EXHIBIT 13(a)
                        CONSOLIDATED FINANCIAL STATEMENTS





<PAGE>






REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Board of Directors and Stockholders
First Financial Corporation



We have audited the accompanying  consolidated balance sheets of First Financial
Corporation  as of  December  31, 1996 and 1995,  and the  related  consolidated
statements of income,  changes in stockholders'  equity, and cash flows for each
of the three  years in the period  ended  December  31,  1996.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of First Financial
Corporation at December 31, 1996 and 1995, and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996 in conformity with generally accepted accounting principles.




January 14, 1997
Milwaukee, Wisconsin


                                       -1-

<PAGE>

CONSOLIDATED BALANCE SHEETS

FIRST FINANCIAL CORPORATION
<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                    1996                1995
                                                                                -----------          -------
                                                                                (Dollars in thousands)

ASSETS

<S>                                                                             <C>                    <C>       
Cash                                                                            $  133,529             $  123,379
Federal funds sold                                                                   2,513                 34,929
Interest-earning deposits                                                           18,043                 13,801
                                                                                ----------             ----------
                                               CASH AND CASH EQUIVALENTS           154,085                172,109

Securities available for sale (at fair value):
    Investment securities                                                          136,477                 80,999
    Mortgage-related securities                                                  1,048,085                571,293
Securities held to maturity:
    Investment securities (fair value of
      $57,996,000--1996 and $119,063,000--
      1995)                                                                         58,434                119,426
    Mortgage-related securities (fair value of
      $597,106,000--1996 and $691,060,000--
      1995)                                                                        602,352                699,468
Loans receivable:
    Held for sale                                                                   19,119                 26,651
    Held for investment                                                          3,493,700              3,590,149
Foreclosed properties and repossessed
    assets                                                                           3,997                  3,379
Real estate held for investment or sale                                              7,431                  8,289
Office properties and equipment                                                     50,428                 51,124
Intangible assets, less accumulated
    amortization                                                                    12,739                 21,481
Other assets                                                                       113,584                126,740
                                                                                ----------             ----------
                                                                                $5,700,431             $5,471,108
                                                                                ==========             ==========
</TABLE>





                                       -2-

<PAGE>
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                1996              1995
                                                                             ----------         -------
                                                                               (Dollars in thousands)
LIABILITIES

<S>                                                                          <C>               <C>       
Deposits                                                                     $4,444,932        $4,424,525
Federal Home Loan Bank advances and
    other borrowings                                                            769,526           570,508
Advance payments by borrowers for
    taxes and insurance                                                          13,382            13,206
Other liabilities                                                                62,080            77,952
                                                                             ----------        ----------
                                                        TOTAL LIABILITIES     5,289,920         5,086,191


STOCKHOLDERS' EQUITY

Serial preferred stock, $1 par value:
    Authorized: 3,000,000 shares
    None issued
Common stock, $1 par value:
    Authorized: 75,000,000 shares
    Issued: 37,450,879 (1996) and
      37,095,456 (1995) shares
    Outstanding: 36,802,484 (1996) and
      37,095,456 (1995) shares                                                   37,451             37,095
Additional paid-in capital                                                       43,668             42,337
Net unrealized gain (loss) on
 securities available for sale                                                    1,300             (6,021)
Treasury stock, 648,395 shares, at cost                                         (14,447)
Common stock purchased by ESOP                                                                        (271)
Retained earnings                                                               342,539            311,777
                                                                             ----------         ----------
                                               TOTAL STOCKHOLDERS' EQUITY       410,511            384,917

                                                                             $5,700,431         $5,471,108
                                                                             ==========         ==========
</TABLE>

See notes to consolidated financial statements.


                                       -3-

<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF INCOME

FIRST FINANCIAL CORPORATION                                               Year Ended December 31,
                                                                     1996              1995              1994
                                                                           (Dollars in thousands,
                                                                          except per share amounts)
<S>                                                                <C>               <C>               <C>     
Interest income:
    Mortgage loans                                                 $175,508          $183,434          $176,914
    Other loans                                                     126,186           120,256           100,755
    Mortgage-related securities                                      97,251            98,821            89,379
    Investments                                                      20,105            14,797            14,816
                                                                   --------          --------          --------
                                           TOTAL INTEREST INCOME    419,050           417,308           381,864
Interest expense:
    Deposits                                                        199,450           196,823           174,819
    Federal Home Loan Bank advances and
      other borrowings                                               32,291            37,348            29,403
                                                                   --------          --------          --------
    TOTAL INTEREST EXPENSE                                          231,741           234,171           204,222
                                                                   --------          --------          --------
                                             NET INTEREST INCOME    187,309           183,137           177,642
Provisions for losses on loans                                        9,030             9,738             6,824
                                                                   --------          --------          --------
                            NET INTEREST INCOME AFTER PROVISIONS
                                             FOR LOSSES ON LOANS    178,279           173,399           170,818
Non-interest income:
    Deposit account service fees                                     13,934            12,101            10,582
    Loan fees and service charges                                    12,300            11,109             9,814
    Insurance and brokerage sales commis-
      sions                                                           7,293             6,849             7,269
    Service fees on loans sold                                        6,193             7,125             7,737
    Net gain on sales of loans held for sale                         15,082             2,703             2,732
    Net gain (loss) on sales of securities
      available for sale                                            (11,592)            1,182            (7,896)
    Other                                                             3,184             3,222             3,056
                                                                   --------          --------          --------
                                       TOTAL NON-INTEREST INCOME     46,394            44,291            33,294
                                                                   --------          --------          --------
                                                                    224,673           217,690           204,112
Non-interest expense:
    Compensation, payroll taxes and other
       employee benefits                                             47,996            45,263            51,496
    Federal deposit insurance premiums                               38,439            10,169            10,291
    Occupancy                                                         9,377             9,006             9,157
    Amortization of intangible assets                                 8,955             5,245             5,365
    Data processing                                                   7,577             7,159             7,360
    Acquisition-related costs                                                           6,458
    Loan expense                                                      7,222             6,257             6,669
    Telephone and postage                                             6,594             6,434             6,083
    Marketing                                                         6,012             5,941             5,004
    Furniture and equipment                                           4,855             5,303             6,071
    Net cost of (income from) operations
       of foreclosed properties                                        (260)             (164)            1,123
    Other                                                            12,005            11,531            11,748
                                                                   --------          --------          --------
                                      TOTAL NON-INTEREST EXPENSE    148,772           118,602           120,367
                                                                   --------          --------          --------
                                      INCOME BEFORE INCOME TAXES
                                          AND EXTRAORDINARY ITEM     75,901            99,088            83,745

Income taxes                                                         25,443            35,104            30,716
                                                                   --------          --------          --------
                                INCOME BEFORE EXTRAORDINARY ITEM     50,458            63,984            53,029
Extraordinary item, net of tax
  effect of $370,000                                                   (686)
                                                                   --------          --------          --------
                                                      NET INCOME   $ 49,772          $ 63,984          $ 53,029
                                                                   ========          ========          ========
Earnings per share:
    Primary:
      Income before extraordinary item                             $   1.33          $   1.70          $   1.42
      Extraordinary item                                               (.02)
                                                                   --------          --------          --------
      Net income                                                   $   1.31          $   1.70          $   1.42
                                                                   ========          ========          ========
    Fully diluted:
      Income before extraordinary item                             $   1.32          $   1.69          $   1.42
      Extraordinary item                                               (.02)
                                                                   --------          --------          --------
      Net income                                                   $   1.30          $   1.69          $   1.42
                                                                   ========          ========          ========

Cash dividends paid per share                                      $   .510          $   .384          $   .320

See notes to consolidated financial statements.
</TABLE>

                                       -4-

<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FIRST FINANCIAL CORPORATION
                                                                                            Net
                                                                                        Unrealized
                                                                                           Gain
                                                                                         (Loss) on                         Common
                                                                    Additional          Securities                          Stock
                                                       Common         Paid-In            Available        Treasury       Purchased  
                                                       Stock          Capital            For Sale          Stock          By ESOP   
                                                       ------        ---------          ----------        --------       ---------  
                                                                                                   (Dollars in thousands)
<S>                 <C>                                 <C>               <C>            <C>               <C>              <C>     
BALANCES AT JANUARY 1, 1994                             $34,823           $37,967        $ 1,747           $(4,126)         $(2,025)

Net income                                                                                                                          
Cash dividends ($.320 per share)                                                                                                    
Exercise of stock options                                   349             1,246                                                   
Issuance of common stock in
  conjunction with acquisition                            1,172             3,616                                                   
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                                                   (10,366)                                   
Pre-merger transactions
  of pooled company                                          63                19                              457              417 
                                                       --------          --------       --------          --------         -------- 
BALANCES AT DECEMBER 31, 1994                            36,407            42,848         (8,619)           (3,669)          (1,608)

Net income                                                                                                                          
Cash dividends ($.384 per share)                                                                                                    
Exercise of stock options                                   630             2,394                                                   
Payment on ESOP loan                                                                                                            790 
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                                                     2,598                                    
Pre-merger transactions
  of pooled company                                          58            (2,905)                           3,669              547 
                                                       --------          --------       --------          --------         -------- 
BALANCES AT DECEMBER 31, 1995                            37,095            42,337         (6,021)                0             (271)

Net income                                                                                                                          
Cash dividends ($.510 per share)                                                                                                    
Exercise of stock options                                   356             1,346                                                   
Payment on ESOP loan                                                                                                            271 
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                                                     7,321                                    
Purchase of treasury stock                                                                                 (14,447)                 
Other                                                                         (15)                                                  
                                                      ---------         ---------      ---------         ---------        --------- 
BALANCES AT DECEMBER 31, 1996                         $  37,451         $  43,668      $   1,300         $ (14,447)       $       0 
                                                      =========         =========      =========         =========        ========= 
</TABLE>

See notes to consolidated financial statements.
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)

FIRST FINANCIAL CORPORATION
                                            
                                            
                                              Retained        Stockholders'
                                              Earnings           Equity
                                              --------        ---------
BALANCES AT JANUARY 1, 1994                     $212,257          $280,643

Net income                                        53,029            53,029
Cash dividends ($.320 per share)                  (9,950)           (9,950)
Exercise of stock options                                            1,595
Issuance of common stock in
  conjunction with acquisition                     6,613            11,401
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                             (10,366)
Pre-merger transactions
  of pooled company                                                    956
                                                --------          --------
BALANCES AT DECEMBER 31, 1994                    261,949           327,308

Net income                                        63,984            63,984
Cash dividends ($.384 per share)                 (14,156)          (14,156)
Exercise of stock options                                            3,024
Payment on ESOP loan                                                   790
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                               2,598
Pre-merger transactions
  of pooled company                                                  1,369
                                                --------          --------
BALANCES AT DECEMBER 31, 1995                    311,777           384,917

Net income                                        49,772            49,772
Cash dividends ($.510 per share)                 (19,010)          (19,010)
Exercise of stock options                                            1,702
Payment on ESOP loan                                                   271
Change in net unrealized gain
  (loss) on securities available
  for sale, net of tax                                               7,321
Purchase of treasury stock                                         (14,447)
Other                                                                  (15)
                                                --------         ---------
BALANCES AT DECEMBER 31, 1996                   $342,539         $ 410,511
                                                ========         =========


See notes to consolidated financial statements.




                                       -5-

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

FIRST FINANCIAL CORPORATION
<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                     1996              1995              1994
                                                                   --------          --------          ------
                                                                               (Dollars in thousands)
OPERATING ACTIVITIES
<S>                                                                <C>               <C>               <C>       
    Net income                                                     $   49,772        $   63,984        $   53,029
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
        Decrease (increase) in accrued
           interest on loans                                              261           (4,657)            (2,563)
        (Decrease) increase in accrued
           interest on deposits                                        (1,090)            4,123               148
        Loans originated for sale                                    (225,154)         (210,150)         (298,813)
        Proceeds from sales of loans held
           for sale                                                   320,066           211,658           443,931
        Provision for depreciation                                      6,075             5,746             6,513
        Provision for losses on loans and
           other assets                                                 8,563            10,240             7,949
        Amortization of intangible assets
           and servicing rights                                        10,822             6,442             6,255
        Net (gain) loss on sales of loans
           and other assets                                            (3,447)           (3,911)            4,924
        Other                                                         (17,176)            3,639            (1,971)
                                                                   ----------        ----------        -----------
                       NET CASH PROVIDED BY OPERATING ACTIVITIES      148,692            87,114           219,402

INVESTING ACTIVITIES

    Proceeds from sales of investment
        securities available for sale                                  24,343            18,759            65,088
    Proceeds from maturities of investment
        securities held to maturity                                    90,327            51,126            24,393
    Proceeds from maturities of available
        for sale investment securities                                  6,935             9,615            16,649
    Purchases of available for sale
      investment securities                                           (82,884)          (15,770)           (2,627)
    Purchases of investment securities held
        to maturity                                                   (29,849)          (62,710)           (7,610)
    Proceeds from sales of mortgage-related
        securities available for sale                                 395,281                             182,563
    Principal payments received on
        mortgage-related securities                                   195,168           233,949           292,219
    Purchases of mortgage-related securities                         (803,280)                           (594,952)
    Principal collected on loans
        receivable                                                    669,578           564,076           586,875
    Loans originated for portfolio                                   (825,935)         (726,877)         (972,726)
    Additions to office properties and
        equipment                                                      (4,391)           (3,473)           (3,397)
    Proceeds from sales of foreclosed
        properties and repossessed assets                               7,408             8,048             8,745
    Proceeds from sales of real estate
        held for investment                                             1,376                18            14,042
    Business acquisition                                                                                    4,593
                                                                   ----------        ----------          --------
                                  NET CASH PROVIDED BY (USED IN)
                                            INVESTING ACTIVITIES     (355,923)           76,761          (386,145)

</TABLE>

                                       -6-

<PAGE>



CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
<TABLE>
<CAPTION>

FIRST FINANCIAL CORPORATION                                              Year Ended December 31,
                                                                     1996              1995              1994
                                                                   --------          --------          ------
                                                                               (Dollars in thousands)

FINANCING ACTIVITIES
<S>                                                                <C>               <C>                 <C>      
    Net increase (decrease) in deposits                                21,497            38,947          ( 96,257)
    Increase (decrease) in advance payments by
        borrowers for taxes and insurance                                 176            (2,780)              337
    Net increase in reverse repurchase
      agreements                                                       28,118            12,845            13,127
    Proceeds of borrowings                                          1,718,100         1,094,623         1,119,527
    Repayments of borrowings                                       (1,547,200)       (1,245,406)         (881,342)
    Proceeds from exercise of stock options                             1,702             3,254             1,845
    Proceeds from vesting of employee
        benefit plans                                                     271             1,929               416
    Purchase of treasury stock                                        (14,447)
    Payments of cash dividends to
         stockholders                                                 (19,010)          (14,156)           (9,950)
                                                                   ----------        ----------        ----------
                                  NET CASH PROVIDED BY (USED IN)
                                            FINANCING ACTIVITIES      189,207          (110,744)          147,703
                                                                   ----------        ----------        ----------
                            INCREASE (DECREASE) IN CASH AND CASH
                                                     EQUIVALENTS      (18,024)           53,131           (19,040)
Cash and cash equivalents at
     beginning of year                                                172,109           118,978           138,018
                                                                   ----------        ----------        ----------
                        CASH AND CASH EQUIVALENTS AT END OF YEAR   $  154,085        $  172,109        $  118,978
                                                                   ==========        ==========        ==========

Supplemental  disclosure  of cash flow  information:  
    Cash paid or  credited  to accounts for:
        Interest on deposits and borrowings                        $  232,275        $  230,501        $  202,520
        Income taxes                                                   26,997            35,138            34,111
    Non-cash investing activities:
        Mortgage loans securitized and trans-
          ferred to mortgage-related securities
          available for sale                                          161,087
        Investment securities transferred to
          available-for-sale portfolio at
          amortized cost                                                                 20,734            67,337
        Mortgage-related securities transferred
          to available-for-sale portfolio at
          amortized cost                                                                391,537            64,153
        Mortgage loans transferred to loans
           held for sale portfolio                                     27,068            15,467            26,028
        Loans receivable transferred to
           foreclosed properties                                        7,676             6,158             7,169

See notes to consolidated financial statements.
</TABLE>


                                       -7-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FIRST FINANCIAL CORPORATION

December 31, 1996

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business: First Financial Corporation ("FFC") provides a full range of financial
services from offices in Wisconsin and Illinois through its wholly-owned insured
banking subsidiary, First Financial Bank ("FF Bank") and FF Bank's subsidiaries,
all of which are wholly-owned. FFC and its subsidiary are subject to competition
from other  financial  institutions.  FFC and its subsidiary also are subject to
the regulations of certain federal agencies and undergo periodic examinations by
those regulatory authorities.

Basis of Financial Statement Presentation: The consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
and include the accounts of FFC and FF Bank.  Significant  intercompany accounts
and transactions have been eliminated.  Investments in joint ventures, which are
not material, are accounted for on the equity method.

In preparing the consolidated  financial statements in conformity with generally
accepted  accounting  principles,  management is required to make  estimates and
assumptions  that affect the  amounts  reported  in the  consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates. In addition to those discussed under "Investment And Mortgage-Related
Securities  Held To Maturity And Available For Sale" below,  material  estimates
that are  particularly  susceptible  to  change in the  near-term  relate to the
determination  of the allowance for loan losses,  the valuation of  investments,
mortgage-related  securities,  and mortgage servicing rights. In connection with
the  determination  of the  allowance  for loan  losses and real  estate  owned,
management obtains independent appraisals for significant properties.

Cash and Cash  Equivalents:  FFC  considers  its  interest-earning  deposits and
federal funds sold which have original  maturities of three months or less to be
cash equivalents.

Investment and  Mortgage-Related  Securities  Held to Maturity and Available for
Sale:  Debt  securities  are  classified  as held-to-  maturity when FFC has the
intent  and  ability  to  hold  the  securities  to  maturity.  Held-to-maturity
securities are stated at amortized cost.

Debt   securities   not  classified  as   held-to-maturity   are  classified  as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component of
stockholders'  equity.  As a result,  the  balance  of  stockholders'  equity at
December  31,  1996 was  increased  by  $1,300,000,  net of $742,000 in deferred
income



                                       -8-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

taxes,  and at December 31, 1995 was decreased by $6,021,000,  net of $3,104,000
in deferred income taxes.  See Notes C and D. No securities are held by FFC in a
trading account.

In October 1995, the Financial  Accounting  Standards Board ("FASB")  approved a
modification of Statement of Financial  Accounting  Standards  ("Statement") No.
115,  wherein from  November 15, 1995 through  December 31, 1995 FF Bank had the
opportunity to reconsider its classification of investment and  mortgage-related
securities as held-to-maturity, trading, or available-for-sale.  Accordingly, on
December  21,  1995,   FFC  chose  to   reclassify   certain   investments   and
mortgage-related securities from held-to- maturity to available-for-sale. At the
date of transfer,  the amortized  cost of the  investment  and  mortgage-related
securities was $20,734,000 and  $391,537,000,  respectively.  The net unrealized
gain on those  securities  was  $895,000  and  $410,000,  which was  credited to
stockholders'  equity  net of  income  tax  effect  of  $322,000  and  $148,000,
respectively.

The  amortized  cost of debt  securities  classified  as  held-to-  maturity  or
available-for-sale  is adjusted for  amortization  of premiums and  accretion of
discounts to maturity, or in the case of mortgage-related  securities,  over the
estimated life of the security. Such amortization is included in interest income
from the related security.

Interest  and  dividends  are  included  in  interest  income  from the  related
securities.  Realized  gains and losses and declines in value judged to be other
than  temporary  are  included in net  securities  gains  (losses).  The cost of
securities sold is based on the specific identification method.

In connection with the amortization of premiums and discounts and in determining
if declines in value are other than temporary,  management estimates future cash
flows  to be  generated  by  pools  of  loans  underlying  the  mortgage-related
securities.  Included in this  evaluation  are such factors as i) estimated loan
prepayment rates, ii) a review of delinquencies, foreclosures, repossessions and
recovery rates relative to the underlying  mortgage loans  collateralizing  each
security,   iii)  the  level  of   available   subordination   or  other  credit
enhancements,  iv) an  assessment  of the  servicer of the  underlying  mortgage
portfolio and v) the rating  assigned to each security by  independent  national
rating agencies.

Interest,  Fees, and Discounts on Loans: Interest on loans is recorded using the
accrual method. Allowances ($907,000--1996;  $914,000--1995) are established for
uncollected  interest on non-accrual loans.  Generally,  a loan is classified as
non-accrual  and the accrual of interest on such loan is  discontinued  when the
contractual  payment of  principal or interest has become more than 90 days past
due or management has serious doubts about further


                                       -9-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

collectibility  of  principal  or  interest,  even though the loan  currently is
performing.  When a loan is placed on  non-accrual  status,  accrued  but unpaid
interest is reversed.  Generally,  loans are restored to accrual status when the
obligation is brought current,  has performed in accordance with the contractual
terms for a  reasonable  period of time and the ultimate  collectibility  of the
total contractual principal and interest is no longer in doubt.

Loan origination and commitment fees and certain direct loan  origination  costs
are being deferred and the net amounts amortized as an adjustment to the related
loan's yield.  FFC is amortizing  these  amounts,  using the level yield method,
over the contractual life of the related loans.  Such deferred fees are recorded
as income upon prepayment of the related loans.

Unearned discounts on consumer,  home improvement and manufactured housing loans
are amortized over the term of the loans using a method which  approximates  the
level yield method.

The  discounts on loans of acquired  businesses  are being  amortized  using the
level yield method, adjusted for prepayments.

Loans Held for Sale:  Loans held for sale are recorded at the lower of aggregate
cost or market  value and  generally  consist of current  production  of certain
fixed-rate  first mortgage  loans.  Fees received from the borrower are deferred
and recorded as an adjustment of the sales price.

Mortgage Servicing Rights:  Fees charged for servicing loans for other investors
are  recognized  as income in the period the related loan  payments are received
from the borrowers.  Effective  January 1, 1995, FFC adopted  Statement No. 122,
"Accounting for Mortgage  Servicing  Rights."  Statement No. 122 requires that a
mortgage banking enterprise  recognize as a separate asset the rights to service
mortgage loans for others, whether those rights are purchased or originated.  In
accordance with the Statement,  an enterprise that acquires  mortgage  servicing
rights through either the origination or purchase of mortgage loans and sells or
securitizes those loans with servicing rights retained should allocate the total
cost of the  mortgage  loans to the mortgage  servicing  rights and to the loans
(without the mortgage servicing rights) based on their relative fair values. The
value of mortgage  servicing  rights  originated prior to January 1, 1995 is not
recorded on FFC's  consolidated  balance sheets.  FFC has recognized  originated
servicing   rights  of  $2,715,000  and   $1,747,000,   during  1996  and  1995,
respectively.

Originated  servicing  rights resulting from the above adoption of Statement No.
122,  purchased  servicing rights resulting from the valuation of loan servicing
acquired in business  acquisitions  or in the purchase of loan servicing  rights
from other  financial  institutions  and excess  servicing  rights for servicing
income

                                      -10-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

above the normal servicing spread,  are amortized in proportion to, and over the
period of,  estimated  net servicing  revenues,  and are shown as a reduction of
"Service fees on loan sold" in the consolidated statements of income.  Servicing
rights  recorded  subsequent to the adoption of Statement No. 122 are carried at
the lower of  amortized  cost or fair value.  Impairment  of mortgage  servicing
rights is  assessed  based on the fair value of those  rights.  Fair  values are
estimated  using  discounted cash flows based on a current market interest rate.
For purposes of measuring  impairment,  the rights are  stratified  based on the
following predominant risk characteristics of the underlying loans: loan product
type  (i.e.,  fixed  rate or  adjustable)  and  interest  rate.  The  amount  of
impairment  recognized is the amount by which the capitalized mortgage servicing
rights for a stratum exceed their fair value.

Allowances for Losses: Allowances for losses on loans, foreclosed properties and
repossessed assets are established when a loss is probable and can be reasonably
estimated.  These  allowances  are  provided  based  on past  experience  and on
prevailing market conditions.  Management's evaluation of loss considers various
factors  including,  but not  limited  to,  general  economic  conditions,  loan
portfolio composition, prior loss experience and estimated collateral value.

A substantial  portion of FF Bank's loans are  collateralized  by real estate in
Wisconsin  and  Illinois.   Accordingly,   the  ultimate   collectibility  of  a
substantial  portion  of  FF  Bank's  loan  portfolio  and  the  recovery  of  a
substantial  portion of the carrying amount of real estate owned are susceptible
to changes in market conditions in Wisconsin and Illinois.

Management  believes  that  the  allowances  for  losses  on  loans,  foreclosed
properties and repossessed assets are adequate.  While management uses available
information  to recognize  losses,  future  additions to the  allowances  may be
necessary based on changes in economic conditions.

Effective  January 1, 1995,  FFC  adopted  Statement  No.  114,  "Accounting  by
Creditors  for  Impairment of a Loan."  Statement No. 114,  which was amended by
Statement No. 118, requires that impaired loans be measured at the present value
of expected future cash flows discounted at the loan's effective  interest rate,
or, as a practical expedient,  at the loan's observable market price or the fair
value of the collateral if the loan is collateral  dependent.  Statement No. 114
permits certain loans with homogeneous  characteristics  to be excluded from the
effects of this  statement.  Approximately  95% of FFC's  loans  outstanding  at
December  31,  1996 are  included  in one or more  homogeneous  categories.  The
adoption  of  Statements  No.  114 and  118 had no  effect  on  FFC's  financial
condition or results of operations.



                                      -11-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

Depreciation and  Amortization:  The cost of office properties and equipment and
real estate held for investment or sale is being depreciated  principally by the
straight-line  method over the estimated useful lives of the assets. The cost of
leasehold  improvements is being amortized on the straight-line  method over the
lesser of the term of the respective lease or estimated economic life.

Intangible  Assets:  The cost in excess of net assets of acquired  businesses is
being  amortized  over  ten  to  fifteen  years  using  the   straight-line  and
accelerated  methods.  The cost in excess of net assets of acquired  businesses,
aggregating   $1,356,000   and   $4,164,000  at  December  31,  1996  and  1995,
respectively, is net of accumulated amortization.

The premiums  resulting from the valuation of core deposits acquired in business
combinations  or in the  purchase  of  branch  offices  are  amortized  over the
estimated  life of the deposit  base of seven to ten years using the level yield
method.  Core deposit  intangibles,  aggregating  $11,383,000 and $17,317,000 at
December 31, 1996 and 1995, respectively, are net of accumulated amortization.

During 1996  $4,200,000 in additional  amortization of goodwill and core deposit
intangibles was recorded based on FFC's  re-evaluation  of these  intangibles in
accordance  with  Statement  No. 72,  "Accounting  for Certain  Acquisitions  of
Banking and Thrift Institutions" with regard to early 1980's acquisitions.

Income Taxes:  FFC and its  subsidiary  file a  consolidated  federal income tax
return and separate state income tax returns. Financial statement provisions are
made in the income tax expense  accounts for deferred taxes applicable to income
and expense items reported in different periods than for income tax purposes.

FFC accounts for income taxes using the liability  method.  Deferred  income tax
assets  and  liabilities  are  adjusted  regularly  to amounts  estimated  to be
receivable   or  payable  based  on  current  tax  law  and  FFC's  tax  status.
Consequently,  tax  expense in future  years may be  impacted  by changes in tax
rates and tax return limitations.

Per Share Amounts:  The Board of Directors declared a five-for-four  stock split
of FFC's common stock to  stockholders of record on December 16, 1996 payable on
December 30, 1996.  This stock split was  distributed in the form of a 25% stock
dividend.  The par value of the common stock  remained at $1.00.  All numbers of
shares and per share  amounts in the  financial  statements  and notes have been
adjusted to reflect these distributions.

Primary and fully diluted  earnings per share are based on the weighted  average
number of common shares outstanding during each


                                      -12-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

period and common equivalent shares (using the treasury sharemethod) outstanding
at the end of each period.  FFC's common  equivalent  shares consist entirely of
stock options. The resulting number of shares used in computing primary earnings
per share in 1996, 1995 and 1994 after adjustment is 38,093,000,  37,732,000 and
37,319,000, respectively. The resulting number of shares used in computing fully
diluted  earnings  per  share  in  1996,  1995  and  1994  after  adjustment  is
38,220,000, 37,917,000 and 37,358,000, respectively.

Pending Accounting Changes:  The FASB has issued Statement No. 125,  "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
Liabilities" which is effective for transfers occurring after December 31, 1996.
This statement  provides  accounting  and reporting  standards for transfers and
servicing of financial  assets and  extinguishments  of  liabilities  based on a
consistent  application  of a  financial-components  approach  that  focuses  on
control.  The FASB  subsequently  issued  Statement No. 127, in December,  1996,
which provides for the deferral of the effective  date of certain  provisions of
Statement  No.  125.  Management  believes  that the  effect of  adopting  these
statements  will not be  material  to FFC's  financial  condition  or results of
operations.

Reclassifications:  Certain 1995 and 1994  accounts  have been  reclassified  to
conform to the 1996 presentations.

NOTE B--BUSINESS COMBINATION

On February 28, 1995, FFC acquired  FirstRock  Bancorp,  Inc.  ("FirstRock")  of
Rockford,  Illinois.  In the  acquisition,  5,458,015 shares of FFC common stock
were issued to FirstRock  shareholders.  Upon closing,  FirstRock's  subsidiary,
First Federal  Savings Bank, FSB ("First  Federal") was merged into FF Bank with
First  Federal's six offices now operating as branch banking offices of FF Bank.
FirstRock  was  merged  into  FFC.  The  transaction  was  accounted  for  as  a
pooling-of-interests.

As a result of the FirstRock acquisition, FFC and FirstRock incurred expenses i)
in   conjunction   with  the   acquisition   itself  and  ii)  relative  to  the
reorganization  of  FirstRock's   operations  following  the  acquisition.   The
acquisition/transaction  costs and charges  aggregated $6.5 million on a pre-tax
basis and $4.0 million on an after-tax basis, or $0.10 per share.


                                      -13-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE C--INVESTMENT SECURITIES

The  following  is a summary of  available-for-sale  investment  securities  and
held-to-maturity investment securities.
<TABLE>
<CAPTION>

                                              Amortized         Gross Unrealized
                                                 Cost           Gains           Losses        Fair Value
December 31, 1996:                                            (Dollars in thousands)
<S>                                           <C>              <C>              <C>             <C>     

   Available-for-sale:

     U.S. Government and
        federal agency
        obligations                           $ 90,112         $ 1,514          $    87         $ 91,539
     Adjustable-rate mortgage
        mutual fund                             45,796                              858           44,938
                                              --------         -------          -------         --------

                                              $135,908         $ 1,514          $   945         $136,477
                                              ========         =======          =======         ========

   Held-to-maturity:

      U.S. Government and
        federal agency
        obligations                           $ 56,802         $   166          $   605         $ 56,363
     Corporate and bank notes
       receivable (investment
       grade)                                      583                                3              580
     State and municipal
        obligations                              1,049               4                             1,053
                                              --------         -------          -------         --------

                                              $ 58,434         $   170          $   608         $ 57,996
                                              ========         =======          =======         ========

December 31, 1995:

   Available-for-sale:

     U.S. Government and
        federal agency
        obligations                           $ 31,812         $   916          $    51         $ 32,677
     Adjustable-rate mortgage
        mutual fund                             47,905              17              659           47,263
      Corporate and bank notes
        receivable (investment
        grade)                                     997              62                             1,059
                                              --------         -------          -------         --------

                                              $ 80,714         $   995          $   710         $ 80,999
                                              ========         =======          =======         ========

   Held-to-maturity:

      U.S. Government and
        federal agency
        obligations                           $113,519         $   417          $   777         $113,159
     Corporate and bank notes
       receivable (investment
       grade)                                    4,859               2               11            4,850
     State and municipal
        obligations                              1,048               8                2            1,054
                                              --------         -------          -------         --------

                                              $119,426         $   427          $   790         $119,063
                                              ========         =======          =======         ========
</TABLE>

                                      -14-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE C--INVESTMENT SECURITIES--Continued

The amortized cost and fair value of investment securities at December 31, 1996,
by contractual maturity or repricing date, are shown below.
<TABLE>
<CAPTION>

                                             Available-For-Sale   Held-To-Maturity
                                              Amortized      Fair            Amortized       Fair
                                                Cost         Value             Cost         Value
                                                             (Dollars in thousands)

<S>                                           <C>           <C>             <C>            <C>     
  Due in one year or less                     $ 48,873      $ 47,929        $ 20,098       $ 19,830
  Due after one year through
    five years                                  47,003        47,108          37,934         37,762
  Due after five years through
    ten years                                                                    402            404
  Due after ten years                           40,032        41,440
                                              --------      --------        --------       --------

                                              $135,908      $136,477        $ 58,434       $ 57,996
                                              ========      ========        ========       ========
</TABLE>


During the years ended December 31, 1996, 1995 and 1994,  investment  securities
available  for  sale  with a fair  value  at the  date of  sale of  $24,343,000,
$18,759,000, and $65,088,000,  respectively, were sold. The gross realized gains
on such sales totaled $1,464,000, $1,182,000, and $1,319,000, in 1996, 1995, and
1994,  respectively.  Gross  realized  losses on such sales  totaled  $4,000 and
$544,000 in 1996 and 1994, respectively.

Accrued interest on investment securities, including those securities classified
as federal funds sold,  interest-earning deposits and short-term securities, was
$2,208,000 and $3,470,000 at December 31, 1996 and 1995, respectively.


                                      -15-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE D--MORTGAGE-RELATED SECURITIES

The  following  is  a  summary  of  available-for-sale   and  held-to-  maturity
mortgage-related securities.
<TABLE>
<CAPTION>

                                              Amortized         Gross Unrealized
                                                 Cost           Gains           Losses          Fair Value
                                                              (Dollars in thousands)
December 31, 1996:
<S>                                           <C>               <C>              <C>            <C>       

  Available-for-sale:

      U.S. Government agencies:
        Mortgage-backed
         securities                           $  912,071        $ 4,884          $   789        $  916,166
        Collateralized mortgage
         obligations                              12,609             33              172            12,470

      Non-agency:
        Mortgage-backed
         securities                              121,932            572            3,055           119,449
                                              ----------        -------          -------        ----------
                                              $1,046,612        $ 5,489          $ 4,016        $1,048,085
                                              ==========        =======          =======        ==========
  Held-to-maturity:

     U.S. Government agencies:
        Mortgage-backed
         securities                           $  177,347        $ 3,746          $   154        $  180,939
       Collateralized mortgage
         obligations                             270,424          1,630           11,355           260,699

      Non-agency:
       Mortgage-backed
         securities                              154,146          1,137              259           155,024
       Collateralized mortgage
         obligations                                 435              9                                444
                                              ----------        -------          -------        ----------
                                              $  602,352        $ 6,522          $11,768        $  597,106
                                              ==========        =======          =======        ==========

December 31, 1995:

   Available-for-sale:

      U.S. Government agencies:
        Mortgage-backed
         securities                           $  132,770        $ 2,216          $   178        $  134,808
        Collateralized mortgage
         obligations                              66,513            866              197            67,182

      Non-agency:
        Mortgage-backed
         securities                              381,419          2,334           14,450           369,303
                                              ----------        -------          -------        ----------
                                              $  580,702        $ 5,416          $14,825        $  571,293
                                              ==========        =======          =======        ==========
  Held-to-maturity:

      U.S. Government agencies:
        Mortgage-backed
         securities                           $  214,407        $ 4,642          $   145        $  218,904
       Collateralized mortgage
         obligations                             275,008            666           11,092           264,582

      Non-agency:
        Mortgage-backed
         securities                              209,442            166            2,671           206,937
       Collateralized mortgage
         obligations                                 611             26                                637
                                              ----------        -------          -------        ----------
                                              $  699,468        $ 5,500          $13,908        $  691,060
                                              ==========        =======          =======        ==========
</TABLE>

                                      -16-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE D--MORTGAGE-RELATED SECURITIES--Continued

During the years ended December 31, 1996 and 1994,  mortgage-related  securities
available  for sale with a fair  value at the date of sale of  $395,281,000  and
$182,563,000, respectively, were sold, while no mortgage-related securities were
sold during the year ended  December 31, 1995.  The gross realized gains on such
sales totaled $4,469,000 and $461,000 in 1996 and 1994, respectively.  The gross
realized losses on such sales totaled $17,521,000 and $132,000 in 1996 and 1994,
respectively. Also, in 1994, FFC recorded a $9,000,000 permanent impairment loss
on two  non-agency  securities  which  were  sold in 1996 at a  further  loss of
$12,800,000,  which loss is  included in the gross  realized  losses for 1996 as
noted above.

Accrued interest  receivable on  mortgage-related  securities was $9,091,000 and
$8,475,000 at December 31, 1996 and 1995, respectively.

NOTE E--LOANS RECEIVABLE

Loans receivable held for investment consist of the following:
<TABLE>
<CAPTION>

                                                                          December 31,
                                                                     1996                        1995
                                                                  ----------                  -------
                                                                         (Dollars in thousands)
<S>                                                               <C>                         <C>       
Real estate mortgage loans:
   Residential (including multi-family)                           $2,035,010                  $2,176,659
   Commercial and other                                              151,875                     136,714
   Construction - residential (including
        multi-family)                                                 71,596                      56,314
   Construction - commercial                                          22,095                      15,710
                                                                  ----------                  ----------
        Total real estate mortgage loans                           2,280,576                   2,385,397

Consumer and other loans:
   Consumer                                                          415,155                     362,659
   Home equity                                                       296,749                     284,700
   Education                                                         269,633                     240,650
   Credit card                                                       179,352                     214,107
   Manufactured housing                                              104,783                     139,385
   Business                                                           11,728                      17,198
                                                                  ----------                  ----------
        Total consumer and other loans                             1,277,400                   1,258,699
                                                                  ----------                  ----------

Total loans before net items                                       3,557,976                   3,644,096

Less:
   Allowances for losses                                              23,228                      25,235
   Undisbursed loan proceeds                                          42,709                      28,992
   Deferred net loan origination costs                                (1,810)                       (977)
   Unearned discounts                                                    149                         697
                                                                  ----------                  ----------
                                                                      64,276                      53,947
                                                                  ----------                  ----------

                                                                  $3,493,700                  $3,590,149
                                                                  ==========                  ==========
</TABLE>


Accrued interest on loans receivable was $24,901,000 and $25,777,000 at December
31, 1996 and 1995, respectively.

The  following  table sets forth the  composition  of the  non-residential  real
estate loan portfolio, including both permanent

                                      -17-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE E--LOANS RECEIVABLE--Continued

and construction loans, by geographic location of the related
collateral properties.

<TABLE>
<CAPTION>

                                                         December 31,
                                                 1996                               1995
                                         ---------------------------        --------------------------
                                                             Percent                           Percent
                                                                Of                               Of
        Property Location                 Amount              Total           Amount            Total
                                                             (Dollars in thousands)
<S>                                      <C>                 <C>             <C>               <C>   
        Wisconsin                        $114,751             66.0%          $ 96,196           63.1%
        Illinois                           27,253             15.7             30,734           20.2
        Iowa                               12,441              7.1              2,547            1.7
        Minnesota                           6,090              3.5              7,343            4.8
        Georgia                             3,911              2.2              4,021            2.6
        Texas                               2,670              1.5              2,127            1.4
        Tennessee                           2,370              1.4              2,399            1.6
        Other                               4,484              2.6              7,057            4.6
                                         --------            -----           --------          -----

                                         $173,970            100.0%          $152,424          100.0%
                                         ========            =====           ========          =====
</TABLE>


NOTE E--LOANS RECEIVABLE--Continued

Loans  serviced for investors  amounted to  $2,372,000,000,  $2,326,000,000  and
$2,424,000,000  at December 31, 1996, 1995 and 1994,  respectively.  These loans
are not reflected in the consolidated  financial statements.  FF Bank originates
mortgage  loans  which,  depending  whether the loans meet FF Bank's  investment
objectives,  may be sold in the  secondary  mortgage  market or to other private
investors.

NOTE F--FORECLOSED PROPERTIES AND REPOSSESSED ASSETS

Foreclosed properties and repossessed assets are summarized as follows:

                                                        December 31,
                                                      1996               1995
                                                    -------            ------
                                                       (Dollars in thousands)
                                                 
Real estate owned                                  $   763             $ 2,531
Real estate judgments subject to redemption          3,074               1,436
Manufactured housing owned                             182                 303
Repossessed collateral assets                          157                 102
                                                   -------             -------
                                                     4,176               4,372
Less allowance for losses                              179                 993
                                                   -------             -------
                                                 
                                                   $ 3,997             $ 3,379
                                                   =======             =======
                                            

                                      -18-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE G--ALLOWANCES FOR LOSSES

A summary of the activity in the allowances for loan losses follows:

<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                                 1996              1995               1994
                                                                ------            ------             -----
                                                                   (Dollars in thousands)

<S>                                                             <C>               <C>                <C>    
Balance at beginning of year                                    $25,235           $25,180            $25,905
Acquired bank's allowance                                                                                816
Provisions                                                        9,030             9,738              6,824
Charge-offs                                                     (12,145)          (11,087)            (9,872)
Recoveries                                                        1,108             1,404              1,507
                                                                -------           -------            -------

                                      BALANCE AT END OF YEAR    $23,228           $25,235            $25,180
                                                                =======           =======            =======
</TABLE>


A summary of the activity in the allowance  for losses on foreclosed  properties
and repossessed  assets  follows.  The provisions for losses are included in the
Consolidated  Statements of Income in "Net cost of (income  from)  operations of
foreclosed properties."
<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                                1996               1995               1994
                                                               ------             ------             -----
                                                                          (Dollars in thousands)

<S>                                                            <C>                <C>                <C>   
Balance at beginning of year                                   $  993             $1,146             $3,561
Provisions                                                       (467)                60              1,000
Charge-offs                                                      (347)              (213)            (3,415)
                                                               ------             ------             ------

                                      BALANCE AT END OF YEAR   $  179             $  993             $1,146
                                                               ======             ======             ======
</TABLE>


NOTE H--OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                          1996                         1995
                                                                        --------                     ------
                                                                                (Dollars in thousands)

<S>                                                                     <C>                         <C>    
Land and parking lot improvements                                       $12,551                     $12,160
Office buildings and improvements                                        53,556                      52,083
Furniture and equipment                                                  34,876                      36,814
Leasehold improvements                                                    2,899                       2,850
                                                                        -------                     -------
                                                                        103,882                     103,907
Less allowances for depreciation and
   amortization                                                          53,454                      52,783
                                                                        -------                     -------

                                                                        $50,428                     $51,124
                                                                        =======                     =======
</TABLE>


                                      -19-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE I--DEPOSITS

Deposits are summarized as follows:
<TABLE>
<CAPTION>

                                            December 31, 1996                        December 31, 1995
                                                            Weighted                                  Weighted
                                                            Average                                   Average
                                         Amount               Rate                Amount               Rate
                                         ------               ----                ------               ----
                                                                 (Dollars in thousands)

<S>                                    <C>                     <C>              <C>                     <C>  
Checking accounts:
   Interest-bearing                    $  306,967              1.16%            $  321,929              1.17%
   Non-interest-bearing                   148,176                                  151,274
                                       ----------                               ----------
    Total checking
     accounts                             455,143              0.78                473,203              0.78

Passbook accounts                         649,841              2.71                687,960              2.67

Variable-rate insured
   money market accounts                  377,466              3.53                310,545              3.45

Certificate accounts                    2,955,355              5.74              2,944,600              5.72
                                       ----------                               ----------

                                        4,437,805              4.60%             4,416,308              4.56%
                                                               ====                                     ====
Accrued interest                            7,127                                    8,217
                                       ----------                               ----------
                                       $4,444,932                               $4,424,525
                                       ==========                               ==========
</TABLE>

Aggregate annual maturities of certificate  accounts at December 31, 1996 are as
follows:

              Matures During
                Year Ending
               December 31,
          (Dollars in thousands)

                    1997                                           $1,966,010
                    1998                                              729,014
                    1999                                              143,100
                    2000                                               90,695
                    2001                                               23,412
                    Thereafter                                          3,124
                                                                   ----------
                                                                   $2,955,355

Certificate  accounts with balances of $100,000 or more totaled $233,704,000 and
$214,943,000  at December 31, 1996 and 1995,  respectively.  The following table
presents the maturities of  certificate  accounts in amounts of $100,000 or more
at December 31, 1996 by time remaining to maturity.

               Maturities
               (Dollars in thousands)

          January 1, 1997 through March 31, 1997                $  72,321
          April 1, 1997 through June 30, 1997                      43,395
          July 1, 1997 through December 31, 1997                   58,965
          January 1, 1998 and after                                59,023
                                                                ---------
                                                                $ 233,704



                                      -20-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE J--BORROWINGS

Federal Home Loan Bank ("FHL Bank") advances and other  borrowings are comprised
of the following:
<TABLE>
<CAPTION>

                                                                       December 31,
                                                             1996                          1995
                                                     ------------------            -----------------------
                                                                    Weighted                      Weighted
                                                                    Average                       Average
                                     Maturity         Amount          Rate          Amount          Rate
                                                              (Dollars in thousands)

<S>                                  <C>             <C>              <C>          <C>              <C>  
Federal Home Loan Bank:              On Demand       $303,100         5.60%        $154,401         5.95%
                                     1996                                           320,367         5.81
                                     1997             400,031         5.41               31         7.00
                                     2000                 162         7.00              162         7.00
                                     2001                 100         5.50              100         5.50
                                     2003                 307         2.50              307         2.50

Subordinated notes                   1999                                            54,925         8.51

Reverse repurchase
  agreements:                        1996                                            25,972         5.89
                                     1997              54,090         5.42

Collateralized mortgage
  obligations                        Various            5,616        16.67            8,024        18.65

Industrial development
  revenue bonds                      Various            6,120         7.12            6,219         7.10
                                                     --------                      --------

                                                     $769,526         5.58%        $570,508         6.31%
                                                     ========        =====         ========        =====
</TABLE>

At  December  31,  1996,  FFC has an  unused  line-of-credit  in the  amount  of
$18,000,000. The line-of-credit is available to FFC for working-capital purposes
or for potential  future  acquisitions.  Under the terms of the  line-of-credit,
which is available through April,  1997,  interest on outstanding notes would be
payable at the lender's then prevailing prime rate. The line-of-credit agreement
contains  various  covenants  relative  to the  operations  of FFC and FF  Bank.
Included among the covenants are  restrictions on levels of total borrowings and
the interest-bearing asset/liability ratio for FFC, on a consolidated basis, and
a requirement that FF Bank maintain a minimum  risk-based  regulatory capital of
8.0%. All of such covenants are met at December 31, 1996. In addition, FFC would
pledge its stock in FF Bank as  collateral  should the  line-of-credit  be drawn
upon.

Aggregate maturities on borrowings at December 31, 1996 are as follows. Payments
on  collateralized  mortgage  obligations  are  included  based  upon  estimated
prepayments on the underlying mortgage portfolios.



                                      -21-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE J--BORROWINGS--Continued


             Matures During
              Year Ending
              December 31,
   (Dollars in thousands)

                 1997                                      $757,959
                 1998                                         2,707
                 1999                                         1,914
                 2000                                           884
                 2001                                           235
                 Thereafter through 2021                      5,827
                                                           --------
                                                           $769,526

FF Bank is  required  to  maintain  unencumbered  first  mortgage  loans  in its
portfolio  aggregating at least 167% of the amount of outstanding  advances from
the FHL Bank as collateral.  In addition, these borrowings are collateralized by
FHL Bank stock of $35,419,000 at December 31, 1996,  which is included in "Other
assets" in the consolidated balance sheets.

In January,  1996, FFC redeemed all of its outstanding 8% Subordinated Notes due
November, 1999, which aggregated $54,925,000 at the date of redemption.  The net
after-tax cost of $686,000  associated  with the redemption has been reported as
an extraordinary charge in 1996.

Reverse repurchase agreements  outstanding at the end of 1996 had maturity dates
within  ninety  days.  These  agreements  are  treated  as  financings  with the
obligations  to  repurchase  securities  reflected as a liability and the dollar
amount  of the  securities  underlying  the  agreements  remaining  in the asset
accounts.  The  securities  underlying  the  agreements are held by the counter-
party  brokers in FF Bank's  account.  The  agreements  were  collateralized  by
mortgage-related  securities  having a fair value of $54,895,000 and $27,786,000
at December  31, 1996 and 1995,  respectively.  Based upon  month-end  balances,
securities  sold  under  agreements  to  repurchase  averaged   $92,984,000  and
$59,092,000 during 1996 and 1995,  respectively.  The maximum amount outstanding
at any  month-end  was  $173,789,000  and  $100,454,000  during  1996 and  1995,
respectively.

UFS Capital  Corporation  and FFS Funding  Corporation,  FF Bank's  wholly-owned
finance  subsidiaries,  have  issued the  collateralized  mortgage  obligations.
Principal repayments are scheduled in varying amounts through January, 2003. The
obligations are  collateralized  by  mortgage-backed  securities with a carrying
value of $9,015,000 and a fair value of $9,152,000 at December 31, 1996.

Industrial  development  revenue bonds are payable in seven annual  installments
ranging from $105,000 to $150,000  with  additional  payments of $1,910,000  and
$3,320,000 due October 1, 2012 and

                                      -22-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE J--BORROWINGS--Continued

2021, respectively.  Interest is payable semi-annually. The bonds were issued to
refinance  an  apartment  project  which  was  previously  sold.  The  bonds are
collateralized  by  mortgage-backed  securities with a carrying value and a fair
value of $9,212,000 and $9,431,000,  respectively, at December 31, 1996. FF Bank
has a loan receivable  from the buyer of $5,746,000 at December 31, 1996,  which
is secured by a first mortgage on the apartment project.


                                      -23-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE K--INCOME TAXES

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                                      1996                  1995                  1994
                                                     -------               -------               -----
                                                                    (Dollars in thousands)
<S>                                                  <C>                   <C>                   <C>    
Current:
     Federal                                         $25,472               $31,849               $30,743
     State                                               460                 3,794                 1,903
                                                     -------               -------               -------
                                                      25,932                35,643                32,646

Deferred (credit):
     Federal                                                                   667                (2,080)
     State                                            (1,141)               (1,206)                  150
                                                     -------               -------               -------
                                                        (489)                 (539)               (1,930)
                                                     -------               -------               -------
                                                      25,443                35,104                30,716
Extraordinary item                                      (370)
                                                     -------               -------               -------
                                                     $25,073               $35,104               $30,716
                                                     =======               =======               =======
</TABLE>

The provision for income taxes  relative to continuing  operations  differs from
that computed at the federal statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                      1996                  1995                  1994
                                                     -------               -------               -----
                                                                    (Dollars in thousands)
<S>                                                  <C>                   <C>                   <C>    
Income before income taxes                           $75,215               $99,088               $83,745
                                                     =======               =======               =======

Tax at federal statutory rate (35%)                  $26,325               $34,681               $29,311
Add (deduct) effect of:
     State income taxes (net of
       federal income taxes)                            (442)                1,682                 2,019
     Change in valuation allowance
       for deferred tax assets                           148                  (898)                 (864)
     Other                                              (588)                 (361)                  250
                                                     -------               -------               -------

                        INCOME TAX PROVISION         $25,443               $35,104               $30,716
                                                     =======               =======               =======
</TABLE>

The  significant  components  of the net deferred tax asset  (liability)  are as
follows:
                                                    Deferred Tax
                                                  Asset (Liability)
                                                   At December 31,
                                             1996                      1995
                                           -------                   ------
                                            (Dollars in thousands)
Deferred loan fees and other
  loan yield adjustments                   $   (961)                 $    156
Depreciation                                 (2,386)                   (2,399)
Loan loss allowances                          8,108                    11,715
Deferred compensation                         2,239                     2,185
Deposit base
  intangible amortization                     2,896                     2,636
FHL Bank stock dividend                      (1,084)                   (1,084)
Market valuation adjustments                   (759)                    3,148
Capital loss carryforward                     3,395
State tax net operating loss
  carryforwards                               2,641                     1,753
Other                                            96                      (677)
                                           --------                  --------
                                             14,185                    17,433
Valuation allowance for
  deferred tax assets                        (3,047)                   (2,899)
                                           --------                  --------
                                           $ 11,138                  $ 14,534
                                           ========                  ========


                                      -24-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE K--INCOME TAXES--Continued

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.

For financial reporting  purposes,  a valuation allowance has been recognized to
offset deferred tax assets related to state net operating loss  carryforwards of
subsidiary,  deposit base  intangibles  and other  temporary  differences.  When
realized,  the tax benefit  for these  items will be used to reduce  current tax
expense for that period.

FF Bank qualified under  provisions of the Internal  Revenue Code that permitted
it to deduct from taxable  income an allowance  for bad debts that differed from
the  provision  for such  losses  charged  to  income  for  financial  reporting
purposes.  Accordingly,  no  provision  for  income  taxes  has  been  made  for
$79,243,000 of retained income at December 31, 1996. If, in the future,  FF Bank
no longer  qualifies as a bank for tax purposes,  income taxes may be imposed at
the then-applicable  rates. If income taxes had been provided,  the deferred tax
liability would have been approximately $31,804,000.

NOTE L--STOCKHOLDERS' EQUITY

On October 16, 1996, FFC began its first share repurchase program for its common
stock.  Under this  program,  up to  1,875,000  shares can be  purchased  over a
six-month time frame.  During 1996,  FFC purchased  648,395 shares at an average
per share cost of $22.28 and an aggregate cost of  $14,447,000.  The repurchased
shares became treasury shares and can be used for general corporate purposes.

The Board of Directors of FFC is authorized to issue  preferred  stock in series
and to establish the voting  powers,  other special rights of the shares of each
such series and the qualifications and restrictions thereof. Preferred stock may
rank prior to the common stock as to dividend rights, liquidation preferences or
both, and may have full or limited voting rights.

Under Wisconsin state law, preferred stockholders would be entitled to vote as a
separate class or series in certain circumstances, including any amendment which
would adversely change the specific terms of such series of stock or which would
create or  enlarge  any class or series  ranking  prior  thereto  in rights  and
preferences. No preferred stock has been issued.

Deposits in FF Bank are insured to the maximum  allowable amounts by the Savings
Association  Insurance  Fund  ("SAIF") as  administered  by the Federal  Deposit
Insurance  Corporation  ("FDIC").  As a  SAIF-insured  institution,  FF  Bank is
required to meet tangible,  core and risk-based  regulatory capital requirements
of the Office of Thrift Supervision ("OTS") as

                                      -25-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE L--STOCKHOLDERS' EQUITY--Continued

formulated  under the Federal  Deposit  Insurance  Corporation  Improvement  Act
("FDICIA").

The FDICIA contains  provisions for regulatory  capital standards that require a
minimum 1.5% tangible  capital  ratio,  a minimum 3.0% core leverage  capital to
adjusted  tangible  assets  capital  ratio and a minimum 8.0%  qualifying  total
capital to risk- weighted  assets capital ratio.  At December 31, 1996 FF Bank's
regulatory capital  significantly  exceeded all minimum standards required under
the FDICIA.

As of December 31, 1996 and 1995, FF Bank was "well  capitalized"  as defined by
the regulatory  capital  standards.  To be categorized  as well  capitalized,  a
financial  institution must maintain a minimum core leverage ratio of 5.0%, core
risk-based ratio of 6.0%, and a total risk-based ratio of 10.0%.

The following table summarizes FF Bank's capital amounts and capital ratios, and
the capital amounts and ratios required by its regulators:
<TABLE>
<CAPTION>
                                                                                             Minimum Required
                                                               Minimum Required                 To Be Well
                                                                  For Capital                Capitalized Under
                                        Actual                 Adequacy Purposes              OTS Requirements
                                   ---------------------     ------------------------      -----------------------
                                    Amount        Ratio         Amount        Ratio          Amount        Ratio
                                    ------        -----         ------        -----          ------        -----
                                                              (Dollars in thousands)
<S>                                 <C>           <C>            <C>          <C>           <C>             <C>  
As of December 31, 1996:

Tangible capital
 (to tangible assets)               $352,763       6.20%         $ 85,376      1.50%

Core leverage capital
 (to adjusted tangible
  assets)                            364,146       6.39%          171,093      3.00%         $285,155        5.00%

Risk-based capital
 (to risk-based assets)              346,133      13.91%          199,134      8.00%          248,918       10.00%

Core leverage capital
 (to risk-based assets)              364,146      14.63%                                      149,351        6.00%


As of December 31, 1995:

Tangible capital
 (to tangible assets)               $400,199       7.30%         $ 82,251      1.50%

Core leverage capital
 (to adjusted tangible
  assets)                            417,516       7.59%          165,021      3.00%         $275,036        5.00%

Risk-based capital
 (to risk-based assets)              442,544      15.82%          223,850      8.00%          279,813       10.00%

Core leverage capital
 (to risk-based assets)              417,516      14.92%                                      167,888        6.00%

</TABLE>

                                      -26-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE L--STOCKHOLDERS' EQUITY--Continued

Under  the  terms  of the  FDICIA,  FF Bank is  further  subject  to the  prompt
corrective  action ("PCA")  provisions of the FDICIA.  Under the FDICIA,  thrift
institutions  are  assigned,  based  upon  regulatory  capital  ratios and other
subjective  supervisory  criteria,  to one of five PCA categories,  ranging from
"well capitalized" to "critically  undercapitalized".  Institutions  assigned to
the three  lowest  categories  are  subject  to PCA  sanctions  by the OTS.  PCA
sanctions include, among other items,  additional  restrictions on dividends and
capital distributions.

Applicable  rules and regulations of the OTS impose  limitations on dividends by
FF  Bank.  Within  those  limitations,   certain  "safe  harbor"  dividends  are
permitted,  subject to providing  the OTS at least 30 days advance  notice.  The
safe harbor  amount is based upon an  institution's  regulatory  capital  level.
Thrift  institutions  which have  capital in excess of all capital  requirements
before  and  after  the  proposed   dividend  are   permitted  to  make  capital
distributions  during  any  calendar  year up to the  greater of (i) 100% of net
income to date during the calendar year,  plus one-half of the surplus over such
institution's  capital  requirements  at the beginning of the calendar  year, or
(ii) 75% of net income over the most recent four-quarter period.

Additional  restrictions  would apply to an institution  which does not meet its
capital  requirement  before or after a proposed  dividend.  In  addition,  as a
result  of the PCA  provisions  of the  FDICIA,  the OTS has  indicated  that it
intends  to review  existing  regulations  on  dividends  to  determine  whether
amendments are necessary based on such provisions.  In the interim,  the OTS has
indicated  that  it  intends  to  determine  the   permissibility  of  dividends
consistent with the PCA provisions of the FDICIA.

NOTE M--EMPLOYEE BENEFIT PLANS

FFC sponsors a  defined-contribution  profit  sharing plan which covers all full
time  employees  who  have  completed  one  year of  service  and  are at  least
twenty-one years old.  Corporate  contributions are  discretionary.  Expense for
this  plan  for  1996,  1995  and 1994  was  $2,122,000,  $ -0- and  $3,353,000,
respectively.

FFC sponsors a  supplemental  executive  retirement  plan for certain  executive
officers,  which is  funded  through  life  insurance  and  provides  additional
benefits at retirement.  At December 31, 1996, the projected  future  obligation
under  this  plan  amounted  to  $1,838,000,  which is being  accrued  through a
combination  of annual  amortization  of prior service costs plus current annual
provisions for additional service costs and interest.  Expense for this plan was
$272,000, $215,000 and $227,000 for 1996, 1995 and 1994, respectively.





                                      -27-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE M--EMPLOYEE BENEFIT PLANS--Continued

FFC  sponsors  an  unfunded  defined-benefit  retirement  plan  for all  outside
directors. At December 31, 1996, the projected future obligation under this plan
totaled  $1,464,000,  which is being  accrued  through a  combination  of annual
amortization  of  prior  service  costs  plus  current  annual   provisions  for
additional  service  costs and  interest.  Expense  for this plan was  $208,000,
$126,000 and $183,000 in 1996, 1995 and 1994, respectively.

During 1995,  as part of the  acquisition  of  FirstRock,  FF Bank  acquired the
existing Employee Stock Ownership Plan ("ESOP"), originally established in 1992.
The plan covers  substantially  all employees with more than one year of service
who have attained the age of  twenty-one.  During 1996, the ESOP was utilized in
conjunction  with FFC's profit sharing plan,  resulting in the  distribution  of
69,312 shares held in the plan to employees.  During 1995, the ESOP was utilized
in  lieu  of  FFC's  profit  sharing  plan,  resulting  in the  distribution  of
approximately 201,250 FFC shares. The ESOP shares, which were purchased in 1992,
are  grandfathered  from  Statement  of Position  ("SOP") No. 93-6 issued by the
American  Institute of Certified Public  Accountants.  As such, expense for ESOP
shares  allocated  to FFC  employees  was  recorded at cost as opposed to market
value as required  by SOP No.  93-6 for shares  acquired by the ESOP after 1992.
The expense related to ESOP  distributions for 1996, 1995 and 1994 was $271,000,
$828,000 and $231,000,  respectively. At December 31, 1996, all ESOP shares have
been  allocated to employees and the plan will be merged into the profit sharing
plan in 1997.

FFC also sponsors a defined-benefit  pension plan covering  substantially all of
its Illinois-based  employees (the "Retirement Plan"). Benefits are based upon a
formula  using years of service and the  participant's  compensation  during the
term of employment.


                                      -28-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE M--EMPLOYEE BENEFIT PLANS--Continued

The following  tables set forth the Retirement  Plan's funded status and amounts
recognized in the consolidated financial statements:
<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                            1996              1995
                                                                          --------          ------
                                                                            (Dollars in thousands)
<S>                                                                       <C>               <C>      
Actuarial present value of benefit obligations:
     Accumulated benefit obligation, including
     vested benefits of $2,936,000--1996 and
     $2,971,000--1995                                                     $   3,427         $   3,126
                                                                          =========         =========

Plan assets at fair value, primarily fixed
     income securities                                                    $   4,080         $   4,143
Projected benefit obligation                                                  3,530             3,238
                                                                          ---------         ---------
Plan assets in excess of projected
     benefit obligation                                                         550               905
Unrecognized prior service cost                                                 190               201
Unrecognized net loss from past experience
     different from that assumed and effects
     of changes in assumptions                                                  480               500
Unrecognized net transition asset                                            (1,047)           (1,175)
                                                                          ---------         ---------
Prepaid pension cost included in other assets                             $     173         $     431
                                                                          =========         =========
</TABLE>

Net  periodic  expense for the  Retirement  Plan,  as  determined  by  actuarial
consultants,  was  $160,000,  $238,000  and  $504,000  in 1996,  1995 and  1994,
respectively.

The  principal  actuarial  assumptions  used  to  develop  the  pension  benefit
obligation for the Retirement Plan were as follows:

                                                    Year Ended December 31,
                                                  1996       1995       1994
                                                --------   --------   ------

Weighted average discount rate                    7.50%      7.25%      8.25%
Rate of increase in future compensation           5.00       5.00       5.00
Expected long-term rate of return on plan
  assets                                          8.50       8.50       8.50


FFC does not,  as a policy,  offer  post-retirement  benefits  other than profit
sharing,  ESOP,  pensions and certain  supplemental  retirement  benefits  noted
above.

NOTE N--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

FFC 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  commitments  to  extend  credit  and  financial
guarantees and involve, to varying degrees, elements of credit and interest-rate
risk in excess of the amount recognized in the consolidated  balance sheets. The
contract amounts of those instruments  reflect the extent of involvement FFC has
in particular classes of financial instruments.

FFC's exposure to credit loss in the event of  nonperformance by the other party
to the  financial  instrument  for  commitments  to extend  credit and financial
guarantees written is represented by the

                                      -29-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE N--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

contractual  amount of those  instruments.  FFC uses the same credit policies in
making commitments and conditional  obligations as it does for  on-balance-sheet
instruments.

Financial  instruments  whose  contract  amounts  represent  credit  risk are as
follows:
                                                        December 31,
                                                 1996                  1995
                                               --------              ------
                                                   (Dollars in thousands)

Commitments to extend credit:
  Fixed rate (6.55% to 8.85% at
    December 31, 1996)                         $ 13,566              $ 19,398
  Adjustable rate                                16,605                20,778
Unused lines of credit:
  Credit cards                                  718,268               837,341
  Home equity                                   426,408               360,189
  Business lines                                    873                 1,158
  Other                                           8,800                 8,800
Loans sold with recourse                         27,000                37,000
Financial guarantees written                      7,000                10,995

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. As some such  commitments  expire without being drawn
upon, the total  commitment  amounts do not  necessarily  represent  future cash
requirements.  FFC evaluates each customer's  creditworthiness on a case-by-case
basis. With the exception of credit card lines-of-credit,  FFC generally extends
credit  only  on a  secured  basis.  Collateral  obtained  varies  but  consists
primarily of one- to  four-family  residences  and  income-producing  commercial
properties.

Commitments  to extend  credit on a  fixed-rate  basis  expose  FFC to a certain
amount of interest-rate risk if market rates of interest increase  substantially
during the commitment  period.  Similar risks exist relative to loans classified
as held for sale, which totaled $19,119,000 at December 31, 1996. This exposure,
however,  is partially  mitigated by firm  commitments  to sell certain of these
loans.  Commitments  outstanding  to sell  mortgage  loans at December  31, 1996
amount to $20,709,000.

All loans  currently  sold to others are sold on a  non-recourse  basis with the
servicing of these loans being  retained by FF Bank. At December 31, 1996,  1995
and  1994,  $27,000,000,  $37,000,000  and  $44,000,000,  respectively,  of  the
serviced  loans were  previously  sold with recourse.  Of these recourse  loans,
approximately $19,000,000, $27,000,000 and $36,000,000 were federally-insured or
federally-guaranteed  at December  31,  1996,  1995 and 1994,  respectively.  In
addition,  management has considered the remaining  uninsured or  non-guaranteed
balance in the determination of the adequacy of the allowance for losses.

                                      -30-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE N--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK-- Continued

Financial guarantees represent agreements whereby, for an annual fee, letters of
credit were issued by FF Bank to provide credit  enhancement in connection  with
the issuance of industrial development revenue bonds issued by municipalities to
finance  commercial or multi-family  real estate owned by third parties.  In the
event the third party borrowers default on principal or interest payments on the
bonds,  FF Bank is  required  to either pay the amount in default or acquire the
then  outstanding  bonds. FF Bank may foreclose on the underlying real estate to
recover amounts in default.  Management has considered  these  agreements in its
review of the adequacy of the allowance for losses.  At December 31, 1996, bonds
in the  aggregate  principal  amount of  $7,000,000  are supported by letters of
credit issued by FF Bank.  The bond  agreements  have  expiration  dates through
2008.

Except for the above-noted  commitments to originate  and/or sell mortgage loans
in the normal course of business, FFC and FF Bank have not undertaken the use of
off-balance sheet derivative financial instruments for any purpose.

NOTE O--FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value information about financial instruments, whether or not recognized in
the balance  sheet,  for which it is practicable to estimate that value follows.
In cases where quoted market prices are not available,  fair values are based on
estimates using present value or other valuation  techniques.  Those  techniques
are significantly  affected by the assumptions used, including the discount rate
and  estimates  of future cash flows.  In that  regard,  the derived  fair value
estimates cannot be  substantiated by comparison to independent  markets and, in
many cases,  could not be realized in immediate  settlement  of the  instrument.
Certain financial instruments and all nonfinancial instruments are excluded from
these disclosures.

The following  methods and  assumptions  were used by FFC in estimating its fair
value disclosures for financial instruments:

          CASH  AND CASH  EQUIVALENTS:  The  carrying  amounts  reported  in the
          balance sheet for cash and short-term  instruments  approximate  those
          assets' fair values.

          ACCRUED  INTEREST  INCOME  AND  EXPENSE:  The fair  value  of  accrued
          interest income and expense approximates the respective book value.

          INVESTMENT AND MORTGAGE-RELATED SECURITIES: Fair values for investment
          and  mortgage-related  securities  are based on quoted market  prices,
          where  available.  If quoted  market  prices are not  available,  fair
          values are based on quoted market prices of comparable instruments.


                                      -31-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE O--FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued

          LOANS  RECEIVABLE:  For  variable-rate  mortgage  loans  that  reprice
          frequently and with no significant  change in credit risk, fair values
          are  based  on  carrying  values.   The  fair  values  for  fixed-rate
          residential  mortgage  loans  are  based on  quoted  market  prices of
          similar loans sold in conjunction  with  securitization  transactions,
          adjusted for differences in loan characteristics.  The fair values for
          commercial  real estate  loans,  rental  property  mortgage  loans and
          consumer  and other loans are  estimated  using  discounted  cash flow
          analyses and interest  rates  currently  being  offered for loans with
          similar terms to borrowers of similar credit quality.

          MORTGAGE SERVICING RIGHTS:  Mortgage loan servicing rights, consist of
          FFC's contractual right to service loans for others.  These rights are
          valued at estimated  fair values  using a discounted  cash flow model.
          The value of those rights  originated  prior to January 1, 1995 is not
          included.

          FHL BANK AND FEDERAL RESERVE BANK STOCK:  The stock is carried at cost
          which is its  redeemable  value  since the  market  for this  stock is
          restricted.

          DEPOSITS:   The  fair  values  disclosed  for   interest-bearing   and
          non-interest-bearing  checking  accounts,  passbook accounts and money
          market  accounts are, by  definition,  equal to the amount  payable on
          demand at the reporting date (i.e., their carrying amounts).  The fair
          values of fixed-rate  certificates  of deposit are  estimated  using a
          discounted cash flow calculation that applies interest rates currently
          being offered on  certificates  to a schedule of  aggregated  expected
          monthly maturities of the outstanding certificates of deposit.

          BORROWINGS:   The  fair  values  of  FFC's  long-term  borrowings  are
          estimated using discounted cash flow analyses,  based on FFC's current
          incremental   borrowing   rates  for   similar   types  of   borrowing
          arrangements.   Short  term  borrowing  fair  values  approximate  the
          carrying value due to the nature of the borrowing.

          OFF-BALANCE-SHEET    INSTRUMENTS:   Fair   values   for   FFC's   off-
          balance-sheet  instruments  (lending  commitments  and unused lines of
          credit)  are based on fees  currently  charged to enter  into  similar
          agreements, taking into account the remaining terms of the agreements,
          the counterparties' credit standing and discounted cash flow analyses.
          The fair  value  of these  off-balance-sheet  items  approximates  the
          recorded  amounts of the related  fees and is not material at December
          31, 1996 and 1995.


                                      -32-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE O--FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued

The carrying amounts and fair values of FFC's financial  instruments  consist of
the following:
<TABLE>
<CAPTION>

                                                                        December 31,
                                                          1996                              1995
                                                 ----------------------            ------------------------------
                                                  Carrying           Fair            Carrying            Fair
                                                   Amount            Value            Amount             Value
                                                   ------            -----            ------             -----
                                                                  (Dollars in thousands)
<S>                                              <C>               <C>               <C>               <C>      
Cash equivalents                                $   20,556        $   20,556        $   48,730        $   48,730

Investment securities                              194,911           194,473           200,425           200,062

FHL Bank and Federal Reserve
  Bank stock                                        36,229            36,229            35,456            35,456

Mortgage-related securities                      1,650,437         1,645,191         1,270,761         1,262,353

Loans receivable                                 3,512,819         3,521,154         3,616,800         3,647,193

Mortgage servicing rights                            9,243            11,792             8,395            10,993

Accrued interest receivable                         36,224            36,224            37,722            37,722

Deposits                                         4,437,805         4,431,876         4,416,308         4,423,272

Federal Home Loan Bank
  and other borrowings                             769,526           770,505           570,508           574,082

Accrued interest payable                            10,051            10,051            10,585            10,585
</TABLE>


NOTE P--MORTGAGE SERVICING RIGHTS

An analysis of activity in FFC's  combined  excess  mortgage  servicing  rights,
purchased  mortgage  servicing rights and originated  mortgage  servicing rights
(originated after January 1, 1995) is as follows:

                                        Year Ended December 31,
                              1996              1995              1994
                            -------           -------           ------
                                        (Dollars in thousands)

Balance at beginning
  of year                   $ 8,395           $ 7,880           $ 4,441
Additions                     2,723             1,773             4,508
Amortization                 (1,875)           (1,258)           (1,069)
                            -------           -------           -------

BALANCE AT END OF YEAR      $ 9,243           $ 8,395           $ 7,880
                            =======           =======           =======


NOTE Q--STOCK-BASED COMPENSATION

FFC has a stock  option plan under which shares of common stock are reserved for
the grant of both  incentive  and  non-incentive  stock  options  to  directors,
officers  and  employees.  The date on which the options are first  exercisable,
generally two or more years from the grant date, is determined by the Stock Plan
Committee of the Board of Directors.  The options expire no later than ten years
from the grant date.

                                      -33-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE Q--STOCK-BASED COMPENSATION--Continued

FFC  has  elected  to  follow  Accounting   Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees" (APB 25) and related  Interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair value  accounting  provided for under FASB  Statement No. 123,
"Accounting  for  Stock-Based  Compensation,"  requires use of option  valuation
models that were not developed for use in valuing employee stock options.  Under
APB 25,  because the exercise  price of FFC's  employee stock options equals the
market  price of the  underlying  stock on the date of  grant,  no  compensation
expense is recognized.

Pro forma information regarding net income and earnings per share is required by
Statement No. 123, which also requires that the  information be determined as if
FFC has accounted for its employee stock options granted  subsequent to December
31, 1994 under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes  option pricing
model  with the  following  weighted-average  assumptions  for  1996  and  1995,
respectively:  risk-free  interest  rates of 5.9% and 6.6%; a dividend  yield of
2.5%;  volatility  factors of the expected market price of FFC's common stock of
 .25 and .27; and  weighted-average  expected lives of the options of 4.5 and 4.4
years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
FFC's employee stock options have characteristics  significantly  different from
those of traded options, and because changes in the subjective input assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is  amortized  to expense  over the  options'  vesting  period.  FFC's pro forma
information follows (in thousands except for earnings per share information):

                                                1996                     1995
                                              --------                 ------

Pro forma net income                          $ 49,736                 $ 63,959

Pro forma earnings per share:
  Primary                                     $   1.31                 $   1.70
  Fully diluted                               $   1.30                 $   1.69

Because Statement No. 123 is applicable only to options granted
subsequent to December 31, 1994, its pro forma effect will not be
fully reflected until 1997.

                                      -34-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE Q--STOCK-BASED COMPENSATION--Continued

A summary of the status of FFC's stock option plan as of December 31, 1996, 1995
and 1994 and changes during the years ended on those dates follows:

<TABLE>
<CAPTION>

                                          1996                        1995                      1994
                                     ---------------------      ---------------------     ---------------------
                                                  Weighted                  Weighted                   Weighted
                                                  Average                   Average                    Average
                                                  Exercise                  Exercise     Exercise
                                     Options       Price        Options      Price        Options       Price
                                     -------       -----        -------      -----        -------       -----
                                                       (Number of options in thousands)
<S>                                   <C>         <C>            <C>        <C>             <C>        <C>    
Outstanding at begin-
 ning of year                         1,779       $  7.35        2,459      $  6.58         2,691      $  5.82
Granted                                  18         17.91           35        13.73           219        12.21
Exercised                              (373)         5.50         (708)        4.95          (416)        4.56
Forfeited                                (9)        14.81           (7)       12.58           (35)        7.45
                                      -----                      -----                      -----
OUTSTANDING AT END OF
 YEAR                                 1,415          7.92        1,779         7.35         2,459         6.58
                                      =====                      =====                      =====

Options exercisable at
 year-end                             1,147                      1,295                      1,589
Weighted-average fair
 value of options grant-
 ed during the year                   $4.37                      $3.53
</TABLE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1996:

<TABLE>
<CAPTION>

                                      Options Outstanding                             Options Exercisable
                               ---------------------------------------------       ------------------------------
                                                  Weighted-
                                                   Average        Weighted-                           Weighted-
     Range of                                     Remaining        Average                             Average
     Exercise                    Options         Contractual      Exercise            Options         Exercise
     Prices                    Outstanding          Life            Price           Exercisable         Price
----------------               -----------     --------------   ------------      -------------      ------------
                                                         (Number of options in thousands)
<S>                              <C>             <C>              <C>                 <C>            <C>
$ 2.48 to $ 6.40                    244           4.3 years       $  3.89                244         $  3.89
   $ 7.55                           896           5.9 years          7.55                719            7.55
$10.90 to $13.40                    252           7.5 years         12.25                182           12.27
$16.60 to $19.65                     23           9.2 years         17.59                  2           17.10
                               ----------                                           ----------
$ 2.48 to $19.65                  1,415           6.0 years          7.92              1,147            7.54
                               ==========                                           ==========
</TABLE>


At December  31,  1996,  options for 755,000  shares were  available  for future
grant.

NOTE R--LITIGATION

FFC is  involved  in  certain  lawsuits  in the  course of its  general  lending
business and other operations. FFC believes there are sound defenses against the
claims asserted therein and is vigorously  defending these actions.  Management,
after  review  with its  legal  counsel,  is of the  opinion  that the  ultimate
disposition of its litigation will not have a material effect on FFC's financial
condition.



                                      -35-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE S--FIRST FINANCIAL CORPORATION PARENT COMPANY ONLY
                               FINANCIAL INFORMATION

<TABLE>
<CAPTION>
BALANCE SHEETS
                                                                                      December 31,
                                                                                 1996               1995
                                                                               --------           ------
                                                                                (Dollars in thousands)
<S>                                                                            <C>                <C>     
ASSETS
Cash and cash equivalents                                                      $ 35,603           $ 13,613
Investment securities available for sale                                          4,687              4,668
Investment in subsidiary                                                        368,017            417,830
Prepaid expenses and other assets                                                 3,743              5,068
                                                                               --------           --------
                                                                               $412,050           $441,179
                                                                               ========           ========

LIABILITIES
Subordinated notes                                                                                $ 54,925
Other liabilities                                                              $  1,539              1,066
                                                                               --------           --------
                                                        TOTAL LIABILITIES         1,539             55,991


STOCKHOLDERS' EQUITY
Common stock                                                                     37,451             37,095
Additional paid-in capital                                                       43,668             42,337
Retained earnings                                                               342,539            311,777
Net unrealized gain (loss) on
 securities available for sale                                                    1,300             (6,021)
Treasury stock, at cost                                                         (14,447)
                                                                               --------           --------
                                               TOTAL STOCKHOLDERS' EQUITY       410,511            385,188
                                                                               --------           --------
                                                                               $412,050           $441,179
                                                                               ========           ========
</TABLE>

STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                         1996           1995                1994
                                                                       -------        -------             ------
                                                                               (Dollars in thousands)
<S>                                                                    <C>            <C>            <C>    
Interest income                                                        $   795        $   920        $   644
Interest expense on borrowings                                             182          4,675          4,686
                                                                       -------        -------        -------
                                   NET INTEREST INCOME (EXPENSE)           613         (3,755)        (4,042)
Equity in net income of subsidiary                                      51,428         68,028         56,903
                                                                       -------        -------        -------
                                                                        52,041         64,273         52,861
Management fees paid to subsidiary                                         700            660            628
Other expenses                                                           1,401          1,807          1,080
                                                                       -------        -------        -------
                                INCOME BEFORE INCOME TAX CREDITS
                                          AND EXTRAORDINARY ITEM        49,940         61,806         51,153
Income tax credits                                                        (518)        (2,178)        (1,876)
                                                                       -------        -------        -------
                                INCOME BEFORE EXTRAORDINARY ITEM        50,458         63,984         53,029
Extraordinary item                                                        (686)
                                                                       -------        -------        -------
                                                      NET INCOME       $49,772        $63,984        $53,029
                                                                       =======        =======        =======
</TABLE>

                                      -36-

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FIRST FINANCIAL CORPORATION

NOTE S--FIRST FINANCIAL CORPORATION PARENT COMPANY ONLY FINANCIAL INFORMATION--
Continued


STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                   1996             1995            1994
                                                                 --------         --------        ------
                                                                          (Dollars in thousands)
<S>                                                              <C>              <C>              <C>     
OPERATING ACTIVITIES
   Net income                                                    $ 49,772         $ 63,984         $ 53,029
   Adjustments to reconcile net income
     to net cash provided by (used in)
     operating activities:
      Equity in net income of subsidiary                          (51,428)         (68,028)         (56,903)
      Other                                                         2,326            1,649              218
                                                                 --------         --------         --------
                                 NET CASH PROVIDED BY (USED IN)
                                           OPERATING ACTIVITIES       670           (2,395)          (3,656)

INVESTING ACTIVITIES
   Cash dividends from subsidiary                                 113,000           16,945           16,200
   Investment in subsidiary                                        (5,000)
                                                                 --------         --------         --------
                                           NET CASH PROVIDED BY
                                           INVESTING ACTIVITIES   108,000           16,945           16,200

FINANCING ACTIVITIES
   Redemption of subordinated debt                                (54,925)
   Purchase of treasury stock                                     (14,447)
   Exercise of stock options                                        1,702            3,024            1,595
   Cash dividends paid                                            (19,010)         (14,156)          (9,950)
                                                                 --------         --------         --------
                                               NET CASH USED IN
                                           FINANCING ACTIVITIES   (86,680)         (11,132)          (8,355)
                                                                 --------         --------         --------

Increase in cash and cash equivalents                              21,990            3,418            4,189
Cash and cash equivalents at beginning
   of year                                                         13,613           10,195            6,006
                                                                 --------         --------         --------

                       CASH AND CASH EQUIVALENTS AT END OF YEAR  $ 35,603         $ 13,613         $ 10,195
                                                                 ========         ========         ========
</TABLE>



                                      -37-