<PAGE>
EXHIBIT 13--ANNUAL REPORT
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                      EXHIBIT 13

                               2005 ANNUAL REPORT

FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>

(Dollar amounts in thousands,
except per share amounts)           2005            2004            2003            2002            2001
-----------------------------    ----------      ----------      ----------      ----------      ----------
<S>                              <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
Total assets                     $2,136,918      $2,183,992      $2,223,057      $2,169,748      $2,041,905
Securities                          536,291         507,990         576,950         520,166         471,888
Loans, net of unearned fees       1,395,741       1,463,871       1,429,525       1,432,564       1,348,461
Deposits                          1,464,918       1,443,121       1,479,347       1,434,654       1,313,656
Borrowings                          370,090         438,013         451,862         457,645         480,674
Shareholders' equity                269,323         268,335         255,279         241,971         217,511

INCOME STATEMENT DATA:
Interest income                     121,647         116,888         122,661         136,262         144,673
Interest expense                     47,469          44,686          48,225          58,086          74,125
Net interest income                  74,178          72,202          74,436          78,176          70,548
Provision for loan losses            11,698           8,292           7,455           9,478           6,615
Other income                         32,025          35,754          30,819          30,468          21,468
Other expenses                       63,538          63,656          62,461          63,317          53,329
Net income                           23,054          28,009          26,493          28,640          24,196

PER SHARE DATA:
Net income                             1.72            2.07            1.95            2.10            1.78
Cash dividends                          .82             .79             .70             .62             .57

PERFORMANCE RATIOS:
Net income to average assets           1.07%           1.28%           1.21%           1.30%           1.19%
Net income to average
     shareholders' equity              8.52           10.45           10.57           12.01           11.33
Average total capital
     to average assets                13.35           13.24           12.45           11.73           11.38
Average shareholders' equity
     to average assets                12.51           12.23           11.43           10.80           10.46
Dividend payout                       47.57           38.13           35.88           29.57           32.28
</TABLE>

                                       7
<PAGE>


                          FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                      DECEMBER 31,
                                                                             ----------------------------
(Dollar amounts in thousands, except per share data)                            2005            2004
----------------------------------------------------                         -----------      -----------
<S>                                                                          <C>              <C>
ASSETS
Cash and due from banks                                                      $    78,201      $    94,928
Federal funds sold                                                                 2,982            5,400
Securities available-for-sale                                                    536,291          507,990
Loans, net of allowance of $16,042 in 2005 and $19,918 in 2004                 1,379,699        1,443,953
Accrued interest receivable                                                       12,537           12,016
Premises and equipment, net                                                       31,270           31,154
Bank-owned life insurance                                                         55,832           49,177
Goodwill                                                                           7,102            7,102
Other intangible assets                                                            2,860            3,093
Other real estate owned                                                            4,115            3,262
Other assets                                                                      26,029           25,917
                                                                             -----------      -----------
     TOTAL ASSETS                                                            $ 2,136,918      $ 2,183,992
                                                                             ===========      ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Non-interest-bearing                                                       $   182,416      $   145,852
  Interest-bearing:
     Certificates of deposit of $100 or more                                     189,493          184,604
     Other interest-bearing deposits                                           1,093,009        1,112,665
                                                                             -----------      -----------
                                                                               1,464,918        1,443,121

Short-term borrowings                                                             26,224           75,527
Other borrowings                                                                 343,866          362,486
Other liabilities                                                                 32,587           34,523
                                                                             -----------      -----------
     TOTAL LIABILITIES                                                         1,867,595        1,915,657

Shareholders' equity

 Common stock, $.125 stated value per share,
    Authorized shares -- 40,000,000
     Issued shares -- 14,450,966
     Outstanding shares -- 13,373,570 in 2005 and 13,535,770 in 2004               1,806            1,806
 Additional paid-in capital                                                       67,670           67,519
 Retained earnings                                                               223,710          211,623
 Accumulated other comprehensive income                                            1,903            8,357
 Less: Treasury shares at cost -- 1,077,396 in 2005 and 915,196 in 2004          (25,766)         (20,970)
                                                                             -----------      -----------

     TOTAL SHAREHOLDERS' EQUITY                                                  269,323          268,335
                                                                             -----------      -----------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                              $ 2,136,918      $ 2,183,992
                                                                             ===========      ===========
</TABLE>


See accompanying notes.


                                       8
<PAGE>

                               2005 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>

                                                                           YEARS ENDED DECEMBER 31,
                                                                  -----------------------------------------
(Dollar amounts in thousands, except per share data)                 2005           2004           2003
----------------------------------------------------              ----------     ----------      ----------
<S>                                                               <C>            <C>             <C>
INTEREST AND DIVIDEND INCOME:
  Loans, including related fees                                   $   96,388     $   92,440      $   96,536
  Securities:
    Taxable                                                           16,802         15,315          15,714
    Tax-exempt                                                         6,306          7,055           7,816
  Other                                                                2,151          2,078           2,595
                                                                  ----------     ----------      ----------
        TOTAL INTEREST AND DIVIDEND INCOME                           121,647        116,888         122,661

INTEREST EXPENSE:
  Deposits                                                            27,184         23,695          26,925
  Short-term borrowings                                                  783          1,017             431
  Other borrowings                                                    19,502         19,974          20,869
                                                                  ----------     ----------      ----------
        TOTAL INTEREST EXPENSE                                        47,469         44,686          48,225
                                                                  ----------     ----------      ----------
        NET INTEREST INCOME                                           74,178         72,202          74,436
  Provision for loan losses                                           11,698          8,292           7,455
                                                                  ----------     ----------      ----------
        NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES           62,480         63,910          66,981

NON-INTEREST INCOME:
  Trust and financial services                                         3,626          3,918           3,762
  Service charges and fees on deposit accounts                        11,732         11,499           8,066
  Other service charges and fees                                       6,440          6,794           8,063
  Securities gains (losses)                                              571           (165)            237
  Insurance commissions                                                5,995          6,142           6,282
  Gain on sale of mortgage loans                                       1,289            806           2,027
  Gain on life insurance benefit                                          --          4,113              --
  Other                                                                2,372          2,647           2,382
                                                                  ----------     ----------      ----------
        TOTAL NON-INTEREST INCOME                                     32,025         35,754          30,819

NON-INTEREST EXPENSES:
  Salaries and employee benefits                                      38,617         37,876          36,696
  Occupancy expense                                                    3,796          3,904           3,830
  Equipment expense                                                    3,861          3,585           3,224
  Other                                                               17,264         18,291          18,711
                                                                  ----------     ----------      ----------
        TOTAL NON-INTEREST EXPENSE                                    63,538         63,656          62,461
                                                                  ----------     ----------      ----------
        INCOME BEFORE INCOME TAXES                                    30,967         36,008          35,339

  Provision for income taxes                                           7,913          7,999           8,846
                                                                  ----------     ----------      ----------
        NET INCOME                                                $   23,054     $   28,009      $   26,493
                                                                  ==========     ==========      ==========

EARNINGS PER SHARE:

        BASIC AND DILUTED                                         $     1.72     $     2.07      $     1.95
                                                                  ==========     ==========      ==========
 Weighted average number of shares outstanding (in thousands)         13,433         13,525          13,588
                                                                  ==========     ==========      ==========
 </TABLE>


 See accompanying notes.


                                       9
<PAGE>
                          FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                                               ACCUMULATED
                                                                                                 OTHER
                                                      COMMON        ADDITIONAL     RETAINED   COMPREHENSIVE  TREASURY
(Dollar amounts in thousands, except per share data)  STOCK      PAID-IN CAPITAL   EARNINGS     INCOME        STOCK         TOTAL
---------------------------------------------------- --------    ---------------  ---------   -------------  --------    ---------
<S>                                                  <C>         <C>              <C>         <C>            <C>         <C>

BALANCE, JANUARY 1, 2003                             $    903      $ 66,809       $ 178,209   $  14,276      $ (18,226)  $ 241,971

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


Two-for-one stock split
  (6,782,885 shares)                                      903            --            (903)         --             --          --
Contribution of 40,000 shares
  to ESOP                                                  --           372              --          --            884       1,256
Treasury stock purchase
  (80,120 shares)                                          --            --              --          --         (2,123)     (2,123)
Cash dividends, $ .70 per share                            --            --          (9,505)         --             --      (9,505)
                                                     --------      --------       ---------   ---------      ---------   ---------

BALANCE, DECEMBER 31, 2003                              1,806        67,181         194,294      11,463        (19,465)    255,279

Comprehensive income:
  Net income                                               --            --          28,009          --             --      28,009
  Other comprehensive loss,
    net of tax:
  Change in net unrealized
    gains/losses on securities
    available-for-sale, net                                --            --              --      (3,106)            --      (3,106)
                                                                                                                         ---------
      Total comprehensive income                                                                                            24,903

Contribution of 36,000 shares
  to ESOP                                                  --           338              --          --            825       1,163
Treasury stock purchase
  (79,000 shares)                                          --            --              --          --         (2,330)     (2,330)
Cash dividends, $ .79 per share                            --            --         (10,680)         --             --     (10,680)
                                                     --------      --------       ---------   ---------      ---------   ---------

BALANCE, DECEMBER 31, 2004                              1,806        67,519         211,623       8,357        (20,970)    268,335

Comprehensive income:
  Net income                                               --            --          23,054          --             --      23,054
  Other comprehensive loss,
    net of tax:
  Change in net unrealized
    gains/losses on securities
    available-for-sale, net                                --            --              --      (6,454)            --      (6,454)
                                                                                                                         ---------
      Total comprehensive income                           --            --              --          --             --      16,600

Contribution of 41,500 shares
  to ESOP                                                  --           151              --          --            993       1,144
Treasury stock purchase
  (203,700 shares)                                         --            --              --          --         (5,789)     (5,789)
Cash dividends, $ .82 per share                            --            --         (10,967)         --             --     (10,967)
                                                     --------      --------       ---------   ---------      ---------   ---------

BALANCE, DECEMBER 31, 2005                           $  1,806      $ 67,670       $ 223,710   $   1,903      $ (25,766)  $ 269,323
                                                     ========      ========       =========   =========      =========   =========

</TABLE>

See accompanying notes.

                                       10
<PAGE>


                               2005 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>

                                                                                          YEARS ENDED DECEMBER 31,
                                                                                   ---------------------------------------
(Dollar amounts in thousands, except per share data)                                 2005           2004           2003
---------------------------------------------------                                ---------      ---------      ---------
<S>                                                                                <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                         $  23,054      $  28,009      $  26,493
   Adjustments to reconcile net income to net cash provided by operating
      activities:
         Net (accretion) amortization on securities                                   (1,462)         2,092            558
         Provision for loan losses                                                    11,698          8,292          7,455
         Securities (gains) losses                                                      (571)           165           (237)
         Depreciation and amortization                                                 3,363          3,184          2,883
         Provision for deferred income taxes                                           1,716          1,648           (252)
         Net change in accrued interest receivable                                      (521)         1,057          2,126
         Contribution of shares to ESOP                                                1,144          1,163          1,256
         Gains on life insurance benefit                                                  --         (4,113)            --
         Other, net                                                                      592          1,842          5,126
                                                                                   ---------      ---------      ---------
            NET CASH FROM OPERATING ACTIVITIES                                        39,013         43,339         45,408
                                                                                   ---------      ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Sales of securities available-for-sale                                             11,376         11,466          8,308
   Calls, maturities and principal reductions on securities available-for-sale       373,741        105,945        189,049
   Purchases of securities available-for-sale                                       (422,141)       (55,885)      (259,150)
   Loans made to customers, net of repayments                                         49,806        (44,834)        (5,844)
   Net change in federal funds sold                                                    2,418            450         (5,800)
   Purchase of bank-owned life insurance                                              (5,000)            --             --
   Purchase of customer list                                                            (338)            --             --
   Proceeds from life insurance benefit                                                   --          7,267             --
   Additions to premises and equipment                                                (2,908)        (4,458)        (1,758)
                                                                                   ---------      ---------      ---------
            NET CASH FROM INVESTING ACTIVITIES                                         6,954         19,951        (75,195)
                                                                                   ---------      ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net change in deposits                                                             21,797        (36,226)        44,693
   Net change in other short-term borrowings                                         (49,303)         6,898         34,274
   Dividends paid                                                                    (10,779)       (10,155)        (8,845)
   Purchases of treasury stock                                                        (5,789)        (2,330)        (2,123)
   Proceeds from other borrowings                                                         --         85,006         18,013
   Repayments on other borrowings                                                    (18,620)      (105,753)       (58,070)
                                                                                   ---------      ---------      ---------
            NET CASH FROM FINANCING ACTIVITIES                                       (62,694)       (62,560)        27,942
                                                                                   ---------      ---------      ---------
            NET CHANGE IN CASH AND CASH EQUIVALENTS                                  (16,727)           730         (1,845)
            CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                              94,928         94,198         96,043
                                                                                   ---------      ---------      ---------
            CASH AND CASH EQUIVALENTS, END OF YEAR                                 $  78,201      $  94,928      $  94,198
                                                                                   =========      =========      =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:

   Interest                                                                        $  46,919      $  44,979      $  48,791
                                                                                   =========      =========      =========
   Income taxes                                                                    $   5,413      $   6,501      $   8,016
                                                                                   =========      =========      =========
</TABLE>

See accompanying notes.

                                       11
<PAGE>
                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

      BUSINESS

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

      First Financial Bank also has two investment subsidiaries, Portfolio
      Management Specialists A (Specialists A) and Portfolio Management
      Specialists B (Specialists B), which were established to hold and manage
      certain assets as part of a strategy to better manage various income
      streams and provide opportunities for capital creation as needed.
      Specialists A and Specialists B subsequently entered into a limited
      partnership agreement, Global Portfolio Limited Partners. Portfolio
      Management Specialists B also owns First Financial Real Estate, LLC. At
      December 31, 2005, $490.8 million of securities and loans were owned by
      these subsidiaries. Specialists A, Specialists B, Global Portfolio Limited
      Partners and First Financial Real Estate LLC are included in the
      consolidated financial statements.

      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 three subsidiaries. The Corporation's primary source
      of revenue is derived from loans to customers, primarily middle-income
      individuals, and investment activities.

      The Corporation operates 46 branches in west-central Indiana and
      east-central Illinois. First Financial Bank is the largest bank in Vigo
      County. It operates 12 full-service banking branches within the county;
      five in Clay County, Indiana; one in Greene County, Indiana; two in Knox
      County, Indiana; five in Parke County, Indiana; five in Sullivan County,
      Indiana; four in Vermillion County, Indiana; one in Clark County,
      Illinois; one in Coles County, Illinois; three in Crawford County,
      Illinois; one in Jasper County, Illinois; two in Lawrence County,
      Illinois; two in Richland County, Illinois; one in Vermilion County,
      Illinois; and one in Wayne County, Illinois. It also has a main office in
      downtown Terre Haute and an operations center/office building in southern
      Terre Haute.

      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 subsidiary is regulated by the Office of the
      Comptroller of the Currency. The state bank subsidiary is jointly
      regulated by the state banking organization and the Federal Deposit
      Insurance Corporation.

      SIGNIFICANT ACCOUNTING POLICIES

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

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

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

      Interest income includes amortization of purchase premium or discount.
      Premiums and discounts are amortized on the level yield method without
      anticipating prepayments. Mortgage-backed securities are amortized over
      the expected life. Realized gains and losses on sales are based on the
      amortized cost of the security sold. Declines in the fair value of
      securities below their cost that are other than temporary are reflected as
      realized losses. In estimating other-than-temporary losses, management
      considers: 1) the length of time and extent that fair value has been less
      than cost; 2) the financial condition and near term prospects of the
      issuer; and 3) the Corporation's ability and intent to hold the security
      for a period sufficient to allow for any anticipated recovery in fair
      value.

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

      Interest income is accrued on the unpaid principal balance and includes
      amortization of net deferred loan fees and costs over the loan term
      without anticipating prepayments. Interest income is not reported when
      full loan repayment is in doubt, typically when the loan is impaired or
      payments are significantly past due.

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

      ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
      allowance for probable incurred credit losses. Loan losses are charged
      against the allowance when management believes the uncollectibility of a
      loan balance is confirmed. Subsequent recoveries, if any, are credited to
      the allowance. Management estimates the allowance balance required using
      past loan loss experi-

                                       12



<PAGE>



                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      ence, 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. The allowance consists of
      specific and general components. The specific component relates to loans
      that are individually classified as impaired or loans otherwise classified
      as substandard or doubtful. The general component covers non-classified
      loans and is based on historical loss experience adjusted for current
      factors.

      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. Large groups of smaller balance homogeneous loans,
      such as consumer and residential real estate loans, are collectively
      evaluated for impairment and, accordingly, they are not separately
      identified for impairment disclosures.

      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: Land is carried at cost. Premises and equipment
      are stated at cost less accumulated depreciation. Depreciation is computed
      over the useful lives of the assets, which range from 3 to 33 years for
      furniture and equipment and 5 to 39 years for buildings and leasehold
      improvements.

      FEDERAL HOME LOAN BANK (FHLB) STOCK: The Corporation is a member of the
      FHLB system. Members are required to own a certain amount of stock based
      on the level of borrowings and other factors, and may invest in additional
      amounts. FHLB stock is carried at cost and periodically evaluated for
      impairment. Because this stock is viewed as a long-term investment,
      impairment is based on ultimate recovery of par value. Both cash and stock
      dividends are reported as income. FHLB stock is included with securities.

      SERVICING RIGHTS: Servicing rights are recognized as assets for the
      allocated value of retained servicing rights on loans sold. Servicing
      rights are expensed in proportion to, and over the period of, estimated
      net servicing revenues. Impairment is evaluated based on the fair value of
      the rights, using groupings of the underlying loans as to loan type and
      interest rate, and then secondarily as to loan type and investor. Fair
      value is determined using prices for similar assets with similar
      characteristics, when available, or based upon discounted cash flows using
      market-based assumptions. Any impairment of a grouping is reported as a
      valuation allowance.

      Servicing fee income is recorded for fees earned for servicing loans. The
      fees are based on a contractual percentage of the outstanding principal or
      a fixed amount per loan and are recorded as income when earned. The
      amortization of mortgage servicing rights is netted against loan servicing
      fee income.

      BANK-OWNED LIFE INSURANCE: The Corporation has purchased life insurance
      policies on certain key executives. Bank-owned life insurance is recorded
      at its cash surrender value, or the amount that can be realized.

      GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill results from business
      acquisitions and represents the excess of the purchase price over the fair
      value of acquired tangible assets and liabilities and identifiable
      intangible assets. Goodwill is assessed at least annually for impairment
      and any such impairment will be recognized in the period identified.

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

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

      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. Deferred compensation and supplemental
      retirement plan expense allocates the benefits over years of service.

      DEFERRED COMPENSATION PLAN: A deferred compensation plan covers all
      directors. Under the plan, the Corporation pays each director, or their
      beneficiary, the amount of fees deferred plus interest over 10 years,
      beginning when the director achieves age 65. A liability is accrued for
      the obligation under these plans. The expense incurred for the deferred
      compensation for each of the last three years was $164 thousand, $160
      thousand and $123 thousand, resulting in a deferred compensation liability
      of $2.2 million and $2.0 million as of year-end 2005 and 2004.

      LONG-TERM INCENTIVE PLAN: A long-term incentive plan provides for the
      payment of incentive rewards as a 10-year annuity to all directors and
      certain key officers. The plan expires December 31, 2009, and compensation
      expense is recognized over the service period. Payments under the plan
      generally do not begin until the earlier of January 1, 2015, or the
      January 1 immediately following the year in which the participant reaches
      age 65. Compensation expense for each of the last three years was $1.6
      million, $1.5 million and $1.5 million, resulting in a liability of $7.3
      million and $5.5 million as of year-end 2005 and 2004.

      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.

      LOAN COMMITMENTS AND RELATED 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

                                       13
<PAGE>
                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      represents the exposure to loss, before considering customer collateral or
      ability to repay. Such financial instruments are recorded when they are
      funded.

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

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

      ADOPTION OF NEW ACCOUNTING STANDARDS: During 2005 the Corporation adopted
      SOP 03-3, which requires that a valuation allowance for loans acquired in
      a transfer, including in a business combination, reflect only losses
      incurred after acquisition and should not be recorded at acquisition. It
      applies to any loan acquired in a transfer that showed evidence of credit
      quality deterioration since it was made. This new standard had no effect
      on the Corporation's financial statements and results of operations.

      In May of 2005, the FASB issued statement 154, "Accounting Changes and
      Error Corrections," that provides guidance on reporting of accounting
      changes and correction of errors made in fiscal years beginning after the
      date of this statement. First Financial Corporation has adopted statement
      154. The adoption of this statement had no effect on the financial
      statements included herein.

      In November of 2005, the FASB issued a staff position that amended FASB
      statement No. 115, "Accounting for Certain Investments in Debt and Equity
      Securities." This amendment addresses the measurement, accounting and
      disclosures for securities that have been recognized to be other than
      temporarily impaired as well as those that have not been recognized as
      other-than-temporarily impaired. First Financial Corporation has adopted
      these amendments that have had no effect on the financial statements
      included herein.

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

2.    FAIR VALUES OF FINANCIAL INSTRUMENTS:

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

      Fair values for impaired loans are estimated using discounted cash flow
      analysis or underlying collateral values. Fair value of debt is based on
      current rates for similar financing.

      The 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,
                                                  ------------------------------------------------------------
                                                              2005                            2004
                                                  ----------------------------    ----------------------------
                                                   CARRYING           FAIR         CARRYING           FAIR
(Dollar amounts in thousands)                        VALUE            VALUE          VALUE            VALUE
-----------------------------                     -----------      -----------    -----------      -----------
<S>                                               <C>              <C>            <C>              <C>
Cash and due from banks                           $    78,201      $    78,201    $    94,928      $    94,928
Federal funds sold                                      2,982            2,982          5,400            5,400
Securities available-for-sale                         536,291          536,291        507,990          507,990
Loans, net                                          1,379,699        1,371,835      1,443,953        1,448,791
Accrued interest receivable                            12,537           12,537         12,016           12,016
Deposits                                           (1,464,918)      (1,469,670)    (1,443,121)      (1,449,322)
Short-term borrowings                                 (26,224)         (26,224)       (75,527)         (75,527)
Federal Home Loan Bank advances                      (337,266)        (338,849)      (337,886)        (341,148)
Other borrowings                                       (6,600)          (6,600)       (24,600)         (24,600)
Accrued interest payable                               (3,692)          (3,692)        (3,142)          (3,142)
</TABLE>

                                       14



<PAGE>


                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.    RESTRICTIONS ON CASH AND DUE FROM BANKS:

      Certain affiliate banks are required to maintain average reserve balances
      with the Federal Reserve Bank that do not earn interest. The amount of
      those reserve balances was approximately $2.1 million and $33.2 million at
      December 31, 2005 and 2004, respectively.

4.    SECURITIES:

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

<TABLE>
<CAPTION>

                                                              DECEMBER 31, 2005
                                               ------------------------------------------------
                                                                  UNREALIZED
                                               AMORTIZED    ---------------------         FAIR
(Dollar amounts in thousands)                    COST        GAINS        LOSSES         VALUE
-----------------------------                  ---------    --------     ---------      --------
<S>                                            <C>          <C>          <C>           <C>
U.S. Government sponsored entity
   mortgage-backed securities and agencies     $306,697     $    787     $ (6,081)     $301,403
Collateralized mortgage obligations               2,357            7           (4)        2,360
State and municipal                             129,916        4,543         (414)      134,045
Corporate obligations                            89,740          534          (50)       90,224
Equities                                          4,410        3,849           --         8,259
                                               --------     --------     --------      --------
          TOTAL                                $533,120     $  9,720     $ (6,549)     $536,291
                                               ========     ========     ========      ========
</TABLE>


<TABLE>
<CAPTION>


                                                              DECEMBER 31, 2004
                                               ------------------------------------------------
                                                                 UNREALIZED
                                               AMORTIZED    ---------------------       FAIR
(Dollar amounts in thousands)                     COST       GAINS        LOSSES        VALUE
-----------------------------                  ---------    --------     --------     --------
<S>                                            <C>          <C>          <C>          <C>
U.S. Government sponsored entity
   mortgage-backed securities and agencies     $ 227,927    $  2,573     $ (1,472)    $229,028
Collateralized mortgage obligations               19,895          12          (41)
                                                                                        19,866
State and municipal                              137,206       7,263         (175)     144,294
Corporate obligations                            104,754       1,333          (10)     106,077
Equities                                           4,280       4,445           --        8,725
                                               ---------    --------     --------     --------
          TOTAL                                $ 494,062    $ 15,626     $ (1,698)    $507,990
                                               =========    ========     ========     ========
</TABLE>


      As of December 31, 2005, the Corporation does not have any securities from
      any issuer, other than the U.S. Government, with an aggregate book or fair
      value that exceeds ten percent of shareholders' equity.

      Securities with a carrying value of approximately $54.7 million and $33.0
      million at December 31, 2005 and 2004, respectively, were pledged as
      collateral for short-term borrowings and for other purposes.

      Below is a summary of the gross gains and losses realized by the
      Corporation on investment sales during the years ended December 31, 2005,
      2004 and 2003, respectively.

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                   2005         2004         2003
-----------------------------                 --------     --------     --------
<S>                                           <C>          <C>          <C>
Proceeds                                      $ 11,376     $ 11,466     $  8,308
Gross gains                                        537          409          237
Gross losses                                        --           --           --
</TABLE>

      Additional gains of $34 thousand in 2005 and $47 thousand in 2004 resulted
      from redemption premiums on called securities.

      The Corporation evaluates securities for other-than-temporary impairment
      on a quarterly basis. Factors considered include length of time impaired,
      reason for impairment, outlook and the Corporation's ability to hold the
      investment to allow for recovery of fair value. There were no securities
      considered to be other-than-temporarily impaired at December 31, 2005. At
      December 31, 2004, the Corporation had one security that it considered to
      be other-than-temporarily impaired, and the Corporation wrote down the
      value of the investment by $621 thousand to its fair value and
      subsequently sold the security.

                                       15



<PAGE>
                          FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Contractual maturities of debt securities at year-end 2005 were as
      follows. Securities not due at a single maturity or with no maturity date,
      primarily mortgage-backed and equity securities, are shown separately.

<TABLE>
<CAPTION>

                                                            AVAILABLE-FOR-SALE
                                                          ----------------------
                                                          AMORTIZED       FAIR
(Dollar amounts in thousands)                                COST        VALUE
-----------------------------                             ---------     --------
<S>                                                        <C>          <C>
Due in one year or less                                    $ 42,057     $ 42,304
Due after one but within five years                         104,704      107,242
Due after five but within ten years                          35,626       37,450
Due after ten years                                          45,973       46,095
                                                           --------     --------
                                                            228,360      233,091
Mortgage-backed securities and equities                     304,760      303,200
                                                           --------     --------
 TOTAL                                                     $533,120     $536,291
                                                           ========     ========
</TABLE>


      The following tables show the securities' gross unrealized losses and fair
      value, aggregated by investment category and length of time that
      individual securities have been in continuous unrealized loss position, at
      December 31, 2005 and 2004.







<TABLE>
<CAPTION>

                                                                           DECEMBER 31, 2005
                                             ------------------------------------------------------------------------------
                                               LESS THAN 12 MONTHS        MORE THAN 12 MONTHS               TOTAL
                                             ------------------------   ------------------------   ------------------------
                                                           UNREALIZED                 UNREALIZED                 UNREALIZED
(Dollar amounts in thousands)                FAIR VALUE      LOSSES     FAIR VALUE      LOSSES     FAIR VALUE      LOSSES
-----------------------------                ----------    ----------   ----------    ----------   ----------    ----------
<S>                                          <C>           <C>          <C>           <C>          <C>           <C>
U.S. Government sponsored entity
  mortgage-backed securities and agencies     $206,666     $ (4,250)     $ 57,222     $ (1,831)     $263,888     $ (6,081)
Collateralized mortgage obligations                904           (2)        1,334           (2)        2,238           (4)
State and municipal obligations                 14,509         (240)        8,994         (174)       23,503         (414)
Corporate obligations                              698           (2)          950          (48)        1,648          (50)
                                              --------     --------      --------     --------      --------     --------
  Total temporarily impaired securities       $222,777     $ (4,494)     $ 68,500     $ (2,055)     $291,277     $ (6,549)
                                              ========     ========      ========     ========      ========     ========
</TABLE>


<TABLE>
<CAPTION>

                                                                           DECEMBER 31, 2004
                                             ------------------------------------------------------------------------------
                                               LESS THAN 12 MONTHS        MORE THAN 12 MONTHS               TOTAL
                                             ------------------------   ------------------------   ------------------------
                                                           UNREALIZED                 UNREALIZED                 UNREALIZED
(Dollar amounts in thousands)                FAIR VALUE      LOSSES     FAIR VALUE      LOSSES     FAIR VALUE      LOSSES
-----------------------------                ----------    ----------   ----------    ----------   ----------    ----------
<S>                                          <C>           <C>          <C>           <C>          <C>           <C>
U.S. Government sponsored entity
   mortgage-backed securities and agencies    $ 72,754     $   (497)     $ 40,497     $   (975)     $113,251     $ (1,472)
Collateralized mortgage obligations             17,059          (41)           --           --        17,059          (41)
State and municipal obligations                 12,979         (110)          428          (65)       13,407         (175)
Corporate obligations                            2,000           (5)        1,506           (5)        3,506          (10)
                                              --------     --------      --------     --------      --------     --------
   Total temporarily impaired securities      $104,792     $   (653)     $ 42,431     $ (1,045)     $147,223     $ (1,698)
                                              ========     ========      ========     ========      ========     ========
</TABLE>

      These losses represent negative adjustments to market value relative to
      the rate of interest paid on the securities and not losses related to the
      creditworthiness of the issuer. Management has the intent and ability to
      hold for the foreseeable future and believes the value will recover as the
      securities approach maturity or market rates change.

                                       16
<PAGE>


                               2005 ANNUAL REPORT

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.    LOANS:

      Loans are summarized as follows:

<TABLE>
<CAPTION>

                                                            DECEMBER 31,
                                                   ----------------------------
(Dollar amounts in thousands)                         2005             2004
                                                   -----------      -----------
<S>                                                <C>              <C>
Commercial, financial and agricultural             $   382,214      $   401,724
Real estate - construction                              31,918           32,810
Real estate - mortgage                                 707,008          753,826
Installment                                            272,062          272,261
Lease financing                                          2,845            3,658
                                                   -----------      -----------
  Total gross loans                                  1,396,047        1,464,279
  Less: unearned income                                   (306)            (408)
  Allowance for loan losses                            (16,042)         (19,918)
                                                   -----------      -----------
          TOTAL                                    $ 1,379,699      $ 1,443,953
                                                   ===========      ===========
</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 2005 the
      aggregate dollar amount of these loans to directors and executive officers
      who held office at the end of the year amounted to $34.1 million at the
      beginning of the year. During 2005, advances of $19.6 million, repayments
      of $30.5 million and changes to persons included of $(1.2) million were
      made with respect to related party loans for an aggregate dollar amount
      outstanding of $22.0 million at December 31, 2005.

      Loans serviced for others, which are not reported as assets, total $416.6
      million and $391.9 million at year-end 2005 and 2004.

      Activity for capitalized mortgage servicing rights (included in other
      assets) and the related valuation allowance was as follows:

<TABLE>
<CAPTION>


                                                        DECEMBER 31,
                                              ---------------------------------
(Dollar amounts in thousands)                  2005         2004         2003
-----------------------------                 -------      -------      -------
<S>                                           <C>          <C>          <C>
Servicing rights:
   Beginning of year                          $ 2,960      $ 3,114      $ 2,548
   Additions                                      735          631        1,961
   Amortized to expense                          (764)        (785)      (1,395)
                                              -------      -------      -------
   End of year                                $ 2,931      $ 2,960      $ 3,114
                                              =======      =======      =======

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


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

6.    ALLOWANCE FOR LOAN LOSSES:

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

<TABLE>
<CAPTION>

                                                            DECEMBER 31,
                                               ------------------------------------
(Dollar amounts in thousands)                    2005          2004          2003
-----------------------------                  --------      --------      --------
<S>                                            <C>           <C>           <C>
Balance at beginning of year                   $ 19,918      $ 21,239      $ 21,249
Provision for loan losses                        11,698         8,292         7,455
Recoveries of loans previously charged off        1,918         1,771         1,475
Loans charged off                               (17,492)      (11,384)       (8,940)
                                               --------      --------      --------
      BALANCE AT END OF YEAR                   $ 16,042      $ 19,918      $ 21,239
                                               ========      ========      ========
</TABLE>


                                       17
<PAGE>
                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Impaired loans were as follows:


<TABLE>
<CAPTION>

                                                                     DECEMBER 31,
                                                               -----------------------
(Dollar amounts in thousands)                                    2005           2004
-----------------------------                                  ---------     ---------
<S>                                                            <C>           <C>
Year-end loans with no allocated allowance for loan losses     $     500     $   2,582
Year-end loans with allocated allowance for loan losses            3,622        16,240
                                                               ---------     ---------
      TOTAL                                                    $   4,122     $  18,822
                                                               =========     =========

Amount of the allowance for loan losses allocated              $   1,657     $   6,331
Nonperforming loans:
      Loans past due over 90 days still on accrual                 6,354         7,813
      Non-accrual loans                                            8,464        19,862
</TABLE>

      Nonperforming loans include both smaller balance homogeneous loans that
      are collectively evaluated for impairment and individually classified
      impaired loans.

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                        2005          2004          2003
-----------------------------                     ---------     ---------     ---------
<S>                                               <C>           <C>           <C>
Average of impaired loans during the year         $  11,992     $  14,794     $   8,992
Interest income recognized during impairment            126           436           583
Cash-basis interest income recognized                    11           315            --
</TABLE>

      It was not practicable to determine the amount of cash basis interest
      income recognized for 2003.

7.    PREMISES AND EQUIPMENT:

      Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>

                                                              DECEMBER 31,
                                                         ----------------------
(Dollar amounts in thousands)                              2005          2004
-----------------------------                            --------      --------
<S>                                                      <C>           <C>
Land                                                     $  5,617      $  5,617
Building and leasehold improvements                        35,290        35,102
Furniture and equipment                                    29,887        27,928
                                                         --------      --------
                                                           70,794        68,647
Less accumulated depreciation                             (39,524)      (37,493)
                                                         --------      --------
      TOTAL                                              $ 31,270      $ 31,154
                                                         ========      ========
</TABLE>

      Aggregate depreciation expense was $2.79 million, $2.62 million and $2.24
      million for 2005, 2004 and 2003, respectively.

8.    GOODWILL AND INTANGIBLE ASSETS:

      The Corporation completed its annual impairment testing of goodwill during
      the second quarter of 2005. Management does not believe any amount of the
      goodwill is impaired.

      Intangible assets subject to amortization at December 31, 2005 and 2004
      are as follows:


<TABLE>
<CAPTION>


                                             2005                            2004
                                   ---------------------------     --------------------------
                                     GROSS         ACCUMULATED       GROSS        ACCUMULATED
(Dollar amounts in thousands)        AMOUNT       AMORTIZATION       AMOUNT      AMORTIZATION
-----------------------------      ---------      ------------     ---------     ------------
<S>                                <C>             <C>             <C>             <C>
Customer list intangible           $   3,446       $   1,692       $   3,108       $   1,390
Core deposit intangible                2,193           1,117           2,193             939
Non-compete agreements                   500             470             500             379
                                   ---------       ---------       ---------       ---------
                                   $   6,139       $   3,279       $   5,801       $   2,708
                                   =========       =========       =========       =========

</TABLE>

      Aggregate amortization expense was $571 thousand, $558 thousand and $638
      thousand for 2005, 2004 and 2003, respectively.

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

<TABLE>
<CAPTION>

                                  In thousands
<S>                               <C>
                        2006       $     497
                        2007             425
                        2008             425
                        2009             425
                        2010             425
</TABLE>

                                       18
<PAGE>
                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.    DEPOSITS

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

<TABLE>
<CAPTION>

<S>                                               <C>
                               2006               $  348,575
                               2007                  166,817
                               2008                   75,671
                               2009                   32,139
                               2010                   18,094
</TABLE>

10.   SHORT-TERM BORROWINGS

      A summary of the carrying value of the Corporation's short-term borrowings
      at December 31, 2005 and 2004 is presented below:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                              2005             2004
-----------------------------                           ---------        ---------
<S>                                                     <C>              <C>
Federal funds purchased                                 $  19,032        $  69,002
Repurchase agreements                                       5,579            5,597
Other short-term borrowings                                 1,613              928
                                                        ---------        ---------
                                                        $  26,224        $  75,527
                                                        =========        =========
</TABLE>


<TABLE>
<CAPTION>


(Dollar amounts in thousands)                             2005             2004
-----------------------------                           ---------        ---------
<S>                                                     <C>              <C>
Average amount outstanding                              $  25,927        $  71,745
Maximum amount outstanding at a month end                  54,808          103,386
Average interest rate during year                            3.16%            1.46%
Interest rate at year-end                                    3.77%            2.34%
</TABLE>


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

      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.

11.   OTHER BORROWINGS:

      Other borrowings at December 31, 2005 and 2004 are summarized as follows:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                                            2005            2004
-----------------------------                                         ---------       ---------
<S>                                                                   <C>             <C>
FHLB advances                                                         $ 337,266       $ 337,886
Note payable to a financial institution                                      --          18,000
City of Terre Haute, Indiana economic development revenue bonds           6,600           6,600
                                                                      ---------       ---------
        TOTAL                                                         $ 343,866       $ 362,486
                                                                      =========       =========
</TABLE>

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

<TABLE>
<CAPTION>

<S>                                          <C>
                              2006           $    8,665
                              2007                  766
                              2008               52,632
                              2009               22,916
                              2010              257,594
                              Thereafter          1,293
                                             ----------
                                             $  343,866
                                             ==========
</TABLE>


                                       19


<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The Corporation's subsidiary banks are members of the Federal Home Loan
      Bank (FHLB) and accordingly are permitted to obtain advances. The advances
      from the FHLB, aggregating $337.3 million at December 31, 2005, accrue
      interest, payable monthly, at annual rates, primarily fixed, varying from
      3.28% to 6.60% with a weighed average rate of 5.46%. The advances are due
      at various dates through August 2017. FHLB advances are, generally, due in
      full at maturity. They are secured by eligible securities totaling $129.9
      million and a blanket pledge on real estate loan collateral. Certain
      advances may be prepaid, without penalty, prior to maturity. The FHLB can
      adjust the interest rate from fixed to variable on certain advances, but
      those advances may then be prepaid, without penalty.

      On December 31, 2004, the Corporation entered into a revolving credit loan
      agreement (Note) with a financial institution. The total principal amount
      of loans outstanding at one time under this Note could not exceed $20
      million. The Note was paid off in the third quarter of 2005. The Note bore
      an interest rate equal to the average daily federal funds rate plus 0.875%
      and adjusted daily. The Note was unsecured but required the Corporation to
      meet certain financial covenants. The Corporation complied with all its
      debt covenants. These covenants included maintaining a primary
      capital-to-assets ratio higher than 6.2%, net income that exceeded a 0.6%
      return on average assets, an allowance for loan and lease losses that did
      not fall below .75% of gross loans and dividend declarations that were not
      in excess of 42% of net income.

      The economic development revenue bonds (bonds) require periodic interest
      payments each year until maturity or redemption. The interest rate, which
      was 3.58% at December 31, 2005, and 2.0% at December 31, 2004, 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 debt agreement for the bonds requires the Corporation to meet certain
      financial covenants. These covenants require the Corporation to maintain a
      Tier I capital ratio of at least 6.2% and net income to average assets of
      0.6%. At December 31, 2005 and 2004, the Corporation was in compliance
      with all of its debt covenants.

      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 expired November 1, 2005, and was
      automatically extended for one year. 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.

12.   INCOME TAXES:

      Income tax expense is summarized as follows:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                 2005              2004           2003
-----------------------------               ---------        ---------       ---------
<S>                                         <C>              <C>             <C>
Federal:
  Currently payable                         $   6,202        $   5,884       $   8,046
  Deferred                                      1,334            1,282            (544)
                                            ---------        ---------       ---------
                                                7,536            7,166           7,502
State:
  Currently payable                                (5)             467           1,052
  Deferred                                        382              366             292
                                            ---------        ---------       ---------
                                                  377              833           1,344
                                            ---------        ---------       ---------
     TOTAL                                  $   7,913        $   7,999       $   8,846
                                            =========        =========       =========
</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)                                2005             2004             2003
-----------------------------                             ---------        ---------        ---------
<S>                                                       <C>              <C>              <C>
Federal income taxes computed at the statutory rate       $  10,839        $  12,603        $  12,369
Add (deduct) tax effect of:
  Tax exempt income                                          (2,902)          (4,889)          (3,738)
  State tax, net of federal benefit                             245              541              873
  Affordable housing credits                                   (327)            (327)            (507)
  Other, net                                                     58               71             (151)
                                                          ---------        ---------        ---------
     TOTAL                                                $   7,913        $   7,999        $   8,846
                                                          =========        =========        =========
</TABLE>
                                       20
<PAGE>
                               2005 ANNUAL REPORT

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,
         2005 and 2004, are as follows:


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                                    2005                2004
-----------------------------                                -------------      -------------
<S>                                                          <C>                <C>
Deferred tax assets:
   Loan losses provision                                     $       6,454      $       7,927
   Deferred compensation                                             4,012              3,417
   Compensated absences                                                494                481
   Post-retirement benefits                                            920                698
   State net operating loss carry forward                               78                243
   Other                                                               981                929
                                                             -------------      -------------
      GROSS DEFERRED ASSETS                                         12,939             13,695
                                                             =============      =============

Deferred tax liabilities:
   Net unrealized gains on securities available-for-sale            (1,268)            (5,571)
   Depreciation                                                     (1,440)            (1,512)
   Federal Home Loan Bank stock dividends                           (1,519)            (1,221)
   Mortgage servicing rights                                        (1,176)            (1,176)
   Pensions                                                         (2,394)            (2,048)
   Other                                                            (3,012)            (2,624)
                                                             -------------      -------------
      GROSS DEFERRED LIABILITIES                                   (10,809)           (14,152)
                                                             -------------      -------------
      NET DEFERRED TAX ASSETS (LIABILITIES)                  $       2,130      $        (457)
                                                             =============      =============
</TABLE>

13.      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 commercial 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 $270.0
         million and $245.9 million as of December 31, 2005 and 2004. In
         addition, the Corporation had outstanding commitments of $6.9 million
         and $5.3 million under commercial letters of credit as of December 31,
         2005 and 2004, respectively. The majority of these commitments bear
         variable interest rates. The Corporation is exposed to credit loss in
         the event the counterparties to such agreements do not perform in
         accordance with the agreements.

         Commitment and contingent liabilities are summarized as follows at
         December 31:


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                             2005               2004
-----------------------------                        -------------     -------------
<S>                                                  <C>               <C>
Home equity                                          $      32,338     $      32,523
Credit card lines                                           46,276            52,695
Commercial operating lines                                  24,270            15,937
Other commitments                                          169,226           147,871
                                                     -------------     -------------
                                                     $     272,110     $     249,026
Commercial letters of credit                                 6,933             5,319
</TABLE>


         The majority of commercial operating lines and home equity lines are
         variable rate, while the majority of other commitments to fund loans
         are fixed rate. Since many commitments to make loans expire without
         being used, these amounts do not necessarily represent future cash
         commitments. Collateral obtained upon exercise of the commitment is
         determined using management's credit evaluation of the borrower, and
         may include accounts receivable, inventory, property, land and other
         items. The approximate duration of these commitments is generally one
         year or less.



                                       21

<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.      RETIREMENT PLANS:

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

         Assets in the ESOP are considered in calculating the funding to the
         defined benefit plan required to provide such benefits. Any shortfall
         of benefits under the ESOP are to be provided by the defined benefit
         plan. The ESOP may provide benefits beyond those determined under the
         defined benefit plan. Contributions to the ESOP are determined by the
         Corporation's Board of Directors. The Corporation made contributions to
         the defined benefit plan of $1.41 million, $1.42 million and $1.55
         million in 2005, 2004 and 2003. The Corporation contributed $1.14
         million, $1.16 million and $1.26 million to the ESOP in 2005, 2004 and
         2003.


         The Corporation uses a measurement date of December 31, 2005.

         Pension expense included the following components:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                               2005               2004               2003
-----------------------------                          -------------      -------------      -------------
<S>                                                    <C>                <C>                <C>
Service cost -- benefits earned                        $       2,725      $       2,508      $       2,166
Interest cost on projected benefit obligation                  2,451              2,168              2,025
Expected return on plan assets                                (3,285)            (2,799)            (2,334)
Net amortization and deferral                                    229                227                240
                                                       -------------      -------------      -------------
Total pension expense                                  $       2,120      $       2,104      $       2,097
                                                       =============      =============      =============
</TABLE>


         The following information sets forth the change in projected 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>
(Dollar amounts in thousands)                                                  2005               2004
-----------------------------                                              -------------      -------------
<S>                                                                        <C>                <C>
Change in benefit obligation:
Benefit obligation at January 1                                            $      42,820      $      36,300
Service cost                                                                       2,725              2,508
Interest cost                                                                      2,451              2,168
Actuarial (gain) loss                                                             (1,831)             3,102
Benefits paid                                                                     (3,624)            (1,258)
                                                                           -------------      -------------
Benefit obligation at December 31                                                 42,541             42,820
                                                                           -------------      -------------

Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1                                            41,007             34,665
Actual return on plan assets                                                      (5,445)             5,017
Employer contributions                                                             2,550              2,583
Benefits paid                                                                     (3,624)            (1,258)
                                                                           -------------      -------------
Fair value of plan assets at December 31                                          34,488             41,007
                                                                           -------------      -------------

Funded status:
Funded status at December 31                                                      (8,053)            (1,813)
Unrecognized prior service cost                                                     (158)              (177)
Unrecognized net actuarial cost                                                   14,214              7,562
                                                                           -------------      -------------
Prepaid pension asset recognized in the consolidated balance sheets        $       6,003      $       5,572
                                                                           =============      =============
</TABLE>



                                       22
<PAGE>


                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The accumulated benefit obligation for the defined benefit pension plan
         was $34,206 and $37,202 at year-end 2005 and 2004.


<TABLE>
<S>                                                              <C>         <C>
Principal assumptions used:
Discount rate                                                    5.50%       5.75%
Rate of increase in compensation levels                          3.75        3.75
Expected long-term rate of return on plan assets                 8.00        8.00
</TABLE>


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


         PLAN ASSETS -- The Corporation's pension plan weighted-average asset
         allocation for the years 2005 and 2004 by asset category are as
         follows:


<TABLE>
<CAPTION>
                                                                      PENSION PLAN                   ESOP
                          PENSION PLAN             ESOP            PERCENTAGE OF PLAN          PERCENTAGE OF PLAN
                       TARGET ALLOCATION    TARGET ALLOCATION     ASSETS AT DECEMBER 31,      ASSETS AT DECEMBER 31,
ASSET CATEGORY               2006                  2006              2005       2004            2005        2004
--------------         -----------------    -----------------     ----------------------      ----------------------
<S>                    <C>                  <C>                   <C>         <C>             <C>           <C>
Equity securities           40-60%               100-100%              64%       63%              99%          99%
Debt securities             40-60                    0-0               35        35                0            0
Other                         0-0                    0-0                1         2                1            1
                                                                      ---       ---              ---          ---
  TOTAL                                                               100%      100%             100%         100%
</TABLE>


         The investment objective for the retirement program is to maximize
         total return without exposure to undue risk. Asset allocation favors
         equities, with a target allocation of approximately 88%. This target
         includes the Corporation's ESOP, which is 99% invested in corporate
         stock. Other investment allocations include fixed income securities and
         cash.

         Equity securities include First Financial Corporation common stock in
         the amount of $22.1 million (64 percent of total plan assets) and $30.7
         million (75 percent of total plan assets) at December 31, 2005 and
         2004, respectively.

         CONTRIBUTIONS -- The Corporation expects to contribute $1.5 million to
         its pension plan and $1.2 million to its ESOP in 2006.

         ESTIMATED FUTURE PAYMENTS -- The following benefit payments, which
         reflect expected future service, are expected:


<TABLE>
<CAPTION>
                                      PENSION BENEFITS
                              (Dollar amounts in thousands)
<S>                           <C>
2006                                 $       436
2007                                         512
2008                                         595
2009                                         708
2010                                         853
2011--2015                                 6,725
</TABLE>


         SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN -- The Corporation has
         established a Supplemental Executive Retirement Plan (SERP) for certain
         executive officers. The provisions of the SERP allow the Plan's
         participants who are also participants in the Corporation's defined
         benefit pension plan to receive supplemental retirement benefits to
         help recompense for benefits lost due to imposition of IRS limitations
         on benefits under the Corporation's tax qualified defined benefit
         pension plan. Expenses related to the plan were $193 thousand in 2005
         and $187 thousand in 2004. There was no expense recorded in connection
         with this plan in years prior to 2004. The SERP has expected benefit
         payments of $618 thousand after five years, which reflects expected
         future service. The plan is unfunded and has a measurement date of
         December 31.




                                       23

<PAGE>
                          FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Corporation also provides medical benefits to its employees
         subsequent to their retirement. The Corporation uses a measurement date
         of December 31, 2005. Accrued post-retirement benefits as of December
         31, 2005 and 2004 are as follows:


<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                       --------------------------------
(Dollar amounts in thousands)                               2005              2004
-----------------------------                          -------------      -------------
<S>                                                    <C>                <C>
Change in benefit obligation:
  Benefit obligation at January 1                      $       6,021      $       4,284
  Service cost                                                   141                 83
  Interest cost                                                  319                243
  Plan participants' contributions                               143                119
  Actuarial (gain) loss                                         (736)             1,681
  Benefits paid                                                 (388)              (389)
                                                       -------------      -------------
  Benefit obligation at December 31                    $       5,500      $       6,021
                                                       =============      =============

Reconciliation of funded status:
  Funded status                                        $       5,500      $       6,021
  Unrecognized transition obligation                            (482)              (543)
  Unrecognized net gain (loss)                                (2,726)            (3,712)
                                                       -------------      -------------
  Accrued benefit cost                                 $       2,292      $       1,766
                                                       =============      =============
</TABLE>


         The post-retirement benefits paid in 2005 and 2004 of $388 thousand and
         $389 thousand, respectively, were fully funded by company and
         participant contributions. There were no other changes to plan assets
         in 2005 and 2004.

         Weighted-average assumptions as of December 31:


<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                                    ----------------------
                                                                    2005              2004
                                                                    ----              ----
<S>                                                                 <C>               <C>
Discount rate                                                       5.50%             5.50%
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)                                  2005              2004             2003
-----------------------------                               ------------     ------------     ------------
<S>                                                         <C>              <C>              <C>
Service cost                                                $        141     $         83     $        102
Interest cost                                                        319              243              252
Amortization of transition obligation                                 60               60               60
Recognized actuarial loss                                            250              137              120
                                                            ------------     ------------     ------------
Net periodic benefit cost                                   $        770     $        523     $        534
                                                            ============     ============     ============
</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
(Dollar amounts in thousands)                                     INCREASE       DECREASE
-----------------------------                                     --------       --------
<S>                                                              <C>            <C>
Effect on total of service and interest cost components          $       58     $      (42)
Effect on post-retirement benefit obligation                            127           (113)
</TABLE>


         CONTRIBUTIONS -- The Corporation expects to contribute $294 thousand to
         its other post-retirement benefit plan in 2006.



                                       24
<PAGE>


                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         ESTIMATED FUTURE PAYMENTS -- The following benefit payments, which
         reflect expected future service, are expected:


<TABLE>
<CAPTION>
                              POST-RETIREMENT MEDICAL BENEFITS
                               (Dollar amounts in thousands)
<S>                                <C>
2006                               $         294
2007                                         312
2008                                         324
2009                                         338
2010                                         355
2011--2015                                 2,047
</TABLE>


15.      OTHER COMPREHENSIVE INCOME (LOSS):

         Other comprehensive loss components and related taxes were as follows:


<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,
                                                                                ---------------------------------------------------
(Dollar amounts in thousands)                                                        2005               2004               2003
-----------------------------                                                   -------------      -------------      -------------
<S>                                                                             <C>                <C>
Unrealized holding gains and (losses) on securities available-for-sale          $     (10,186)     $      (5,347)     $      (4,450)
Reclassification adjustments for (gains) and losses later
   recognized in income                                                                  (571)               165               (237)
                                                                                -------------      -------------      -------------
Net unrealized gains and losses                                                       (10,757)            (5,182)            (4,687)
Tax effect                                                                              4,303              2,076              1,874
                                                                                -------------      -------------      -------------
Other comprehensive income (loss)                                               $      (6,454)     $      (3,106)     $      (2,813)
                                                                                =============      =============      =============
</TABLE>


16.      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, 2005,
         approximately $25.8 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 and Banks 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
         and Banks' 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 and Banks 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, 2005 and 2004, that the Corporation meets all capital adequacy
         requirements to which it is subject.

         As of December 31, 2005, the most recent notification from the
         respective regulatory agencies categorized the subsidiary banks as well
         capitalized under the regulatory framework for prompt corrective
         action. To be categorized as well capitalized, the banks 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 banks' category.

         The following table presents the actual and required capital amounts
         and related ratios for the Corporation and the lead bank, First
         Financial Bank, N.A., at year end 2005 and 2004.



                                       25
<PAGE>

                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                          TO BE WELL CAPITALIZED
                                                                            FOR CAPITAL                   UNDER PROMPT CORRECTIVE
                                               ACTUAL                     ADEQUACY PURPOSES                 ACTION PROVISIONS
                                   ----------------------------     ----------------------------       ---------------------------
(Dollar amounts in thousands)          AMOUNT            RATIO         AMOUNT              RATIO         AMOUNT             RATIO
------------------------------     -----------          -------     -----------            -----       ---------           -------
<S>                                <C>                  <C>         <C>                    <C>         <C>                 <C>
TOTAL RISK-BASED CAPITAL
  Corporation -- 2005              $   273,207           16.99%     $   128,637             8.0%             N/A             N/A
  Corporation -- 2004                  269,405           16.55%         130,239             8.0%             N/A             N/A
  First Financial Bank -- 2005         262,282           17.09%         122,804             8.0%         153,506            10.0%
  First Financial Bank -- 2004         243,390           17.09%         113,956             8.0%         142,445            10.0%

TIER I RISK-BASED CAPITAL
  Corporation -- 2005              $   257,165           15.99%     $    64,319             4.0%             N/A             N/A
  Corporation -- 2004                  249,487           15.32%          65,120             4.0%             N/A             N/A
  First Financial Bank -- 2005         248,727           16.20%          61,402             4.0%          92,103             6.0%
  First Financial Bank -- 2004         227,880           16.00%          56,978             4.0%          85,467             6.0%

TIER I LEVERAGE CAPITAL
  Corporation -- 2005              $   257,165           11.89%     $    86,532             4.0%             N/A             N/A
  Corporation -- 2004                  249,487           11.42%          87,391             4.0%             N/A             N/A
  First Financial Bank -- 2005         248,727           11.94%          83,355             4.0%         104,194             5.0%
  First Financial Bank -- 2004         227,880           11.82%          77,143             4.0%          96,429             5.0%
</TABLE>


17.      PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:

         The parent company's condensed balance sheets as of December 31, 2005
         and 2004, and the related condensed statements of income and cash flows
         for each of the three years in the period ended December 31, 2005, are
         as follows:


CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,
                                                                                          -------------------------------
(Dollar amounts in thousands)                                                                  2005              2004
-----------------------------                                                             -------------     -------------
<S>                                                                                       <C>               <C>
ASSETS
  Cash deposits in affiliated banks                                                       $       8,364     $       9,710
  Investments in subsidiaries                                                                   267,335           282,435
  Land and headquarters building, net                                                             6,244             6,156
  Other                                                                                           8,613             9,709
                                                                                          -------------     -------------
    TOTAL ASSETS                                                                          $     290,556     $     308,010
                                                                                          =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Borrowings                                                                              $      10,636     $      28,636
  Dividends payable                                                                               5,603             5,414
  Other liabilities                                                                               4,994             5,625
                                                                                          -------------     -------------
    TOTAL LIABILITIES                                                                            21,233            39,675
SHAREHOLDERS' EQUITY                                                                            269,323           268,335
                                                                                          -------------     -------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                            $     290,556     $     308,010
                                                                                          =============     =============
</TABLE>



                                       26
<PAGE>
                               2005 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


        CONDENSED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                               ------------------------------------------------
(Dollar amounts in thousands)                                                      2005             2004             2003
-----------------------------                                                  ------------     -------------     -------------
<S>                                                                            <C>              <C>               <C>
    Dividends from subsidiaries                                                $     33,828     $      13,670     $      12,418
    Other income                                                                      1,013               967             1,006
    Interest on borrowings                                                             (943)             (703)             (663)
    Other operating expenses                                                         (3,017)           (2,931)           (2,759)
                                                                               ------------     -------------     -------------

    Income before income taxes and equity
        in undistributed earnings of subsidiaries                                   30,881            11,003            10,002
      Income tax benefit                                                             1,177               909               907
                                                                               ------------     -------------     -------------
        Income before equity in undistributed
        earnings of subsidiaries                                                    32,058            11,912            10,909

    Equity in undistributed earnings of subsidiaries                                (9,004)           16,097            15,584
                                                                               ------------     -------------     -------------
        Net income                                                             $     23,054     $      28,009     $      26,493
                                                                               ============     =============     =============
</Table>


        CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                              ------------------------------------------------
(Dollar amounts in thousands)                                                      2005              2004              2003
-----------------------------                                                 ------------      ------------      ------------
<S>                                                                           <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                    $     23,054      $     28,009      $     26,493
    Adjustments to reconcile net income to net cash
        provided by operating activities:
            Provision for depreciation and amortization                                258               206               215
            Equity in undistributed earnings of subsidiaries                         9,004           (16,097)          (15,584)
            Contribution of shares to ESOP                                           1,144             1,163             1,256
            Increase (decrease) in other liabilities                                   479               416             1,626
            (Increase) decrease in other assets                                       (392)              869               852
                                                                              ------------      ------------      ------------
                NET CASH FROM OPERATING ACTIVITIES                                  33,547            14,566            14,858

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of furniture and fixtures                                                (325)               --               (34)
                                                                              ------------      ------------      ------------
                NET CASH FROM INVESTING ACTIVITIES                                    (325)               --               (34)
                                                                              ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from borrowings                                                            --                --            18,236
    Principal payments on long-term borrowings                                     (18,000)               --           (19,500)
    Purchase of treasury stock                                                      (5,789)           (2,330)           (2,123)
    Dividends paid                                                                 (10,779)          (10,155)           (8,845)
                                                                              ------------      ------------      ------------
                NET CASH FROM FINANCING ACTIVITIES                                 (34,568)          (12,485)          (12,232)
                                                                              ------------      ------------      ------------
                NET (DECREASE) INCREASE IN CASH                                     (1,346)            2,081             2,592
                CASH, BEGINNING OF YEAR                                              9,710             7,629             5,037
                                                                              ------------      ------------      ------------
                CASH, END OF YEAR                                             $      8,364      $      9,710      $      7,629
                                                                              ============      ============      ============

    Supplemental disclosures of cash flow information:
    Cash paid during the year for:
        Interest                                                              $        938      $        678      $        663
                                                                              ============      ============      ============
        Income taxes                                                          $      5,413      $      6,501      $      8,016
                                                                              ============      ============      ============
</TABLE>



                                       27
<PAGE>
                           FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.      SELECTED QUARTERLY DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                                     2005
                                   -------------------------------------------------------------------------
                                                               NET       PROVISION
                                   INTEREST     INTEREST     INTEREST     FOR LOAN       NET      NET INCOME
(Dollar amounts in thousands)       INCOME      EXPENSE       INCOME       LOSSES       INCOME     PER SHARE
-----------------------------      --------     --------     --------    ---------     --------   ----------
<S>                                <C>          <C>          <C>          <C>          <C>          <C>
March 31                           $ 29,365     $ 11,022     $ 18,343     $  2,223     $  6,311     $    .48
June 30                            $ 29,776     $ 11,498     $ 18,278     $  3,783     $  4,992     $    .37
September 30                       $ 30,893     $ 12,208     $ 18,685     $  2,608     $  6,323     $    .46
December 31                        $ 31,613     $ 12,741     $ 18,872     $  3,084     $  5,428     $    .41
</Table>


<Table>
<Caption>
                                                                     2004
                                   -------------------------------------------------------------------------
                                                               NET       PROVISION
                                   INTEREST     INTEREST     INTEREST     FOR LOAN       NET      NET INCOME
(Dollar amounts in thousands)       INCOME      EXPENSE       INCOME       LOSSES       INCOME     PER SHARE
-----------------------------      --------     --------     --------    ---------     --------   ----------
<S>                                <C>          <C>          <C>          <C>          <C>          <C>
March 31                           $ 29,276     $ 11,343     $ 17,933     $  1,923     $ 10,685     $    .79
June 30                            $ 28,825     $ 11,072     $ 17,753     $  1,923     $  6,329     $    .47
September 30                       $ 29,021     $ 11,174     $ 17,847     $  2,223     $  5,975     $    .44
December 31                        $ 29,766     $ 11,097     $ 18,669     $  2,223     $  5,020     $    .37
</TABLE>


         In the first quarter of 2004, the Corporation realized $4.1 million of
         income from gain on a life insurance benefit.


                                   ----------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS

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, 2005 and 2004, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2005. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Financial Corporation as of December 31, 2005 and 2004, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2005, in conformity with U.S. generally accepted accounting
principles.

         We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of First
Financial Corporation's internal control over financial reporting as of December
31, 2005, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report, dated February 21, 2006, expressed an unqualified
opinion thereon.



/s/ Crowe Chizek and Company LLC
Indianapolis, Indiana
February 21, 2006





                                       28
<PAGE>

                               2005 ANNUAL REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING


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

         We have audited management's assessment, included in the accompanying
"Report on Internal Control Over Financial Reporting," that First Financial
Corporation (Corporation) maintained effective internal control over financial
reporting as of December 31, 2005, based on criteria established in "Internal
Control--Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). First Financial Corporation's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Corporation's
internal control over financial reporting based on our audit.

         We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

         A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U. S.
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.

         Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

         In our opinion, management's assessment that First Financial
Corporation maintained effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on criteria
established in "Internal Control--Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Also in our
opinion, First Financial Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2005,
based on criteria established in "Internal Control--Integrated Framework" issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

         We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets as of December 31, 2005 and 2004, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 2005 of First Financial Corporation and our report
dated February 21, 2006 expressed an unqualified opinion.


/s/ Crowe Chizek and Company LLC
Indianapolis, Indiana
February 21, 2006



                                       29
<PAGE>

                           FIRST FINANCIAL CORPORATION

MANAGEMENT'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING


The management of First Financial Corporation (the "Corporation") has prepared
and is responsible for the preparation and accuracy of the consolidated
financial statements and related financial information included in the Annual
Report.

The management of the Corporation is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The
Corporation's internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The Corporation's internal control
over financial reporting includes those policies and procedures that: (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Corporation; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Corporation are being made only in accordance with authorizations of
management and directors of the Corporation; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Corporation's assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management assessed the Corporation's system of internal control over financial
reporting as of December 31, 2005, in relation to criteria for effective
internal control over financial reporting as described in "Internal
Control--Integrated Framework," issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management
concluded that, as of December 31, 2005, its system of internal control over
financial reporting is effective and meets the criteria of the "Internal
Control--Integrated Framework."

Crowe Chizek and Company LLC, independent registered public accounting firm, has
issued an attestation report dated February 21, 2006 on management's assessment
of the Corporation's internal control over financial reporting.


MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis reviews the financial condition of First
Financial Corporation at December 31, 2005 and 2004, and the results of its
operations for the three years ended December 31, 2005. Where appropriate,
factors that may affect future financial performance are also discussed. The
discussion should be read in conjunction with the accompanying consolidated
financial statements, related footnotes and selected financial data.

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

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




                                       30
<PAGE>
                               2005 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

First Financial Corporation (the Corporation) is a financial services company.
The Corporation, which is headquartered in Terre Haute, Ind., offers a wide
variety of financial services including commercial, mortgage and consumer
lending, lease financing, trust account services and depositor services through
its three subsidiaries. At the close of business in 2005 the Corporation and its
subsidiaries had 808 full-time equivalent employees.

First Financial Bank is the largest bank in Vigo County, Ind. It operates 12
full-service banking branches within the county; five in Clay County, Ind.; one
in Greene County, Ind.; two in Knox County, Ind.; five in Parke County, Ind.;
five in Sullivan County, Ind.; four in Vermillion County, Ind.; one in Clark
County, Ill.; one in Coles County, Ill.; three in Crawford County, Ill.; one in
Jasper County, Ill.; two in Lawrence County, Ill.; two in Richland County, Ill.;
one in Vermilion County, Ill.; and one in Wayne County, Ill. 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. Morris
Plan has one office and is located in Vigo County.

First Financial Bank and Morris Plan face competition from other financial
institutions. These competitors consist of commercial banks, a mutual savings
bank and other financial institutions, including consumer finance companies,
insurance companies, brokerage firms and credit unions.

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 62 professionals and over 85 years of successful service
to both businesses and households in their market area. The agency has
representation agreements with more than 40 regional and national insurers to
market their products of property and casualty insurance, surety bonds, employee
benefit plans, life insurance and annuities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

     ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses represents
     management's estimate of losses inherent in the existing loan portfolio.
     The allowance for loan losses is increased by the provision for loan losses
     charged to expense and reduced by loans charged off, net of recoveries. The
     allowance for loan losses is determined based on management's assessment of
     several factors: reviews and evaluations of specific loans, changes in the
     nature and volume of the loan portfolio, current economic conditions and
     the related impact on segments of the loan portfolio, historical loan loss
     experience and the level of classified and nonperforming loans.

     Loans are considered impaired if, based on current information and events,
     it is probable that the Corporation will be unable to collect the scheduled
     payments of principal or interest according to the contractual terms of the
     loan agreement. When a loan is deemed impaired, impairment is measured by
     using the fair value of underlying collateral, the present value of the
     future cash flows discounted at the effective interest rate stipulated in
     the loan agreement, or the estimated market value of the loan. In measuring
     the fair value of the collateral, management uses assumptions (e.g.,
     discount rate) and methodologies (e.g., comparison to the recent selling
     price of similar assets) consistent with those that would be utilized by
     unrelated third parties.

     Changes in the financial condition of individual borrowers, economic
     conditions, historical loss experience, or the condition of the various
     markets in which collateral may be sold may affect the required level of
     the allowance for loan losses and the associated provision for loan losses.
     Should cash flow assumptions or market conditions change, a different
     amount may be recorded for the allowance for loan losses and the associated
     provision for loan losses.

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

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

                                       31

<PAGE>


                          FIRST FINANCIAL CORPORATION

RESULTS OF OPERATIONS -- SUMMARY FOR 2005

     Net income for 2005 was $23.1 million, or $1.72 per share. This represents
     a 17.7% decrease in net income and a 16.9% decrease in earnings per share,
     compared to 2004. 2004 net income was favorably affected by $4.1 million in
     life insurance proceeds, which increased 2004 earnings per share by $.30.

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.

     Net interest income increased $2 million to $74.2 million in 2005. Total
     average interest-earning assets decreased to $2.01 billion in 2005 from
     $2.04 billion in 2004. The tax-equivalent yield on these assets increased
     to 6.28% in 2005 from 6.00% in 2004. Total average interest-bearing
     liabilities of $1.74 billion in 2004 decreased to $1.71 billion in 2005.
     The average cost of these interest-bearing liabilities increased to 2.77%
     in 2005 from 2.56% in 2004.

     The net interest margin increased from 3.81% in 2004 to 3.92% in 2005. This
     increase is primarily the result of the increased yield on earning assets
     having a larger impact than the increased cost of interest-bearing
     liabilities. Earning assets yields increased 28 basis points while the cost
     of interest-bearing liabilities increased by 21 basis points. The costs of
     funding earning assets were reduced as more funding was provided by lower
     cost deposits, including non-interest bearing deposits, than borrowings in
     2005 compared to 2004.

     The following table sets forth the components of net interest income due to
     changes in volume and rate. The table information compares 2005 to 2004 and
     2004 to 2003.

<TABLE>
<CAPTION>
                                                        2005 COMPARED TO 2004                    2004 COMPARED TO 2003
                                                      INCREASE (DECREASE) DUE TO               INCREASE (DECREASE) DUE TO
                                                  -------------------------------------   -------------------------------------
                                                                       VOLUME/                                 VOLUME/
(Dollar amounts in thousands)                      VOLUME    RATE       RATE     TOTAL    VOLUME      RATE      RATE     TOTAL
----------------------------------------------    -------   -------   --------  -------   -------   -------   --------  -------
<S>                                               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Interest earned on interest-earning
assets:
  Loans (1)(2)                                    $  (726)  $ 4,592   $   (37)  $ 3,829   $ 2,473   $(7,717)  $  (194)  $(5,438)
    securities                                       (564)    2,129       (78)    1,487      (541)      147        (5)     (399)
  Tax-exempt investment
    securities(2)                                    (835)     (947)       56    (1,726)   (1,593)     (413)       42    (1,964)
  Federal funds sold                                  212        45       189       446       (25)       47       (24)       (2)
                                                  -------   -------   -------   -------   -------   -------   -------   -------
Total interest income                              (1,913)    5,819       130     4,036      (314)   (7,936)     (181)   (7,803
                                                  -------   -------   -------   -------   -------   -------   -------   -------
Interest paid on interest-bearing liabilities:
  Transaction accounts                                206     2,804       149     3,159       460      (816)      (87)     (443)
  Time deposits                                        16       314        --       330    (2,298)     (544)       55    (2,787)
  Short-term borrowings                              (653)    1,169      (750)     (234)      448        68        70       586
  Other borrowings                                 (1,054)      614       (32)     (472)     (847)      (50)        2      (895)
                                                  -------   -------   -------   -------   -------   -------   -------   -------
Total interest expense                             (1,485)    4,901      (633)    2,783    (2,237)   (1,342)       40    (3,539)
                                                  -------   -------   -------   -------   -------   -------   -------   -------
Net interest income                               $  (428)  $   918   $   763   $ 1,253   $ 2,551   $(6,594)  $  (221)  $(4,264)
                                                  =======   =======   =======   =======   =======   =======   =======   =======
</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%.

                                       32
<PAGE>


                               2005 ANNUAL REPORT

RESULTS OF OPERATIONS -- SUMMARY FOR 2005

PROVISION FOR LOAN LOSSES

     The provision for loan losses charged to expense is based upon credit loss
     experience and the results of a detailed analysis estimating an appropriate
     and adequate allowance for loan losses. The analysis includes the
     evaluation of impaired loans as prescribed under Statement of Financial
     Accounting Standards (SFAS) Nos. 114 and 118, pooled loans as prescribed
     under SFAS No. 5, and economic and other risk factors as outlined in
     various Joint Interagency Statements issued by the bank regulatory
     agencies. For the year ended December 31, 2005, the provision for loan
     losses was $11.7 million, an increase of $3.4 million, or 41.1%, compared
     to 2004. The increase was the result of several components related to the
     analysis of the Corporation's Allowance for Loan and Lease Losses.

     Although net charge-offs for 2005 were $15.6 million as compared to $9.6
     million for 2004, classified credits were reduced by $12.5 million, or
     17.3%, from prior year totals and nonperforming loans decreased by $13.2
     million. During the year commercial and real estate credits were identified
     for sale and written down to realizable value. This caused both an increase
     in provision for loan losses as well as decreased nonperforming loans and
     classified credits. Changes in bankruptcy statutes increased the amount of
     charge-offs of consumer credits in the second half of 2005. At December 31,
     2005, the resulting allowance for loan losses was $16.0 million or 1.15% of
     total loans, net of unearned income. A year earlier the allowance was $19.9
     million or 1.36% of total loans.

NON-INTEREST INCOME

     Non-interest income of $32.0 million decreased $3.8 million from the $35.8
     million earned in 2004. Excluding the $4.1 million non-taxable gain on life
     insurance benefit realized in 2004, the non-interest income is up by $384
     thousand. Increased gains on loan and security sales were partially offset
     by reduced income from insurance commissions and trust fees.

NON-INTEREST EXPENSES

     Non-interest expenses totaled $63.5 million for 2005 compared to $63.7
     million for 2004. Salaries and employee benefits increased $741 thousand or
     2.0%. Occupancy expense decreased 2.8% or $108 thousand while equipment
     expense increased by 7.7% or $276 thousand. All other expenses decreased to
     $17.3 million from $18.3 million in 2004. Consolidation of affiliate banks,
     which has contributed to the control of non-interest expenses, was
     completed in the third quarter of 2005.

INCOME TAXES

     The Corporation's federal income tax provision was $7.9 million in 2005
     compared to a provision of $8.0 million in 2004. The overall effective tax
     rate in 2004 of 22.2% compares to a 2005 effective rate of 25.6%. The life
     insurance benefit received in 2004 was not subject to income tax, thereby
     reducing the effective tax rate.


COMPARISON OF 2004 TO 2003

     Net income for 2004 was $28.0 million or $2.07 per share compared to $26.5
     million in 2003 or $1.95 per share. This increased income was primarily the
     result of increased non-interest income in 2004 from a gain on life
     insurance benefit of $4.1 million. Total average interest-earning assets
     decreased $1.8 million in 2004 from $2.04 billion in 2003. The tax
     equivalent net interest margin decreased to 3.81% in 2004 from 4.02% in
     2003. This decrease is primarily the result of funding costs decreasing at
     a slower rate than the yield on earning assets.

     The provision for loan losses increased $837 thousand from $7.5 million in
     2003 to $8.3 million in 2004, and net charge-offs increased $2.1 million
     from $7.5 million in 2003 to $9.6 million in 2004.

     There was a $3.7 million improvement in net non-interest income and expense
     from 2003 to 2004. Non-interest expenses increased $1.2 million while
     non-interest income increased $4.9 million. The majority of this increase
     in non-interest income was the result of the gain on life insurance benefit
     of $4.1 million realized in 2004.

     The provision for income taxes fell $847 thousand from 2003 to 2004,
     reducing the effective tax rate from 25.0% in 2003 to 22.2% in 2004. This
     decrease in the effective tax rate was the result of the increase in
     non-taxable income from the gain on life insurance benefit realized in
     2004. Without this gain the effective tax rate would have been 25.1%.

                                       33


<PAGE>


                          FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

     The Corporation's total assets decreased 2.2% or $47.1 million at December
     31, 2005, from a year earlier. Available-for-sale securities increased
     $28.3 million at December 31, 2005, from the previous year. Loans, net of
     unearned income, decreased by $68.3 million, to $1.40 billion. Deposits
     increased $21.8 million while borrowings decreased by $67.9 million.

     Total shareholders' equity increased $988 thousand to $269.3 million at
     December 31, 2005. Net income was partially offset by higher dividends and
     the continued repurchase of corporate stock. The Corporation had higher
     purchases of treasury stock in 2005, acquiring 203,700 shares at a cost of
     $5.8 million compared to 79,000 shares during 2004 at a cost of $2.3
     million. There were also 41,500 shares from the treasury with a value of
     $1.14 million that were contributed to the ESOP plan. Increased interest
     rates reduced other comprehensive income as the Corporation recorded a net
     unrealized loss on available-for-sale securities of $6.5 million. While
     this fluctuation in fair value decreased shareholders' equity, no loss is
     recognized in net income unless the security is actually sold or considered
     to be other-than-temporarily impaired.

     Following is an analysis of the components of the Corporation's balance
     sheet.

SECURITIES

     The Corporation's investment strategy seeks to maximize income from the
     investment portfolio while using it as a risk management tool and ensuring
     safety of principal and capital. During 2005 the portfolio's balance
     increased by 5.57%. During 2005 the Federal Reserve increased the fed funds
     rate by 2.00% to 4.25%. The average life of the portfolio was extended from
     4.00 years to 4.36 years. The portfolio structure will continue to provide
     cash flows to be reinvested during 2006.

     Year-end securities maturity schedules were comprised of the following:


<TABLE>
<CAPTION>
                                           1 YEAR AND LESS        1 TO 5 YEARS       5 TO 10 YEARS     OVER 10 YEARS
                                          ----------------------------------------------------------------------------
                                                                                                                         2005
(Dollar amounts in thousands)             BALANCE     RATE     BALANCE   RATE     BALANCE    RATE    BALANCE    RATE     TOTAL
--------------------------------------    -------     ----    --------   ----    --------    ----    -------    ----    -------
<S>                                       <C>         <C>     <C>        <C>      <C>        <C>     <C>        <C>     <C>
U.S. government sponsored
  entity mortgage-backed
  securities and agencies                 $11,759     4.28%   $284,815   4.56%   $ 4,829     5.50%        --      --%   $301,403
Collateralized mortgage obligations(1)      2,215     4.22         145   9.73         --       --         --      --       2,360
States and political subdivisions          29,760     4.24      66,383   3.25     34,591     1.63      3,311    3.31     134,045
Corporate obligations                       6,679     4.88      37,901   5.75      2,860     5.41     42,784    5.09      90,224
                                          -------             --------           -------              ------            --------
  Total                                    50,413     4.33     389,244   4.45     42,280     2.33     46,095    4.96     528,032
                                          -------             --------           -------              ------            --------
Equities                                       --       --          --     --         --       --      8,259      --       8,259
                                          -------             --------           -------              ------            --------
  TOTAL                                   $50,413             $389,244           $42,280             $54,354            $536,291
                                          =======             ========           =======             =======            ========
</TABLE>



(1)  Distribution of maturities is based on the estimated average life of the
     asset.

                                       34
<PAGE>


                               2005 ANNUAL REPORT

FINANCIAL CONDITION -- SUMMARY

LOAN PORTFOLIO

     Loans outstanding by major category as of December 31 for each of the last
     five years and the maturities at year end 2005 are set forth in the
     following analyses.

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                 2005       2004        2003        2002        2001
--------------------------------------   ----------  ----------  ---------   ----------  ----------
<S>                                      <C>         <C>         <C>         <C>         <C>
LOAN CATEGORY
Commercial, financial and agricultural   $  382,214  $  401,724  $  374,638  $  331,316  $  302,496
Real estate - construction                   31,918      32,810      35,361      42,930      34,610
Real estate - mortgage                      707,008     753,826     766,911     789,618     757,345
Installment                                 272,062     272,261     248,290     268,067     249,710
Lease financing                               2,845       3,658       4,884       1,281       5,023
                                         ----------  ----------  ----------  ----------  ----------
  TOTAL                                  $1,396,047  $1,464,279  $1,430,084  $1,433,212  $1,349,184
                                         ==========  ==========  ==========  ==========  ==========
</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                 $197,534    $151,941     $32,739  $  382,214
Real estate - construction                               17,342       7,740       6,836      31,918
                                                       --------    --------     -------  ----------
    TOTAL                                              $214,876    $159,681     $39,575     414,132
                                                       ========    ========     =======

Real estate - mortgage                                                                      707,008
Installment                                                                                 272,062
Lease financing                                                                               2,845
                                                                                         ----------
    TOTAL                                                                                $1,396,047
                                                                                         ==========
Loans maturing after one year with:
  Fixed interest rates                                             $ 59,011     $34,335
  Variable interest rates                                           100,670       5,240
                                                                   --------     -------

    TOTAL                                                          $159,681     $39,575
                                                                   ========     =======
</TABLE>

                                       35


<PAGE>


                          FIRST FINANCIAL CORPORATION

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)                   2005         2004         2003         2002         2001
-------------------------------------------     ----         ----         ----         ----         ----
<S>                                          <C>          <C>          <C>          <C>          <C>
Amount of loans outstanding
  at December 31,                            $1,396,047   $1,464,279   $1,430,084   $1,433,212   $1,349,184
                                             ==========   ==========   ==========   ==========   ==========
Average amount of loans by year              $1,441,247   $1,452,572   $1,417,026   $1,432,290   $1,315,725
                                             ==========   ==========   ==========   ==========   ==========
Allowance for loan losses
  at beginning of year                       $   19,918   $   21,239   $   21,249   $   18,313   $   19,072
  Addition resulting from acquisition                --           --           --        1,711           --
  Loans charged off:
  Commercial, financial and agricultural          6,093        4,080        2,253        4,627        4,079
  Real estate - mortgage                          2,590          623        1,101          892          557
  Installment                                     8,809        6,680        5,586        4,619        4,395
  Leasing                                            --            1           --           --           12
                                             ----------   ----------   ----------   ----------   ----------
    Total loans charged off                      17,492       11,384        8,940       10,138        9,043
                                             ----------   ----------   ----------   ----------   ----------
Recoveries of loans previously charged off:
  Commercial, financial and agricultural            284          452          432          840          819
  Real estate - mortgage                            343           37          166          110           60
  Installment                                     1,291        1,281          877          935          790
  Leasing                                            --            1           --           --           --
                                             ----------   ----------   ----------   ----------   ----------
     Total recoveries                             1,918        1,771        1,475        1,885        1,669
                                             ----------   ----------   ----------   ----------   ----------
  Net loans charged off                          15,574        9,613        7,465        8,253        7,374
     Provision charged to expense                11,698        8,292        7,455        9,478        6,615
                                             ----------   ----------   ----------   ----------   ----------
Balance at end of year                       $   16,042   $   19,918   $   21,239   $   21,249   $   18,313
                                             ==========   ==========   ==========   ==========   ==========
Ratio of net charge-offs during period
  to average loans outstanding                     1.08%         .66%         .53%         .58%         .56%
                                             ==========   ==========   ==========   ==========   ==========
</TABLE>

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

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

                                       36
<PAGE>


                               2005 ANNUAL REPORT

FINANCIAL CONDITION -- SUMMARY

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                           -------------------------------------------------------
(Dollar amounts in thousands)               2005        2004        2003        2002        2001
--------------------------------------     ------      -------     -------     -------     -------
<S>                                        <C>         <C>         <C>         <C>         <C>
Commercial, financial and agricultural     $ 8,148     $11,840     $13,844     $12,993     $11,151
Real estate -- mortgage                        867         850       1,254       1,471       1,330
Installment                                  7,027       7,228       6,141       5,856       4,489
Leasing                                         --          --          --          15          17
Unallocated                                     --          --          --         914       1,326
                                           -------     -------     -------     -------     -------
  TOTAL ALLOWANCE FOR LOAN LOSSES          $16,042     $19,918     $21,239     $21,249     $18,313
                                           =======     =======     =======     =======     =======
</TABLE>

NONPERFORMING LOANS

     Management monitors the components and status of nonperforming 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.

<TABLE>
<CAPTION>
(Dollar amounts in thousands)              2005       2004         2003       2002         2001
------------------------------------      ------     -------     -------     -------      ------
<S>                                      <C>         <C>         <C>         <C>         <C>
Non-accrual loans                        $ 8,464     $19,862     $ 8,429     $11,807     $ 8,854
Restructured loans                            57         430         542         546         590
Accruing loans past due over 90 days       6,354       7,813       5,384       5,899       4,925
                                         -------     -------     -------     -------     -------
                                         $14,875     $28,105     $14,355     $18,252     $14,369
                                         =======     =======     =======     =======     =======
</TABLE>

     The ratio of the allowance for loan losses as a percentage of nonperforming
     loans was 108% at December 31, 2005, compared to 71% in 2004. The following
     loan categories comprise significant components of the nonperforming loans
     at December 31, 2005 and 2004:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)          2005                      2004
-----------------------------          ----                      ----
Non-accrual loans:
<S>                           <C>               <C>     <C>              <C>
1-4 family residential        $ 1,118           13%     $   608            3%
Commercial loans                5,888           70       17,635           89
Installment loans               1,458           17        1,619            8
                              -------          ---      -------          ---
                              $ 8,464          100%     $19,862          100%
                              =======          ===      =======          ===
Past due 90 days or more:
1-4 family residential        $ 3,197           51%     $ 3,723           47%
Commercial loans                1,554           24        2,159           28
Installment loans               1,603           25        1,931           25
                              -------          ---      -------          ---
                              $ 6,354          100%     $ 7,813          100%
                              =======          ===      =======          ===
</TABLE>

     Non-performing loans were significantly reduced during 2005 as a result of
     sales and charge-offs of commercial credits. This also reduced the amount
     of the allowance for loan losses allocated to commercial loans.

     There are no material concentrations by industry within the nonperforming
     loans.

                                       37
<PAGE>


                          FIRST FINANCIAL CORPORATION

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, 2005, approximately $52.0 million of commercial loans are
     graded doubtful or substandard, including $8.2 million of non-accrual and
     past-due commercial loans listed on the previous page. This compares to
     $56.5 million in 2004, which included $18.7 million of non-performing
     loans. The classification of these loans, however, does not imply that
     management expects losses on each of these loans, but believes that a
     higher level of scrutiny is prudent under the circumstances. Many of these
     loans are still accruing and are, generally, performing in accordance with
     their loan agreements. However, for reasons such as previous payment
     history, bankruptcy proceedings, industry concerns or information specific
     to that borrower, it is the opinion of management that these loans require
     close monitoring.

DEPOSITS

     The information below presents the average amount of deposits and rates
     paid on those deposits for 2005, 2004 and 2003.

<TABLE>
<CAPTION>
                                             2005                 2004                  2003
                                     --------------------  ------------------   ----------------------
(Dollar amounts in thousands)          AMOUNT       RATE     AMOUNT      RATE     AMOUNT        RATE
--------------------------------     ----------     -----  ----------    ----   ----------    --------
<S>                                  <C>            <C>    <C>           <C>    <C>           <C>
Non-interest-bearing
  demand deposits                    $  153,027            $  150,944           $  177,712
Interest-bearing demand deposits        294,344      .77%     259,859     .50%     231,590         .63%
Savings deposits                        392,791     1.21%     392,635     .65%     357,989         .80%
Time deposits:
$100,000 or more                        185,436     3.11%     163,890    2.86%     197,946        2.87%
Other time deposits                     457,685     3.11%     478,706    3.04%     517,364        3.27%
                                     ----------            ----------           ----------
  TOTAL                              $1,483,283            $1,446,034           $1,482,601
                                     ==========            ==========           ==========
</TABLE>

     The maturities of certificates of deposit of $100 thousand or more
     outstanding at December 31, 2005, are summarized as follows:

<TABLE>
<CAPTION>
                                    <S>                          <C>
                                    3 months or less             $ 28,602
                                    Over 3 through 6 months        22,312
                                    Over 6 through 12 months       22,675
                                    Over 12 months                115,904
                                                                 --------
                                       TOTAL                     $189,493
                                                                 ========
</TABLE>

                                       38

<PAGE>


                               2005 ANNUAL REPORT

FINANCIAL CONDITION -- SUMMARY

OTHER BORROWINGS

     Advances from the Federal Home Loan Bank decreased to $337.3 million in
     2005 compared to $337.9 million in 2004. The Asset/Liability Committee
     reviews these investments and funding sources and considers the related
     strategies on a weekly basis. See Interest Rate Sensitivity and Liquidity
     below for more information.

CAPITAL RESOURCES

     Bank regulatory agencies have established capital adequacy standards which
     are used extensively in their monitoring and control of the industry. These
     standards relate capital to level of risk by assigning different weightings
     to assets and certain off-balance-sheet activity. As shown in the footnote
     to the consolidated financial statements ("Regulatory Matters"), the
     Corporation's capital exceeds the requirements to be considered well
     capitalized at December 31, 2005.

     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 2005 and 2004 was
     47.6% and 38.1%, respectively. The Corporation expects to continue its
     policy of paying regular cash dividends, subject to future earnings and
     regulatory restrictions and capital requirements.

INTEREST RATE SENSITIVITY AND LIQUIDITY

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

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

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

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

     The table on the following page shows the Corporation's estimated
     sensitivity profile as of December 31, 2005. The change in interest rates
     assumes a parallel shift in interest rates of 100 and 200 basis points.
     Given a 100 basis point increase in rates, net interest income would
     decrease .32% over the next 12 months and increase 2.26% over the following
     12 months. Given a 100 basis point decrease in rates, net interest income
     would decrease 2.89% over the next 12 months and decrease 5.77% over the
     following 12 months. These estimates assume all rate changes occur
     overnight and management takes no action as a result of this change.

                                       39

<PAGE>


                          FIRST FINANCIAL CORPORATION

FINANCIAL CONDITION -- SUMMARY

<TABLE>
<CAPTION>
                                  PERCENTAGE CHANGE IN NET INTEREST INCOME
BASIS POINT                       -----------------------------------------
INTEREST RATE CHANGE              12 MONTHS       24 MONTHS       36 MONTHS
--------------------              ---------       ---------       ---------
<S>                               <C>             <C>             <C>
Down 200                             -6.22%         -12.11%         -17.45%
Down 100                             -2.89           -5.77           -8.50
Up 100                               -0.32            2.26            5.14
Up 200                               -5.44           -0.63            5.36
</TABLE>

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

     LIQUIDITY RISK: Liquidity is measured by each bank's ability to raise funds
     to meet the obligations of its customers, including deposit withdrawals and
     credit needs. This is accomplished primarily by maintaining sufficient
     liquid assets in the form of investment securities and core deposits. The
     Corporation has $14.3 million of investments that mature throughout the
     coming 12 months. The Corporation also anticipates $71.9 million of
     principal payments from mortgage-backed securities. Given the current rate
     environment, the Corporation anticipates $18.5 million in securities to be
     called within the next 12 months.

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

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

     CONTRACTUAL OBLIGATIONS: The following table presents, as of December 31,
     2005, significant fixed and determinable contractual obligations to third
     parties by payment date. Further discussion of the nature of each
     obligation is included in the referenced note to the consolidated financial
     statements.

<TABLE>
<CAPTION>
                                                                     PAYMENTS DUE IN
                                          ----------------------------------------------------------------------
                                             NOTE   ONE YEAR      ONE TO      THREE TO     OVER FIVE
(Dollar amounts in thousands)             REFERENCE  OR LESS    THREE YEARS  FIVE YEARS      YEARS        TOTAL
-----------------------------             --------- --------    -----------  ----------    ---------    --------
<S>                                       <C>       <C>          <C>          <C>          <C>          <C>
Deposits without a stated maturity                  $823,190     $     --     $     --     $     --     $823,190
Consumer certificates of deposit                     348,575      242,488       50,233          432      641,728
Short-term borrowings                        10       26,224           --           --           --       26,224
Other borrowings                             11        8,665       53,398      280,510        1,293      343,866
</TABLE>

     COMMITMENTS: The following table details the amount and expected maturities
     of significant commitments as of December 31, 2005. Further discussion of
     these commitments is included in Note 13 to the consolidated financial
     statements.

<TABLE>
<CAPTION>
                                 TOTAL AMOUNT         ONE YEAR            OVER ONE
(Dollar amounts in thousands)     COMMITTED            OR LESS              YEAR
-----------------------------    ------------         --------            --------
<S>                              <C>                  <C>                 <C>
Commitments to extend credit:
Unused loan commitments          $270,017             $144,962            $125,055
Commercial letters of credit        6,933                6,933                  --
</TABLE>


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

OUTLOOK

     The Corporation's primary market is west-central Indiana and east-central
     Illinois. Typically, this market does not expand or contract at rates that
     are experienced by both the state and national economies. This area
     continues to be driven primarily by the retail, higher education and health
     care industries. During 2005 the area's employment data were mixed.
     East-central Illinois generally experienced falling unemployment rates
     while west-central Indiana experienced rising rates. A number of projects
     remain under development; however, there are limited significant growth
     opportunities currently available.

                                       40
<PAGE>



                               2005 ANNUAL REPORT

CONSOLIDATED BALANCE SHEET -- AVERAGE BALANCES AND INTEREST RATES

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                  --------------------------------------------------------------------------------------------------
                                               2005                              2004                              2003
                                  ------------------------------   ------------------------------    ------------------------------
                                    AVERAGE               YIELD/    AVERAGE                YIELD/     AVERAGE                YIELD/
(Dollar amounts in thousands)       BALANCE    INTEREST    RATE     BALANCE     INTEREST   RATE       BALANCE      INTEREST  RATE
-------------------------------   ----------   --------   ------   ----------   --------  -------    ----------    --------  ------
<S>                               <C>          <C>        <C>      <C>          <C>       <C>        <C>           <C>       <C>
ASSETS
Interest-earning assets:
  Loans (1)(2)                    $1,441,247    96,957     6.73%   $1,452,572     93,128     6.41%   $1,417,026     98,565    6.96%
  Taxable investment securities      387,269    16,802     4.39       402,063     15,315     3.81       416,403     15,714    3.77
  Tax-exempt investments (2)         171,802    12,248     7.13       182,727     13,974     7.65       203,021     15,938    7.85
  Federal funds sold                  13,772       496     3.60         2,628         50     1.90         5,129         52     .99
                                  ----------   -------     ----    ----------    -------     ----     ---------    -------    ----
  Total interest-earning assets    2,014,090   126,503     6.28%    2,039,990    122,467     6.00%    2,041,579    130,269    6.38%
                                               -------     ====                  -------     ====                  -------    ====
Non-interest earning assets:
  Cash and due from banks             74,005                           77,443                            80,261
  Premises and equipment, net         30,720                           30,610                            29,634
  Other assets                        62,779                           66,177                            63,753
  Less allowance for loan losses     (18,298)                         (22,052)                          (22,242)
                                  ----------                       ----------                        ----------
    TOTALS                        $2,163,296                       $2,192,168                        $2,192,985
                                  ==========                       ==========                        ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Transaction accounts             $ 687,135     7,031     1.02%    $ 652,494      3,872      .59%    $ 589,579      4,315     .73%
  Time deposits                      643,121    20,153     3.13       642,596     19,823     3.08       715,310     22,610    3.16
  Short-term borrowings               25,766       783     3.04        71,926      1,017     1.41        35,262        431    1.22
  Other borrowings                   356,728    19,502     5.47       376,600     19,974     5.30       392,540     20,869    5.32
                                  ----------   -------     ----    ----------    -------     ----     ---------    -------    ----
    Total interest-bearing
    liabilities:                   1,712,750    47,469     2.77%    1,743,616     44,686     2.56%    1,732,691     48,225    2.78%
                                               -------     ====                  -------     ====                  -------    ====

Non interest-bearing
  liabilities:
Demand deposits                      153,027                          150,944                           177,712
Other                                 26,942                           29,519                            30,441
                                  ----------                       ----------                        ----------
                                   1,892,719                        1,924,079                         1,940,844

Shareholders' equity                 270,577                          268,089                           252,141
                                  ----------                       ----------                        ----------
    TOTALS                        $2,163,296                       $2,192,168                        $2,192,985
                                  ==========                       ==========                        ==========

Net interest earnings                          $79,034                           $77,781                           $82,044
                                               =======                           =======                           =======

Net yield on interest-earning assets                       3.92%                             3.81%                            4.02%
                                                           ====                              ====                             ====
</TABLE>


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

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




<PAGE>


                          FIRST FINANCIAL CORPORATION

MARKET AND DIVIDEND INFORMATION

     At year-end 2005 shareholders owned 13,373,570 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 2005 and 2004.

<TABLE>
<CAPTION>
                                               2005                                    2004
                                   ----------------------------            ------------------------------
                                     TRADE PRICE        CASH                  TRADE PRICE         CASH
                                                      DIVIDENDS                                 DIVIDENDS
Quarter ended                       HIGH      LOW     DECLARED              HIGH       LOW      DECLARED
-------------                      ------    ------   ---------            ------     ------    ---------
<S>                                <C>       <C>       <C>                 <C>        <C>        <C>
March 31                           $34.48    $29.55                        $31.49     $28.50
June 30                            $29.57    $25.39     $.40               $32.43     $27.81      $.39
September 30                       $31.99    $25.70                        $32.91     $30.38
December 31                        $28.29    $25.75     $.42               $37.07     $30.72      $.40
</TABLE>

                                       42