##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended September 30, 2008
 Commission File Number 0-16759
 FIRST FINANCIAL CORPORATION
  INDIANA
    
    35-1546989(State or other jurisdiction
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)One First Financial Plaza, Terre Haute, IN
    
    47807(Address of principal executive office)
    
    (Zip Code)
  
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Page No.PART I. Financial InformationItem 1. Financial Statements:Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Shareholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    11Item 4. Controls and Procedures
    
    
    15PART II. Other Information:Item 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3. Defaults upon Senior Securities
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    16Signatures
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Part I  Financial Information
 
   
   September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash and due from banks
    
    $
    49,824
    
    
    $
    70,082Federal funds sold and short-term investments
    
    
    10,665
    
    
    
    4,201Securities available-for-sale
    
    
    596,750
    
    
    
    558,020Loans:Commercial, financial and agricultural
    
    
    521,470
    
    
    
    461,086Real estate  construction
    
    
    28,449
    
    
    
    29,637Real estate  mortgage
    
    
    632,276
    
    
    
    673,355Installment
    
    
    294,025
    
    
    
    262,858Lease financing
    
    
    1,924
    
    
    
    2,2751,478,144
    
    
    
    1,429,211Less:Unearned Income
    
    
    (158
    )
    
    
    (212
    )Allowance for loan losses
    
    
    (15,840
    )
    
    
    (15,351
    )1,462,146
    
    
    
    1,413,648Credit card loans held-for-sale
    
    
    12,777
    
    
    
    14,068Restricted Stock
    
    
    26,227
    
    
    
    28,613Accrued interest receivable
    
    
    13,371
    
    
    
    13,698Premises and equipment, net
    
    
    32,237
    
    
    
    32,632Bank-owned life insurance
    
    
    61,566
    
    
    
    59,950Goodwill
    
    
    7,102
    
    
    
    7,102Other intangible assets
    
    
    1,619
    
    
    
    1,937Other real estate owned
    
    
    3,469
    
    
    
    1,472Other assets
    
    
    27,982
    
    
    
    26,139TOTAL ASSETS
    
    $
    2,305,735
    
    
    $
    2,231,562LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    239,183
    
    
    $
    225,549Interest-bearing:Certificates of deposit of $100 or more
    
    
    185,519
    
    
    
    193,901Other interest-bearing deposits
    
    
    1,104,510
    
    
    
    1,110,2711,529,212
    
    
    
    1,529,721Short-term borrowings
    
    
    51,261
    
    
    
    27,331Other borrowings
    
    
    410,167
    
    
    
    341,285Other liabilities
    
    
    35,440
    
    
    
    51,533TOTAL LIABILITIES
    
    
    2,026,080
    
    
    
    1,949,870Shareholders equityCommon stock, $.125 stated value per share; 

Authorized shares-40,000,000

Issued shares-14,450,966

Outstanding shares-13,098,615 in 2008 and 13,136,359 in 2007
    
    
    1,806
    
    
    
    1,806Additional paid-in capital
    
    
    68,212
    
    
    
    68,212Retained earnings
    
    
    261,843
    
    
    
    250,011Accumulated other comprehensive income (loss)
    
    
    (18,016
    )
    
    
    (5,181
    )Treasury shares at cost-1,352,351 in 2008 and 1,314,607 in 2007
    
    
    (34,190
    )
    
    
    (33,156
    )TOTAL SHAREHOLDERS EQUITY
    
    
    279,655
    
    
    
    281,692TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,305,735
    
    
    $
    2,231,562
   3




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)INTEREST INCOME:Loans, including related fees
    
    $
    24,799
    
    
    $
    26,661
    
    
    $
    75,256
    
    
    $
    78,263Securities:Taxable
    
    
    6,412
    
    
    
    5,957
    
    
    
    18,794
    
    
    
    17,405Tax-exempt
    
    
    1,609
    
    
    
    1,694
    
    
    
    4,787
    
    
    
    4,876Other
    
    
    554
    
    
    
    603
    
    
    
    2,095
    
    
    
    2,197TOTAL INTEREST INCOME
    
    
    33,374
    
    
    
    34,915
    
    
    
    100,932
    
    
    
    102,741INTEREST EXPENSE:Deposits
    
    
    7,378
    
    
    
    10,676
    
    
    
    25,971
    
    
    
    31,265Short-term borrowings
    
    
    290
    
    
    
    499
    
    
    
    857
    
    
    
    1,180Other borrowings
    
    
    4,602
    
    
    
    4,991
    
    
    
    14,084
    
    
    
    14,525TOTAL INTEREST EXPENSE
    
    
    12,270
    
    
    
    16,166
    
    
    
    40,912
    
    
    
    46,970NET INTEREST INCOME
    
    
    21,104
    
    
    
    18,749
    
    
    
    60,020
    
    
    
    55,771Provision for loan losses
    
    
    2,215
    
    
    
    1,575
    
    
    
    5,875
    
    
    
    4,505NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    18,889
    
    
    
    17,174
    
    
    
    54,145
    
    
    
    51,266NON-INTEREST INCOME:Trust and financial services
    
    
    981
    
    
    
    926
    
    
    
    3,090
    
    
    
    2,846Service charges and fees on deposit accounts
    
    
    3,157
    
    
    
    3,062
    
    
    
    8,937
    
    
    
    8,803Other service charges and fees
    
    
    1,640
    
    
    
    1,492
    
    
    
    4,511
    
    
    
    4,259Securities gains/(losses), net
    
    
    (6,139
    )
    
    
    
    
    
    
    (5,784
    )
    
    
    20Insurance commissions
    
    
    1,556
    
    
    
    1,715
    
    
    
    4,752
    
    
    
    4,659Gain on sales of mortgage loans
    
    
    184
    
    
    
    211
    
    
    
    594
    
    
    
    615Other
    
    
    61
    
    
    
    429
    
    
    
    1,630
    
    
    
    2,309TOTAL NON-INTEREST INCOME
    
    
    1,440
    
    
    
    7,835
    
    
    
    17,730
    
    
    
    23,511NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    10,043
    
    
    
    9,606
    
    
    
    30,501
    
    
    
    29,173Occupancy expense
    
    
    1,047
    
    
    
    1,003
    
    
    
    3,084
    
    
    
    3,074Equipment expense
    
    
    1,185
    
    
    
    1,078
    
    
    
    3,424
    
    
    
    3,245Other
    
    
    4,228
    
    
    
    4,441
    
    
    
    12,148
    
    
    
    12,802TOTAL NON-INTEREST EXPENSE
    
    
    16,503
    
    
    
    16,128
    
    
    
    49,157
    
    
    
    48,294INCOME BEFORE INCOME TAXES
    
    
    3,826
    
    
    
    8,881
    
    
    
    22,718
    
    
    
    26,483Provision for income taxes
    
    
    324
    
    
    
    2,519
    
    
    
    5,123
    
    
    
    7,285NET INCOME
    
    $
    3,502
    
    
    $
    6,362
    
    
    $
    17,595
    
    
    $
    19,198PER SHARE DATABasic and Diluted
    
    $
    0.27
    
    
    $
    0.48
    
    
    $
    1.34
    
    
    $
    1.45Dividends Per Share
    
    
    
    
    
    
    
    
    
    $
    0.44
    
    
    $
    0.43Weighted average number of shares
outstanding 
(in thousands)
    
    
    13,099
    
    
    
    13,136
    
    
    
    13,108
    
    
    
    13,195
   4




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##### Table of Contents



AccumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, July 1, 2007
    
    $
    1,806
    
    
    $
    68,003
    
    
    $
    243,052
    
    
    $
    (10,723
    )
    
    $
    (32,343
    )
    
    $
    269,795Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    6,362
    
    
    
    
    
    
    
    
    
    
    
    6,362Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,708
    
    
    
    
    
    
    
    3,708Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    110Total comprehensive
income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,180Treasury stock purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,567
    )
    
    
    (1,567
    )Balance, September 30, 2007
    
    $
    1,806
    
    
    $
    68,003
    
    
    $
    249,414
    
    
    $
    (6,905
    )
    
    $
    (33,910
    )
    
    $
    278,408Balance, July 1, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    258,341
    
    
    $
    (12,452
    )
    
    $
    (34,190
    )
    
    $
    281,717Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    3,502
    
    
    
    
    
    
    
    
    
    
    
    3,502Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,692
    )
    
    
    
    
    
    
    (5,692
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    128Total comprehensive
income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,062
    )Balance, September 30, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    261,843
    
    
    $
    (18,016
    )
    
    $
    (34,190
    )
    
    $
    279,655
   5




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##### Table of Contents



AccumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, January 1, 2007
    
    $
    1,806
    
    
    $
    68,003
    
    
    $
    235,967
    
    
    $
    (5,494
    )
    
    $
    (29,022
    )
    
    $
    271,260Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    19,198
    
    
    
    
    
    
    
    
    
    
    
    19,198Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,951
    )
    
    
    
    
    
    
    (1,951
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    540Total comprehensive
income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,787Adoption of FIN48
    
    
    
    
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    (86
    )Cash Dividends, $.43 per share
    
    
    
    
    
    
    
    
    
    
    (5,665
    )
    
    
    
    
    
    
    
    
    
    
    (5,665
    )Treasury stock purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,888
    )
    
    
    (4,888
    )Balance, September 30, 2007
    
    $
    1,806
    
    
    $
    68,003
    
    
    $
    249,414
    
    
    $
    (6,905
    )
    
    $
    (33,910
    )
    
    $
    278,408Balance, January 1, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    250,011
    
    
    $
    (5,181
    )
    
    $
    (33,156
    )
    
    $
    281,692Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,595
    
    
    
    
    
    
    
    
    
    
    
    17,595Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,219
    )
    
    
    
    
    
    
    (13,219
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    
    
    
    
    384Total comprehensive
income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,760Cash Dividends, $.44 per share
    
    
    
    
    
    
    
    
    
    
    (5,763
    )
    
    
    
    
    
    
    
    
    
    
    (5,763
    )Treasury stock purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,034
    )
    
    
    (1,034
    )Balance, September 30, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    261,843
    
    
    $
    (18,016
    )
    
    $
    (34,190
    )
    
    $
    279,655
   6




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##### Table of Contents



Nine Months EndedSeptember 30,2008
    
    
    2007(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    17,595
    
    
    $
    19,198Adjustments to reconcile net income to net cash
provided by operating activities:Net amortization (accretion) of premiums and discounts on investments
    
    
    (2,083
    )
    
    
    (1,941
    )Provision for loan losses
    
    
    5,875
    
    
    
    4,505Securities (gains) losses
    
    
    5,784
    
    
    
    (20
    )Gain on sale of other real estate
    
    
    (41
    )
    
    
    (163
    )Depreciation and amortization
    
    
    2,618
    
    
    
    2,600Other, net
    
    
    (10,008
    )
    
    
    (5,497
    )NET CASH FROM OPERATING ACTIVITIES
    
    
    19,740
    
    
    
    18,682CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from the sales of securities available-for-sale
    
    
    961
    
    
    
    2,939Proceeds from the redemption of restricted stock
    
    
    2,386
    
    
    
    Calls, maturities and principal reductions on securities available-for-sale
    
    
    66,827
    
    
    
    67,929Purchases of securities available-for-sale
    
    
    (132,249
    )
    
    
    (113,680
    )Loans made to customers, net of repayment
    
    
    (56,544
    )
    
    
    (41,987
    )Proceeds from sales of other real estate owned
    
    
    1,506
    
    
    
    3,400Net change in federal funds sold
    
    
    (6,464
    )
    
    
    20,712Additions to premises and equipment
    
    
    (1,905
    )
    
    
    (1,654
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    (125,482
    )
    
    
    (62,341
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net change in deposits
    
    
    (509
    )
    
    
    (6,741
    )Net change in short-term borrowings
    
    
    23,930
    
    
    
    43,161Dividends paid
    
    
    (5,785
    )
    
    
    (5,708
    )Purchase of treasury stock
    
    
    (1,034
    )
    
    
    (4,888
    )Proceeds from other borrowings
    
    
    283,500
    
    
    
    81,000Repayments on other borrowings
    
    
    (214,618
    )
    
    
    (81,757
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    85,484
    
    
    
    25,067NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (20,258
    )
    
    
    (18,592
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    70,082
    
    
    
    77,682CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    49,824
    
    
    $
    59,090
   7




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##### Table of Contents



1.
    
    Significant Accounting Policies
  2.
    
    Impaired Loans
  September 30,
    
    
    December 31,2008
    
    
    2007Impaired Loans with related allowance for loan losses calculated under SFAS No. 114
    
    $
    4,293
    
    
    $
    2,203Impaired Loans with no related allowance for loan losses
    
    
    1,659
    
    
    
    $
    5,952
    
    
    $
    2,203
  3.
    
    Securities
  (000s)September 30, 2008
    
    
    December 31, 2007Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueUnited States Government entity mortgage-backed securities
    
    $
    345,326
    
    
    $
    345,404
    
    
    $
    288,742
    
    
    $
    289,704Collateralized Mortgage Obligations
    
    
    81,339
    
    
    
    82,745
    
    
    
    76,730
    
    
    
    77,174State and Municipal Obligations
    
    
    141,701
    
    
    
    140,911
    
    
    
    142,862
    
    
    
    146,515Corporate Obligations
    
    
    44,757
    
    
    
    21,026
    
    
    
    38,010
    
    
    
    36,843Equity Securities
    
    
    4,847
    
    
    
    6,664
    
    
    
    4,721
    
    
    
    7,784$
    617,970
    
    
    $
    596,750
    
    
    $
    551,065
    
    
    $
    558,020
    8




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##### Table of Contents



4.
    
    Fair Value
  Level 1:
    
    Quoted prices (unadjusted) of identical assets or liabilities in active markets that
the entity has the ability to access as of the measurement date.Level 2:
    
    Significant other observable inputs other than Level I prices such as quoted prices
for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data.Level 3:
    
    Significant unobservable inputs that reflect a reporting entitys own assumptions
about the assumptions that market participants would use in pricing an asset or liability.
   September 30, 2008Fair Value Measurements UsingLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Carrying ValueSecurities available-for-sale (1)
    
    $
    2,580
    
    
    $
    581,995
    
    
    $
    12,175
    
    
    $
    596,750
 (1)
    
    Carried at fair value prior to the adoption of SFAS 159. The fair value of securities
reported using Level 3 inputs include certain investments in bank equities and collateralized debt
obligations for which Level 1 and Level 2 inputs are not available.  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Beginning Balance
    
    $
    33,745Total gains or losses (realized/unrealized)
    
    
    (21,306
    )Purchase
    
    
    0Settlements
    
    
    (264
    )Pay downs and Maturities
    
    
    0Transfers into (out of) Level 3
    
    
    0Ending Balance
    
    $
    12,175
   9




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##### Table of Contents



5.
    
    Short-Term Borrowings
  (000s)September 30,
    
    
    December 31,2008
    
    
    2007Federal Funds P urchased
    
    $
    29,558
    
    
    $
    3,032Repurchase Agreements
    
    
    19,405
    
    
    
    22,656Note P ayable  U.S. Government
    
    
    2,298
    
    
    
    1,643$
    51,261
    
    
    $
    27,331
 6.
    
    Other Borrowings
  (000s)September 30,
    
    
    December 31,2008
    
    
    2007FHLB Advances
    
    $
    403,567
    
    
    $
    334,685City of T erre Haute, Indiana economic development revenue bonds
    
    
    6,600
    
    
    
    6,600$
    410,167
    
    
    $
    341,285
 7.
    
    Components of Net Periodic Benefit Cost
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(000s)
    
    
    (000s)Post-Retirement
    
    
    
    
    
    
    
    
    
    
    Post-RetirementPension Benefits
    
    
    Health Benefits
    
    
    Pension Benefits
    
    
    Health Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    758
    
    
    $
    768
    
    
    $
    31
    
    
    $
    29
    
    
    $
    2,273
    
    
    $
    2,304
    
    
    $
    94
    
    
    $
    88Interest cost
    
    
    727
    
    
    
    693
    
    
    
    60
    
    
    
    77
    
    
    
    2,181
    
    
    
    2,080
    
    
    
    179
    
    
    
    232Expected return on plan assets
    
    
    (823
    )
    
    
    (911
    )
    
    
    
    
    
    
    
    
    
    
    (2,469
    )
    
    
    (2,733
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45Net amortization of prior service cost
    
    
    (5
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )
    
    
    
    
    
    
    Net amortization of net (gain) loss
    
    
    182
    
    
    
    116
    
    
    
    3
    
    
    
    43
    
    
    
    547
    
    
    
    347
    
    
    
    8
    
    
    
    129Net Periodic Benefit Cost
    
    $
    839
    
    
    $
    661
    
    
    $
    109
    
    
    $
    164
    
    
    $
    2,518
    
    
    $
    1,984
    
    
    $
    326
    
    
    $
    494
 Employer Contributions
  8.
    
    Unrecognized Tax Benefits
  9.
    
    New accounting standards
   10




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##### Table of Contents



rd
  10. Participation in the Treasury Capital Purchase Program
    
 Managements Discussion and Analysis of Financial Condition and Results of
Operations and Quantitative and Qualitative Disclosures About Market Risk
    11




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##### Table of Contents



Critical Accounting Policies
   Recognition of Interest Income and Impairment on Purchased
Beneficial Interests and Beneficial Interests That Continue to be Held by a Transferor in
Securitized Financial Assets, market participant
 Summary of Operating Results
   Net Interest Income
  Non-Interest Income
  Non-Interest Expenses
   12




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##### Table of Contents



Allowance for Loan Losses
  Non-performing Loans
  (000s)September 30,
    
    
    December 31,2008
    
    
    2007Non-accrual loans
    
    $
    12,147
    
    
    $
    7,971Restructured loans
    
    
    101
    
    
    
    50Accruing loans past due over 90 days
    
    
    3,326
    
    
    
    4,462$
    15,574
    
    
    $
    12,483Ratio of the allowance for loan losses
as a percentage of non-performing loans
    
    
    102
    %
    
    
    123
    %
  (000s)September 30,
    
    
    December 31,2008
    
    
    2007Non-accrual loans1-4 family residential
    
    $
    1,624
    
    
    $
    2,574Commercial loans
    
    
    9,076
    
    
    
    3,938Installment loans
    
    
    1,447
    
    
    
    1,459$
    12,147
    
    
    $
    7,971Past due 90 days or more1-4 family residential
    
    $
    660
    
    
    $
    1,230Commercial loans
    
    
    1,785
    
    
    
    2,795Installment loans
    
    
    881
    
    
    
    437$
    3,326
    
    
    $
    4,462
 Interest Rate Sensitivity and Liquidity
  Interest Rate Risk
    13




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##### Table of Contents



Basis Point
    
    Percentage Change in Net Interest IncomeInterest Rate Change
    
    12 months
    
    
    24 months
    
    
    36 monthsDown 200
    
    
    -1.85
    
    
    
    -8.49
    
    
    
    -11.17Down 100
    
    
    -0.14
    
    
    
    -3.15
    
    
    
    -4.85Up 100
    
    
    1.10
    
    
    
    2.65
    
    
    
    3.43Up 200
    
    
    -2.33
    
    
    
    1.09
    
    
    
    4.62
  Liquidity Risk
  Financial Condition
  Capital Adequacy
  September 30, 2008
    
    
    December 31, 2007Total risk-based capitalCorporation
    
    
    17.94
    %
    
    
    18.18
    %First Financial Bank
    
    
    17.89
    %
    
    
    18.13
    %Tier I risk-based capitalCorporation
    
    
    17.00
    %
    
    
    17.22
    %First Financial Bank
    
    
    17.11
    %
    
    
    17.33
    %Tier I leverage capitalCorporation
    
    
    12.67
    %
    
    
    12.44
    %First Financial Bank
    
    
    12.61
    %
    
    
    12.60
    %
  14




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##### Table of Contents



Controls and Procedures.
  
 PART II  Other Information
 
 Legal Proceedings.
  
 Risk Factors.
  
 Unregistered Sales of Equity Securities and Use of Proceeds.
 (a)
    
    None.(b)
    
    Not applicable.(c)
    
    Purchases of Equity Securities.
  
 Defaults upon Senior Securities.
  
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  
 Other Information.
 (a)
    
    Not applicable.(b)
    
    Not applicable.
  15




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##### Table of Contents



Exhibits.
 Exhibit No.:


    
    Description of Exhibit:3.1
    
    
    Amended and Restated Articles of Incorporation of First Financial Corporation,
incorporated by reference to Exhibit 3(i) of the Corporations Form 10-Q filed for the
quarter ended September 30, 2002.3.2
    
    
    Code of By-Laws of First Financial Corporation, incorporated by reference to
Exhibit 3(ii) of the Corporations Form 10-Q filed for the quarter ended September 30,
2002.10.1
    
    
    Employment Agreement for
Norman L. Lowery, dated April 14, 2008 and effective January 1, 2008, incorporated by
reference to Exhibit 10.1 of the Corporation Form 10-Q filed for the quarter
ended March 31, 2008.10.2
    
    
    2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by
reference to Exhibit 10.3 of the Corporations Form 10-Q filed for the quarter ended
September 30, 2002.10.3
    
    
    2008 Schedule of Director Compensation, incorporated by reference to Exhibit 10.3
of the Corporations Form 10-K filed for the fiscal year ended December 31, 2007.10.4
    
    
    2008 Schedule of Named Executive Officer Compensation, incorporated by reference
to the Corporations Form 10-K filed for the fiscal year ended December 31, 2007.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 by Principal Executive Officer, dated November 6, 2008.31.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 by Principal Financial Officer, dated November 6, 2008.32.1
    
    
    Certification, dated November 6, 2008, of Principal Executive Officer and
Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2005
on Form 10-Q for the quarter ended September 30, 2008.
  16




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##### Table of Contents



FIRST FINANCIAL CORPORATION
(Registrant)Date: November 6, 2008
    By:
    /s/ Donald E. SmithDonald E. Smith, Chairman Date: November 6, 2008
    By:
    /s/ Norman L. LoweryNorman L. Lowery, Vice Chairman and CEO Date: November 6, 2008
    By:
    /s/ Michael A. CartyMichael A. Carty, Treasurer and CFO  17




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##### Table of Contents



Exhibit Index
 
 Exhibit No.:


    
    Description of Exhibit:3.1
    
    
    Amended and Restated Articles of Incorporation of First Financial Corporation,
incorporated by reference to Exhibit 3(i) of the Corporations Form 10-Q filed for the
quarter ended September 30, 2002.3.2
    
    
    Code of By-Laws of First Financial Corporation, incorporated by reference to
Exhibit 3(ii) of the Corporations Form 10-Q filed for the quarter ended September 30,
2002.10.1
    
    
    Employment Agreement for
Norman L. Lowery, dated April 14, 2008 and effective January 1, 2008, incorporated by
reference to Exhibit 10.1 of the Corporation Form 10-Q filed for the quarter
ended March 31, 2008.10.2
    
    
    2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by
reference to Exhibit 10.3 of the Corporations Form 10-Q filed for the quarter ended
September 30, 2002.10.3
    
    
    2008 Schedule of Director Compensation, incorporated by reference to Exhibit 10.3
of the Corporations Form 10-K filed for the fiscal year ended December 31, 2007.10.4
    
    
    2008 Schedule of Named Executive Officer Compensation, incorporated by reference
to the Corporations Form 10-K filed for the fiscal year ended December 31, 2007.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 by Principal Executive Officer, dated November 6, 2008.31.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 by Principal Financial Officer, dated November 6, 2008.32.1
    
    
    Certification, dated November 6, 2008, of Principal Executive Officer and
Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2005
on Form 10-Q for the quarter ended September 30, 2008.
  18