other branch
buildings. One of the branch buildings is a single-story 44,000-square-foot
building which is located in a Terre Haute suburban area. Six other branch bank
buildings are leased by the Bank. The expiration dates on the leases are
February 14, 2011, May 31, 2011, June 30, 2004, December 31, 2003, June 30,
2002, and September 1, 2001.

     Facilities of the Corporation's subsidiary, First State Bank, include
branches in Clay City and Poland, Indiana and two branch facilities in Brazil,
Indiana including the main office. The buildings are held in fee by First State.

     Facilities of the Corporation's subsidiary, First Citizens State Bank of
Newport, include its main office in Newport, Indiana and three branch facilities
in Cayuga and Clinton, Indiana. All four buildings are held in fee by First
Citizens.

     Facilities of the Corporation's subsidiary, First Farmers State Bank,
include its main office in Sullivan, Indiana and five branch facilities in
Carlisle, Dugger, Farmersburg, Hymera, and Worthington, Indiana. All six
buildings are held in fee by First Farmers.

     The facility of the Corporation's subsidiary, First Ridge Farm State Bank,
includes an office facility in Ridge Farm, Illinois. The building is held in fee
by First Ridge Farm State.

     Facilities of the Corporation's subsidiary, First Parke State Bank, include
its main office in Rockville, Indiana and three branch facilities in Marshall,
Montezuma and Rosedale, Indiana. All four buildings are held in fee by First
Parke.

     The facility of the Corporation's subsidiary, First National Bank of
Marshall, includes an office facility in Marshall, Illinois. The building is
held in fee by First National Bank of Marshall.

     Facilities of the Corporation's subsidiary, First Crawford State Bank,
include its main office in Robinson, Illinois and two branch facilities in
Oblong and Sumner, Illinois. All three buildings are held in fee by First
Crawford.

     The facility of the Corporation's subsidiary, The Morris Plan Company,
includes an office facility in Terre Haute, Indiana. The building is held in fee
by The Morris Plan Company.

ITEM 3. LEGAL PROCEEDINGS

     There are no material pending legal proceedings which involve the
Corporation or its subsidiaries.

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

     None


                                        2


<PAGE>   4
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     See "Market and Dividend information" on page 37 of the 2000 Annual Report.

ITEM 6.  SELECTED FINANCIAL DATA

     See "Five Year Comparison of Selected Financial Data" on page 9 of the 2000
Annual Report to Shareholders.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

     See "Management's Discussion and Analysis" on pages 28 through 35 of the
2000 Annual Report to Shareholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See "Interest Rate Risk" section of "Management's Discussion and Analysis"
on pages 34 and 35 of the 2000 Annual Report to Shareholders.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See "Consolidated Balance Sheets" on page 10, "Consolidated Statements of
Income" on page 11, "Consolidated Statements of Shareholders Equity" on page 12,
"Consolidated Statements of Cash Flows" on page 13, and "Notes to Consolidated
Financial Statement" on pages 14-26. "Responsibility for Financial Statements"
and "Report of Independent Accountants" can be found on page 27.

Statistical disclosure by Bank Holding Company include the following
information:

     1. "Volume/Rate Analysis," on page 29.
     2. "Loan Portfolio," on page 30.
     3. "Allowance for Possible Loan Losses," on page 31.
     4. "Under-Performing Loans," on page 32.
     5. "Deposits," on page 33.
     6. "Short-Term Borrowings," on page 33.
     7. "Consolidated Balance Sheet-Average Balances and Interest Rates," on
        page 36.

ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

     None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     See "Nominees for Terms to Expire in 2004," "Other Executive Officers of
the Corporation" and "Section 16(a) Beneficial Ownership Reporting Compliance"
on pages 2, 3 and 9 of the Annual Proxy Statement of First Financial
Corporation.

ITEM 11. EXECUTIVE COMPENSATION

     See "Compensation of Directors" on page 3, "Compensation of Officers" on
pages 3 through 5, and "Comparative Performance Graph" and "Employment
Contracts" on pages 7 and 8 of the Annual Proxy Statement of First Financial
Corporation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     See "Nominees for Terms to Expire in 2004," "Other Executive Officers of
the Corporation" and "Section 16(a) Beneficial Ownership Reporting Compliance"
on pages 2, 3 and 9 and "Principal Shareholders and Security Ownership of
Management" on page 9 of the Annual Proxy Statement of First Financial
Corporation.


                                        3

<PAGE>   5
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See "Certain Relationships" on page 3, and "Transactions with Management"
on pages 6 and 7 of the Annual Proxy Statement of First Financial Corporation.

                                PART IV

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

     (a) (1) The following consolidated financial statements of the Registrant
             and its subsidiaries are included in the Annual Report of First
             Financial Corporation attached:

             Consolidated Balance Sheets-December 31, 2000 and 1999

             Consolidated Statements of Income-Years ended December 31, 2000,
             1999, and 1998

             Consolidated Statements of Shareholders' Equity-Years ended
             December 31, 2000, 1999, and 1998

             Consolidated Statements of Cash Flow-Years ended December 31, 2000,
             1999, and 1998

             Notes to Consolidated Financial Statements

         (2) Schedules to the Consolidated Financial Statements required by
             Article 9 of Regulation S-X are not required, inapplicable, or the
             required information has been disclosed elsewhere.

         (3) Listing of Exhibits:

                                Exhibit Number            Description
                                --------------            -----------
                                      21                  Subsidiaries
                                      23           Predecessor Auditor's Report

     (b) Reports on Forms 8-K-None

     (c) Exhibits-Exhibits to (a)(3) listed above are attached to this report.

     (d) Financial Statements Schedules-No schedules are required to be
         submitted. See response to ITEM 14(a)(2).


                                   SIGNATURES


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

                                              First Financial Corporation


                                              Michael A. Carty, Signed
                                              ----------------------------------
                                              Michael A. Carty, Treasurer
                                              (Principal Financial Officer
                                              and Principal Accounting Officer)
                                              Date: February 20, 2001
                                                    ----------------------------


                                        4
<PAGE>   6

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

Name                                                   Date


Donald E. Smith, Signed                             February 20, 2001
----------------------------------------
Donald E. Smith, President & Director
(Principal Executive Officer)


Walter A. Bledsoe, Signed                           February 20, 2001
----------------------------------------
Walter A. Bledsoe, Director


B. Guille Cox, Jr., Signed                           February 20, 2001
----------------------------------------
B. Guille Cox, Jr., Director


Thomas T. Dinkel, Signed                            February 20, 2001
----------------------------------------
Thomas T. Dinkel, Director


Anton H. George, Signed                             February 20, 2001
----------------------------------------
Anton H. George, Director

                                                    February 20, 2001
----------------------------------------
Mari H. George, Director


Gregory L. Gibson, Signed                           February 20, 2001
----------------------------------------
Gregory L. Gibson, Director


Norman L. Lowery, Signed                            February 20, 2001
----------------------------------------
Norman L. Lowery, Director

                                                    February 20, 2001
----------------------------------------
William A. Niemeyer, Director


Patrick O'Leary, Signed                             February 20, 2001
----------------------------------------
Patrick O'Leary, Director


John W. Ragle, Signed                               February 20, 2001
----------------------------------------
John W. Ragle, Director

                                                    February 20, 2001
----------------------------------------
Chapman J. Root II, Director


Virginia L. Smith, Signed                           February 20, 2001
----------------------------------------
Virginia L. Smith, Director



                                        5

<PAGE>   7
FIRST FINANCIAL CORPORATION

FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
(Dollar amounts in thousands,
except per share amounts)         2000          1999          1998         1997           1996
--------------------------------------------------------------------------------------------------
<S>                            <C>           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Total assets                   $2,043,267    $1,905,201    $1,849,752    $1,634,936    $1,619,642
Investments                       568,405       594,319       633,365       527,993       582,744
Net loans                       1,298,006     1,191,898     1,111,765     1,005,799       918,767
Deposits                        1,322,559     1,256,115     1,260,365     1,194,524     1,175,228
Borrowings                        507,771       445,821       385,700       256,214       278,352
Shareholders' equity              191,223       168,682       182,183       165,480       150,377

INCOME STATEMENT DATA:
Interest income                   146,417       133,576       129,137       122,372       115,836
Interest expense                   80,583        66,815        66,430        62,072        57,810
Net interest income                65,834        66,761        62,707        60,300        58,026
Provision for loan losses           4,392         4,725         5,396         5,382         4,461
Other income                       13,610        12,012        10,611         8,957         7,849
Other expenses                     42,703        43,543        42,567        39,629        39,280
Net income                         23,213        21,622        18,558        18,100        15,971

PER SHARE DATA:
Net income                           3.45          3.10          2.58          2.58          2.28
Cash dividends                       1.08           .94           .84           .72           .61

PERFORMANCE RATIOS:
Net income to average assets         1.18%         1.16%         1.07%         1.11%         1.03%
Net income to average
    shareholders' equity            12.98         12.55         10.76         11.74         11.19
Average total capital
    to average assets                9.97         10.13         10.71         10.13          9.80
Average shareholders' equity
    to average assets                9.10          9.28          9.90          9.45          9.19
Dividend payout                     31.19         30.10         32.54         28.06         26.85
</TABLE>



                                       6
<PAGE>   8


FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                       --------------------------
(Dollar amounts in thousands, except per share data)                       2000           1999
-------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>
ASSETS
Cash and due from banks                                                 $    68,755    $    58,075
Federal funds sold                                                            4,175            190
Available-for-sale securities                                               568,405        594,319
Loans, net of unearned income of $947 in 2000 and $1,987 in 1999          1,298,006      1,191,898
    Less: Allowance for loan losses                                          19,072         17,949
                                                                        -----------    -----------
      Total Net Loans                                                     1,278,934      1,173,949

Accrued interest receivable                                                  17,803         14,703
Premises and equipment, net                                                  26,363         26,095
Bank-owned life insurance                                                    45,037           --
Other assets                                                                 33,795         37,870
                                                                        -----------    -----------
     TOTAL ASSETS                                                       $ 2,043,267    $ 1,905,201
                                                                        ===========    ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Non-interest-bearing                                                  $   148,922    $   148,230
    Interest-bearing:
    Certificates of deposit of $100 or more                                 258,260        218,515
    Other interest-bearing deposits                                         915,377        889,370
                                                                        -----------    -----------
                                                                          1,322,559      1,256,115

Short-term borrowings                                                        18,708         63,499
Other borrowings                                                            489,063        382,322
Other liabilities                                                            21,714         34,583
                                                                        -----------    -----------
     TOTAL LIABILITIES                                                    1,852,044      1,736,519

Shareholders' equity
  Common stock, $.125 stated value per share,
    Authorized shares - 40,000,000
    Issued shares - 7,225,483 in 2000 and 1999
    Outstanding shares - 6,694,237 in 2000 and 6,845,418 in 1999                903            903
  Additional capital                                                         66,680         66,680
  Retained earnings                                                         141,653        125,680
  Accumulated other comprehensive income:
    Unrealized (losses) gains on investments, net of tax                      3,900         (7,819)
  Less: Treasury shares at cost - 531,246 in 2000 and 380,065 in 1999       (21,913)       (16,762)
                                                                        -----------    -----------
     TOTAL SHAREHOLDERS' EQUITY                                             191,223        168,682
                                                                        -----------    -----------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 2,043,267    $ 1,905,201
                                                                        ===========    ===========
</TABLE>



See accompanying notes.


                                       7
<PAGE>   9

CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                                 -------------------------------
(Dollar amounts in thousands, except per share data)               2000        1999       1998
------------------------------------------------------------------------------------------------
<S>                                                              <C>        <C>        <C>
INTEREST INCOME:
  Loans, including related fees                                  $107,145   $ 96,175   $ 93,579
  Securities:
    Taxable                                                        30,535     28,500     27,091
    Tax-exempt                                                      8,357      8,049      7,810
  Other                                                               380        852        657
                                                                 --------   --------   --------
     TOTAL INTEREST INCOME                                        146,417    133,576    129,137
INTEREST EXPENSE:
  Deposits                                                         49,892     45,337     50,388
  Short-term borrowings                                             4,747      3,469      2,715
  Other borrowings                                                 25,944     18,009     13,327
                                                                 --------   --------   --------
     TOTAL INTEREST EXPENSE                                        80,583     66,815     66,430
                                                                 --------   --------   --------
     NET INTEREST INCOME                                           65,834     66,761     62,707
  Provision for loan losses                                         4,392      4,725      5,396
                                                                 --------   --------   --------
     NET INTEREST INCOME AFTER
      PROVISION FOR LOAN LOSSES                                    61,442     62,036     57,311

NON-INTEREST INCOME:
  Trust services income                                             2,678      2,522      2,179
  Service charges and fees on deposit accounts                      4,638      4,010      3,845
  Other service charges and fees                                    4,626      3,763      1,679
  Securities gains                                                    145        189        905
  Other                                                             1,523      1,528      2,003
                                                                 --------   --------   --------
     TOTAL NON-INTEREST INCOME                                     13,610     12,012     10,611
NON-INTEREST EXPENSES:
  Salaries and employee benefits                                   23,055     24,558     23,519
  Occupancy expense                                                 3,105      2,887      2,823
  Equipment expense                                                 3,717      3,650      3,370
  Printing and supplies expense                                     1,002        993      1,118
  Other                                                            11,824     11,455     11,737
                                                                 --------   --------   --------
                                                                   42,703     43,543     42,567
                                                                 --------   --------   --------
     INCOME BEFORE INCOME TAXES                                    32,349     30,505     25,355

Provision for income taxes                                          9,136      8,883      6,797
                                                                 --------   --------   --------
     NET INCOME                                                  $ 23,213   $ 21,622   $ 18,558
                                                                 ========   ========   ========

EARNINGS PER SHARE:

     NET INCOME                                                  $   3.45   $   3.10   $   2.58
                                                                 ========   ========   ========
  Weighted average number of shares outstanding (in thousands)      6,730      6,964      7,206
                                                                 ========   ========   ========
</TABLE>


See accompanying notes.




                                       8
<PAGE>   10

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                               ACCUMULATED
                                                                                                  OTHER
                                                         COMMON      ADDITIONAL    RETAINED  COMPREHENSIVE   TREASURY
(Dollar amounts in thousands, except per share data)     STOCK         CAPITAL      EARNINGS     INCOME        STOCK      TOTAL
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>          <C>          <C>          <C>
Balance, January 1, 1998                                 $     877   $  59,787   $  98,046    $   6,770    $    --      $ 165,480
Comprehensive income:
   Net income                                                 --          --        18,558         --           --         18,558
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                         --          --          --          1,353         --          1,353
                                                                                                                         --------

       Total comprehensive income                                                                                          19,911

Treasury stock purchase (91,093 shares)                       --          --          --           --         (4,089)      (4,089)
Morris Plan acquisition                                         26       6,893        --           --           --          6,919
Cash dividends, $ .84 per share                               --          --        (6,038)        --           --         (6,038)
                                                         ---------   ---------   ---------    ---------    ---------    ---------
Balance, December 31, 1998                                     903      66,680     110,566        8,123       (4,089)     182,183

Comprehensive income:
   Net income                                                 --          --        21,622         --           --         21,622
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                         --          --          --        (15,942)        --        (15,942)
                                                                                                                         --------
       Total comprehensive income                            5,680

Treasury stock purchase (288,972 shares)                      --          --          --           --        (12,673)     (12,673)
Cash dividends, $ .94 per share                               --          --        (6,508)        --           --         (6,508)
                                                         ---------   ---------   ---------    ---------    ---------    ---------
Balance, December 31, 1999                                     903      66,680     125,680       (7,819)     (16,762)     168,682

Comprehensive income:
   Net income                                                 --          --        23,213         --           --         23,213
   Other comprehensive income, net of tax:
   Change in net unrealized gains/losses
     on available-for-sale securities                         --          --          --         11,719         --         11,719
                                                                                                                         --------
       Total comprehensive income                                                                                          34,932

Treasury stock purchase (151,181 shares)                      --          --          --           --         (5,151)      (5,151)
Cash dividends, $1.08 per share                               --          --        (7,240)        --           --         (7,240)
                                                         ---------   ---------   ---------    ---------    ---------    ---------
Balance, December 31, 2000                               $     903   $  66,680   $ 141,653    $   3,900    $ (21,913)   $ 191,223
                                                         =========   =========   =========    =========    =========    =========
</TABLE>



See accompanying notes.


                                       9
<PAGE>   11


CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                        ------------------------------------
(Dollar amounts in thousands, except per share data)       2000         1999         1998
--------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                              $  23,213    $  21,622    $  18,558
  Adjustments to reconcile net income to net cash
    provided by operating activities:
     Net (accretion) amortization on securities            (2,171)         348         (745)
     Provision for loan losses                              4,392        4,725        5,396
     Securities gains                                        (145)        (189)        (905)
     Depreciation and amortization                          3,318        2,865        2,541
     Provision for deferred income taxes                      225         (341)      (1,010)
     Net change in accrued interest receivable             (3,100)           1         (618)
     Other, net                                           (17,169)      14,904          723
                                                        ---------    ---------    ---------
        NET CASH PROVIDED BY OPERATING ACTIVITIES           8,563       43,935       23,940
                                                        ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Sales of available-for-sale securities                   42,037      115,794      111,496
  Maturities of available-for-sale securities              55,881      114,333      107,658
  Purchases of available-for-sale securities              (51,659)    (219,117)    (315,933)
  Purchase of bank-owned life insurance                   (45,000)        --           --
  Loans made to customers, net of repayments             (108,050)     (84,100)     (77,742)
  Net change in federal funds sold                         (3,985)         260          230
  Additions to premises and equipment                      (3,417)      (4,881)      (2,398)
                                                        ---------    ---------    ---------
        NET CASH USED BY INVESTING ACTIVITIES            (114,193)     (77,711)    (176,689)
                                                        ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in deposits                                   66,444       (4,250)      33,568
  Net change in other short-term borrowings               (44,791)     (40,133)      52,335
  Dividends paid                                           (6,933)      (6,224)      (5,624)
  Purchases of treasury stock                              (5,151)     (12,673)      (4,089)
  Cash acquired resulting from merger                        --           --            470
  Proceeds from other borrowings                          563,800      293,000      251,637
  Repayments on other borrowings                         (457,059)    (192,746)    (174,486)
                                                        ---------    ---------    ---------
        NET CASH PROVIDED BY FINANCING ACTIVITIES         116,310       36,974      153,811
                                                        ---------    ---------    ---------
        NET CHANGE IN CASH AND CASH EQUIVALENTS            10,680        3,198        1,062
        CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR       58,075       54,877       53,815
                                                        ---------    ---------    ---------
        CASH AND CASH EQUIVALENTS, END OF YEAR          $  68,755    $  58,075    $  54,877
                                                        =========    =========    =========

  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
    Interest                                            $  80,514    $  66,908    $  66,233
                                                        =========    =========    =========
    Income taxes                                        $  10,114    $  10,182    $   7,403
                                                        =========    =========    =========

    See also Note 1 regarding Morris Plan acquisition

</TABLE>

See accompanying notes.

                                       10
<PAGE>   12
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, Terre Haute First National Bank
    of Vigo County, Indiana (Terre Haute First), The Morris Plan Company of
    Terre Haute (Morris Plan), First State Bank of Clay County, Indiana (First
    State), First Citizens State Bank of Newport, Indiana (Citizens), First
    Farmers State Bank of Sullivan, Indiana (Farmers), First Parke State Bank of
    Rockville, Indiana (Parke), First Ridge Farm State Bank of Ridge Farm,
    Illinois (Ridge Farm), First National Bank of Marshall, Illinois (Marshall),
    First Crawford State Bank of Robinson, Illinois (Crawford) and First
    Financial Reinsurance Company, a corporation incorporated in the country of
    Turks and Caicos Islands (FFRC).

    Terre Haute First also has two investment subsidiaries, Global Portfolio
    Managers A (Global A) and Global Portfolio Managers B (Global B), which were
    incorporated in the state of Nevada to hold and manage certain securities.
    Global A and Global B subsequently entered into a limited partnership
    agreement, Global Portfolio Limited Partners. At December 31, 2000, $134.9
    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 and consumer
    lending, lease financing, trust account services and depositor services
    through its nine subsidiaries.

    Terre Haute First is the largest bank in Vigo County. It operates 12
    full-service banking branches within the county. It also has a main office
    in downtown Terre Haute and an operations center/office building in southern
    Terre Haute.

    The Corporation operates 37 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
    generally accepted accounting principles, 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 future results could differ. The allowance for loan losses 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 and 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 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.

    ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
    allowance for probable 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, known and
    inherent risks in the nature and volume of the portfolio, information about
    specific borrower situations and estimated collateral values. 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.

    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.



                                       11
<PAGE>   13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    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.

    SERVICING RIGHTS: Servicing rights are recognized as assets for purchased
    rights and 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.

    MORRIS PLAN ACQUISITION: In March 1998, the Corporation acquired all of the
    outstanding common stock of Morris Plan in exchange for 210,000 shares of
    its common stock. The acquisition was accounted for using the purchase
    method of accounting and resulted in goodwill of approximately $2.4 million,
    which will be amortized over 15 years. Assets and liabilities assumed upon
    acquisition were each approximately $39 million, including cash of $470
    thousand.

    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.

    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.

    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.

    NEW ACCOUNTING PRONOUNCEMENTS: Beginning January 1, 2001, a new accounting
    standard required all derivatives to be recorded at fair value. Unless
    designated as hedges, changes in these fair values will be recorded in the
    statements of income. Fair value changes involving hedges will generally be
    recorded by offsetting gains and losses on the hedge and on the hedged item,
    even if the fair value of the hedged item is not otherwise recorded.
    Adoption of this standard did not have a material effect on the
    Corporation's financial position or results of operations.

    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 MARKET 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.

    INDUSTRY SEGMENT: Internal financial information is aggregated and reported
    in one line of business, which is banking.



                                       12
<PAGE>   14

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 loans held for sale
    is based on market quotes. Fair value of debt is based on current rates for
    similar financing. The fair value of off-balance-sheet items is based on the
    current fees or cost that would be charged to enter into or terminate such
    arrangements and is nominal.

    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,
                                  ---------------------------------------------------------
                                             2000                             1999
                                  ---------------------------------------------------------
                                    CARRYING         FAIR          CARRYING        FAIR
(Dollar amounts in thousands)        VALUE           VALUE           VALUE         VALUE
-------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>
Cash and due from banks           $    68,755    $    68,755    $    58,075    $    58,075
Federal funds sold                      4,175          4,175            190            190
Available-for-sale securities         568,405        568,405        594,319        594,319
Loans                               1,298,953      1,289,348      1,193,885      1,189,417
Accrued interest receivable            17,803         17,803         14,703         14,703
Deposits                           (1,322,559)    (1,331,640)    (1,256,115)    (1,257,134)
Short-term borrowings                 (18,708)       (18,708)       (63,499)       (63,499)
Federal Home Loan Bank advances      (482,460)      (481,598)      (375,713)      (374,446)
Other borrowings                       (6,603)        (6,603)        (6,609)        (6,609)
Accrued interest payable               (6,731)        (6,731)        (5,696)        (5,696)
</TABLE>

3. RESTRICTIONS ON CASH AND DUE FROM BANKS:

   Certain affiliate banks are required to maintain average reserve balances
   with the Federal Reserve Bank. The amount of those reserve balances was
   approximately $15.5 million and $15.8 million at December 31, 2000 and 1999,
   respectively.

4. SECURITIES:

   The amortized cost and estimated fair value of year-end securities are as
   follows:

                                                  DECEMBER 31, 2000
                                      ------------------------------------------
                                                      UNREALIZED
                                      AMORTIZED  ---------------------   FAIR
(Dollar amounts in thousands)           COST      GAINS      LOSSES      VALUE
--------------------------------------------------------------------------------
U.S. Government                       $    650   $   --     $   --      $    650
U.S. Government agencies               339,233      1,840     (3,025)    338,048
Collateralized mortgage obligations      6,686          1       (141)      6,546
State and municipal                    163,018      3,873       (693)    166,198
Corporate obligations                   57,026        422       (485)     56,963
                                      --------   --------   --------    --------
    TOTAL                             $566,613   $  6,136   $ (4,344)   $568,405
                                      ========   ========   ========    ========


                                       13
<PAGE>   15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                 DECEMBER 31, 1999
                                     -------------------------------------------
                                                    UNREALIZED
                                     AMORTIZED   --------------------    FAIR
(Dollar amounts in thousands)          COST       GAINS     LOSSES       VALUE
                                     -------------------------------------------
U.S. Government                       $178,018   $    188   $ (6,170)   $172,036
U.S. Government agencies               215,824        241     (7,448)    208,617
Collateralized mortgage obligations      8,187         12       (320)      7,879
State and municipal                    169,040      1,100     (4,082)    166,058
Corporate obligations                   40,324       --         (595)     39,729
                                      --------   --------   --------    --------
      TOTAL                           $611,393   $  1,541   $(18,615)   $594,319
                                      ========   ========   ========    ========

    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 $3.6
    million and $3.2 million, and fair value was $8.3 million and $7.3 million
    at December 31, 2000 and 1999, respectively.

    During 2000, the Corporation purchased bank-owned life insurance for an
    initial premium of $45 million. 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, 2000, 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.

    Investment securities with a par value amounting to approximately $62.6
    million and $66.2 million at December 31, 2000 and 1999, respectively, were
    pledged as collateral for borrowings and for other purposes.

    Below is a summary of the gross gains and losses realized by the Corporation
    from investments sold during the years

(Dollar amounts in thousands)      2000         1999         1998
---------------------------------------------------------------------
Proceeds                        $  42,037    $ 115,794    $ 111,496
Gross gains                           262          627          967
Gross losses                         (117)        (438)         (62)

    Contractual maturities of debt securities at year-end 2000 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
                                                                          ---------------------
                                                                                                 WEIGHTED
                                                                           AMORTIZED    FAIR     AVERAGE
(Dollar amounts in thousands)                                                COST       VALUE    YIELDS
---------------------------------------------------------------------------------------------------------
<S>                                                                        <C>        <C>        <C>
Due in one year or less                                                    $ 15,102   $ 15,122   6.76%
                                                                                                 ====
Due after one but within five years                                          40,119     40,754   7.55%
                                                                                                 ====
Due after five but within ten years                                         123,348    124,420   7.30%
                                                                                                 ====
Due after ten years                                                         152,614    153,621   7.33%
                                                                                                 ====
Mortgage-backed securities, primarily
issued by U.S. Government agencies                                          235,430    234,488   7.04%
                                                                           --------   --------   ====
      TOTAL                                                                $566,613   $568,405
                                                                           ========   ========
</TABLE>


                                       14
<PAGE>   16
FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  LOANS:

    Loans are summarized as follows:


                                                            DECEMBER 31,
                                                     ---------------------------
                                                        2000            1999
                                                     ---------------------------
                                                      CARRYING       CARRYING
(Dollar amounts in thousands)                           VALUE          VALUE
--------------------------------------------------------------------------------
Commercial, financial and agricultural               $   282,904    $   247,949
Real estate - construction                                41,325         44,782
Real estate - mortgage                                   732,387        671,972
Installment                                              237,527        223,459
Lease financing                                            4,810          5,723
                                                     -----------    -----------
   Total gross loans                                   1,298,953      1,193,885
   Less: unearned income                                    (947)        (1,987)
       allowance for loan losses                         (19,072)       (17,949)
                                                     -----------    -----------
     TOTAL                                           $ 1,278,934    $ 1,173,949
                                                     ===========    ===========

    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 2000 the aggregate
    dollar amount of these loans to directors and executive officers who held
    office at the end of the year amounted to $43.2 million at the beginning of
    the year. During 2000, advances of $61.1 million and repayments of $60.3
    million were made with respect to related party loans for an aggregate
    dollar amount outstanding of $44.0 million at December 31, 2000.

    Loans serviced for others, which are not reported as assets, total $110.8
    million and $92.5 million at year-end 2000 and 1999. Capitalized mortgage
    servicing rights aggregated $792 thousand and $653 thousand at year-end,
    2000 and 1999.

6.  ALLOWANCE FOR LOAN LOSSES:

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

                                                         DECEMBER 31,
                                             ----------------------------------
(Dollar amounts in thousands)                   2000        1999        1998
-------------------------------------------------------------------------------
Balance at beginning of year                 $ 17,949    $ 16,429    $ 13,503
Allowance resulting from merger                  --          --           970
Provision for loan losses                       4,392       4,725       5,396
Recoveries of loans previously charged off      1,394       1,105       1,196
Loans charged off                              (4,663)     (4,310)     (4,636)
                                             --------    --------    --------
   BALANCE AT END OF YEAR                    $ 19,072    $ 17,949    $ 16,429
                                             ========    ========    ========

   Impaired loans were as follows:

                                                               DECEMBER 31,
                                                             ----------------
(Dollar amounts in thousands)                                 2000      1999
-----------------------------------------------------------------------------
Year-end loans with no allocated allowance for loan losses   $ --     $  839
Year-end loans with allocated allowance for loan losses       6,422    6,670
                                                             ------   ------
   TOTAL                                                     $6,422   $7,509
                                                             ======   ======
Amount of the allowance for loan losses allocated            $5,008   $2,312
Loans past due over 90 days still on accrual                  5,499    5,229
Average of impaired loans during the year                     4,274    6,787


                                       15
<PAGE>   17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  PREMISES AND EQUIPMENT:

    Premises and equipment are summarized as follows:

                                                         DECEMBER 31,
                                                    ---------------------
(Dollar amounts in thousands)                         2000         1999
-------------------------------------------------------------------------
Land                                                $  3,813    $  3,678
Building and leasehold improvements                   29,773      27,657
Furniture and equipment                               24,574      23,494
                                                    --------    --------
                                                      58,160      54,829
Less accumulated depreciation                        (31,797)    (28,734)
                                                    --------    --------
   TOTAL                                            $ 26,363    $ 26,095
                                                    ========    ========

8.  DEPOSITS AND SHORT-TERM BORROWINGS:

    Scheduled maturities of time deposits for the next five years were as
    follows:

                             2001                    $591,445
                             2002                     107,051
                             2003                      29,917
                             2004                      13,643
                             2005                      19,092
                                                     --------
                                                     $761,148
                                                     ========

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

(Dollar amounts in thousands)     2000      1999
--------------------------------------------------
Federal funds purchased          $ 5,510   $19,559
Repurchase agreements             12,269    35,718
Note payable - U.S. government       929     8,222
                                 -------   -------
                                 $18,708   $63,499
                                 =======   =======

    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.

9.  OTHER BORROWINGS:

    Long-term borrowings at December 31, 2000 and 1999 are summarized as
    follows:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                                       2000       1999
-------------------------------------------------------------------------------------
<S>                                                               <C>        <C>
FHLB advances                                                     $482,460   $375,713
City of Terre Haute, Indiana economic development revenue bonds      6,600      6,600
Other                                                                    3          9
                                                                  --------   --------
    TOTAL                                                         $489,063   $382,322
                                                                  ========   ========
</TABLE>

   The aggregate minimum annual retirements of long-term borrowings are as
   follows:

                           2001                   $    89,833
                           2002                        10,808
                           2003                        34,765
                           2004                        16,522
                           2005                         --
                           Thereafter                 337,135
                                                   ----------
                                                   $  489,063
                                                   ==========



                                       16
<PAGE>   18

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The economic development revenue bonds (bonds) require periodic interest
    payments each year until maturity or redemption. The interest rate, which
    was 5.0% at December 31, 2000, and 5.35% at December 31, 1999, 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, 2001, 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 requires the Corporation to meet certain financial
    covenants. The most restrictive 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, 2000 and 1999, the Corporation was in
    compliance with all of its debt covenants.

    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 $482.5 million at
    December 31, 2000, accrue interest, payable monthly, at annual rates varying
    from 4.6% to 8.0%. The advances are due at various dates through September
    2017. FHLB advances are, generally, due in full at maturity. They are
    secured by a blanket pledge of eligible securities and 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.

10. INCOME TAXES:

    Income tax expense is summarized as follows:

(Dollar amounts in thousands)       2000       1999       1998
----------------------------------------------------------------
Federal:
 Currently payable                 $ 7,372   $ 6,763    $ 5,526
 Deferred                              167      (256)      (886)
                                   -------   -------    -------
                                     7,539     6,507      4,640
State:
 Currently payable                   1,539     2,461      2,289
 Deferred                               58       (85)      (132)
                                   -------   -------    -------
                                     1,597     2,376      2,157
                                   -------   -------    -------
   TOTAL                           $ 9,136   $ 8,883    $ 6,797
                                   =======   =======    =======

    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)                           2000        1999        1998
----------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>
Federal income taxes computed at the statutory rate   $ 11,322    $ 10,677    $  8,829
Add (deduct) tax effect of:
 Tax exempt income                                      (2,691)     (2,679)     (3,016)
 State tax, net of federal benefit                       1,038       1,550       1,402
 Affordable housing credits                               (529)       (565)       (587)
 Other, net                                                 (4)       (100)        169
                                                      --------    --------    --------
   TOTAL                                              $  9,136    $  8,883    $  6,797
                                                      ========    ========    ========
</TABLE>

                                       17
<PAGE>   19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The tax effects of temporary differences that give rise to significant
    portions of the deferred tax assets and liabilities at December 31, 2000 and
    1999, are as follows:


(Dollar amounts in thousands)                               2000        1999
--------------------------------------------------------------------------------
Deferred tax assets:
 Loan losses provision                                    $  7,475    $  7,275
 Deferred compensation                                         775         582
 Compensated absences                                          333         314
 Post-retirement benefits                                      708         729
 Net unrealized losses on available-for-sale securities       --         5,220
 Other                                                         166          94
 Valuation allowance for deferred tax assets                  --          --
                                                          --------    --------
   GROSS DEFERRED ASSETS                                     9,457      14,214
                                                          --------    --------

Deferred tax liabilities:
 Net unrealized gains on available-for-sale securities      (2,592)       --
 Depreciation                                               (1,006)     (1,176)
 Lease financing                                              (176)       (182)
 Originated servicing rights                                  (311)       (265)
 Pensions                                                   (1,503)       (871)
 Other                                                        (677)       (491)
                                                          --------    --------
   GROSS DEFERRED LIABILITIES                               (6,265)     (2,985)
                                                          --------    --------
   NET DEFERRED TAX ASSETS                                $  3,192    $ 11,229
                                                          ========    ========

11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:

    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 had unused lines of credit of $184.0 million and $169.0
    million and commitments to extend credit of $7.1 million as of December 31,
    2000 and 1999. In addition, the Corporation had outstanding commitments of
    $2.1 million and $2.6 million under standby letters of credit as of December
    31, 2000 and 1999, respectively.

    During 2000, the Corporation entered into an interest rate swap with a
    notional principal balance of $10 million. The agreement requires the
    Corporation to make variable rate payments, based on LIBOR, which rate was
    6.58% at December 31, 2000, and entitle the Corporation to receive fixed
    rate payments at a rate of 6.817%. The swap had a 24-month term and was
    entered into to hedge a similar maturity fixed rate certificate of deposit
    special that generated approximately $13 million in deposits. At December
    31, 2000, the swap has a fair value of approximately $321 thou- sand. The
    net settlement income or expense is recorded as interest expense. The
    Corporation is exposed to credit loss in the event the counterparty does not
    perform under the agreement in an amount equal to the rate differential when
    the fixed rate exceeds the variable rate.



                                       18
<PAGE>   20

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. 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
    $1,022 thousand, $1,021 thousand and $350 thousand in 2000, 1999 and 1998,
    respectively. The Corporation contributed $750 thousand, $873 thousand and
    $750 thousand to the ESOP in 2000, 1999 and 1998, respectively.

    Pension expense included the following components:


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                       2000        1999       1998
--------------------------------------------------------------------------------
<S>                                                <C>        <C>        <C>
   Service cost - benefits earned                  $   899    $   927    $ 1,183
   Interest cost on projected benefit obligation     1,780      1,858      2,091
   Expected return on plan assets                   (1,801)    (1,900)    (2,361)
   Net amortization and deferral                       (26)         3       (159)
                                                   -------    -------    -------
   Total pension expense                           $   852    $   888    $   754
                                                   =======    =======    =======
</TABLE>

    The information below sets forth the 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.


<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                           ---------------------
(Dollar amounts in thousands)                                                2000        1999
------------------------------------------------------------------------------------------------
<S>                                                                       <C>          <C>
Change in benefit obligation:
Benefit obligation at January 1                                            $ 31,018     $ 27,498
Service cost                                                                    899          927
Interest cost                                                                 1,780        1,858
Actuarial (gain) loss                                                        (6,099)       1,105
Benefits paid                                                                  (388)        (370)
                                                                           --------     --------
Benefit obligation at December 31                                            27,210       31,018
                                                                           --------     --------

   Reconciliation of fair value of plan assets:
   Fair value of plan assets at January 1                                    27,107       25,754
   Actual return on plan assets                                              (7,311)        (171)
   Employer contributions                                                     1,772        1,894
   Benefits paid                                                               (388)        (370)
                                                                           --------     --------
   Fair value of plan assets at December 31                                  21,180       27,107
                                                                           --------     --------
   Funded status:
     Funded status at December 31                                            (6,030)      (3,911)
     Unrecognized transition obligation                                        --           (174)
     Unrecognized prior service cost                                             32           48
     Unrecognized net actuarial cost                                          9,832        6,951
                                                                           --------     --------
     Prepaid pension asset recognized in the consolidated balance sheets   $  3,834     $  2,914
                                                                           ========     ========
   Principal assumptions used:
     Discount rate                                                             7.50%        7.00%
     Rate of increase in compensation levels                                   5.00         5.00
     Expected long-term rate of return on plan assets                          8.00         8.00
</TABLE>


                                       19
<PAGE>   21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The Corporation also provides medical benefits to its employees subsequent
    to their retirement. Accrued post-retirement benefits as of December 31,
    2000 and 1999 are as follows:

                                          DECEMBER 31,
 (Dollar amounts in thousands)          2000       1999
----------------------------------------------------------
Change in benefit obligation:
  Benefit obligation at January 1      $ 2,938    $ 2,606
  Service cost                              64         57
  Interest cost                            201        195
  Plan participants' contributions          24         10
  Actuarial (gain) loss                    104        262
  Actual benefits paid                    (322)      (192)
                                       -------    -------
  Benefit obligation at December 31    $ 3,009    $ 2,938
                                       =======    =======
Reconciliation of funded status:
  Funded status                        $ 3,009      2,938
  Unrecognized transition obligation      (784)      (844)
  Unrecognized net gain (loss)          (1,081)    (1,022)
                                       -------    -------
  Accrued benefit cost                 $ 1,144    $ 1,072
                                       =======    =======

    The post-retirement benefits paid in 2000 and 1999 of $322 thousand and $192
    thousand, respectively, were fully funded by company and participant
    contributions. There were no other changes to plan assets in 2000 and 1999.

    Weighted-average assumptions as of December 31:

                                                               DECEMBER 31,
                                                          ----------------------
                                                             2000       1999
--------------------------------------------------------------------------------

Discount rate                                                7.50%      7.00%
Initial weighted health care cost trend rate                 7.50      10.00
Ultimate health care cost trend rate                         5.00       5.00


   Post-retirement health benefit expense included the following components:

                                           YEARS ENDED DECEMBER 31,
                                          --------------------------
(Dollar amounts in thousands)               2000     1999     1998
--------------------------------------------------------------------
Service cost                                $ 64     $ 57     $ 48
Interest cost                                201      195      165
Amortization of transition obligation         60       60       60
Recognized actuarial loss                     45       48       30
                                            ----     ----     ----
Net periodic benefit cost                   $370     $360     $303
                                            ====     ====     ====

    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:


                                                        1% POINT     1% POINT
                                                        INCREASE     DECREASE
                                                        ---------------------
Effect on total of service and interest cost components   $  8        $ (7)
Effect of post-retirement benefit obligation               100         (91)



                                       20
<PAGE>   22

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. OTHER COMPREHENSIVE INCOME:

    Other comprehensive income components and related taxes were as follows:


<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                       --------------------------------
(Dollar amounts in thousands)                                             2000        1999        1998
--------------------------------------------------------------------------------------------------------
<S>                                                                    <C>         <C>         <C>
Unrealized holding gains and losses on available-for-sale securities   $ 19,676    $(26,382)   $  3,160
Less reclassification adjustments for gains and losses later
   recognized in income                                                    (145)       (189)       (905)
                                                                       --------    --------    --------
Net unrealized gains and losses                                          19,531     (26,571)      2,255
Tax effect                                                               (7,812)     10,629        (902)
                                                                       --------    --------    --------
Other comprehensive income                                             $ 11,719    $(15,942)   $  1,353
                                                                       ========    ========    ========
</TABLE>

14. 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, 2000, approximately
    $36.5 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, 2000 and 1999, that the
    Corporation meets all capital adequacy requirements to which it is subject.

    As of December 31, 2000, 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 table on the following page presents the actual and required capital
    amounts and related ratios for the Corporation and the lead bank, Terre
    Haute First National Bank, at year end 2000 and 1999.




                                       21
<PAGE>   23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                            FOR CAPITAL
                                              ACTUAL                                    ADEQUACY PURPOSES
                                      ---------------------     -------------------------------------------------------------------
(Dollar amounts in thousands)          AMOUNT        RATIO                  AMOUNT                                  RATIO
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>         <C>                                    <C>
TOTAL RISK-BASED CAPITAL
 Corporation - 2000                   $202,033       15.21%     greater than or equal to $106,244      greater than or equal to 8.0%
 Corporation - 1999                    188,719       15.91%     greater than or equal to   94,893      greater than or equal to 8.0%
 Terre Haute First - 2000              127,391       15.22%     greater than or equal to   66,939      greater than or equal to 8.0%
 Terre Haute First - 1999              117,432       15.75%     greater than or equal to   59,468      greater than or equal to 8.0%

TIER I RISK-BASED CAPITAL
 Corporation - 2000                   $185,402       13.96%     greater than or equal to $ 53,122      greater than or equal to 4.0%
 Corporation - 1999                    173,853       14.66%     greater than or equal to   47,446      greater than or equal to 4.0%
 Terre Haute First - 2000              117,122       14.00%     greater than or equal to   33,469      greater than or equal to 4.0%
 Terre Haute First - 1999              108,104       14.50%     greater than or equal to   29,824      greater than or equal to 4.0%

TIER I LEVERAGE CAPITAL
 Corporation - 2000                   $185,402        9.43%     greater than or equal to $ 78,646      greater than or equal to 4.0%
 Corporation - 1999                    173,853        9.36%     greater than or equal to   74,272      greater than or equal to 4.0%
 Terre Haute First - 2000              117,122        9.26%     greater than or equal to   50,598      greater than or equal to 4.0%
 Terre Haute First - 1999              108,104        9.04%     greater than or equal to   47,837      greater than or equal to 4.0%


<CAPTION>
                                                                TO BE WELL CAPITALIZED
                                                                UNDER PROMPT CORRECTIVE
                                                                   ACTION PROVISIONS
                                        ------------------------------------------------------------------------
(Dollar amounts in thousands)                         AMOUNT                                 RATIO
----------------------------------------------------------------------------------------------------------------
<S>                                     <C>                                     <C>
TOTAL RISK-BASED CAPITAL                greater than or equal to $132,805       greater than or equal to  10.0%
 Corporation - 2000                     greater than or equal to  118,616       greater than or equal to  10.0%
 Corporation - 1999                     greater than or equal to   83,674       greater than or equal to  10.0%
 Terre Haute First - 2000               greater than or equal to   73,560       greater than or equal to  10.0%
 Terre Haute First - 1999

TIER I RISK-BASED CAPITAL               greater than or equal to $ 79,683       greater than or equal to   6.0%
 Corporation - 2000                     greater than or equal to   71,170       greater than or equal to   6.0%
 Corporation - 1999                     greater than or equal to   50,204       greater than or equal to   6.0%
 Terre Haute First - 2000               greater than or equal to   44,736       greater than or equal to   6.0%
 Terre Haute First - 1999

TIER I LEVERAGE CAPITAL                 greater than or equal to $ 98,308       greater than or equal to   5.0%
 Corporation - 2000                     greater than or equal to   92,840       greater than or equal to   5.0%
 Corporation - 1999                     greater than or equal to   63,248       greater than or equal to   5.0%
 Terre Haute First - 2000               greater than or equal to   59,797       greater than or equal to   5.0%
 Terre Haute First - 1999

</TABLE>

15. PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:

    The parent company's condensed balance sheets as of December 31, 2000 and
    1999, and the related condensed statements of income and cash flows for each
    of the three years in the period ended December 31, 2000, are as follows:

    BALANCE SHEETS

                                                     DECEMBER 31,
                                                --------------------
(Dollar amounts in thousands)                     2000       1999
--------------------------------------------------------------------
ASSETS
 Cash deposits in affiliated banks               $  4,107   $  8,647
 Investments in bank subsidiaries                 182,597    156,150
 Land and headquarters building, net                6,789      6,902
 Other                                             10,635      9,726
                                                 --------   --------
     TOTAL ASSETS                                $204,128   $181,425
                                                 ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
 Long-term borrowings                            $  6,780   $  6,935
 Dividends payable                                  3,749      3,442
 Other liabilities                                  2,376      2,366
                                                 --------   --------
     TOTAL LIABILITIES                             12,905     12,743
Shareholders' equity                              191,223    168,682
                                                 --------   --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $204,128   $181,425
                                                 ========   ========



                                       22
<PAGE>   24

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                       -----------------------------
(Dollar amounts in thousands)                            2000       1999      1998
------------------------------------------------------------------------------------
<S>                                                     <C>       <C>       <C>
Income:
 Dividends from bank subsidiaries                       $ 8,608   $17,457   $17,815
  Other income                                            1,056       890       899
                                                        -------   -------   -------
   Total income                                           9,664    18,347    18,714
Expenses:
 Interest on long-term borrowings                           370       366       335
 Other operating expenses                                 1,779     1,617     1,684
                                                        -------   -------   -------
   Total operating expenses                               2,149     1,983     2,019
                                                        -------   -------   -------

   Income before income taxes and equity
     in undistributed earnings of bank subsidiaries       7,515    16,364    16,695
 Income tax benefit                                         571       457       738
                                                        -------   -------   -------
     Income before equity in undistributed
     earnings of bank subsidiaries                        8,086    16,821    17,433
Equity in undistributed earnings of bank subsidiaries    15,127     4,801     1,125
                                                        -------   -------   -------
     Net income                                         $23,213   $21,622   $18,558
                                                        =======   =======   =======
</TABLE>

 STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ----------------------------------
(Dollar amounts in thousands)                                  2000        1999        1998
----------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                   $ 23,213    $ 21,622    $ 18,558
  Adjustments to reconcile net income to net cash
    provided by operating activities:
     Provision for depreciation and amortization                  356         349         172
     Equity in undistributed earnings of bank subsidiaries    (15,127)     (4,801)     (1,125)
     (Decrease) increase in other liabilities                      10        (331)        286
     Increase in other assets                                    (687)       (204)       (542)
                                                             --------    --------    --------
       NET CASH PROVIDED BY OPERATING ACTIVITIES                7,765      16,635      17,349
 CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on long-term borrowings                     (155)       (145)       (145)
  Purchase of furniture and fixtures                              (66)       --          --
  Proceeds from reissuance of treasury stock                     --          --           (27)
  Purchase of treasury stock                                   (5,151)    (12,673)     (4,089)
  Dividends paid                                               (6,933)     (6,224)     (5,624)
                                                             --------    --------    --------
       NET CASH USED BY FINANCING ACTIVITIES                  (12,305)    (19,042)     (9,885)
                                                             --------    --------    --------
       NET (DECREASE) INCREASE IN CASH                          (4,540)     (2,407)      7,464
       CASH, BEGINNING OF YEAR                                   8,647      11,054       3,590
                                                             --------    --------    --------
       CASH, END OF YEAR                                      $  4,107    $  8,647    $ 11,054
                                                             ========    ========    ========
  Supplemental disclosures of cash flow information:
    Cash paid during the year for:
     Interest                                                $    370    $    362    $    311
                                                             ========    ========    ========
     Income taxes                                            $ 10,114    $ 10,182    $  7,403
                                                             ========    ========    ========
</TABLE>


                                       23
<PAGE>   25

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 generally accepted accounting principles 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, 2000. 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, 2000.

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

    The Examining and Trust 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 Examining and Trust Audit
Committee.

/s/ DONALD E. SMITH                                       /s/ MICHAEL A. CARTY

Donald E. Smith                                           Michael A. Carty
President & Chief Executive Officer                       Treasurer

REPORT OF INDEPENDENT ACCOUNTANTS

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, 2000 and 1999, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended. 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 audit. The consolidated
statements of income, changes in shareholders' equity and cash flows of First
Financial Corporation for the year ended December 31, 1998, were audited by
other auditors whose report dated January 22, 1999, expressed an unqualified
opinion on those statements.

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

    In our opinion, the 1999 and 2000 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
First Financial Corporation as of December 31, 2000 and 1999, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Indianapolis, Indiana                        /s/ CROWE, CHIZEK AND COMPANY LLP
January 12, 2001                             Crowe, Chizek and Company LLP



                                       24
<PAGE>   26

FIRST FINANCIAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis reviews the financial condition of First
Financial Corporation at December 31, 2000 and 1999, and the results of its
operations for the three years ended December 31, 2000. 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.

Forward-looking statements contained in the following discussion are based on
estimates and assumptions that are subject to significant business, economic and
competitive uncertainties, many of which are beyond the Corporation's control
and are subject to change. These uncertainties can affect actual results and
could cause actual results to differ materially from those expressed in any
forward-looking statements in this discussion.

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 and consumer lending, lease
financing, trust account services and depositor services through its nine
subsidiaries. At the close of business in 2000 the Corporation and its
subsidiaries had 694 full-time equivalent employees.

Terre Haute First is the largest bank in Vigo County. It operates 12
full-service banking branches within the county. 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 six branches of which five are located in
Sullivan County and one in Greene County. Sullivan County is contiguous to Vigo
County. Morris Plan has one branch and is located in Vigo County. Ridge Farm has
one branch and is located in Vermilion County, Illinois. Parke has four branches
in Parke County, a county contiguous to Vigo County. Marshall has one branch and
is located in Clark County, Illinois, a county contiguous to Vigo County.
Crawford has two branches in Crawford County, Illinois, and one branch in
Lawrence County, Illinois.

Terre Haute First and Morris Plan face competition from other financial
institutions in Vigo County. These competitors consist of two commercial banks,
a mutual savings bank and other financial institutions, including consumer
finance companies, brokerage firms and credit unions. The seven 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.

     - RIDGE FARM    Four commercial banks, three savings and loans, ten credit
                     unions and four brokerage firms in Vermilion County,
                     Illinois.

     - MARSHALL      Three commercial banks and one savings and loan in Clark
                     County, Illinois.

     - 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.

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.



                                       25
<PAGE>   27
RESULTS OF OPERATIONS - SUMMARY FOR 2000

    Net income for 2000 increased to $23.2 million from $21.6 million in 1999
    and earnings per share increased to $3.45 for 2000 from $3.10 in 1999. This
    increase was primarily the result of improved non-interest income and
    reduced non-interest expense. The primary components of income and expense
    affecting net income are discussed in the following analysis.

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 increased to $1.86 billion in 2000
    from $1.75 billion in 1999. The yield on these assets increased to 8.16% in
    2000 from 7.90% in 1999. Total average interest-bearing liabilities amounted
    to $1.63 billion in 2000 compared to $1.52 billion in 1999. The yield on
    these interest-bearing liabilities increased to 4.94% in 2000 from 4.40% in
    1999.

    On a tax equivalent basis, net interest income decreased $0.7 million from
    $71.5 million in 1999 to $70.8 million in 2000. The net interest margin
    decreased from 4.09% in 1999 to 3.82% in 2000. This decrease is primarily
    the result of borrowing rates increasing faster than the yield on earning
    assets.

    The following table sets forth the components of net interest income due to
    changes in volume and rate. The table information compares 2000 to 1999 and
    1999 to 1998.


<TABLE>
<CAPTION>
                                            2000 COMPARED TO 1999                          1999 COMPARED TO 1998
                                          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))             $  8,762    $  2,114    $    192    $ 11,068    $  7,528    $ (4,574)   $   (366)   $  2,588
    Taxable investment
      securities                       179       1,844          12       2,035         906         487          16       1,409
    Tax-exempt
      investment
      securities ((2))                 792        (299)        (19)        474         383         (15)       --           368
    Federal funds sold                (560)        255        (167)       (472)        263         (48)        (20)        195
                                  --------    --------    --------    --------    --------    --------    --------    --------
Total interest income                9,173       3,914          18      13,105       9,080      (4,150)       (370)      4,560
                                  --------    --------    --------    --------    --------    --------    --------    --------

Interest paid on
  interest-bearing liabilities:
    Transaction accounts                59         644           5         708         486        (635)        (33)       (182)
    Time deposits                      628       3,164          55       3,847      (1,602)     (3,400)        133      (4,869)
    Short-term borrowings              450         733          95       1,278         927        (130)        (43)        754
    Other borrowings                 4,936       2,353         646       7,935       5,759        (751)       (326)      4,682
                                  --------    --------    --------    --------    --------    --------    --------    --------
  Total interest expense             6,073       6,894         801      13,768       5,570      (4,916)       (269)        385
                                  --------    --------    --------    --------    --------    --------    --------    --------
  Net interest income             $  3,100    $ (2,980)   $   (783)   $   (663)   $  3,510    $    766    $   (101)   $  4,175
                                  ========    ========    ========    ========    ========    ========    ========    ========
</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%.



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 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 $4.4 million and $4.7 million for 2000
    and 1999, respectively.

    Net charge-offs for 2000 increased to $3.3 million from $3.2 million in
    1999. At December 31, 2000, the resulting allowance for loan losses was
    $19.1 million or 1.49% of total loans, net of unearned income. A year
    earlier the allowance was $17.9 million or 1.51% of total loans.

                                       26
<PAGE>   28

FIRST FINANCIAL CORPORATION

RESULTS OF OPERATIONS - SUMMARY FOR 2000

OTHER INCOME

    Other income increased 13.3% in 2000 to $13.6 million from $12.0 million
    earned in 1999. Service charges and fees on deposit accounts and other
    service charges and fees increased $628 thousand and $863 thousand,
    respectively. These increases are the result of a focused effort to increase
    fee-based income.

OTHER EXPENSES

    Other expenses totaled $42.7 million for 2000 compared to $43.5 million for
    1999. This represents a decrease of $840 thousand or 1.2% for 2000. Salaries
    and related benefits, the largest component of this group, decreased from
    $24.6 million to $23.1 million or 6.1%. This decline resulted from lower
    employee benefit costs and a slight reduction in employees during 2000. All
    other expenses for 2000 increased to $19.6 million from $19.0 million as
    compared to 1999 as management focused on controlling the Corporation's
    overhead.

INCOME TAXES

    The Corporation's federal income tax provision was $7.5 million in 2000
    compared to a provision of $6.5 million in 1999. The overall effective tax
    rate in 2000 of 28.3% compares to a 1999 effective rate of 29.1%.

COMPARISON OF 1999 TO 1998

    Net income for 1999 was $21.6 million or $3.10 per share compared to $18.6
    million in 1998 or $2.58 per share. This increased income was primarily the
    result of improved net interest and non-interest income.

    Net interest income increased $4.0 million in 1999 as compared to 1998. This
    increase was driven by growth as the net interest margin actually decreased
    slightly from 4.10% in 1998 to 4.09% in 1999.

    The Corporation's total assets increased to a record $2.04 billion at
    December 31, 2000, up from $1.91 billion a year earlier. Loans, net of
    unearned income, increased by $106 million, to $1.30 billion. While most
    categories increased, real estate mortgage and commercial loans increased by
    $60.4 million and $34.9 million to $732.4 million and $282.9 million,
    respectively. The increase resulted primarily because of favorable economic
    conditions. The overall increase in loans was primarily funded by deposits
    and advances from the Federal Home Loan Bank. Advances from the Federal Home
    Loan Bank at December 31, 2000, were $482.5 million. Total shareholders'
    equity increased to $191.2 million at December 31, 2000, compared to $168.7
    million a year earlier. Higher net income was offset by increased dividends
    and the continued repurchase of corporate stock. During the year 151,181
    shares were acquired at a cost of $5.2 million. In addition, during 2000,
    the Corporation recorded a net unrealized gain on available-for-sale
    securities of $11.7 million. While this fluctuation in fair value increased
    shareholders' equity, no gain 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 and interest sensitivity of the loans
    outstanding as of December 31, 2000, are set forth in the following
    analysis.

<TABLE>
<CAPTION>
(Dollar amounts in thousands)              2000         1999         1998         1997         1996
---------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>          <C>
Loan Category
Commercial, financial and agricultural   $  282,904   $  247,949   $  233,080   $  229,855   $  197,449
Real estate - construction                   41,325       44,782       32,880       23,734       22,629
Real estate - mortgage                      732,387      671,972      636,615      561,466      508,010
Installment                                 237,527      223,459      205,251      188,552      188,670
Lease financing                               4,810        5,723        5,825        3,271        3,284
                                         ----------   ----------   ----------   ----------   ----------
      TOTAL                              $1,298,953   $1,193,885   $1,113,651   $1,006,878   $  920,042
                                         ==========   ==========   ==========   ==========   ==========
</TABLE>

                                       27

<PAGE>   29
FINANCIAL CONDITION - SUMMARY

<TABLE>
<CAPTION>
                                                       After One
                                           Within      But Within   After Five
(Dollar amounts in thousands)             One Year     Five Years     Years       Total
------------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>
MATURITY DISTRIBUTION
Commercial, financial and agricultural   $  169,316   $   65,760   $   47,828   $  282,904
Real estate - construction                   20,370       10,611       10,344       41,325
                                         ----------   ----------   ----------      -------
       TOTAL                             $  189,686   $   76,371   $   58,172      324,229
                                         ==========   ==========   ==========

Real estate - mortgage                                                             732,387
Installment                                                                        237,527
Lease financing                                                                      4,810
                                                                                ----------
       TOTAL                                                                    $1,298,953
                                                                                ==========

Loans maturing after one year with:
  Fixed interest rates                                $   33,802   $   46,026
  Variable interest rates                                 42,569       12,146
                                                      ----------   ----------
       TOTAL                                          $   76,371   $   58,172
                                                      ==========   ==========
</TABLE>

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)                   2000          1999          1998          1997          1996
-----------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>           <C>           <C>           <C>
Amount of loans outstanding
   at December 31,                            $1,298,953    $1,193,885    $1,113,651    $1,006,878    $  920,042
                                              ==========    ==========    ==========    ==========    ==========
Average amount of loans by year               $1,256,505    $1,151,968    $1,066,537    $  953,008    $  885,964
                                              ==========    ==========    ==========    ==========    ==========

Allowance for loan losses
   at beginning of year                       $   17,949    $   16,429    $   13,503    $   10,756    $   10,616
   Allowance resulting from acquisition             --            --             970          --            --
Loans charged off:
   Commercial, financial and agricultural          1,055           344         1,195           487         2,577
   Real estate - mortgage                            406           932           614           596           207
   Installment                                     3,196         3,034         2,827         2,732         2,016
   Leasing                                             6          --            --            --               2
                                              ----------    ----------    ----------    ----------    ----------
       Total loans charged off                     4,663         4,310         4,636         3,815         5,401
                                              ----------    ----------    ----------    ----------    ----------

Recoveries of loans previously charged off:
   Commercial, financial and agricultural            578           170           461           260           426
   Real estate - mortgage                             28           142           101           163           147
   Installment                                       788           788           634           747           500
   Leasing                                          --               5          --              10             7
                                              ----------    ----------    ----------    ----------    ----------
       Total recoveries                            1,394         1,105         1,196         1,180         1,080
                                              ----------    ----------    ----------    ----------    ----------

Net loans charged off                              3,269         3,205         3,440         2,635         4,321
Provision charged to expense                       4,392         4,725         5,396         5,382         4,461
                                              ----------    ----------    ----------    ----------    ----------
Balance at end of year                        $   19,072    $   17,949    $   16,429    $   13,503    $   10,756
                                              ==========    ==========    ==========    ==========    ==========
Ratio of net charge-offs during period
   to average loans outstanding                      .26%          .28%          .32%          .28%          .49%
                                              ==========    ==========    ==========    ==========    ==========
</TABLE>


    Management anticipates $3.8 million of commercial, financial and
    agricultural loans, $0.4 million of real estate mortgage loans and $2.3
    million of installment loans will be charged off for 2001.


                                       28
<PAGE>   30

FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION - SUMMARY

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
    2000, 1999 and 1998, under the original terms of the loans is $953 thousand,
    $364 thousand and $495 thousand, respectively. The Corporation recorded
    interest income on such loans in the amounts of $656 thousand, $119 thousand
    and $149 thousand for 2000, 1999 and 1998, respectively.


(Dollar amounts in thousands)      2000      1999      1998      1997      1996
--------------------------------------------------------------------------------
Non-accrual loans                $ 8,316   $ 2,879   $ 4,103   $ 3,866   $ 2,504
Restructured loans                   735       959         7        17        34
                                 -------   -------   -------   -------   -------
                                   9,051     3,838     4,110     3,883     2,538
Accruing loans past due            5,499     5,229     8,184     4,384     5,296
                                 -------   -------   -------   -------   -------
                                 $14,550   $ 9,067   $12,294   $ 8,267   $ 7,834
                                 =======   =======   =======   =======   =======

    The ratio of the allowance for loan losses as a percentage of
    under-performing loans was 131% at December 31, 2000, compared to 198% in
    1999. This decrease is the result of a significant increase in the amount of
    loans in non-accrual status, amounting to $8.3 million in 2000 as compared
    to $2.9 million in 1999. This increase is primarily due to the Corporation's
    portion of a loan made to a steel manufacturer, which accounts for more than
    60% of the total. Management anticipates the charge-off of a significant
    portion of that credit in 2001.

    The following loan categories comprise significant components of the
    under-performing loans at December 31, 2000:

(Dollar amounts in thousands)
--------------------------------------------------------------------------------
  Non-accrual loans:
    1-4 family residential      $1,601        19%
    Commercial loans             6,019        72
    Installment loans              696         9
    Other, various                --        --
                                ------       ---
                                $8,316       100%
                                ======       ===
  Past due 90 days or more:
    1-4 family residential      $1,667        30%
    Commercial loans             2,986        54
    Installment loans              818        15
    Other, various                  28         1
                                ------       ---
                                $5,499       100%
                                ======       ===

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

    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, 2000, approximately $26.2 million of commercial loans are
    graded doubtful or substandard, including the $9.0 million of non-accrual
    and past-due commercial loans listed above. 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.




                                       29
<PAGE>   31
FINANCIAL CONDITION - SUMMARY

DEPOSITS

    Total deposits increased to $1.32 billion at December 31, 2000, from $1.26
    billion at December 31, 1999. 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 2000, 1999 and 1998.


<TABLE>
<CAPTION>
                                              2000                             1999                         1998
                                   ---------------------------------------------------------------------------------------
(Dollar amounts in thousands)         Amount            Rate        Amount            Rate        Amount            Rate
--------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                 <C>     <C>                   <C>      <C>                <C>
Non-interest-bearing
  demand deposits                  $  145,923                                                  $  143,551       $ 133,259
Interest-bearing demand deposits      168,579            1.34%      294,953            2.31%      277,051            2.43%
Savings deposits                      243,357            3.14%      114,326            2.09%      112,078            2.35%
Time deposits:
  $100,000 or more                    215,889            5.66%      200,133            5.16%      205,028            5.69%
  Other time deposits                 500,401            5.55%      503,928            5.12%      527,640            5.56%
                                   ----------                    ----------                    ----------
    TOTAL                          $1,274,149                    $1,256,891                    $1,255,056
                                   ==========                    ==========                    ==========

</TABLE>

    The maturities of certificates of deposit of $100 thousand or more
    outstanding at December 31, 2000, are summarized as follows:


                    3 months or less               $  75,683
                    Over 3 through 6 months           48,387
                    Over 6 through 12 months          45,685
                    Over 12 months                    88,505
                                                    --------
                                            TOTAL   $258,260
                                                    ========

SHORT-TERM BORROWINGS

    A summary of the carrying value of the Corporation's short-term borrowings
    at December 31, 2000, 1999 and 1998 is presented below:

(Dollar amounts in thousands)       2000       1999       1998
-----------------------------------------------------------------
Federal funds purchased          $  5,510   $ 19,559   $ 48,022
Repurchase agreements              12,269     35,718     52,549
Other short-term borrowings           929      8,222      3,061
                                 --------   --------   --------
                                 $ 18,708   $ 63,499   $103,632
                                 ========   ========   ========

    Federal funds purchased amounted to $5.5 million in 2000 compared to $19.6
    million in 1999. Repurchase agreements were $12.2 million in 2000, down from
    $35.7 million a year earlier. The amounts and interest rates related to
    federal funds purchased and repurchase agreements are presented below:


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                     2000           1999           1998
--------------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>
Average amount outstanding                  $    71,040    $    63,641    $    45,266
Maximum amount outstanding at a month end       117,716        150,168        102,513
Average interest rate during year                  6.35%          5.19%          5.51%
Interest rate at year-end                          5.47%          5.25%          5.60%
</TABLE>


                                       30
<PAGE>   32

FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION - SUMMARY

OTHER BORROWINGS

    Advances from the Federal Home Loan Bank increased to $482.5 million in 2000
    compared to $375.7 million in 1999. The major reasons for the increase were
    to fund loan demand and reduce the dependency on short-term borrowings.
    The latter of these, because of an inverted yield curve for most of 2000,
    were some of the most expensive sources of funds. The Asset/Liability
    Committee reviews these investments and considers the related strategies on
    a weekly basis. See Interest Rate Sensitivity and Liquidity on the following
    page for more information.

CAPITAL RESOURCES

    As of December 31, 2000, the Corporation's shareholders' equity was $191.2
    million, an increase of 13.3% from the 1999 level of $168.7 million. This
    increase is in excess of increased dividends returned to shareholders and a
    stock repurchase plan, under which 151,181 shares were repurchased during
    2000 for $5.2 million. In addition, during 2000, the Corporation recorded a
    net unrealized gain on available-for-sale securities of $11.7 million. While
    this fluctuation in fair value increased shareholders' equity, no gain is
    recognized in net income unless the security is sold. 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, 2000.

    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 2000 and 1999 was 31.2% and 30.1%,
    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 charges the nine subsidiary banks with
    monitoring and managing their individual sensitivity to fluctuations in
    interest rates and assuring that they have adequate liquidity to meet loan
    and deposit demand or any potential unexpected deposit withdrawals. This
    function is facilitated by the Asset/Liability Committee. The primary goal
    of the committee is to maximize net interest income within the interest rate
    risk limits approved by the Board of Directors. This goal is accomplished
    through management of the subsidiary banks' balance sheet liquidity and
    interest rate risk exposures due to the changes in economic conditions and
    interest rate levels.

    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 income is largely dependent on the effective
    management of this risk.

    The Committee reviews a series of monthly reports to ensure that performance
    objectives are being met. The Committee monitors and controls interest rate
    risk through earnings simulation. Simulation modeling measures the effects
    of changes in interest rates, changes in the shape of the yield curve, and
    changes in prepayment speeds on net interest income. The primary measure of
    Interest Rate Risk is "Earnings at Risk." This measure projects the earnings
    effect of various rate movements over the next three years on net interest
    income. It is important to note that measures of interest rate risk have
    limitations and are dependent upon certain 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 and believes the assumptions
    to be valid and theoretically sound. The relationships are continuously
    monitored for behavioral changes.



                                       31
<PAGE>   33

FINANCIAL CONDITION - SUMMARY

    The Corporation does not significantly rely on any derivative products to
    manage interest rate risk, nor does it have a trading account. The
    Corporation does have certain assets, such as callable agency securities,
    and liabilities, such as callable FHLB advances, which contain embedded
    derivatives that are clearly and closely related to the underlying assets
    and liabilities. During 2000, the Corporation entered into an interest rate
    swap designed to hedge the interest rate risk associated with a fixed rate
    certificate of deposit promotion. Management will continue to evaluate the
    merits and attendant risks of financial instruments designed to facilitate
    the management of interest rate risk but does not expect the use of such
    products will become a significant part of the Corporation's interest rate
    risk management strategy.

    The table below shows the Corporation's estimated earnings sensitivity
    profile as of December 31, 2000. Given a 100 basis point increase in rates,
    net interest income would decrease 4.77% over the next 12 months and
    decrease 5.40% over the next 24 months. A 100 basis point decrease would
    result in a .73% increase in net interest income over the next 12 months and
    a .83% increase over the next 24 months. These estimates assume all rates
    changed overnight and management took no action as a result of this change.


                                        PERCENTAGE CHANGE IN NET INTEREST INCOME
          BASIS POINT                  -----------------------------------------
       INTEREST RATE CHANGE             12 MONTHS    24 MONTHS     36 MONTHS
--------------------------------------------------------------------------------
           Down 200                      -0.32%       -0.02%       -3.76%
           Down 100                       0.73         0.83        -1.03
           Up 100                        -4.77        -5.40        -3.60
           Up 200                        -9.39       -10.50        -6.85

    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. The model assumes no actions are taken and prices change to the
    full extent of the rate shock.

    LIQUIDITY RISK

    Liquidity is measured by each bank's ability to raise funds to meet the
    obligations from 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 $15.1 million of investments that mature throughout the
    coming 12 months. The Corporation also anticipates $36.1 million of
    principal payments from mortgage-backed securities. Given the current rate
    environment, the Corporation anticipates $82.9 million in securities to be
    called within 2000 or the next 12 months.

OUTLOOK

    The Wabash Valley, the Corporation's primary market area, enjoyed economic
    growth similar to the national economy throughout 2000, including a clear
    slowing of economic activity during the latter part of the year. Although an
    economic slowdown could have an adverse impact on the local economy,
    historically the Wabash Valley has slowed at a lower rate than that of the
    country or state. This is due largely to the fact that the Wabash Valley is
    not dependent on any one industry segment but is a regional center for
    retail, education and health-related fields. Management anticipates that the
    outlook for 2001 will be somewhat slower than the previous year with growth
    in loans and deposits reflective of a slower economy.

    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.

    Like most other financial institutions, the Corporation has placed a high
    emphasis on marketing efforts. The goal is to attain a greater share of each
    customer's financial activities, commonly called "share of the wallet." To
    this end, First Financial has established a full-service brokerage, expanded
    its trust activities and is currently evaluating the delivery of certain
    insurance products. These activities are expected to provide an increased
    amount of fee-based income in the future.



                                       32
<PAGE>   34
FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES


<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                ----------------------------------------------------------------------------------------------------
                                              2000                            1999                              1998
                                --------------------------------  -------------------------------    -------------------------------
                                  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))               $1,256,505   $  107,633   8.57%   $1,151,968   $   96,565   8.38%   $1,066,537       93,977   8.81%
Taxable investment securities      430,467       30,535   7.09       427,781       28,500   6.66       413,941       27,091   6.54
Tax-exempt investment
  securities ((2))                 162,907       12,857   7.89       153,112       12,383   8.09       148,383       12,015   8.10
Federal funds sold                   5,832          380   6.52        16,991          852   5.01        12,131          657   5.42
                                ----------   ----------   ----    ----------   ----------   ----     ---------      -------   ----
Total interest-earning assets    1,855,711      151,405   8.16%    1,749,852      138,300   7.90%    1,640,992      133,740   8.15%
                                             ----------   ====                    -------   ====                    -------   ====

Non-interest earning assets:
  Cash and due from bank            63,158                            58,212                            54,909
  Premises and equipment, net       26,404                            24,847                            24,723
  Other assets                      39,900                            41,469                            36,766
  Less allowance for loan losses   (19,017)                          (17,585)                          (15,690)
                                ----------                        ----------                        ----------
        TOTALS                  $1,966,156                        $1,856,795                        $1,741,700
                                ==========                        ==========                        ==========

LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Transactions accounts           $  411,936        9,901   2.40%   $  409,279        9,193   2.25%     $389,129        9,375   2.41%
Time deposits                      716,290       39,991   5.58       704,061       36,144   5.13       732,668       41,013   5.60
Short-term borrowings               75,230        4,747   6.31        66,594        3,469   5.21        49,643        2,715   5.47
Other borrowings                   429,383       25,944   6.04       337,007       18,009   5.34       235,333       13,327   5.66
                                ----------   ----------   ----    ----------   ----------   ----     ---------      -------   ----
Total interest-bearing
  liabilities:                   1,632,839       80,583   4.94%    1,516,941       66,815   4.40%    1,406,773       66,430   4.72%
                                                 ------   ====                     ------   ====                     ------   ====
Non interest-bearing
  liabilities:
Demand deposits                    145,923                           143,551                           133,259
Other                                8,491                            23,973                            29,223
                                ----------                        ----------                       -----------
                                 1,787,253                         1,684,465                         1,569,255

Shareholders' equity               178,903                           172,330                           172,445
                                ----------                        ----------                       -----------
      TOTALS                    $1,966,156                        $1,856,795                       $ 1,741,700
                                ==========                        ==========                       ===========

Net interest earnings                        $   70,822                        $   71,485                            67,310
                                             ==========                        ==========                            ======
Net yield on interest-earning assets                      3.82%                             4.09%                             4.10%
                                                          ====                              ====                              ====
</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%.


                                       33
<PAGE>   35
MARKET AND DIVIDEND INFORMATION

    At year-end 2000 shareholders owned 6,694,237 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 2000 and 1999.


<TABLE>
<CAPTION>
                                                 2000                                1999
                                     -----------------------------        ---------------------------
                                       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                         $41.22   $33.19                       $51.50    $41.00
    June 30                          $34.68   $30.38      $ .52            $45.00    $36.41    $ .44
    September 30                     $33.62   $29.00                       $38.25    $35.00
    December 31                      $32.94   $27.50      $ .56            $41.50    $34.50    $ .50
</TABLE>


SELECTED QUARTERLY DATA

<TABLE>
<CAPTION>
                                                                       2000
                                           ----------------------------------------------------------
                                                                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                               $35,151   $18,397   $16,754   $  860    $5,415   $ .80
    June 30                                $36,286   $19,229   $17,057   $1,189    $6,081   $ .90
    September 30                           $37,134   $20,931   $16,203   $1,140    $5,974   $ .89
    December 31                            $37,846   $22,026   $15,820   $1,203    $5,743   $ .86

<CAPTION>
                                                                       1999
                                           ----------------------------------------------------------
                                                                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                               $32,614   $16,283   $16,331   $1,482    $4,992   $ .71
    June 30                                $32,897   $16,328   $16,569   $1,078    $5,386   $ .77
    September 30                           $33,774   $16,692   $17,082   $1,084    $5,520   $ .80
    December 31                            $34,291   $17,512   $16,779   $1,081    $5,724   $ .83
</TABLE>



                                       34