<PAGE>
                       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, 2001                                             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, 2002 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 $273,250,450. (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, 2002 -- 6,837,260
shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the 2001 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 17, 2002 are
incorporated by reference into Part III.
<PAGE>
                         FORM 10-K CROSS-REFERENCE INDEX

<TABLE>
<CAPTION>
                                                                                                                 PAGE
<S>                                                                                                             <C>
PART I

     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 ................................................     4

PART IV

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

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

               Subsidiaries of the Registrant ................................................................  Exhibit 21
</TABLE>


                                        1
<PAGE>
                                     PART I

ITEM 1.     BUSINESS

      First Financial Corporation (the Corporation) became a multi-bank holding
company in 1984 and a financial services holding company in 2001. For more
information on the Corporation's business, please refer to the following
sections of the 2001 Annual Report to Shareholders:

      1. Description of services, affiliations, number of employees, and
competition, on page 27.
      2. Information regarding supervision of the Corporation, on page 12.
      3. Details regarding competition, on page 27.

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, September 1, 2006, June 30, 2004, December 31,
2003 and June 30, 2002.

      Facilities of the Corporation's subsidiary, First State Bank, include its
main office in Brazil, Indiana and four branch facilities in Brazil, Clay City
and Poland, Indiana. All five 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 seven branch facilities in
Carlisle, Dugger, Farmersburg, Hymera, Monroe City, Sandborn and Worthington,
Indiana. All eight 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 four branch facilities in
Rockville, Marshall, Montezuma and Rosedale, Indiana. All five 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.

      Facilities of the Corporation's subsidiary, Forrest Sherer, Inc., include
its main office and one satellite office in Terre Haute, Indiana. The buildings
are held in fee by Forrest Sherer, Inc.

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>
                                     PART II

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

      See "Market and Dividend information" on page 37 of the 2001 Annual
Report.

ITEM 6.     SELECTED FINANCIAL DATA

      See "Five Year Comparison of Selected Financial Data" on page 7 of the
2001 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 27 through 35 of the
2001 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 2001 Annual Report to Shareholders.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      See "Consolidated Balance Sheets" on page 8, "Consolidated Statements of
Income" on page 9, "Consolidated Statements of Changes in Shareholders Equity"
on page 10, "Consolidated Statements of Cash Flows" on page 11, and "Notes to
Consolidated Financial Statement" on pages 12-25. "Responsibility for Financial
Statements" and "Report of Independent Auditors" can be found on page 26.

Statistical disclosure by Bank Holding Company include the following
information:

      1. "Volume/Rate Analysis," on page 28.
      2. "Loan Portfolio," on page 30.
      3. "Allowance for 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 2005," "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 "Employment Contracts" and "Comparative Performance
Graph" 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 2005," "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>
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      See "Certain Relationships" on page 3, and "Transactions with Management"
on page 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, 2001 and 2000

            Consolidated Statements of Income -- Years ended December 31, 2001,
            2000, and 1999

            Consolidated Statements of Changes in Shareholders' Equity -- Years
            ended December 31, 2001, 2000, and 1999

            Consolidated Statements of Cash Flows -- Years ended December 31,
            2001, 2000, and 1999

            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

     (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 19, 2002


                                        4
<PAGE>
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 19, 2002
-------------------------------------                          -----------------
Donald E. Smith, President & Director
(Principal Executive Officer)


Walter A. Bledsoe, Signed                                      February 19, 2002
-------------------------------------                          -----------------
Walter A. Bledsoe, Director


B. Guille Cox, Jr., Signed                                     February 19, 2002
-------------------------------------                          -----------------
B. Guille Cox, Jr., Director


Thomas T. Dinkel, Signed                                       February 19, 2002
-------------------------------------                          -----------------
Thomas T. Dinkel, Director


                                                               February 19, 2002
-------------------------------------                          -----------------
Anton H. George, Director


                                                               February 19, 2002
-------------------------------------                          -----------------
Mari H. George, Director


Gregory L. Gibson, Signed                                      February 19, 2002
-------------------------------------                          -----------------
Gregory L. Gibson, Director


Norman L. Lowery, Signed                                       February 19, 2002
-------------------------------------                          -----------------
Norman L. Lowery, Director

                                                               February 19, 2002
-------------------------------------                          -----------------
William A. Niemeyer, Director

Patrick O'Leary, Signed                                        February 19, 2002
-------------------------------------                          -----------------
Patrick O'Leary, Director

                                                               February 19, 2002
-------------------------------------                          -----------------
Chapman J. Root II, Director

Virginia L. Smith, Signed                                      February 19, 2002
-------------------------------------                          -----------------
Virginia L. Smith, Director


                                       5
<PAGE>
FIRST FINANCIAL CORPORATION

FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
(Dollar amounts in thousands,
except per share amounts)                  2001            2000            1999             1998             1997
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>              <C>              <C>
BALANCE SHEET DATA:
Total assets                           $2,041,905      $2,043,267      $1,905,201       $1,849,752       $1,634,936
Securities                                463,509         568,405         594,319          633,365          527,993
Net loans                               1,348,461       1,298,006       1,191,898        1,111,765        1,005,799
Deposits                                1,313,656       1,322,559       1,256,115        1,260,365        1,194,524
Borrowings                                480,674         507,771         445,821          385,700          256,214
Shareholders' equity                      217,511         191,223         168,682          182,183          165,480

INCOME STATEMENT DATA:
Interest income                           144,673         146,417         133,576          129,137          122,372
Interest expense                           74,125          80,583          66,815           66,430           62,072
Net interest income                        70,548          65,834          66,761           62,707           60,300
Provision for loan losses                   6,615           4,392           4,725            5,396            5,382
Other income                               21,468          13,610          12,012           10,611            8,957
Other expenses                             53,329          42,703          43,543           42,567           39,629
Net income                                 24,196          23,213          21,622           18,558           18,100

PER SHARE DATA:
Net income                                   3.56            3.45            3.10             2.58             2.58
Cash dividends                               1.14            1.08             .94              .84              .72

PERFORMANCE RATIOS:
Net income to average assets                 1.19%           1.18%           1.16%            1.07%            1.11%
Net income to average
      shareholders' equity                  11.33           12.98           12.55            10.76            11.74
Average total capital
      to average assets                     11.38            9.97           10.13            10.71            10.13
Average shareholders' equity
      to average assets                     10.46            9.10            9.28             9.90             9.45
Dividend payout                             32.02           31.19           30.10            32.54            28.06
</TABLE>


                                       6
<PAGE>
FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                           ---------------------------
(Dollar amounts in thousands, except per share data)                           2001            2000
------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>
ASSETS
Cash and due from banks                                                    $    68,205     $    68,755
Federal funds sold                                                              43,376           4,175
Available-for-sale securities                                                  463,509         568,405
Loans, net of allowance of $18,313 in 2001 and $19,072 in 2000               1,330,148       1,278,934
Accrued interest receivable                                                     14,948          17,803
Premises and equipment, net                                                     26,237          26,363
Bank-owned life insurance                                                       47,756          45,037
Goodwill                                                                         7,102           2,136
Other intangible assets                                                          3,767             292

Other assets                                                                    36,857          31,367
                                                                           -----------     ------------
     TOTAL ASSETS                                                          $ 2,041,905     $ 2,043,267
                                                                           ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Non-interest-bearing                                                    $   163,985     $   148,922
      Interest-bearing:
      Certificates of deposit of $100 or more                                  204,474         258,260
      Other interest-bearing deposits                                          945,197         915,377
                                                                           -----------     ------------
                                                                             1,313,656       1,322,559
Short-term borrowings                                                           54,596          18,708
Other borrowings                                                               426,078         489,063
Other liabilities                                                               30,064          21,714
                                                                           -----------     ------------
     TOTAL LIABILITIES                                                       1,824,394       1,852,044
Shareholders' equity
   Common stock, $.125 stated value per share,
      Authorized shares -- 40,000,000
      Issued shares -- 7,225,483
      Outstanding shares -- 6,844,260 in 2001 and 6,694,237 in 2000                903             903
Additional capital                                                              66,680          66,680
Retained earnings                                                              158,038         141,653
Accumulated other comprehensive income                                           8,299           3,900
   Less: Treasury shares at cost -- 381,223 in 2001 and 531,246 in 2000        (16,409)        (21,913)
                                                                           -----------     ------------
         TOTAL SHAREHOLDERS' EQUITY                                            217,511         191,223
                                                                           -----------     ------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $ 2,041,905     $  2,043,267
                                                                           ===========     ============
</TABLE>

See accompanying notes.


                                       7
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                                   --------------------------------
(Dollar amounts in thousands, except per share data)                 2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
INTEREST INCOME:
   Loans, including related fees                                   $108,658    $107,145    $ 96,175
   Securities:
     Taxable                                                         24,622      30,535      28,500
     Tax-exempt                                                       8,326       8,357       8,049
   Other                                                              3,067         380         852
                                                                   --------    --------    --------
     TOTAL INTEREST INCOME                                          144,673     146,417     133,576

INTEREST EXPENSE:
   Deposits                                                          47,208      49,892      45,337
   Short-term borrowings                                              2,514       4,747       3,469
   Other borrowings                                                  24,403      25,944      18,009
                                                                   --------    --------    --------
         TOTAL INTEREST EXPENSE                                      74,125      80,583      66,815
                                                                   --------    --------    --------
         NET INTEREST INCOME                                         70,548      65,834      66,761
   Provision for loan losses                                          6,615       4,392       4,725
                                                                   --------    --------    --------
         NET INTEREST INCOME AFTER
           PROVISION FOR LOAN LOSSES                                 63,933      61,442      62,036

NON-INTEREST INCOME:
   Trust and financial services                                       3,545       3,633       3,116
   Service charges and fees on deposit accounts                       5,470       4,638       4,010
   Other service charges and fees                                     4,327       3,116       2,317
   Securities gains                                                     180         145         189
   Insurance commissions                                              3,763         555         852
   Sales of mortgage loans                                            2,209         275         446
   Other                                                              1,974       1,248       1,082
                                                                   --------    --------    --------
         TOTAL NON-INTEREST INCOME                                   21,468      13,610      12,012

NON-INTEREST EXPENSES:
   Salaries and employee benefits                                    30,544      23,055      24,558
   Occupancy expense                                                  3,692       3,105       2,887
   Equipment expense                                                  3,448       3,717       3,650
   Printing and supplies expense                                        760       1,002         993
   Other                                                             14,885      11,824      11,455
                                                                   --------    --------    --------
         TOTAL NON-INTEREST EXPENSE                                  53,329      42,703      43,543
                                                                   --------    --------    --------
         INCOME BEFORE INCOME TAXES                                  32,072      32,349      30,505

Provision for income taxes                                            7,876       9,136       8,883
                                                                   --------    --------    --------
         NET INCOME                                                $ 24,196    $ 23,213    $ 21,622
                                                                   ========    ========    ========

EARNINGS PER SHARE:

         NET INCOME                                                $   3.56    $   3.45    $   3.10
                                                                   ========    ========    ========
   Weighted average number of shares outstanding (in thousands)       6,800       6,730       6,964
                                                                   ========    ========    ========
</TABLE>

See accompanying notes.


                                       8
<PAGE>
FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                                              Other
(Dollar amounts in thousands, except              Common       Additional     Retained    Comprehensive    Treasury
 per share data)                                   Stock        Capital       Earnings        Income         Stock          Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>          <C>              <C>            <C>
Balance, January 1, 1999                         $     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

Comprehensive income:
     Net income                                         --            --        24,196             --             --         24,196
     Other comprehensive income, net of tax:
     Change in net unrealized gains/losses
        on available-for-sale securities                --            --            --          4,399             --          4,399
                                                                                                                          ---------
     Total comprehensive income                                                                                              28,595

Issuance of treasury stock (182,672 shares)          6,801         6,801
Treasury stock purchase (32,649 shares)                 --            --            --             --         (1,297)        (1,297)
Cash dividends, $1.14 per share                         --            --        (7,811)            --             --         (7,811)
                                                 ---------     ---------     ---------      ---------      ---------      ---------
Balance, December 31, 2001                       $     903     $  66,680     $ 158,038      $   8,299      $ (16,409)     $ 217,511
                                                 =========     =========     =========      =========      =========      =========
</TABLE>

See accompanying notes.


                                       9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                            ---------------------------------------
(Dollar amounts in thousands, except per share data)                          2001            2000           1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                  $  24,196      $  23,213      $  21,622
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Net (accretion) amortization on securities                              (2,128)        (2,171)           348
       Provision for loan losses                                                6,615          4,392          4,725
       Securities gains                                                          (180)          (145)          (189)
       Depreciation and amortization                                            3,500          3,318          2,865
       Provision for deferred income taxes                                        110            225           (341)
       Net change in accrued interest receivable                                2,855         (3,100)             1
       Other, net                                                              (4,202)       (17,169)        14,904
                                                                            ---------      ---------      ---------
          NET CASH FROM OPERATING ACTIVITIES                                   30,766          8,563         43,935
                                                                            ---------      ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Sales of available-for-sale securities                                       1,097         42,037        115,794
   Maturities and principal reductions on available-for-sale securities       156,938         55,881        114,333
   Purchases of available-for-sale securities                                 (43,499)       (51,659)      (219,117)
   Purchase of bank-owned life insurance                                           --        (45,000)            --
   Loans made to customers, net of repayments                                 (57,521)      (108,050)       (84,100)
   Net change in federal funds sold                                           (39,201)        (3,985)           260
   Purchase of Forrest Sherer                                                  (1,699)            --             --
   Additions to premises and equipment                                         (2,548)        (3,417)        (4,881)
                                                                            ---------      ---------      ---------
          NET CASH FROM INVESTING ACTIVITIES                                   13,567       (114,193)       (77,711)
                                                                            ---------      ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net change in deposits                                                      (8,903)        66,444         (4,250)
   Net change in other short-term borrowings                                   35,888        (44,791)       (40,133)
   Dividends paid                                                              (7,586)        (6,933)        (6,224)
   Purchases of treasury stock                                                 (1,297)        (5,151)       (12,673)
   Proceeds from other borrowings                                              78,923        563,800        293,000
   Repayments on other borrowings                                            (141,908)      (457,059)      (192,746)
                                                                            ---------      ---------      ---------
          NET CASH FROM FINANCING ACTIVITIES                                  (44,883)       116,310         36,974
                                                                            ---------      ---------      ---------
          NET CHANGE IN CASH AND CASH EQUIVALENTS                                (550)        10,680          3,198

          CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                         68,755         58,075         54,877
                                                                            ---------      ---------      ---------
            CASH AND CASH EQUIVALENTS, END OF YEAR                          $  68,205      $  68,755      $  58,075
                                                                            =========      =========      =========
   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid during the year for:
      Interest                                                              $  76,911      $  80,514      $  66,908
                                                                            =========      =========      =========
      Income taxes                                                          $   7,533      $  10,114      $  10,182
                                                                            =========      =========      =========
</TABLE>

See accompanying notes.


                                       10
<PAGE>
FIRST FINANCIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

      BUSINESS

      ORGANIZATION The consolidated financial statements of First Financial
      Corporation and its subsidiaries (the Corporation) include the parent
      company and its wholly-owned subsidiaries, 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
      (State), First Citizens State Bank of Vermillion County, Indiana
      (Citizens), First Farmers State Bank of Sullivan County, Indiana
      (Farmers), First Parke State Bank of Parke County, Indiana (Parke), First
      Ridge Farm State Bank of Vermilion County, Illinois (Ridge Farm), First
      National Bank of Marshall of Clark County, Illinois (Marshall), First
      Crawford State Bank of Crawford County, Illinois (Crawford) and First
      Financial Reinsurance Company, a corporation incorporated in the country
      of Turks and Caicos Islands (FFRC). In 2001 the Corporation acquired
      Forrest Sherer Inc., a full-line insurance agency headquartered in Terre
      Haute, Indiana.

      Terre Haute First also has two investment subsidiaries, Global Portfolio
      Managers A (Global A) and Global Portfolio Managers B (Global B), which
      were established to hold and manage certain securities as part of a
      strategy to manage taxable income and reduce taxable expense. Global A and
      Global B subsequently entered into a limited partnership agreement, Global
      Portfolio Limited Partners. At December 31, 2001, $110.7 million of
      securities were owned by these subsidiaries.

      The Corporation, which is headquartered in Terre Haute, Indiana, offers a
      wide variety of financial services including commercial, mortgage and
      consumer lending, lease financing, trust account services and depositor
      services through its 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 40 branches in west-central Indiana and
      east-central Illinois. The Corporation's primary source of revenue is
      derived from loans to customers, primarily middle-income individuals, and
      investment activities.

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

      SIGNIFICANT ACCOUNTING POLICIES

      USE OF ESTIMATES: To prepare financial statements in conformity with
      accounting principles generally accepted in the United States of America,
      management makes estimates and assumptions based on available information.
      These estimates and assumptions affect the amounts reported in the
      financial statements and disclosures provided, and 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 within shareholders' equity. Other securities,
      such as Federal Home Loan Bank stock, are carried at cost.

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

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


                                       11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

      PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
      accumulated depreciation. Depreciation is computed over the useful lives
      of the assets.

      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.

      FORREST SHERER INC. ACQUISITION: In May 2001 the Corporation acquired all
      of the outstanding common stock of Forrest Sherer Inc., a full-line
      insurance agency headquartered in Terre Haute, Indiana, in exchange for
      $1.7 million in cash and 182,672 shares of its common stock. The
      acquisition was accounted for using the purchase method of accounting and
      resulted in the recording of goodwill of $5.4 million and other identified
      intangible assets of $3.1 million. Goodwill is amortizing using the
      straight line method over a period of 15 years. The other intangible asset
      is being amortized over 10 years using an accelerated method.

      The following table presents pro-forma revenue, net income and earnings
      per share determined as if the acquisition had been consummated at January
      1, 2000. Key assumptions include the add-back of merger-related expenses
      paid by Forrest Sherer in the year 2001 of approximately $196 thousand and
      the annual amortization of intangible assets of approximately $607
      thousand.

<TABLE>
<CAPTION>
                                               2001        2000
                    -------------------------------------------
<S>                                         <C>         <C>
                    Revenue                 168,252     165,232
                    Net Income               24,280      23,443
                    Earnings per share         3.51        3.39
</TABLE>

      ACQUISITION OF COMMUNITY FINANCIAL CORPORATION: During March 2001, the
      Corporation executed a definitive agreement to acquire Community Financial
      Corporation (Community), based in Olney, Illinois. The transaction was
      consummated on January 31, 2002. The aggregate purchase price for
      Community was $33 million and the book value of assets acquired was $32
      million. Management does not expect intangible assets will be significant.
      This transaction was accounted for using the purchase method.

      INTANGIBLE ASSETS: Intangible assets include goodwill associated with the
      First Crawford acquisition in 1996, the Morris Plan acquisition in 1998,
      the Forrest Sherer acquisition in 2001, and other identified intangible
      assets, primarily value attributed to customer lists, non-compete
      agreements and branch purchase intangibles. These assets are recorded at
      cost and amortized over their estimated lives. Amortization expense was
      $826 thousand, $219 thousand and $219 thousand in 2001, 2000 and 1999.

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

      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.

                                       12
<PAGE>
FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      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.

      DERIVATIVES: Effective January 1, 2001, the Corporation implemented a new
      accounting standard that required all derivative instruments to be
      recorded at their fair values. If derivative instruments are designated as
      fair value hedges, both the change in the fair value of the hedge and in
      the fair value of the hedged item are included in current earnings. Fair
      value adjustments related to cash flow hedges are recorded in other
      comprehensive income and reclassified to earnings when the hedged
      transaction is reflected in earnings. Ineffective portions of hedges are
      reflected in income currently.

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

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

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

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

      FAIR 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.

      NEW ACCOUNTING PRONOUNCEMENTS: New accounting standards affect the
      recording of business combinations and will affect accounting for
      intangible assets. Business combinations initiated after June 30, 2001,
      are to be recorded using the purchase method of accounting. Under the
      purchase method, all identifiable tangible and intangible assets and
      liabilities of the acquired company must be recorded at fair value at date
      of acquisition. The excess of the cost over the fair value of net assets
      acquired is goodwill. Identifiable intangible assets with finite useful
      lives will be separated from goodwill and will continue to be amortized
      under the new standard, whereas goodwill will no longer be amortized after
      December 31, 2001. Annual impairment testing will be required for goodwill
      with impairment being recorded if the carrying amount of goodwill exceeds
      its implied fair value. Adoption of this standard on January 1, 2002, is
      expected to reduce annual amortization expense by approximately $581
      thousand.


                                       13
<PAGE>
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.

      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,
                                             -----------------------------------------------------------------
                                                         2001                                2000
                                             -----------------------------       -----------------------------
                                               Carrying           Fair            Carrying             Fair
(Dollar amounts in thousands)                   Value             Value            Value               Value
--------------------------------------------------------------------------------------------------------------
<S>                                          <C>               <C>               <C>               <C>
Cash and due from banks                      $    68,205       $    68,205       $    68,755       $    68,755
Federal funds sold                                43,376            43,376             4,175             4,175
Available-for-sale securities                    463,509           463,509           568,405           568,405
Loans                                          1,349,184         1,358,630         1,298,953         1,289,348
Accrued interest receivable                       14,948            14,948            17,803            17,803
Deposits                                      (1,313,656)       (1,326,743)       (1,322,559)       (1,331,640)
Short-term borrowings                            (54,596)          (54,596)          (18,708)          (18,708)
Federal Home Loan Bank advances                 (419,478)         (428,177)         (482,460)         (481,598)
Other borrowings                                  (6,600)           (6,600)           (6,603)           (6,603)
Accrued interest payable                          (4,807)           (4,807)           (6,731)           (6,731)
Off-balance sheet financial instruments               --               759                --               321
</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 $17.1 million and $15.5 million at December 31, 2001 and
      2000, respectively.

4.    SECURITIES:

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

<TABLE>
<CAPTION>

                                                         December 31, 2001
                                         ---------------------------------------------------
                                                            Unrealized
                                         Amortized     ----------------------         Fair
(Dollar amounts in thousands)              Cost         Gains         Losses          Value
--------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>            <C>
U.S. Government and its agencies         $208,973      $  4,776      $    (18)      $213,731
Collateralized mortgage obligations         4,958           107            --          5,065
State and municipal                       162,886         4,547          (567)       166,866
Corporate obligations                      77,576           810          (539)        77,847
                                         --------      --------      --------       --------
     TOTAL                               $454,393      $ 10,240      $ (1,124)      $463,509
                                         ========      ========      ========       ========
</TABLE>


                                       14
<PAGE>
FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                         December 31, 2000
                                         -------------------------------------------------
                                                            Unrealized
                                         Amortized     ----------------------       Fair
(Dollar amounts in thousands)              Cost         Gains         Losses        Value
------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>          <C>
U.S. Government and its agencies         $339,883      $  1,840      $ (3,025)    $338,698
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
                                         ========      ========      ========     ========
</TABLE>

The Corporation invests in the equity securities of financial services
companies. These investments are considered to be available-for-sale and are
included in other assets on the consolidated balance sheet. Cost was $3.7
million and $3.6 million, and fair value was $8.4 million and $8.3 million at
December 31, 2001 and 2000, 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, 2001, 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 $57.3 million
and $62.6 million at December 31, 2001 and 2000, 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 ended December 31, 2000, 1999 and 1998,
respectively.

<TABLE>
<CAPTION>
(Dollar amounts in thousands)              2001           2000            1999
--------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>
Proceeds                                $   1,097      $  42,037       $ 115,794
Gross gains                                   180            262             627
Gross losses                                   --           (117)           (438)
</TABLE>

Contractual maturities of debt securities at year-end 2001 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                                                       $  7,335      $  7,418      7.15%
                                                                                                          =====
Due after one but within five years                                             41,185        42,768      7.56%
                                                                                                          =====
Due after five but within ten years                                             93,620        95,916      7.51%
                                                                                                          =====
Due after ten years                                                            133,304       134,768      6.70%
                                                                                                          =====
Mortgage-backed securities, primarily issued by U.S. Government agencies       178,897       182,639      6.78%
                                                                              --------      --------      =====
     TOTAL                                                                    $454,393      $463,509
                                                                              ========      ========
</TABLE>


                                       15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.    LOANS:

      Loans are summarized as follows:

<TABLE>
<CAPTION>
                                                           December 31,
                                                  -----------------------------
                                                     2001              2000
                                                  -----------       -----------
                                                   Carrying          Carrying
(Dollar amounts in thousands)                        Value             Value
--------------------------------------------------------------------------------
<S>                                               <C>               <C>
Commercial, financial and agricultural            $   302,496       $   282,904
Real estate - construction                             34,610            41,325
Real estate - mortgage                                757,345           732,387
Installment                                           249,710           237,527
Lease financing                                         5,023             4,810
                                                  -----------       -----------
     Total gross loans                              1,349,184         1,298,953
     Less: unearned income                               (723)             (947)
           allowance for loan losses                  (18,313)          (19,072)
                                                  -----------       -----------
     TOTAL                                        $ 1,330,148       $ 1,278,934
                                                  ===========       ===========
</TABLE>

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 2001 the aggregate dollar amount of these
loans to directors and executive officers who held office at the end of the year
amounted to $45.8 million at the beginning of the year. During 2001, advances of
$68.7 million and repayments of $70.4 million were made with respect to related
party loans for an aggregate dollar amount outstanding of $44.1 million at
December 31, 2001.

Loans serviced for others, which are not reported as assets, total $175.2
million and $110.8 million at year-end 2001 and 2000. Capitalized mortgage
servicing rights aggregated $1.5 million and $792 thousand at year-end, 2001 and
2000.

6.    ALLOWANCE FOR LOAN LOSSES:

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

<TABLE>
<CAPTION>
                                                             December 31,
                                                --------------------------------------
(Dollar amounts in thousands)                     2001           2000            1999
--------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
Balance at beginning of year                    $ 19,072       $ 17,949       $ 16,429
Provision for loan losses                          6,615          4,392          4,725
Recoveries of loans previously charged off         1,669          1,394          1,105
Loans charged off                                 (9,043)        (4,663)        (4,310)
                                                --------       --------       --------
     BALANCE AT END OF YEAR                     $ 18,313       $ 19,072       $ 17,949
                                                ========       ========       ========
</TABLE>

      Impaired loans were as follows:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                               -----------------
(Dollar amounts in thousands)                                   2001       2000
--------------------------------------------------------------------------------
<S>                                                            <C>        <C>
Year-end loans with no allocated allowance for loan losses     $   --     $   --
Year-end loans with allocated allowance for loan losses         3,610      6,422
                                                               ------     ------
     TOTAL                                                     $3,610     $6,422
                                                               ======     ======
Amount of the allowance for loan losses allocated              $2,033     $5,008
Loans past due over 90 days still on accrual                    4,925      5,499
Average of impaired loans during the year                       5,978      4,274
</TABLE>


                                       16
<PAGE>
FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    PREMISES AND EQUIPMENT:

      Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                         -----------------------
(Dollar amounts in thousands)                              2001           2000
--------------------------------------------------------------------------------
<S>                                                      <C>            <C>
Land                                                     $  3,885       $  3,813
Building and leasehold improvements                        30,533         29,773
Furniture and equipment                                    25,113         24,574
                                                         --------       --------
                                                           59,531         58,160
Less accumulated depreciation                             (33,294)       (31,797)
                                                         --------       --------
     TOTAL                                               $ 26,237       $ 26,363
                                                         ========       ========
</TABLE>

8.    DEPOSITS AND SHORT-TERM BORROWINGS:

      Scheduled maturities of time deposits were as follows:

<TABLE>
<S>                                                   <C>
                     2002                             $402,571
                     2003                               86,106
                     2004                              140,717
                     2005                               22,411
                     2006                               16,590
                     Thereafter                            265
                                                      --------
                                                      $668,600
                                                      ========
</TABLE>

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

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                               2001         2000
--------------------------------------------------------------------------------
<S>                                                       <C>          <C>
Federal funds purchased                                   $  9,920      $  5,510
Repurchase agreements                                       37,400        12,269
Note payable - U.S. government                               7,276           929
                                                          --------      --------
                                                          $ 54,596      $ 18,708
                                                          ========      ========
</TABLE>

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

9.    OTHER BORROWINGS:

      Long-term borrowings at December 31, 2001 and 2000 are summarized as
      follows:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                                          2001          2000
-------------------------------------------------------------------------------------------
<S>                                                                  <C>           <C>
FHLB advances                                                        $419,478      $482,460
City of Terre Haute, Indiana economic development revenue bonds         6,600         6,600
Other                                                                      --             3
                                                                     --------      --------
     TOTAL                                                           $426,078      $489,063
                                                                     ========      ========
</TABLE>

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

<TABLE>
<S>                                                   <C>
                     2002                             $ 21,383
                     2003                               34,626
                     2004                               33,301
                     2005                                   --
                     2006                                  440
                     Thereafter                        336,328
                                                      --------
                                                      $426,078
                                                      ========
</TABLE>


                                       17
<PAGE>
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 1.7% at December 31, 2001, and 5.0% at December 31, 2000, 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, 2002, 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, 2001 and 2000, 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
      $419.5 million at December 31, 2001, accrue interest, payable monthly, at
      annual rates varying from 2.1% to 6.6%. The advances are due at various
      dates through August 2017. FHLB advances are, generally, due in full at
      maturity. They are secured by 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:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                    2001         2000         1999
--------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>
Federal:
  Currently payable                            $ 6,413      $ 7,372      $ 6,763
  Deferred                                          68          167         (256)
                                               -------      -------      --------
                                                 6,481        7,539        6,507
State:
  Currently payable                              1,353        1,539        2,461
  Deferred                                          42           58          (85)
                                               -------      -------      --------
                                                 1,395        1,597        2,376
                                               -------      -------      --------
    TOTAL                                      $ 7,876      $ 9,136      $ 8,883
                                               =======      =======      ========
</TABLE>

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

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                               2001           2000           1999
-----------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>
Federal income taxes computed at the statutory rate      $ 11,225       $ 11,322       $ 10,677
Add (deduct) tax effect of:
  Tax exempt income                                        (3,683)        (2,691)        (2,679)
  State tax, net of federal benefit                           907          1,038          1,550
  Affordable housing credits                                 (604)          (529)          (565)
  Other, net                                                   31             (4)          (100)
                                                         --------       --------       --------
    TOTAL                                                $  7,876       $  9,136       $  8,883
                                                         ========       ========       ========
</TABLE>


                                       18


<PAGE>
FIRST FINANCIAL CORPORATION

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, 2001
      and 2000, are as follows:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                                  2001        2000
---------------------------------------------------------------------------------
<S>                                                          <C>         <C>
Deferred tax assets:
  Loan losses provision                                      $  7,177    $  7,475
  Deferred compensation                                         1,555         775
  Compensated absences                                            383         333
  Post-retirement benefits                                        762         708
  Other                                                           320         166
  Valuation allowance for deferred tax assets                      --          --
                                                             --------    --------
    GROSS DEFERRED ASSETS                                      10,197       9,457
                                                             --------    --------

Deferred tax liabilities:
  Net unrealized gains on available-for-sale securities        (9,179)     (2,592)
  Depreciation                                                 (1,022)     (1,006)
  Lease financing                                                (207)       (176)
  Originated servicing rights                                    (579)       (311)
  Pensions                                                     (1,571)     (1,503)
  Other                                                        (1,135)       (677)
                                                             --------    --------
    GROSS DEFERRED LIABILITIES                                (13,693)     (6,265)
                                                             --------    --------
    NET DEFERRED TAX ASSETS (LIABILITIES)                    $ (3,496)   $  3,192
                                                             ========    ========
</TABLE>

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's customers had unused lines of credit of $208.4 million
      and $184.0 million and commitments to extend credit of $7.1 million as of
      December 31, 2001 and 2000. In addition, the Corporation had outstanding
      commitments of $5.6 million and $2.1 million under standby letters of
      credit as of December 31, 2001 and 2000, respectively. The Corporation
      uses derivative financial instruments, currently only limited amounts of
      interest rate swaps and caps, to facilitate the management of interest
      rate risk. The Corporation is exposed to credit loss in the event the
      counterparties to such agreements do not perform in accordance with the
      agreements.

      During 2000, the Corporation entered into an interest rate swap agreement
      with a 24-month term and a notional principal balance of $10 million,
      under which the Corporation makes variable rate payments, based on LIBOR,
      and receives fixed rate payments. The interest rate swap was designated as
      a hedge against a similar maturity certificate of deposit promotion. At
      year-end 2001 and 2000, the agreement had a fair market value of $513
      thousand and $321 thousand, approximately the same amount as the fair
      value adjustment attributable to the certificates of deposit. The interest
      rate swap is included in time deposits on the consolidated statements of
      condition at December 31, 2001. Net settlement expense or benefit is
      included in interest expense.

      During 2001 the Corporation purchased an interest rate cap contract with a
      notional principal balance of $50 million. The agreement requires the
      counterparty to pay the Corporation the excess of the 3-month LIBOR over
      6.00%. The cap has a 36-month term which runs through March 2004. No
      payments are currently required under the agreement. The agreement was
      entered into to help protect the Corporation's net interest income should
      interest rates increase in excess of the cap's trigger amount. The
      interest rate cap is carried at fair value, approximately $246 thousand at
      December 31, 2001, and is included in other assets on the statement of
      condition.


                                       19
<PAGE>
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 $907 thousand, $774 thousand and $1,021
      thousand in 2001, 2000 and 1999, respectively. The Corporation contributed
      $350 thousand, $750 thousand and $873 thousand to the ESOP in 2001, 2000
      and 1999, respectively.

      Pension expense included the following components:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                        2001          2000          1999
--------------------------------------------------------------------------------------
<S>                                                <C>           <C>           <C>
Service cost - benefits earned                     $   698       $   899       $   927
Interest cost on projected benefit obligation        1,766         1,780         1,858
Expected return on plan assets                      (1,679)       (1,801)       (1,900)
Net amortization and deferral                          296           (26)            3
                                                   -------       -------       -------
Total pension expense                              $ 1,081       $   852       $   888
                                                   =======       =======       =======
</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)                                                2001            2000
---------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>
Change in benefit obligation:
Benefit obligation at January 1                                            $ 23,647        $ 25,427
Service cost                                                                    698             899
Interest cost                                                                 1,766           1,780
Actuarial (gain) loss                                                         4,933          (3,891)
Benefits paid                                                                  (751)           (568)
                                                                           --------        --------
Benefit obligation at December 31                                            30,293          23,647
                                                                           --------        --------

Reconciliation of fair value of plan assets:

Fair value of plan assets at January 1                                       20,929          24,212
Actual return on plan assets                                                  4,452          (4,239)
Employer contributions                                                        1,257           1,524
Benefits paid                                                                  (751)           (568)
                                                                           --------        --------
Fair value of plan assets at December 31                                     25,887          20,929
                                                                           --------        --------

Funded status:
  Funded status at December 31                                               (4,406)         (2,718)
  Unrecognized prior service cost                                              (232)           (250)
  Unrecognized net actuarial cost                                             8,648           6,802
                                                                           --------        --------
  Prepaid pension asset recognized in the consolidated balance sheets      $  4,010        $  3,834
                                                                           ========        ========

Principal assumptions used:
  Discount rate                                                                7.00%           7.50%
  Rate of increase in compensation levels                                      5.00%           5.00%
  Expected long-term rate of return on plan assets                             8.00%           8.00%
</TABLE>


                                       20
<PAGE>
FIRST FINANCIAL CORPORATION

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,
      2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                          ----------------------
(Dollar amounts in thousands)                               2001          2000
--------------------------------------------------------------------------------
<S>                                                       <C>           <C>
Change in benefit obligation:
  Benefit obligation at January 1                         $ 3,009       $ 2,938
  Service cost                                                 63            64
  Interest cost                                               215           201
  Plan participants' contributions                             38            24
  Actuarial (gain) loss                                       355           104
  Actual benefits paid                                       (250)         (322)
                                                          -------       -------
  Benefit obligation at December 31                       $ 3,430       $ 3,009
                                                          =======       =======

Reconciliation of funded status:
  Funded status                                           $ 3,430       $ 3,009
  Unrecognized transition obligation                         (724)         (784)
  Unrecognized net gain (loss)                             (1,463)       (1,081)
                                                          -------       -------
  Accrued benefit cost                                    $ 1,243       $ 1,144
                                                          =======       =======
</TABLE>

      The post-retirement benefits paid in 2001 and 2000 of $250 thousand and
      $322 thousand, respectively, were fully funded by company and participant
      contributions. There were no other changes to plan assets in 2001 and
      2000.

      Weighted-average assumptions as of December 31:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                              ------------------
                                                              2001         2000
--------------------------------------------------------------------------------
<S>                                                           <C>          <C>
      Discount rate                                           7.00%        7.50%
      Initial weighted health care cost trend rate            7.50         7.50
      Ultimate health care cost trend rate                    5.00         5.00
</TABLE>

      Post-retirement health benefit expense included the following components:

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                        ------------------------
(Dollar amounts in thousands)                           2001      2000      1999
--------------------------------------------------------------------------------
<S>                                                     <C>       <C>       <C>
Service cost                                            $ 63      $ 64      $ 57
Interest cost                                            215       201       195
Amortization of transition obligation                     60        60        60
Recognized actuarial loss                                 54        45        48
                                                        ----      ----      ----
Net periodic benefit cost                               $392      $370      $360
                                                        ====      ====      ====
</TABLE>

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

<TABLE>
<CAPTION>
                                                               1% Point    1% Point
                                                               Increase    Decrease
-----------------------------------------------------------------------------------
<S>                                                            <C>         <C>
Effect on total of service and interest cost components        $      8    $     (7)
Effect on post-retirement benefit obligation                        311        (243)
</TABLE>


                                       21
<PAGE>
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)                                                2001        2000       1999
----------------------------------------------------------------------------------------------------------
<S>                                                                        <C>         <C>        <C>
Unrealized holding gains and losses on available-for-sale securities       $ 7,512     $19,676    $(26,382)
Less reclassification adjustments for gains and losses later
  recognized in income                                                        (180)       (145)       (189)
                                                                           -------     -------    --------
Net unrealized gains and losses                                              7,332      19,531     (26,571)
Tax effect                                                                  (2,933)     (7,812)     10,629
                                                                           -------     -------    --------
Other comprehensive income                                                 $ 4,399     $11,719    $(15,942)
                                                                           =======     =======    ========
</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, 2001,
      approximately $41.7 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, 2001 and 2000,
      that the Corporation meets all capital adequacy requirements to which it
      is subject.

      As of December 31, 2001, the most recent notification from the respective
      regulatory agencies categorized the Corporation and its subsidiary banks
      as well capitalized under the regulatory framework for prompt corrective
      action. To be categorized as adequately capitalized the Corporation must
      maintain minimum total risk-based, Tier I risk-based and Tier I leverage
      ratios as set forth in the table. There are no conditions or events since
      that notification that management believes have changed the Corporation's
      category.

      The following table presents the actual and required capital amounts and
      related ratios for the Corporation and the lead bank, Terre Haute First
      National Bank, at year end 2001 and 2000.


                                       22
<PAGE>
FIRST FINANCIAL CORPORATION
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 - 2001               $219,543       15.15%       > or equals to $115,943        > or equals to 8.0%
  Corporation - 2000                202,033       15.21%       > or equals to  106,244        > or equals to 8.0%
  Terre Haute First - 2001          135,783       14.70%       > or equals to   73,912        > or equals to 8.0%
  Terre Haute First - 2000          127,391       15.22%       > or equals to   66,939        > or equals to 8.0%

TIER I RISK-BASED CAPITAL
  Corporation - 2001               $201,424       13.90%       > or equals to $ 57,972        > or equals to 4.0%
  Corporation - 2000                185,402       13.96%       > or equals to   53,122        > or equals to 4.0%
  Terre Haute First - 2001          126,555       13.70%       > or equals to   36,956        > or equals to 4.0%
  Terre Haute First - 2000          117,122       14.00%       > or equals to   33,469        > or equals to 4.0%

TIER I LEVERAGE CAPITAL
  Corporation - 2001               $201,424        9.87%       > or equals to $ 81,651        > or equals to 4.0%
  Corporation - 2000                185,402        9.43%       > or equals to   78,646        > or equals to 4.0%
  Terre Haute First - 2001          126,555        9.85%       > or equals to   51,418        > or equals to 4.0%
  Terre Haute First - 2000          117,122        9.26%       > or equals to   50,598        > or equals to 4.0%
</TABLE>

<TABLE>
<CAPTION>
                                                   To Be Well Capitalized
                                                  Under Prompt Corrective
                                                     Action Provisions
                                   --------------------------------------------------
(Dollar amounts in thousands)               Amount                      Ratio
-------------------------------------------------------------------------------------
<S>                                <C>                           <C>
TOTAL RISK-BASED CAPITAL
  Corporation - 2001               > or equals to $144,929       > or equals to 10.0%
  Corporation - 2000               > or equals to  132,805       > or equals to 10.0%
  Terre Haute First - 2001         > or equals to   92,389       > or equals to 10.0%
  Terre Haute First - 2000         > or equals to   83,674       > or equals to 10.0%

TIER I RISK-BASED CAPITAL
  Corporation - 2001               > or equals to $ 86,957       > or equals to  6.0%
  Corporation - 2000               > or equals to   79,683       > or equals to  6.0%
  Terre Haute First - 2001         > or equals to   55,434       > or equals to  6.0%
  Terre Haute First - 2000         > or equals to   50,204       > or equals to  6.0%

TIER I LEVERAGE CAPITAL
  Corporation - 2001               > or equals to $102,064       > or equals to  5.0%
  Corporation - 2000               > or equals to   98,308       > or equals to  5.0%
  Terre Haute First - 2001         > or equals to   64,273       > or equals to  5.0%
  Terre Haute First - 2000         > or equals to   63,248       > or equals to  5.0%
</TABLE>

15. PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:

The parent company's condensed balance sheets as of December 31, 2001 and 2000,
and the related condensed statements of income and cash flows for each of the
three years in the period ended December 31, 2001, are as follows:

CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             December 31,
                                                       ------------------------
(Dollar amounts in thousands)                            2001            2000
                                                       --------        --------
<S>                                                    <C>             <C>
ASSETS
  Cash deposits in affiliated banks                    $  3,916        $  4,107
  Investments in subsidiaries                           211,234         182,597
  Land and headquarters building, net                     6,660           6,789
  Other                                                  10,721          10,635
                                                       --------        --------
     TOTAL ASSETS                                      $232,531        $204,128
                                                       ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Borrowings                                           $  8,100        $  6,780
  Dividends payable                                       3,973           3,749
  Other liabilities                                       2,947           2,376
                                                       --------        --------
     TOTAL LIABILITIES                                   15,020          12,905
Shareholders' equity                                    217,511         191,223
                                                       --------        --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $232,531        $204,128
                                                       ========        ========
</TABLE>

                                       23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                  --------------------------------------------------------------
(Dollar amounts in thousands)                                       2001                       2000                       1999
                                                                  --------                   --------                   --------
<S>                                                               <C>                        <C>                        <C>
Dividends from subsidiaries                                       $ 10,485                   $  8,608                   $ 17,457
Other income                                                           971                      1,056                        890
Interest on borrowings                                                (314)                      (370)                      (366)
Other operating expenses                                            (2,801)                    (1,779)                    (1,617)
  Income before income taxes and equity                           --------                   --------                   --------
    in undistributed earnings of subsidiaries                        8,341                      7,515                     16,364
  Income tax benefit                                                   863                        571                        457
    Income before equity in undistributed                         --------                   --------                   --------
    earnings of subsidiaries                                         9,204                      8,086                     16,821

Equity in undistributed earnings of subsidiaries                    14,992                     15,127                      4,801
                                                                  --------                   --------                   --------
      Net income                                                  $ 24,196                   $ 23,213                   $ 21,622
                                                                  ========                   ========                   ========
</TABLE>

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                     ------------------------------------------------------------
(Dollar amounts in thousands)                                          2001                      2000                      1999
                                                                     --------                  --------                  --------
<S>                                                                  <C>                       <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                           $ 24,196                  $ 23,213                  $ 21,622
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Provision for depreciation and amortization                           360                       356                       349
    Equity in undistributed earnings of subsidiaries                  (14,992)                  (15,127)                   (4,801)
    Increase (decrease) in other liabilities                              571                        10                      (331)
    Increase in other assets                                           (1,009)                     (687)                     (204)
                                                                     --------                  --------                  --------
     NET CASH FROM OPERATING ACTIVITIES                                 9,126                     7,765                    16,635

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of furniture and fixtures                                      (55)                      (66)                       --
  Purchase of Forrest Sherer Inc.                                      (1,699)                       --                        --
                                                                     --------                  --------                  --------
     NET CASH FROM INVESTING ACTIVITIES                                (1,754)                      (66)                       --
                                                                     --------                  --------                  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings                                              1,500                        --                        --
  Principal payments on long-term borrowings                             (180)                     (155)                     (145)
  Purchase of treasury stock                                           (1,297)                   (5,151)                  (12,673)
  Dividends paid                                                       (7,586)                   (6,933)                   (6,224)
                                                                     --------                  --------                  --------
     NET CASH FROM FINANCING ACTIVITIES                                (7,563)                  (12,305)                  (19,042)
                                                                     --------                  --------                  --------
     NET (DECREASE) INCREASE IN CASH                                     (191)                   (4,540)                   (2,407)
     CASH, BEGINNING OF YEAR                                            4,107                     8,647                    11,054
                                                                     --------                  --------                  --------
     CASH, END OF YEAR                                               $  3,916                  $  4,107                  $  8,647
                                                                     ========                  ========                  ========
  Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                                         $    314                  $    370                  $    362
                                                                     ========                  ========                  ========
    Income taxes                                                     $  7,533                  $ 10,114                  $ 10,182
                                                                     ========                  ========                  ========
</TABLE>

                                       24
<PAGE>
FIRST FINANCIAL CORPORATION

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, 2001. 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, 2001.

      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.

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

REPORT OF INDEPENDENT AUDITORS

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

      We have audited the accompanying consolidated balance sheets of First
Financial Corporation as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. 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.

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Financial Corporation
as of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

      As discussed in Note 1, during 2001 the Corporation adopted new accounting
guidance on derivatives.

Indianapolis, Indiana                              [Signed]
January 11, 2002                                   Crowe, Chizek and Company LLP


                                       25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis reviews the financial condition of First
Financial Corporation at December 31, 2001 and 2000, and the results of its
operations for the three years ended December 31, 2001. 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, mortgage and consumer
lending, lease financing, trust account services and depositor services through
its nine subsidiaries. At the close of business in 2001 the Corporation and its
subsidiaries had 706 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 eight branches, of which
five are located in Sullivan County, two in Knox County and one in Greene
County. Sullivan County is contiguous to Vigo County. Morris Plan has one office
and is located in Vigo County. Ridge Farm has one office and is located in
Vermilion County, Illinois. Parke has five branches in Parke County, a county
contiguous to Vigo County. Marshall has one office 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.

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


                                       26
<PAGE>
FIRST FINANCIAL CORPORATION

RESULTS OF OPERATIONS -- SUMMARY FOR 2001

      Net income through the fourth quarter of 2001 increased 4.2% to $24.2
      million from $23.2 million reported in 2000, despite the decreasing
      interest rate environment and the expectation that the purchase of Forrest
      Sherer Inc., an insurance agency, was to be slightly dilutive.

      Earnings were driven by a $4.7 million or 7.2% increase in net interest
      income, a result of higher earning assets and an improving net interest
      margin. First Financial was in position to benefit from the significant
      decline in interest rates in 2001. Average loans were up $59.2 million or
      4.7% over 2000, and even with the lower rates, loan interest income
      increased $1.5 million or 1.4%. Correspondingly, average interest-bearing
      liabilities were up $20.1 million or 1.2% over the same period in 2000;
      however, total interest expense decreased $6.5 million or 8.0%.

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 $1.92 billion in 2001
      from $1.86 billion in 2000. The tax-equivalent yield on these assets
      decreased to 7.86% in 2001 from 8.16% in 2000. Total average
      interest-bearing liabilities amounted to $1.65 billion in 2001 compared to
      $1.63 billion in 2000. The average cost of these interest-bearing
      liabilities decreased to 4.48% in 2001 from 4.94% in 2000.

      On a tax equivalent basis, net interest income increased $6.0 million from
      $70.8 million in 2000 to $76.8 million in 2001. The net interest margin
      increased from 3.82% in 2000 to 4.00% in 2001. This increase is primarily
      the result of funding costs decreasing 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 2001 to 2000
      and 2000 to 1999.

<TABLE>
<CAPTION>
                                                 2001 Compared to 2000                        2000 Compared to 1999
                                              Increase (Decrease) Due to                    Increase (Decrease) Due to
                                    --------------------------------------------    --------------------------------------------
                                                             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)                    $  5,073    $ (3,587)   $   (169)   $  1,317    $  8,762    $  2,114    $    192    $ 11,068
    Taxable investment securities     (2,886)     (3,343)        316      (5,913)        179       1,844          12       2,035
    Tax-exempt investment
      securities(2)                    3,259         797         202       4,258         792        (299)        (19)        474
  Federal funds sold                     394        (248)       (257)       (112)       (560)        255        (167)       (472)
                                    --------    --------    --------    --------    --------    --------    --------    --------
Total interest income                  5,840      (6,381)         92        (450)      9,173       3,914          18      13,105
                                    --------    --------    --------    --------    --------    --------    --------    --------
Interest paid on
  interest-bearing liabilities:
    Transaction accounts               1,107        (845)        (94)        167          59         644           5         708
    Time deposits                     (1,216)     (1,688)         51      (2,852)        628       3,164          55       3,847
    Short-term borrowings               (815)     (1,712)        294      (2,233)        450         733          95       1,278
    Other borrowings                     528      (2,028)        (41)     (1,541)      4,936       2,353         646       7,935
                                    --------    --------    --------    --------    --------    --------    --------    --------
  Total interest expense                (395)     (6,273)        209      (6,459)      6,073       6,894         801      13,768
                                    --------    --------    --------    --------    --------    --------    --------    --------
  Net interest income               $  6,235    $   (108)   $   (118)   $  6,009    $  3,100    $ (2,980)   $   (783)   $   (663)
                                    ========    ========    ========    ========    ========    ========    ========    ========
</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%.

                                       27
<PAGE>
RESULTS OF OPERATIONS -- SUMMARY FOR 2001

PROVISION FOR LOAN LOSSES

     The provision for loan losses is established by charging current earnings
     with an amount which will maintain the allowance for loan losses at a level
     sufficient to provide for probable incurred losses in the Corporation's
     loan portfolio. Management considers several factors in determining the
     provision, including loss experience, changes in the composition of the
     portfolio, the financial condition of borrowers, economic trends, and
     general economic conditions. The provision for loan losses totaled $6.6
     million and $4.4 million for 2001 and 2000, respectively.

     Net charge-offs for 2001 increased to $7.4 million from $3.3 million in
     2000. The majority of this amount relates to a single bankruptcy for a
     project which was and continues to be economically important to the Wabash
     Valley. Management believes the long-term benefit, both to the community
     and the Corporation, will outweigh the short-term impact of the charge-off.
     At December 31, 2001, the resulting allowance for loan losses was $18.3
     million or 1.36% of total loans, net of unearned income. A year earlier the
     allowance was $19.1 million or 1.49% of total loans.

OTHER INCOME

     Other income increased 57.7% in 2001 to $21.5 million from $13.6 million
     earned in 2000. Service charges and fees on deposit accounts and other
     service charges and fees increased $832 thousand and $1.2 million,
     respectively. These increases are the result of a focused effort to
     increase fee-based income.

     Insurance commissions increased $3.2 million due mainly to the acquisition
     of Forrest Sherer Inc., an insurance agency.

     Also, sales of mortgage loans increased $1.9 million to $2.2 million at
     December 31, 2001, from $275 thousand in 2000. Due to low interest rates,
     the majority of mortgage loans made in 2001 were sold in the secondary
     market to protect the bank from possible interest rate increases.

OTHER EXPENSES

     Other expenses totaled $53.3 million for 2001 compared to $42.7 million for
     2000. This represents an increase of $10.6 million or 24.9% for 2001.
     Salaries and related benefits, the largest component of this group,
     increased from $23.1 million to $30.5 million or 32.5%. This increase
     resulted from higher employee benefit costs and an increase in employees
     during 2001 with the addition of Forrest Sherer.

     In 2001 an incentive plan was approved by the Board for long-term retention
     of management. Expenses for this plan totaled $1.9 million in 2001.

INCOME TAXES

     The Corporation's federal income tax provision was $6.4 million in 2001
     compared to a provision of $7.5 million in 2000. The overall effective tax
     rate in 2001 of 24.6% compares to a 2000 effective rate of 28.3%. Over the
     past two years management has implemented a strategy which focuses on the
     taxability of income on securities. This strategy has benefitted the
     Corporation as income tax expense for 2001 declined by $1.3 million or
     13.8% compared to 2000.

COMPARISON OF 2000 TO 1999

     Net income for 2000 was $23.2 million or $3.45 per share compared to $21.6
     million in 1999 or $3.10 per share. This increased income was primarily the
     result of increased non-interest income and decreased non-interest expense
     for a combined $2.4 million positive impact. Increases in non-interest
     income were a result of a concerted effort by management to focus on
     fee-based income. This effort accounted for $1.5 million or 93% of the
     increase.

     The $840 thousand decrease in non-interest expenses in 2000 from 1999 was
     due mainly to the reduction of salary and fringe benefit expenses of $1.3
     million.

                                       28
<PAGE>
FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

     The Corporation's total assets declined slightly by $1.4 million at
     December 31, 2001, from a year earlier. Available-for-sale securities
     declined $104.9 million at December 31, 2001, from the previous year. As
     securities matured or were called, the proceeds were used to pay down
     long-term borrowings, which declined by $63.0 million, rather than
     reinvesting at the lower rates. Loans, net of unearned income, increased by
     $50.4 million, to $1.3 billion. This increase could have been greater as
     the Corporation sold approximately $114 million of real estate loans in the
     secondary market. Real estate mortgage, commercial and installment loans
     increased by $25.0 million, $19.6 million and $12.2 million to $757.3
     million, $302.5 million and $249.7 million, respectively. The increase
     resulted primarily because of lower interest rates and favorable economic
     conditions. The increase in loans was primarily funded by the proceeds from
     securities and increased short-term borrowings.

     Total shareholders' equity increased to $217.5 million at December 31,
     2001, compared to $191.2 million a year earlier. Higher net income was
     offset by increased dividends and the continued repurchase of corporate
     stock. During 2001, 32,649 shares were acquired at a cost of $1.3 million.
     In addition, during 2001, the Corporation recorded a net unrealized gain on
     available-for-sale securities of $4.4 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 are set forth in the following analyses.

<TABLE>
<CAPTION>
     (Dollar amounts in thousands)                   2001             2000             1999            1998             1997
                                                  ----------       ----------       ----------       ----------       ----------
<S>                                               <C>              <C>              <C>              <C>              <C>
     Loan Category

     Commercial, financial and agricultural       $  302,496       $  282,904       $  247,949       $  233,080       $  229,855
     Real estate - construction                       34,610           41,325           44,782           32,880           23,734
     Real estate - mortgage                          757,345          732,387          671,972          636,615          561,466
     Installment                                     249,710          237,527          223,459          205,251          188,552
     Lease financing                                   5,023            4,810            5,723            5,825            3,271
                                                  ----------       ----------       ----------       ----------       ----------
           TOTAL                                  $1,349,184       $1,298,953       $1,193,885       $1,113,651       $1,006,878
                                                  ==========       ==========       ==========       ==========       ==========
</TABLE>

<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            $  177,049            $   86,702            $   38,745            $  302,496
     Real estate - construction                            13,362                11,714                 9,534                34,610
                                                       ----------            ----------            ----------            ----------
                 TOTAL                                 $  190,411            $   98,416            $   48,279               337,106
                                                       ==========            ==========            ==========            ==========

     Real estate - mortgage                                                                                                 757,345
     Installment                                                                                                            249,710
     Lease financing                                                                                                          5,023
                                                                                                                         ----------
                 TOTAL                                                                                                   $1,349,184
                                                                                                                         ==========
     Loans maturing after one year with:
        Fixed interest rates                                                 $   40,052            $   41,610
        Variable interest rates                                                  58,364                 6,669
                                                                             ----------            ----------

                 TOTAL                                                       $   98,416            $   48,279
                                                                             ==========            ==========
</TABLE>

                                       29
<PAGE>
FINANCIAL CONDITION -- SUMMARY

ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                       2001             2000             1999            1998              1997
                                                 ----------       ----------       ----------       ----------       ----------
<S>                                              <C>              <C>              <C>              <C>              <C>
Amount of loans outstanding
     at December 31,                             $1,349,184       $1,298,953       $1,193,885       $1,113,651       $1,006,878
                                                 ==========       ==========       ==========       ==========       ==========
Average amount of loans by year                  $1,315,725       $1,256,505       $1,151,968       $1,066,537       $  953,008
                                                 ==========       ==========       ==========       ==========       ==========

Allowance for loan losses
     at beginning of year                        $   19,072       $   17,949       $   16,429       $   13,503       $   10,756
     Allowance resulting from acquisition                 _               --               --              970               --
Loans charged off:
     Commercial, financial and agricultural           4,079            1,055              344            1,195              487
     Real estate - mortgage                             557              406              932              614              596
     Installment                                      4,395            3,196            3,034            2,827            2,732
     Leasing                                             12                6               --               --               --
                                                 ----------       ----------       ----------       ----------       ----------
        Total loans charged off                       9,043            4,663            4,310            4,636            3,815
                                                 ----------       ----------       ----------       ----------       ----------

Recoveries of loans previously charged off:

     Commercial, financial and agricultural             819              578              170              461              260
     Real estate - mortgage                              60               28              142              101              163
     Installment                                        790              788              788              634              747
     Leasing                                             --               --                5               --               10
                                                 ----------       ----------       ----------       ----------       ----------
          Total recoveries                            1,669            1,394            1,105            1,196            1,180
                                                 ----------       ----------       ----------       ----------       ----------
Net loans charged off                                 7,374            3,269            3,205            3,440            2,635
 Provision charged to expense                         6,615            4,392            4,725            5,396            5,382
                                                 ----------       ----------       ----------       ----------       ----------

Balance at end of year                           $   18,313       $   19,072       $   17,949       $   16,429       $   13,503
                                                 ==========       ==========       ==========       ==========       ==========

Ratio of net charge-offs during period
     to average loans outstanding                       .56%             .26%             .28%             .32%             .28%
                                                 ==========       ==========       ==========       ==========       ==========
</TABLE>

Management anticipates $3.6 million of commercial, financial and agricultural
loans, $0.5 million of real estate-mortgage loans and $2.8 million of
installment loans will be charged off for 2002.

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

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

                                       30
<PAGE>
FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

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

UNDER-PERFORMING LOANS

     Management monitors the components and status of under-performing loans as
     a part of the evaluation procedures used in determining the adequacy of the
     allowance for loan losses. It is the Corporation's policy to discontinue
     the accrual of interest on loans where, in management's opinion, serious
     doubt exists as to collectibility. The amounts shown below represent
     non-accrual loans, loans which have been restructured to provide for a
     reduction or deferral of interest or principal because of deterioration in
     the financial condition of the borrower and those loans which are past due
     more than 90 days where the Corporation continues to accrue interest. The
     interest income for non-accrual and restructured loans that would have been
     recorded in 2001, 2000 and 1999, under the original terms of the loans is
     $1.1 million, $953 thousand and $364 thousand, respectively. The
     Corporation recorded interest income on such loans in the amounts of $535
     thousand, $656 thousand and $119 thousand for 2001, 2000 and 1999,
     respectively.

<TABLE>
<CAPTION>
(Dollar amounts in thousands)            2001               2000               1999               1998               1997
                                        -------            -------            -------            -------            -------
<S>                                     <C>                <C>                <C>                <C>                <C>
     Non-accrual loans                  $ 8,854            $ 8,316            $ 2,879            $ 4,103            $ 3,866
     Restructured loans                     590                735                959                  7                 17
                                        -------            -------            -------            -------            -------
                                          9,444              9,051              3,838              4,110              3,883
     Accruing loans past due              4,925              5,499              5,229              8,184              4,384
                                        -------            -------            -------            -------            -------
                                        $14,369            $14,550            $ 9,067            $12,294            $ 8,267
                                        =======            =======            =======            =======            =======
</TABLE>

     The ratio of the allowance for loan losses as a percentage of
     under-performing loans was 127% at December 31, 2001, compared to 131% in
     2000. This results from the $759 thousand decline in the allowance during
     2001, which more than offset the $181 thousand decline in under-performing
     loans. The following loan categories comprise significant components of the
     under-performing loans at December 31, 2001:

<TABLE>
(Dollar amounts in thousands)
--------------------------------------------------------------------------------
<S>                                           <C>                       <C>
     Non-accrual loans:
       1-4 family residential                 $3,033                     34%
       Commercial loans                        4,406                     50
       Installment loans                       1,415                     16
                                              ------                    ---
       Other, various                         $8,854                    100%
                                              ======                    ===
     Past due 90 days or more:

       1-4 family residential                 $1,587                     32%
       Commercial loans                        2,177                     44
       Installment loans                       1,161                     24
                                              ------                    ---
       Other, various                         $4,925                    100%
                                              ======                    ===
</TABLE>

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

                                       31
<PAGE>
FINANCIAL CONDITION -- SUMMARY

     An element of the Corporation's asset quality management process is the
     ongoing review and grading of each affiliate's commercial loan portfolio.
     At December 31, 2001, approximately $32.3 million of commercial loans are
     graded doubtful or substandard, including the $6.6 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.

DEPOSITS

     Total deposits decreased to $1.31 billion at December 31, 2001, from $1.32
     billion at December 31, 2000. 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 2001, 2000 and 1999.

<TABLE>
<CAPTION>
                                                     2001                        2000                       1999
                                         ------------------------    ------------------------    ----------------------
(Dollar amounts in thousands)               Amount        Rate          Amount        Rate         Amount        Rate
                                         ----------    ----------    ----------    ----------    ----------   ----------
<S>                                      <C>           <C>           <C>           <C>           <C>          <C>
     Non-interest-bearing
       demand deposits                   $  148,931                  $  145,923                  $  143,551
     Interest-bearing demand deposits       170,990         1.28%       168,579         1.34%       294,953       2.31%
     Savings deposits                       287,012         2.74%       243,357         3.14%       114,326       2.09%
     Time deposits:
     $100,000 or more                       198,575         5.32%       215,889         5.66%       200,133       5.16%
     Other time deposits                    495,940         5.36%       500,401         5.55%       503,928       5.12%
                                         ----------                  ----------                  ----------
     TOTAL                               $1,301,448                  $1,274,149                  $1,256,891
                                         ==========                  ==========                  ==========
</TABLE>

     The maturities of certificates of deposit of $100 thousand or more
     outstanding at December 31, 2001, are summarized as follows:

               3 months or less              $ 57,239
               Over 3 through 6 months         28,852
               Over 6 through 12 months        36,845
               Over 12 months                  81,538
                                             --------
               TOTAL                         $204,474
                                             ========

SHORT-TERM BORROWINGS

     A summary of the carrying value of the Corporation's short-term borrowings
     at December 31, 2001, 2000 and 1999 is presented below:

<TABLE>
<CAPTION>
     (Dollar amounts in thousands)           2001          2000          1999
                                            -------       -------       -------
<S>                                         <C>           <C>           <C>
         Federal funds purchased            $ 9,920       $ 5,510       $19,559
         Repurchase agreements               37,400        12,269        35,718
         Other short-term borrowings          7,276           929         8,222
                                            -------       -------       -------
                                            $54,596       $18,708       $63,499
                                            =======       =======       =======
</TABLE>

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

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                              2001                  2000                  1999
                                                        -----------           -----------           -----------
<S>                                                     <C>                   <C>                   <C>
     Average amount outstanding                         $    59,603           $    71,040           $    63,641
     Maximum amount outstanding at a month end               81,330               117,716               150,168
     Average interest rate during year                         4.46%                 6.35%                 5.19%
     Interest rate at year-end                                 2.32%                 5.47%                 5.25%
</TABLE>

                                       32
<PAGE>
FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

OTHER BORROWINGS

     Advances from the Federal Home Loan Bank decreased to $419.5 million in
     2001 compared to $482.5 million in 2000. The major reason for the decrease
     was that as investments had been called, the money was used to pay down
     debt rather than reinvest. Lowering interest rates influenced management's
     decision to pay down the debt. The Asset/Liability Committee reviews these
     investments and considers the related strategies on a weekly basis. See
     Interest Rate Sensitivity and Liquidity below for more information.

CAPITAL RESOURCES

     As of December 31, 2001, the Corporation's shareholders' equity was $217.5
     million, an increase of 13.8% from the 2000 level of $191.2 million. This
     increase is in excess of increased dividends returned to shareholders and a
     stock repurchase plan, under which 32,649 shares were repurchased during
     2001 for $1.3 million. In addition, during 2001, the Corporation recorded a
     net unrealized gain on available-for-sale securities of $4.4 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, 2001.

     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 2001 and 2000 was
     32.0% and 31.2%, 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.

                                       33
<PAGE>
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. In 2001 the Corporation purchased an
     interest rate cap to help protect the net interest income should interest
     rates increase in excess of the cap's trigger amount. 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, 2001. Given a 100 basis point increase in rates,
     net interest income would decrease 4.97% over the next 12 months and
     decrease 2.79% over the next 24 months. A 100 basis point decrease would
     result in a 2.33% increase in net interest income over the next 12 months
     and a .08% decrease over the next 24 months. These estimates assume all
     rates changed overnight and management took no action as a result of this
     change.

<TABLE>
<CAPTION>
                                    Percentage Change in Net Interest Income
                               -------------------------------------------------
<S>                            <C>                  <C>                <C>
         Basis Point
         Interest Rate Change  12 months            24 months          36 months
         -----------------------------------------------------------------------
         Down 200                 1.76%              -2.89%              -8.01%
         Down 100                 2.33                -0.08               -2.68
         Up 100                  -4.97                -2.79               -0.71
         Up 200                  -9.81                -5.27               -1.00
</TABLE>

     Typical rate shock analysis does not reflect management's ability to react
     and thereby reduce the effects of rate changes, and represents a worst case
     scenario. 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 $7.4 million of investments that mature throughout the
     coming 12 months. The Corporation also anticipates $108.9 million of
     principal payments from mortgage-backed securities. Given the current rate
     environment, the Corporation anticipates $22.4 million in securities to be
     called within the next 12 months.

OUTLOOK

     The Wabash Valley, the Corporation's primary market area, experienced
     weakening in the economic climate similar to the national economy
     throughout 2001. 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 2002 will be more positive
     beginning in the third quarter with growth in loans and deposits.

     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 operates a full-lines
     insurance agency. These activities are expected to provide an increased
     amount of fee-based income in the future.

                                       34
<PAGE>
FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES

<TABLE>
<CAPTION>
                                                                                  December 31,
                                           -------------------------------------------------------------------------------------
                                                               2001                                        2000
                                           -------------------------------------------    --------------------------------------
                                              Average                          Yield/       Average                      Yield/
(Dollar amounts in thousands)                 Balance          Interest         Rate        Balance       Interest        Rate
--------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                 <C>             <C>        <C>            <C>             <C>
ASSETS
Interest-earning assets:
   Loans (1)(2)                            $ 1,315,725          108,950         8.28%     $ 1,256,505    $   107,633      8.57%
   Taxable investment securities               389,776           24,622         6.32          430,467         30,535      7.09
   Tax-exempt investments(2)                   204,205           17,115         8.38          162,907         12,857      7.89
   Federal funds sold                           11,877              268         2.26            5,832            380      6.52
                                           -----------          -------         ----      -----------    -----------      ----
   Total interest-earning assets             1,921,583          150,955         7.86%       1,855,711        151,405      8.16%
                                           ===========          =======         ====      ===========    ===========      ====

Non-interest earning assets:
   Cash and due from banks                      58,703                                         63,158
   Premises and equipment, net                  26,624                                         26,404
   Other assets                                 53,168                                         39,900
   Less allowance for loan losses              (18,796)                                       (19,017)
                                           -----------                                    -----------
          TOTALS                           $ 2,041,282                                    $ 1,966,156
                                           ===========                                    ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY

Interest-bearing liabilities:
   Transaction accounts                    $   458,002           10,069         2.20%     $   411,936          9,901      2.40%
   Time deposits                               694,515           37,139         5.35          716,290         39,991      5.58
   Short-term borrowings                        62,321            2,514         4.03           75,230          4,747      6.31
   Other borrowings                            438,123           24,403         5.57          429,383         25,944      6.04
   Total interest-bearing                  -----------          -------         ----      -----------    -----------      ----
      liabilities:                         $ 1,652,961           74,125         4.48%       1,632,839         80,583      4.94%
                                           ===========          =======         ====      ===========    ===========      ====
   Non interest-bearing
      liabilities:
   Demand deposits                             148,931                                        145,923
   Other                                        25,871                                          8,491
                                           -----------                                    -----------
                                             1,827,763                                      1,787,253

   Shareholders' equity                        213,519                                        178,903
                                           -----------                                    -----------
             TOTALS                        $ 2,041,282                                    $ 1,966,156
                                           ===========                                    ===========

   Net interest earnings                                    $    76,831                                  $    70,822
                                                            ===========                                  ===========

   Net yield on interest-earning assets                                         4.00%                                     3.82%
                                                                                ====                                      ====
</TABLE>

<TABLE>
<CAPTION>
                                                             December 31,
                                               ------------------------------------------
                                                                 1999
                                               ------------------------------------------
                                                  Average                          Yield/
(Dollar amounts in thousands)                     Balance       Interest            Rate
-----------------------------------------------------------------------------------------
<S>                                            <C>            <C>                   <C>
ASSETS
Interest-earning assets:
   Loans (1)(2)                                $ 1,151,968    $    96,565           8.38%
   Taxable investment securities                   427,781         28,500           6.66
   Tax-exempt investments(2)                       153,112         12,383           8.09
   Federal funds sold                               16,991            852           5.01
                                               -----------    -----------           ----
   Total interest-earning assets                 1,749,852        138,300           7.90%
                                               ===========    ===========           ====

Non-interest earning assets:
   Cash and due from banks                          58,212
   Premises and equipment, net                      24,847
   Other assets                                     41,469
   Less allowance for loan losses                  (17,585)
                                               -----------
          TOTALS                               $ 1,856,795
                                               ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY

Interest-bearing liabilities:
   Transaction accounts                        $   409,279          9,193           2.25%
   Time deposits                                   704,061         36,144           5.13
   Short-term borrowings                            66,594          3,469           5.21
   Other borrowings                                337,007         18,009           5.34
   Total interest-bearing                      -----------    -----------           ----
      liabilities:                               1,516,941         66,815           4.40%
                                               ===========    ===========           ====
   Non interest-bearing
      liabilities:
   Demand deposits                                 143,551
   Other                                            23,973
                                               -----------
                                                 1,684,465

   Shareholders' equity                            172,330
                                               -----------
             TOTALS                            $ 1,856,795
                                               ===========

   Net interest earnings                                      $    71,485
                                                              ===========

   Net yield on interest-earning assets                                             4.09%
                                                                                    ====
</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%.

                                       35
<PAGE>
MARKET AND DIVIDEND INFORMATION

     At year-end 2001 shareholders owned 6,844,260 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 2001 and 2000.

<TABLE>
<CAPTION>
                                       2001                                     2000
                         ----------------------------------        ----------------------------------
                            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            $40.00        $30.50                      $41.22        $33.19
     June 30             $48.14        $35.68        $  .56        $34.68        $30.38        $  .52
     September 30        $46.25        $38.65                      $33.62        $29.00
     December 31         $44.63        $38.52        $  .58        $32.94        $27.50        $  .56
</TABLE>

SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              2001
                             -------------------------------------------------------------------------------------------------------
                                                                     Net              Provision
(Dollar amounts in           Interest           Interest           Interest           for Loan            Net             Net Income
  thousands)                 Income             Expense             Income             Losses            Income            Per Share
------------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                <C>                <C>                <C>                <C>              <C>
     March 31                $37,468            $20,560            $16,908            $ 1,488            $ 5,907            $ .88
     June 30                 $36,480            $19,326            $17,154            $ 1,464            $ 5,783            $ .85
     September 30            $36,048            $18,139            $17,909            $ 1,512            $ 6,293            $. 92
     December 31             $34,677            $16,100            $18,577            $ 2,151            $ 6,213            $ .91
</TABLE>

<TABLE>
<CAPTION>
                                                                              2000
                             -------------------------------------------------------------------------------------------------------
                                                                     Net              Provision
(Dollar amounts in           Interest           Interest           Interest           for Loan            Net             Net Income
  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
</TABLE>

                                       36