##### 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, 2010
 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)
 (Registrants telephone number, including area code)
 þ o
 o 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
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    19PART II. Other Information:Item 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    21Signatures
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Part I  Financial Information
 
   
   September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCash and due from banks
    
    $
    63,151
    
    
    $
    84,371Federal funds sold and short-term investments
    
    
    77,980
    
    
    
    21,576Securities available-for-sale
    
    
    594,476
    
    
    
    587,246Loans:Commercial
    
    
    881,741
    
    
    
    870,977Resisdential
    
    
    443,630
    
    
    
    447,379Consumer
    
    
    315,262
    
    
    
    314,5611,640,633
    
    
    
    1,632,917Less:Unearned Income
    
    
    (979
    )
    
    
    (1,153
    )Allowance for loan losses
    
    
    (19,974
    )
    
    
    (19,437
    )1,619,680
    
    
    
    1,612,327Restricted Stock
    
    
    27,835
    
    
    
    27,835Accrued interest receivable
    
    
    11,769
    
    
    
    12,005Premises and equipment, net
    
    
    34,519
    
    
    
    35,551Bank-owned life insurance
    
    
    65,597
    
    
    
    64,057Goodwill
    
    
    7,102
    
    
    
    7,102Other intangible assets
    
    
    3,860
    
    
    
    4,916Other real estate owned
    
    
    4,743
    
    
    
    5,885FDIC indemnification ssset
    
    
    2,498
    
    
    
    12,124Other assets
    
    
    48,933
    
    
    
    43,727TOTAL ASSETS
    
    $
    2,562,143
    
    
    $
    2,518,722LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    307,876
    
    
    $
    312,990Interest-bearing:Certificates of deposit of $100 or more
    
    
    227,712
    
    
    
    238,830Other interest-bearing deposits
    
    
    1,382,075
    
    
    
    1,237,8811,917,663
    
    
    
    1,789,701Short-term borrowings
    
    
    36,218
    
    
    
    30,436Other borrowings
    
    
    219,160
    
    
    
    332,737Other liabilities
    
    
    61,420
    
    
    
    59,365TOTAL LIABILITIES
    
    
    2,234,461
    
    
    
    2,212,239Shareholders equityCommon stock, $.125 stated value per share;Authorized shares-40,000,000Issued shares-14,450,966Outstanding shares-13,106,630 in 2010 and 13,116,630 in 2009
    
    
    1,806
    
    
    
    1,806Additional paid-in capital
    
    
    68,739
    
    
    
    68,739Retained earnings
    
    
    291,017
    
    
    
    277,357Accumulated other comprehensive income (loss)
    
    
    245
    
    
    
    (7,904
    )Treasury shares at cost-1,344,336 in 2010 and 1,334,336 in 2009
    
    
    (34,125
    )
    
    
    (33,515
    )TOTAL SHAREHOLDERS EQUITY
    
    
    327,682
    
    
    
    306,483TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,562,143
    
    
    $
    2,518,722
   3




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)INTEREST INCOME:Loans, including related fees
    
    $
    24,355
    
    
    $
    24,332
    
    
    $
    72,407
    
    
    $
    69,969Securities:Taxable
    
    
    4,544
    
    
    
    5,712
    
    
    
    14,394
    
    
    
    17,699Tax-exempt
    
    
    1,680
    
    
    
    1,672
    
    
    
    4,982
    
    
    
    4,961Other
    
    
    607
    
    
    
    508
    
    
    
    1,575
    
    
    
    1,439TOTAL INTEREST INCOME
    
    
    31,186
    
    
    
    32,224
    
    
    
    93,358
    
    
    
    94,068INTEREST EXPENSE:Deposits
    
    
    3,932
    
    
    
    5,012
    
    
    
    12,589
    
    
    
    16,789Short-term borrowings
    
    
    80
    
    
    
    145
    
    
    
    250
    
    
    
    425Other borrowings
    
    
    2,521
    
    
    
    4,200
    
    
    
    8,504
    
    
    
    12,948TOTAL INTEREST EXPENSE
    
    
    6,533
    
    
    
    9,357
    
    
    
    21,343
    
    
    
    30,162NET INTEREST INCOME
    
    
    24,653
    
    
    
    22,867
    
    
    
    72,015
    
    
    
    63,906Provision for loan losses
    
    
    2,390
    
    
    
    3,690
    
    
    
    7,010
    
    
    
    9,380NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    22,263
    
    
    
    19,177
    
    
    
    65,005
    
    
    
    54,526NON-INTEREST INCOME:Trust and financial services
    
    
    1,077
    
    
    
    1,174
    
    
    
    3,533
    
    
    
    3,120Service charges and fees on deposit accounts
    
    
    2,737
    
    
    
    2,968
    
    
    
    7,809
    
    
    
    8,232Other service charges and fees
    
    
    2,027
    
    
    
    1,871
    
    
    
    5,786
    
    
    
    5,055Securities gains/(losses), net
    
    
    28
    
    
    
    
    
    
    
    273
    
    
    
    2Total Impairment Losses
    
    
    (859
    )
    
    
    (3,806
    )
    
    
    (4,028
    )
    
    
    (9,116
    )Loss recognized in other comprehensive loss
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    1,229Net impairment loss recognized in earnings
    
    
    (859
    )
    
    
    (3,322
    )
    
    
    (4,028
    )
    
    
    (7,887
    )Insurance commissions
    
    
    1,590
    
    
    
    1,584
    
    
    
    4,842
    
    
    
    4,600Gain on sales of mortgage loans
    
    
    630
    
    
    
    526
    
    
    
    1,301
    
    
    
    1,710Gain on bargain purchase
    
    
    
    
    
    
    5,409
    
    
    
    
    
    
    
    5,409Other
    
    
    66
    
    
    
    89
    
    
    
    666
    
    
    
    933TOTAL NON-INTEREST INCOME
    
    
    7,296
    
    
    
    10,299
    
    
    
    20,182
    
    
    
    21,174NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    12,046
    
    
    
    10,619
    
    
    
    33,554
    
    
    
    30,813Occupancy expense
    
    
    1,374
    
    
    
    1,171
    
    
    
    3,776
    
    
    
    3,290Equipment expense
    
    
    1,190
    
    
    
    1,174
    
    
    
    3,611
    
    
    
    3,404FDIC Insurance
    
    
    757
    
    
    
    692
    
    
    
    2,186
    
    
    
    2,599Other
    
    
    5,213
    
    
    
    4,855
    
    
    
    14,434
    
    
    
    13,104TOTAL NON-INTEREST EXPENSE
    
    
    20,580
    
    
    
    18,511
    
    
    
    57,561
    
    
    
    53,210INCOME BEFORE INCOME TAXES
    
    
    8,979
    
    
    
    10,965
    
    
    
    27,626
    
    
    
    22,490Provision for income taxes
    
    
    2,686
    
    
    
    3,246
    
    
    
    7,934
    
    
    
    5,620NET INCOME
    
    $
    6,293
    
    
    $
    7,719
    
    
    $
    19,692
    
    
    $
    16,870PER SHARE DATABasic and Diluted
    
    $
    0.48
    
    
    $
    0.59
    
    
    $
    1.50
    
    
    $
    1.29Dividends Per Share
    
    
    
    
    
    
    
    
    
    $
    0.46
    
    
    $
    0.45Weighted average number of shares outstanding (in thousands)
    
    
    13,107
    
    
    
    13,117
    
    
    
    13,113
    
    
    
    13,117
   4




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##### Table of Contents



AccoumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, July 1, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    284,724
    
    
    $
    (2,024
    )
    
    $
    (34,059
    )
    
    $
    319,186Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    6,293
    
    
    
    
    
    
    
    
    
    
    
    6,293Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,836
    
    
    
    
    
    
    
    1,836Change in unrealized gains(losses) on
securities available-for-sale for which
a portion of an other-than-temporary-impairment has been recognized in
earnings, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    255Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,562Treasury stock purchase (2,500 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )
    
    
    (66
    )Balance, September 30, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    291,017
    
    
    $
    245
    
    
    $
    (34,125
    )
    
    $
    327,682Balance, July 1, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    269,696
    
    
    $
    (13,714
    )
    
    $
    (33,785
    )
    
    $
    292,657Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    7,719
    
    
    
    
    
    
    
    
    
    
    
    7,719Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,248
    
    
    
    
    
    
    
    9,248Change in unrealized gains(losses) on
securities available-for-sale for which
a portion of an other-than-temporary-impairment has been recognized in
earnings, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (492
    )
    
    
    
    
    
    
    Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    91Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,058Balance, September 30, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    277,415
    
    
    $
    (4,867
    )
    
    $
    (33,785
    )
    
    $
    309,715
   5




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##### Table of Contents



AccoumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, January 1, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    277,357
    
    
    $
    (7,904
    )
    
    $
    (33,515
    )
    
    $
    306,483Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    19,692
    
    
    
    
    
    
    
    
    
    
    
    19,692Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,341
    
    
    
    
    
    
    
    5,341Change in unrealized gains(losses) on
securities available-for-sale for which
a portion of an other-than-temporary-impairment has been recognized in
earnings, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,274
    
    
    
    
    
    
    
    2,274Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    534
    
    
    
    
    
    
    
    534Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,841Cash Dividends, $.46 per share
    
    
    
    
    
    
    
    
    
    
    (6,032
    )
    
    
    
    
    
    
    
    
    
    
    (6,032
    )Treasury stock purchase (23,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (610
    )
    
    
    (610
    )Balance, September 30, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    291,017
    
    
    $
    245
    
    
    $
    (34,125
    )
    
    
    327,682Balance, January 1, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    263,115
    
    
    $
    (12,946
    )
    
    $
    (33,785
    )
    
    $
    286,844Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    16,870
    
    
    
    
    
    
    
    
    
    
    
    16,870Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,116
    
    
    
    
    
    
    
    23,116Change in unrealized gains(losses) on
securities available-for-sale for which
a portion of an other-than-temporary-impairment has been recognized in
earnings, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,977
    )
    
    
    
    
    
    
    Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    273Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,259Cumulative Effect of change in
accounting principle, adoption of
ASC320-10-65-65, net of tax
    
    
    
    
    
    
    
    
    
    
    3,333
    
    
    
    (3,333
    )
    
    
    
    
    
    
    Cash Dividends, $.45 per share
    
    
    
    
    
    
    
    
    
    
    (5,903
    )
    
    
    
    
    
    
    
    
    
    
    (5,903
    )Balance, September 30, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    277,415
    
    
    $
    (4,867
    )
    
    $
    (33,785
    )
    
    $
    321,200
   6




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##### Table of Contents



Nine Months EndedSeptember 30,2010
    
    
    2009(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    19,692
    
    
    $
    16,870Adjustments to reconcile net income to net cash
provided by operating activities:Net amortization (accretion) of premiums and discounts on investments
    
    
    (768
    )
    
    
    (2,018
    )Provision for loan losses
    
    
    7,010
    
    
    
    9,380Securities (gains) losses
    
    
    (273
    )
    
    
    7,887Securities impairment loss
    
    
    4,028
    
    
    
    Gain on purchase of business unit
    
    
    
    
    
    
    (5,409
    )(Gain) loss on sale of other real estate
    
    
    80
    
    
    
    90Depreciation and amortization
    
    
    3,528
    
    
    
    2,854Other, net
    
    
    6,347
    
    
    
    (536
    )NET CASH FROM OPERATING ACTIVITIES
    
    
    39,644
    
    
    
    29,118CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of securities available-for-sale
    
    
    7,250
    
    
    
    Calls, maturities and principal reductions on securities available-for-sale
    
    
    174,359
    
    
    
    89,911Purchases of securities available-for-sale
    
    
    (179,137
    )
    
    
    (65,683
    )Loans made to customers, net of repayment
    
    
    (15,613
    )
    
    
    (100,956
    )Cash received from purchase of business unit
    
    
    
    
    
    
    30,977Proceeds from sales of other real estate owned
    
    
    2,628
    
    
    
    2,020Net change in federal funds sold
    
    
    (56,404
    )
    
    
    6,530Additions to premises and equipment
    
    
    (1,440
    )
    
    
    (2,739
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    (68,357
    )
    
    
    (39,940
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net change in deposits
    
    
    127,838
    
    
    
    18,475Net change in short-term borrowings
    
    
    5,782
    
    
    
    59,292Dividends paid
    
    
    (11,940
    )
    
    
    (11,805
    )Purchase of treasury stock
    
    
    (610
    )
    
    
    Proceeds from other borrowings
    
    
    2,000
    
    
    
    120,000Repayments on other borrowings
    
    
    (115,577
    )
    
    
    (172,401
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    7,493
    
    
    
    13,561NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (21,220
    )
    
    
    2,739CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    84,371
    
    
    
    67,298CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    63,151
    
    
    $
    70,037
   7




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##### Table of Contents



Significant Accounting Policies
  Allowance for Loan Losses
  September 30,(Dollar amounts in thousands)
    
    2010
    
    
    2009Balance at beginning of year
    
    $
    19,437
    
    
    $
    16,280Provision for loan losses
    
    
    7,010
    
    
    
    9,380Recoveries of loans previously charged off
    
    
    3,681
    
    
    
    1,675Loans charged off
    
    
    (10,154
    )
    
    
    (8,507
    )Balance at End of Period
    
    $
    19,974
    
    
    $
    18,828
  (000s)September 30,
    
    
    December 31,2010
    
    
    2009Impaired Loans with allocated allowance for loan losses
    
    $
    17,262
    
    
    $
    19,330Impaired Loans with no allocated allowance for loan losses
    
    
    5,980
    
    
    
    5,344$
    23,242
    
    
    $
    24,674Amount of allowance allocated to impaired loans
    
    $
    5,494
    
    
    $
    5,438
   8




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##### Table of Contents



Securities
  (000s)September 30, 2010Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    2,033
    
    
    $
    58
    
    
    $
    
    
    
    $
    2,091Mortgage Backed Securities  Residential
    
    
    299,894
    
    
    
    16,682
    
    
    
    
    
    
    
    316,576Mortgage Backed Securities  Commercial
    
    
    142
    
    
    
    4
    
    
    
    
    
    
    
    146Collateralized Mortgage Obligations
    
    
    100,464
    
    
    
    3,250
    
    
    
    
    
    
    
    103,714State and Municipal Obligations
    
    
    153,060
    
    
    
    10,870
    
    
    
    (38
    )
    
    
    163,892Collateralized Debt Obligations
    
    
    15,341
    
    
    
    
    
    
    
    (13,145
    )
    
    
    2,196Equity Securities
    
    
    5,128
    
    
    
    1,391
    
    
    
    (658
    )
    
    
    5,861$
    576,062
    
    
    $
    32,255
    
    
    $
    (13,841
    )
    
    $
    594,476
 December 31, 2009Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    4,103
    
    
    $
    45
    
    
    $
    
    
    
    $
    4,148Mortgage Backed Securities  Residential
    
    
    285,964
    
    
    
    14,260
    
    
    
    (40
    )
    
    $
    300,184Mortgage Backed Securities  Commercial
    
    
    162
    
    
    
    6
    
    
    
    
    
    
    $
    168Collateralized Mortgage Obligations
    
    
    116,330
    
    
    
    3,334
    
    
    
    (100
    )
    
    $
    119,564State and Municipal Obligations
    
    
    143,039
    
    
    
    5,926
    
    
    
    (232
    )
    
    $
    148,733Collateralized Debt Obligations
    
    
    19,253
    
    
    
    
    
    
    
    (17,837
    )
    
    $
    1,416Other Securities
    
    
    7,004
    
    
    
    257
    
    
    
    (189
    )
    
    $
    7,072Equity Securities
    
    
    5,668
    
    
    
    1,462
    
    
    
    (1,169
    )
    
    
    5,961$
    581,523
    
    
    $
    25,290
    
    
    $
    (19,567
    )
    
    $
    587,246
  September 30, 2010Available-for-SaleAmortized
    
    
    Fair(Dollar amounts in thousands)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    9,024
    
    
    $
    9,162Due after one but within five years
    
    
    38,292
    
    
    
    40,553Due after five but within ten years
    
    
    41,126
    
    
    
    44,437Due after ten years
    
    
    182,456
    
    
    
    177,741270,898
    
    
    
    271,893Mortgage-backed securities and equities
    
    
    305,164
    
    
    
    322,583TOTAL
    
    $
    576,062
    
    
    $
    594,476
   9




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##### Table of Contents



September 30, 2010Less Than 12 Months
    
    
    More Than 12 Months
    
    
    
    
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized(Dollar amounts in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesState and municipal obligations
    
    $
    
    
    
    $
    
    
    
    
    1,009
    
    
    
    (38
    )
    
    
    1,009
    
    
    
    (38
    )Collateralized Debt Obligations
    
    
    
    
    
    
    
    
    
    
    2,197
    
    
    
    (13,145
    )
    
    
    2,197
    
    
    
    (13,145
    )Equities
    
    
    764
    
    
    
    (100
    )
    
    
    649
    
    
    
    (558
    )
    
    
    1,413
    
    
    
    (658
    )Total temporarily impaired securities
    
    $
    764
    
    
    $
    (100
    )
    
    $
    3,855
    
    
    $
    (13,741
    )
    
    $
    4,619
    
    
    $
    (13,841
    )
 December 31, 2009Less Than 12 Months
    
    
    More Than 12 Months
    
    
    
    
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized(Dollar amounts in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesMortgage Backed Securities  Residential
    
    $
    6,985
    
    
    $
    (38
    )
    
    $
    47
    
    
    $
    (2
    )
    
    $
    7,032
    
    
    $
    (40
    )Collateralized mortgage obligations
    
    
    6,094
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    6,094
    
    
    
    (100
    )State and municipal obligations
    
    
    6,594
    
    
    
    (45
    )
    
    
    4,841
    
    
    
    (187
    )
    
    
    11,435
    
    
    
    (232
    )Collateralized Debt Obligations
    
    
    
    
    
    
    
    
    
    
    1,416
    
    
    
    (17,837
    )
    
    
    1,416
    
    
    
    (17,837
    )Other Securities
    
    
    
    
    
    
    
    
    
    
    811
    
    
    
    (189
    )
    
    
    811
    
    
    
    (189
    )Equities
    
    
    543
    
    
    
    (280
    )
    
    
    1,150
    
    
    
    (889
    )
    
    
    1,693
    
    
    
    (1,169
    )Total temporarily impaired securities
    
    $
    20,216
    
    
    $
    (463
    )
    
    $
    8,265
    
    
    $
    (19,104
    )
    
    $
    28,481
    
    
    $
    (19,567
    )
 Investments  Debt and Equity Securities Beneficial Interests in Securitized Financial Assets.
      10




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning balance
    
    $
    14,529
    
    
    $
    9,124
    
    
    $
    11,360
    
    
    $
    6,145Amounts related to credit loss for which an
other-than-temporary impairment was not
previously recognized
    
    $
    548
    
    
    $
    1,192
    
    
    $
    548
    
    
    $
    1,485Increases to the amount related to the credit
loss for which other-than-temporary impairment
was previously recognized
    
    
    311
    
    
    
    5,950
    
    
    
    3,480
    
    
    
    8,636Adoption of new accounting guidance on OTTI
    
    
    
    
    
    
    (5,556
    )
    
    
    
    
    
    
    (5,556
    )Ending balance
    
    $
    15,388
    
    
    $
    10,710
    
    
    $
    15,388
    
    
    $
    10,710
  11




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##### Table of Contents



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, 2010Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)(Dollar amounts in thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Carrying ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    0
    
    
    $
    2,091
    
    
    $
    0
    
    
    $
    2,091Mortgage Backed Securities-residential
    
    
    
    
    
    
    316,576
    
    
    
    
    
    
    
    316,576Mortgage Backed Securities-commercial
    
    
    
    
    
    $
    146
    
    
    
    
    
    
    
    146Collateralized mortgage obligations
    
    
    
    
    
    
    103,714
    
    
    
    
    
    
    
    103,714State and municipal
    
    
    
    
    
    
    163,892
    
    
    
    
    
    
    
    163,892Collateralized debt obligations
    
    
    
    
    
    
    
    
    
    
    2,196
    
    
    
    2,196Equities
    
    
    2,529
    
    
    
    
    
    
    
    3,332
    
    
    
    5,861TOTAL
    
    $
    2,529
    
    
    $
    586,419
    
    
    $
    5,528
    
    
    $
    594,476Derivitive Assets
    
    
    
    
    
    
    2,451Derivitive Liabilities
    
    
    
    
    
    
    (2,451
    )
  12




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##### Table of Contents



December 31, 2009Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)(Dollar amounts in thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Carrying ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    0
    
    
    $
    4,148
    
    
    $
    0
    
    
    $
    4,148Mortgage Backed Securities-residential
    
    
    
    
    
    
    300,184
    
    
    
    
    
    
    
    300,184Mortgage Backed Securities-commercial
    
    
    
    
    
    $
    168
    
    
    
    
    
    
    
    168Collateralized mortgage obligations
    
    
    
    
    
    
    119,564
    
    
    
    
    
    
    
    119,564State and municipal
    
    
    
    
    
    
    148,733
    
    
    
    
    
    
    
    148,733Collateralized debt obligations
    
    
    
    
    
    
    0
    
    
    
    1,416
    
    
    
    1,416Other Securities
    
    
    
    
    
    
    7,072
    
    
    
    
    
    
    
    7,072Equities
    
    
    2,600
    
    
    
    0
    
    
    
    3,361
    
    
    
    5,961TOTAL
    
    $
    2,600
    
    
    $
    579,869
    
    
    $
    4,777
    
    
    $
    587,246Derivitive Assets
    
    
    
    
    
    
    889Derivitive Liabilities
    
    
    
    
    
    
    (889
    )
  (000s)Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning Balance
    
    $
    5,463
    
    
    $
    6,679
    
    
    $
    4,777
    
    
    $
    7,994Total realized/unrealized gains or lossesIncluded in earnings
    
    
    (859
    )
    
    
    (778
    )
    
    
    (4,028
    )
    
    
    (2,041
    )Included in other comprehensive income
    
    
    924
    
    
    
    
    
    
    
    4,981
    
    
    
    Settlements
    
    
    0
    
    
    
    
    
    
    
    (202
    )
    
    
    (52
    )Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending Balance
    
    $
    5,528
    
    
    $
    5,901
    
    
    $
    5,528
    
    
    $
    5,901
     13




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##### Table of Contents



September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(Dollar amounts in thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueCash and due from banks
    
    
    63,151
    
    
    
    63,151
    
    
    
    84,371
    
    
    
    84,371Federal funds sold
    
    
    77,980
    
    
    
    77,980
    
    
    
    21,576
    
    
    
    21,576Securities availableforsale
    
    
    594,476
    
    
    
    594,476
    
    
    
    587,246
    
    
    
    587,246Federal Home Loan Bank stock
    
    
    26,181
    
    
    
    N/A
    
    
    
    26,181
    
    
    
    N/ALoans, net
    
    
    1,619,680
    
    
    
    1,617,426
    
    
    
    1,612,237
    
    
    
    1,604,412Accrued interest receivable
    
    
    11,769
    
    
    
    11,769
    
    
    
    12,005
    
    
    
    12,005Deposits
    
    
    (1,917,663
    )
    
    
    (1,924,618
    )
    
    
    (1,789,701
    )
    
    
    (1,798,059
    )Shortterm borrowings
    
    
    (36,218
    )
    
    
    (36,218
    )
    
    
    (30,436
    )
    
    
    (30,436
    )Federal Home Loan Bank advances
    
    
    (219,160
    )
    
    
    (226,431
    )
    
    
    (326,137
    )
    
    
    (337,847
    )Other borrowings
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )Accrued interest payable
    
    
    (2,320
    )
    
    
    (2,320
    )
    
    
    (3,127
    )
    
    
    (3,127
    )
 Short-Term Borrowings
  (000s)September 30,
    
    
    December 31,2010
    
    
    2009Federal Funds Purchased
    
    $
    4,847
    
    
    $
    5,754Repurchase Agreements
    
    
    29,427
    
    
    
    22,578Note Payable  U.S. Government
    
    
    1,944
    
    
    
    2,104$
    36,218
    
    
    $
    30,436
 Other Borrowings
  (000s)September 30,
    
    
    December 31,2010
    
    
    2009FHLB Advances
    
    $
    212,560
    
    
    $
    326,137City of T erre Haute, Indiana economic development revenue bonds
    
    
    6,600
    
    
    
    6,600$
    219,160
    
    
    $
    332,737
 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 Benefits2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    773
    
    
    $
    768
    
    
    $
    16
    
    
    $
    27
    
    
    $
    2,319
    
    
    $
    2,304
    
    
    $
    49
    
    
    $
    82Interest cost
    
    
    828
    
    
    
    693
    
    
    
    54
    
    
    
    60
    
    
    
    2,485
    
    
    
    2,080
    
    
    
    164
    
    
    
    180Expected return on plan assets
    
    
    (850
    )
    
    
    (911
    )
    
    
    
    
    
    
    
    
    
    
    (2,550
    )
    
    
    (2,733
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45Net amortization of prior service cost
    
    
    (4
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    (14
    )
    
    
    
    
    
    
    Net amortization of net (gain) loss
    
    
    245
    
    
    
    116
    
    
    
    3
    
    
    
    0
    
    
    
    736
    
    
    
    347
    
    
    
    9
    
    
    
    0Net Periodic Benefit Cost
    
    $
    992
    
    
    $
    661
    
    
    $
    89
    
    
    $
    102
    
    
    $
    2,977
    
    
    $
    1,984
    
    
    $
    267
    
    
    $
    307
  14




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##### Table of Contents



Employer Contributions
  New accounting standards
   Acquisitions
   15




---



##### Table of Contents



September 30, 2010ASC 310-30
    
    
    Non ASC 310-30Loans
    
    
    Loans
    
    
    Other
    
    
    TotalLoans
    
    $
    13,230
    
    
    $
    37,383
    
    
    $
    
    
    
    $
    50,613Foreclosed Assets
    
    
    
    
    
    
    
    
    
    
    1,154
    
    
    
    1,154Total Covered Assets
    
    $
    13,230
    
    
    $
    37,383
    
    
    $
    1,154
    
    
    $
    51,767
 December 31, 2009ASC 310-30
    
    
    Non ASC 310-30Loans
    
    
    Loans
    
    
    Other
    
    
    TotalLoans
    
    $
    16,849
    
    
    $
    55,025
    
    
    $
    
    
    
    $
    71,874Foreclosed Assets
    
    
    
    
    
    
    
    
    
    
    1,256
    
    
    
    1,256Total Covered Assets
    
    $
    16,849
    
    
    $
    55,025
    
    
    $
    1,256
    
    
    $
    73,130
   
 
 Managements Discussion and Analysis of Financial Condition and Results of
Operations
and Quantitative and Qualitative Disclosures About Market Risk
   Critical Accounting Policies
   16




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##### Table of Contents



Summary of Operating Results
   Net Interest Income
  Non-Interest Income
  Non-Interest Expenses
  Allowance for Loan Losses
 
 Non-performing Loans
  (000s)September 30,
    
    
    December 31,2010
    
    
    2009Non-accrual loans
    
    $
    37,596
    
    
    $
    35,953Restructured loans
    
    
    61
    
    
    
    90Accruing loans past due over 90 days
    
    
    6,286
    
    
    
    8,218$
    43,943
    
    
    $
    44,261Ratio of the allowance for loan losses
as a percentage of non-performing loans
    
    
    45
    %
    
    
    44
    %
  17




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##### Table of Contents



(000s)September 30,
    
    
    December 31,Non-accrual loans
    
    2010
    
    
    2009Commercial loans
    
    $
    27,393
    
    
    $
    30,360Residential loans
    
    
    8,353
    
    
    
    3,862Consumer loans
    
    
    1,850
    
    
    
    1,731$
    37,596
    
    
    $
    35,953Past due 90 days or moreCommercial loans
    
    $
    4,956
    
    
    $
    6,255Residential loans
    
    
    1,248
    
    
    
    1,837Consumer loans
    
    
    82
    
    
    
    126$
    6,286
    
    
    $
    8,218
  (000s)
    
    
    (000s)September 30,
    
    
    December 31,Non-accrual loans
    
    2010
    
    
    2009Commercial loans
    
    $
    5,688
    
    
    $
    7,356Residential loans
    
    
    1,459
    
    
    
    168Consumer loans
    
    
    
    
    
    
    $
    7,147
    
    
    $
    7,524
 Interest Rate Sensitivity and Liquidity
  Interest Rate Risk
     Basis Point
    
    Percentage Change in Net Interest IncomeInterest Rate Change
    
    12 months
    
    
    24 months
    
    
    36 monthsDown 200
    
    
    -1.08
    %
    
    
    -4.03
    %
    
    
    -6.24
    %Down 100
    
    
    0.01
    
    
    
    -1.02
    
    
    
    -1.96Up 100
    
    
    1.38
    
    
    
    3.47
    
    
    
    5.92Up 200
    
    
    2.73
    
    
    
    6.44
    
    
    
    11.26
  18




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##### Table of Contents



Liquidity Risk
  Financial Condition
  Capital Adequacy
  September 30, 2010
    
    
    December 31, 2009
    
    
    To Be Well CapitalizedTotal risk-based capitalCorporation
    
    
    17.33
    %
    
    
    16.44
    %
    
    
    N/AFirst Financial Bank
    
    
    16.99
    %
    
    
    16.09
    %
    
    
    10.00
    %Tier I risk-based capitalCorporation
    
    
    16.30
    %
    
    
    15.45
    %
    
    
    N/AFirst Financial Bank
    
    
    16.10
    %
    
    
    15.23
    %
    
    
    6.00
    %Tier I leverage capitalCorporation
    
    
    12.52
    %
    
    
    12.01
    %
    
    
    N/AFirst Financial Bank
    
    
    12.32
    %
    
    
    11.86
    %
    
    
    5.00
    %
 
 Controls and Procedures
   19




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##### Table of Contents



PART II  Other Information
 
 Legal Proceedings.
  
 Risk Factors.
  
 Unregistered Sales of Equity Securities and Use of Proceeds.
     (c)Total Number Of Shares
    
    
    (c)(a)
    
    
    (b)
    
    
    Purchased As Part Of
    
    
    Maximum Number OfTotal Number Of
    
    
    Average Price
    
    
    Publicly Announced Plans
    
    
    Shares That May YetShares Purchased
    
    
    Paid Per Share
    
    
    Or Programs
    
    
    Be PurchasedJuly 1 - 31, 2010
    
    
    2,500
    
    
    
    26.50
    
    
    
    N/A
    
    
    
    N/AAugust 1-31, 2010
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ASeptember 1-30, 2010
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,500
    
    
    
    26.50
    
    
    
    N/A
    
    
    
    N/A
 
 Defaults upon Senior Securities.
  
 (Removed and Reserved)
 
 Other Information.
   20




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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 8-K filed on July 27, 2009.10.1
    
    
    Employment Agreement for Norman L. Lowery, dated March 26, 2010 and effective
January 1, 2010 included as exhibit 10.1 of the Corporations Form 10-Q filed May 7,
2010.10.2
    
    
    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
    
    
    2010 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, 2009.10.4
    
    
    2010 Schedule of Named Executive Officer Compensation, incorporated by
reference to the Corporations Form 10-K filed for the fiscal year ended December 31,
2009.10.5
    
    
    2005 Long-Term Incentive Plan of First Financial Corporation, incorporated by
reference to Exhibit 10.7 of the Corporations Form 8-K filed September 4, 2007.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010 by Principal Executive Officer, dated November 3, 2010.31.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010 by Principal Financial Officer, dated November 3,
2010.32.1
    
    
    Certification, dated November 3, 2010, 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, 2010.
  21




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##### Table of Contents



FIRST FINANCIAL CORPORATION(Registrant)Date: November 3, 2010
    By:
    /s/ Donald E. SmithDonald E. Smith, ChairmanDate: November 3, 2010
    By:
    /s/ Norman L. LoweryNorman L. Lowery, Vice Chairman and CEO(Principal Executive Officer)Date: November 3, 2010
    By:
    /s/ Rodger A. McHargueRodger A. McHargue, Treasurer and CFO(Principal Financial Officer)  22




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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 8-K filed on July 27, 2009.10.1
    
    
    Employment Agreement for Norman L. Lowery, dated March 26, 2010 and effective
January 1, 2010 included as exhibit 10.1 of the Corporations Form 10-Q filed May 7,
2010.10.2
    
    
    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
    
    
    2010 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, 2009.10.4
    
    
    2010 Schedule of Named Executive Officer Compensation, incorporated by
reference to the Corporations Form 10-K filed for the fiscal year ended December 31,
2009.10.5
    
    
    2005 Long-Term Incentive Plan of First Financial Corporation, incorporated by
reference to Exhibit 10.7 of the Corporations Form 8-K filed September 4, 2007.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010 by Principal Executive Officer, dated November 3, 2010.31.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010 by Principal Financial Officer, dated November 3,
2010.32.1
    
    
    Certification, dated November 3, 2010, 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, 2010.
  23