##### 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 June 30, 2010
 Commission File Number 0-16759
 FIRST FINANCIAL CORPORATION
  INDIANA
    
    35-1546989(State or other jurisdiction 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)One First Financial Plaza, Terre Haute, IN
    
    47807(Address of principal executive office)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 Yes þ No o.
 Yes o No o.
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Yes o No 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
    
    
    19Item 1A. Risk Factors
    
    
    19Item 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
    
    
    20Signatures
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Part
I  Financial Information
 
   
   June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCash and due from banks
    
    $
    60,302
    
    
    $
    84,371Federal funds sold and short-term investments
    
    
    24,930
    
    
    
    21,576Securities available-for-sale
    
    
    600,986
    
    
    
    587,246Loans:Commercial, financial and agricultural
    
    
    591,493
    
    
    
    558,211Real estate  construction
    
    
    25,182
    
    
    
    27,231Real estate  mortgage
    
    
    720,587
    
    
    
    729,668Installment
    
    
    313,112
    
    
    
    314,417Lease financing
    
    
    2,314
    
    
    
    2,3131,652,688
    
    
    
    1,631,840Less:Unearned Income
    
    
    (69
    )
    
    
    (76
    )Allowance for loan losses
    
    
    (19,915
    )
    
    
    (19,437
    )1,632,704
    
    
    
    1,612,327Restricted Stock
    
    
    27,835
    
    
    
    27,835Accrued interest receivable
    
    
    10,959
    
    
    
    12,005Premises and equipment, net
    
    
    35,079
    
    
    
    35,551Bank-owned life insurance
    
    
    65,008
    
    
    
    64,057Goodwill
    
    
    7,102
    
    
    
    7,102Other intangible assets
    
    
    4,178
    
    
    
    4,916Other real estate owned
    
    
    5,397
    
    
    
    5,885FDIC Indimnification Asset
    
    
    4,873
    
    
    
    12,124Other assets
    
    
    49,716
    
    
    
    43,727TOTAL ASSETS
    
    $
    2,529,069
    
    
    $
    2,518,722LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    357,706
    
    
    $
    312,990Interest-bearing:Certificates of deposit of $100 or more
    
    
    253,620
    
    
    
    238,830Other interest-bearing deposits
    
    
    1,269,872
    
    
    
    1,237,8811,881,198
    
    
    
    1,789,701Short-term borrowings
    
    
    36,917
    
    
    
    30,436Other borrowings
    
    
    223,237
    
    
    
    332,737Other liabilities
    
    
    68,531
    
    
    
    59,365TOTAL LIABILITIES
    
    
    2,209,883
    
    
    
    2,212,239Shareholders equityCommon stock, $.125 stated value per share;
Authorized shares-40,000,000
Issued shares-14,450,966
Outstanding shares-13,109,130 in 2010 and 13,129,630 in 2009
    
    
    1,806
    
    
    
    1,806Additional paid-in capital
    
    
    68,739
    
    
    
    68,739Retained earnings
    
    
    284,724
    
    
    
    277,357Accumulated other comprehensive income (loss)
    
    
    (2,024
    )
    
    
    (7,904
    )Treasury shares at cost-1,341,836 in 2010 and 1,321,336 in 2009
    
    
    (34,059
    )
    
    
    (33,515
    )TOTAL SHAREHOLDERS EQUITY
    
    
    319,186
    
    
    
    306,483TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,529,069
    
    
    $
    2,518,722
   3




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)INTEREST INCOME:Loans, including related fees
    
    $
    24,032
    
    
    $
    22,730
    
    
    $
    48,052
    
    
    $
    45,637Securities:Taxable
    
    
    4,842
    
    
    
    5,819
    
    
    
    9,850
    
    
    
    11,987Tax-exempt
    
    
    1,676
    
    
    
    1,648
    
    
    
    3,302
    
    
    
    3,289Other
    
    
    430
    
    
    
    461
    
    
    
    968
    
    
    
    931TOTAL INTEREST INCOME
    
    
    30,980
    
    
    
    30,658
    
    
    
    62,172
    
    
    
    61,844INTEREST EXPENSE:Deposits
    
    
    4,259
    
    
    
    5,573
    
    
    
    8,657
    
    
    
    11,777Short-term borrowings
    
    
    80
    
    
    
    137
    
    
    
    170
    
    
    
    280Other borrowings
    
    
    2,560
    
    
    
    4,372
    
    
    
    5,983
    
    
    
    8,748TOTAL INTEREST EXPENSE
    
    
    6,899
    
    
    
    10,082
    
    
    
    14,810
    
    
    
    20,805NET INTEREST INCOME
    
    
    24,081
    
    
    
    20,576
    
    
    
    47,362
    
    
    
    41,039Provision for loan losses
    
    
    2,190
    
    
    
    2,860
    
    
    
    4,620
    
    
    
    5,690NET INTEREST INCOME AFTER PROVISIONFOR LOAN LOSSES
    
    
    21,891
    
    
    
    17,716
    
    
    
    42,742
    
    
    
    35,349NON-INTEREST INCOME:Trust and financial services
    
    
    1,197
    
    
    
    932
    
    
    
    2,456
    
    
    
    1,946Service charges and fees on deposit accounts
    
    
    2,670
    
    
    
    2,767
    
    
    
    5,072
    
    
    
    5,264Other service charges and fees
    
    
    1,938
    
    
    
    1,652
    
    
    
    3,759
    
    
    
    3,184Securities gains/(losses), net
    
    
    0
    
    
    
    2
    
    
    
    245
    
    
    
    2Total Impairment Losses
    
    
    (71
    )
    
    
    (3,783
    )
    
    
    (3,170
    )
    
    
    (7,408
    )Loss recognized in other comprehensive loss
    
    
    0
    
    
    
    2,197
    
    
    
    
    
    
    
    2,843Net impairment loss recognized in earnings
    
    
    (71
    )
    
    
    (1,586
    )
    
    
    (3,170
    )
    
    
    (4,565
    )Insurance commissions
    
    
    1,582
    
    
    
    1,577
    
    
    
    3,252
    
    
    
    3,016Gain on sales of mortgage loans
    
    
    399
    
    
    
    608
    
    
    
    671
    
    
    
    1,184Other
    
    
    157
    
    
    
    177
    
    
    
    601
    
    
    
    844TOTAL NON-INTEREST INCOME
    
    
    7,872
    
    
    
    6,129
    
    
    
    12,886
    
    
    
    10,875NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    10,678
    
    
    
    10,014
    
    
    
    21,508
    
    
    
    20,194Occupancy expense
    
    
    1,151
    
    
    
    1,027
    
    
    
    2,402
    
    
    
    2,119Equipment expense
    
    
    1,205
    
    
    
    1,109
    
    
    
    2,421
    
    
    
    2,230FDIC Expense
    
    
    727
    
    
    
    1,601
    
    
    
    1,429
    
    
    
    1,907Other
    
    
    4,939
    
    
    
    4,251
    
    
    
    9,221
    
    
    
    8,249TOTAL NON-INTEREST EXPENSE
    
    
    18,700
    
    
    
    18,002
    
    
    
    36,981
    
    
    
    34,699INCOME BEFORE INCOME TAXES
    
    
    11,063
    
    
    
    5,843
    
    
    
    18,647
    
    
    
    11,525Provision for income taxes
    
    
    3,350
    
    
    
    1,222
    
    
    
    5,248
    
    
    
    2,374NET INCOME
    
    $
    7,713
    
    
    $
    4,621
    
    
    $
    13,399
    
    
    $
    9,151PER SHARE DATABasic and Diluted
    
    $
    0.59
    
    
    $
    0.35
    
    
    $
    1.02
    
    
    $
    0.70Dividends Per Share
    
    $
    0.46
    
    
    $
    0.45
    
    
    $
    0.46
    
    
    $
    0.45Weighted average number of shares outstanding (in thousands)
    
    
    13,112
    
    
    
    13,117
    
    
    
    13,116
    
    
    
    13,117
   4




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##### Table of Contents



AccumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, April 1, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    283,043
    
    
    $
    (3,526
    )
    
    $
    (33,966
    )
    
    $
    316,096Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    7,713
    
    
    
    
    
    
    
    
    
    
    
    7,713Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,224
    
    
    
    
    
    
    
    1,224Change 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    100Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,215Cash Dividends, $.46 per share
    
    
    
    
    
    
    
    
    
    
    (6,032
    )
    
    
    
    
    
    
    
    
    
    
    (6,032
    )Treasury stock purchase (3,500 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    (93
    )Balance, June 30, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    284,724
    
    
    $
    (2,024
    )
    
    $
    (34,059
    )
    
    $
    319,186Balance, April 1, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    267,645
    
    
    $
    (8,403
    )
    
    $
    (33,785
    )
    
    $
    295,917Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    4,621
    
    
    
    
    
    
    
    
    
    
    
    4,621Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    (55
    )Change 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,014
    )
    
    
    
    
    
    
    (2,014
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    91Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,643Cumulative Effect of change in
accounting principle, adoption of FSP
ASC 320-10-65, net of tax
    
    
    
    
    
    
    
    
    
    
    3,333
    
    
    
    (3,333
    )
    
    
    
    
    
    
    Cash Dividends, $.45 per share
    
    
    
    
    
    
    
    
    
    
    (5,903
    )
    
    
    
    
    
    
    
    
    
    
    (5,903
    )Balance, June 30, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    269,696
    
    
    $
    (13,714
    )
    
    $
    (33,785
    )
    
    $
    292,657
   5




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##### Table of Contents



AccumulatedOtherCommon
    
    
    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
    
    
    
    
    
    
    
    
    
    
    13,399
    
    
    
    
    
    
    
    
    
    
    
    13,399Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,508
    
    
    
    
    
    
    
    3,508Change 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,016
    
    
    
    
    
    
    
    2,016Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356
    
    
    
    
    
    
    
    356Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,279Cash Dividends, $.46 per share
    
    
    
    
    
    
    
    
    
    
    (6,032
    )
    
    
    
    
    
    
    
    
    
    
    (6,032
    )Treasury stock purchase (20,500 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (544
    )
    
    
    (544
    )Balance, June 30, 2010
    
    $
    1,806
    
    
    $
    68,739
    
    
    $
    284,724
    
    
    $
    (2,024
    )
    
    $
    (34,059
    )
    
    $
    319,186Balance, January 1, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    263,115
    
    
    $
    (12,946
    )
    
    $
    (33,785
    )
    
    $
    286,844Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    9,151
    
    
    
    
    
    
    
    
    
    
    
    9,151Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,591
    
    
    
    
    
    
    
    4,591Change 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,208
    )
    
    
    
    
    
    
    (2,208
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    182Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,716Cumulative Effect of change in
accounting principle, adoption of FSP ASC 320-10-65, net of tax
    
    
    
    
    
    
    
    
    
    
    3,333
    
    
    
    (3,333
    )
    
    
    
    
    
    
    Cash Dividends, $.45 per share
    
    
    
    
    
    
    
    
    
    
    (5,903
    )
    
    
    
    
    
    
    
    
    
    
    (5,903
    )Balance, June 30, 2009
    
    $
    1,806
    
    
    $
    68,654
    
    
    $
    269,696
    
    
    $
    (13,714
    )
    
    $
    (33,785
    )
    
    $
    292,657
   6




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##### Table of Contents



Six Months EndedJune 30,2010
    
    
    2009(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    13,399
    
    
    $
    9,151Adjustments to reconcile net income to net cash
provided by operating activities:Net amortization (accretion) of premiums and discounts on investments
    
    
    (610
    )
    
    
    (1,501
    )Provision for loan losses
    
    
    4,620
    
    
    
    5,690Securities (gains) losses
    
    
    (245
    )
    
    
    (2
    )Securities impairment loss
    
    
    3,169
    
    
    
    4,565(Gain) loss on sale of other real estate
    
    
    59
    
    
    
    36Depreciation and amortization
    
    
    2,384
    
    
    
    1,821Other, net
    
    
    6,913
    
    
    
    (5,281
    )NET CASH FROM OPERATING ACTIVITIES
    
    
    29,689
    
    
    
    14,479CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of securities available-for-sale
    
    
    7,250
    
    
    
    Calls, maturities and principal reductions on securities available-for-sale
    
    
    131,690
    
    
    
    58,507Purchases of securities available-for-sale
    
    
    (145,791
    )
    
    
    (46,989
    )Loans made to customers, net of repayment
    
    
    (25,815
    )
    
    
    (79,917
    )Proceeds from sales of other real estate owned
    
    
    1,495
    
    
    
    1,483Net change in federal funds sold
    
    
    (3,354
    )
    
    
    4,030Additions to premises and equipment
    
    
    (1,174
    )
    
    
    (1,192
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    (35,699
    )
    
    
    (64,078
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net change in deposits
    
    
    91,412
    
    
    
    21,128Net change in short-term borrowings
    
    
    6,481
    
    
    
    74,069Dividends paid
    
    
    (5,908
    )
    
    
    (5,903
    )Purchase of treasury stock
    
    
    (544
    )
    
    
    Proceeds from other borrowings
    
    
    2,000
    
    
    
    70,000Repayments on other borrowings
    
    
    (111,500
    )
    
    
    (122,329
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    (18,059
    )
    
    
    36,965NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (24,069
    )
    
    
    (12,634
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    84,371
    
    
    
    67,298CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    60,302
    
    
    $
    54,664
   7




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##### Table of Contents



Significant Accounting Policies
  Allowance for Loan Losses
  June 30,(Dollar amounts in thousands)
    
    2010
    
    
    2009Balance at beginning of year
    
    $
    19,437
    
    
    $
    16,280Provision for loan losses
    
    
    4,620
    
    
    
    5,690Recoveries of loans previously charged off
    
    
    2,652
    
    
    
    1,087Loans charged off
    
    
    (6,794
    )
    
    
    (6,020
    )BALANCE AT END OF PERIOD
    
    $
    19,915
    
    
    $
    17,037
  (000s)June 30,
    
    
    December 31,2010
    
    
    2009Impaired Loans with allocated allowance for loan losses
    
    $
    17,603
    
    
    $
    19,330Impaired Loans with no allocated allowance for loan losses
    
    
    6,715
    
    
    
    5,344$
    24,318
    
    
    $
    24,674Amount of allowance allocated to impaired loans
    
    $
    5,972
    
    
    $
    5,438
   8




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##### Table of Contents



Securities
  (000s)June 30, 2010Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    4,050
    
    
    $
    68
    
    
    $
    0
    
    
    $
    4,118Mortgage Backed Securities  Residential
    
    
    305,265
    
    
    
    18,213
    
    
    
    
    
    
    $
    323,478Mortgage Backed Securities  Commercial
    
    
    150
    
    
    
    4
    
    
    
    
    
    
    $
    154Collateralized Mortgage Obligations
    
    
    105,378
    
    
    
    3,310
    
    
    
    (5
    )
    
    $
    108,683State and Municipal Obligations
    
    
    149,693
    
    
    
    6,852
    
    
    
    (183
    )
    
    $
    156,362Collateralized Debt Obligations
    
    
    15,846
    
    
    
    
    
    
    
    (13,715
    )
    
    $
    2,131Equity Securities
    
    
    5,674
    
    
    
    1,385
    
    
    
    (999
    )
    
    
    6,060$
    586,056
    
    
    $
    29,832
    
    
    $
    (14,902
    )
    
    $
    600,986
 (000s)December 31, 2009Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government sponcored entities
and entity mortgage-backed securities
    
    $
    4,103
    
    
    $
    45
    
    
    $
    0
    
    
    $
    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
  Amortized
    
    
    Fair(Dollar amounts in thousands)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    7,467
    
    
    $
    7,709Due after one but within five years
    
    
    38,969
    
    
    
    40,897Due after five but within ten years
    
    
    41,427
    
    
    
    43,682Due after ten years
    
    
    187,104
    
    
    
    179,006274,967
    
    
    
    271,294Mortgage-backed securities and equities
    
    
    311,089
    
    
    
    329,692TOTAL
    
    $
    586,056
    
    
    $
    600,986
   June 30, 2010Less Than 12 Months
    
    
    More Than 12 Months
    
    
    
    
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized(Dollar amounts in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesCollateralized mortgage obligations
    
    $
    6,073
    
    
    $
    (5
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,073
    
    
    $
    (5
    )State and municipal obligations
    
    
    5,198
    
    
    
    (89
    )
    
    
    2,880
    
    
    
    (94
    )
    
    
    8,078
    
    
    
    (183
    )Collateralized Debt Obligations
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    (13,715
    )
    
    
    2,131
    
    
    
    (13,715
    )Equities
    
    
    382
    
    
    
    (41
    )
    
    
    1,880
    
    
    
    (958
    )
    
    
    2,262
    
    
    
    (999
    )Total temporarily impaired securities
    
    $
    11,653
    
    
    $
    (135
    )
    
    $
    6,891
    
    
    $
    (14,767
    )
    
    $
    18,544
    
    
    $
    (14,902
    )
  9




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##### Table of Contents



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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning balance
    
    $
    14,458
    
    
    $
    9,124
    
    
    $
    11,359
    
    
    $
    6,145Amounts related to credit loss for which an
other-than-temporary impairment was not
previously recognized
    
    
    
    
    
    $
    1,192
    
    
    
    
    
    
    $
    1,485Increases to the amount related to the credit
loss for which other-than-temporary impairment
was previously recognized
    
    
    71
    
    
    
    5,950
    
    
    
    3,170
    
    
    
    8,636Adoption of new accounting guidance on OTTI
    
    
    
    
    
    
    (5,556
    )
    
    
    
    
    
    
    (5,556
    )Ending balance, June 30, 2010
    
    $
    14,529
    
    
    $
    10,710
    
    
    $
    14,529
    
    
    $
    10,710
 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.
   11




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##### Table of Contents



June 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
    
    
    $
    4,118
    
    
    $
    0
    
    
    $
    4,118Mortgage Backed Securities-residential
    
    
    
    
    
    
    323,478
    
    
    
    
    
    
    
    323,478Mortgage Backed Securities-commercial
    
    
    
    
    
    $
    154
    
    
    
    
    
    
    
    154Collateralized mortgage obligations
    
    
    
    
    
    
    108,683
    
    
    
    
    
    
    
    108,683State and municipal
    
    
    
    
    
    
    156,362
    
    
    
    
    
    
    
    156,362Collateralized debt obligations
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    2,131Equities
    
    
    2,728
    
    
    
    
    
    
    
    3,332
    
    
    
    6,060TOTAL
    
    $
    2,728
    
    
    $
    592,795
    
    
    $
    5,463
    
    
    $
    600,986Derivitive Assets
    
    
    
    
    
    
    1,751Derivitive Liabilities
    
    
    
    
    
    
    (1,751
    )
 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
    )
  12




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##### Table of Contents



(000s)Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning Balance
    
    $
    5,484
    
    
    $
    7,161
    
    
    $
    4,777
    
    
    $
    7,994Total realized/unrealized gains or lossesIncluded in earnings
    
    
    (70
    )
    
    
    (1,586
    )
    
    
    (3,169
    )
    
    
    (4,565
    )Included in other comprehensive income
    
    
    149
    
    
    
    1,104
    
    
    
    4,057
    
    
    
    3,302Settlements
    
    
    (100
    )
    
    
    
    
    
    
    (202
    )
    
    
    (52
    )Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending Balance
    
    $
    5,463
    
    
    $
    6,679
    
    
    $
    5,463
    
    
    $
    6,679
     June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(Dollar amounts in thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueCash and due from banks
    
    
    60,302
    
    
    
    60,302
    
    
    
    84,371
    
    
    
    84,371Federal funds sold
    
    
    24,930
    
    
    
    24,930
    
    
    
    21,576
    
    
    
    21,576Securities
available-for-sale
    
    
    600,986
    
    
    
    600,986
    
    
    
    587,246
    
    
    
    587,246Federal Home Loan Bank stock
    
    
    26,181
    
    
    
    N/A
    
    
    
    26,181
    
    
    
    N/ALoans, net
    
    
    1,632,704
    
    
    
    1,630,321
    
    
    
    1,612,237
    
    
    
    1,604,412Accrued interest receivable
    
    
    10,959
    
    
    
    10,959
    
    
    
    12,005
    
    
    
    12,005Deposits
    
    
    (1,881,198
    )
    
    
    (1,888,562
    )
    
    
    (1,789,701
    )
    
    
    (1,798,059
    )Short-term borrowings
    
    
    (36,917
    )
    
    
    (36,917
    )
    
    
    (30,436
    )
    
    
    (30,436
    )Federal Home Loan Bank advances
    
    
    (216,637
    )
    
    
    (223,768
    )
    
    
    (326,137
    )
    
    
    (337,847
    )Other borrowings
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )Accrued interest payable
    
    
    (2,358
    )
    
    
    (2,358
    )
    
    
    (3,127
    )
    
    
    (3,127
    )
  13




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##### Table of Contents



Short-Term Borrowings
  (000s)June 30,
    
    
    December 31,2010
    
    
    2009Federal Funds Purchased
    
    $
    6,158
    
    
    $
    5,754Repurchase Agreements
    
    
    29,166
    
    
    
    22,578Note Payable  U.S. Government
    
    
    1,593
    
    
    
    2,104$
    36,917
    
    
    $
    30,436
 Other Borrowings
  (000s)June 30,
    
    
    December 31,2010
    
    
    2009FHLB Advances
    
    $
    216,637
    
    
    $
    326,137City of Terre Haute, Indiana economic development revenue bonds
    
    
    6,600
    
    
    
    6,600$
    223,237
    
    
    $
    332,737
 Components of Net Periodic Benefit Cost
 Three Months Ended June 30,
    
    
    Six Months Ended June 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
    
    
    $
    1,546
    
    
    $
    1,536
    
    
    $
    33
    
    
    $
    55Interest cost
    
    
    828
    
    
    
    693
    
    
    
    55
    
    
    
    60
    
    
    
    1,657
    
    
    
    1,387
    
    
    
    109
    
    
    
    120Expected return on plan assets
    
    
    (850
    )
    
    
    (911
    )
    
    
    
    
    
    
    
    
    
    
    (1,700
    )
    
    
    (1,822
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30Net amortization of prior service cost
    
    
    (4
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    Net amortization of net (gain) loss
    
    
    245
    
    
    
    116
    
    
    
    3
    
    
    
    
    
    
    
    491
    
    
    
    231
    
    
    
    6
    
    
    
    Net Periodic Benefit Cost
    
    $
    992
    
    
    $
    661
    
    
    $
    89
    
    
    $
    102
    
    
    $
    1,985
    
    
    $
    1,323
    
    
    $
    178
    
    
    $
    205
 Employer Contributions
  8. New accounting standards
   14




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##### Table of Contents



9. Acquisitions
   June 30, 2010ASC 310-30
    
    
    Non ASC 310-30Loans
    
    
    Loans
    
    
    Other
    
    
    TotalLoans
    
    $
    14,139
    
    
    $
    39,388
    
    
    $
    
    
    
    $
    53,527Foreclosed Assets
    
    
    
    
    
    
    
    
    
    
    1,163
    
    
    
    1,163Total Covered Assets
    
    $
    14,139
    
    
    $
    39,388
    
    
    $
    1,163
    
    
    $
    54,690
 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
    15




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk
   Critical Accounting Policies
 Form
10-K.
 Summary of Operating Results
   Net Interest Income
  Non-Interest Income
   16




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##### Table of Contents



Non-Interest Expenses
  Allowance for Loan Losses
 
 Non-performing Loans
  (000s)June 30,
    
    
    December 31,2010
    
    
    2009Non-accrual loans
    
    $
    36,657
    
    
    $
    35,953Restructured loans
    
    
    64
    
    
    
    90Accruing loans past due over 90 days
    
    
    5,192
    
    
    
    8,218$
    41,913
    
    
    $
    44,261Ratio of the allowance for loan losses
as a percentage of non-performing loans
    
    
    48
    %
    
    
    44
    %
  (000s)June 30,
    
    
    December 31,2010
    
    
    2009Non-accrual loans1-4 family residential
    
    $
    4,404
    
    
    $
    2,917Commercial loans
    
    
    30,008
    
    
    
    30,961Installment loans
    
    
    2,245
    
    
    
    2,075$
    36,657
    
    
    $
    35,953Past due 90 days or more1-4 family residential
    
    $
    1,029
    
    
    $
    1,837Commercial loans
    
    
    4,019
    
    
    
    5,937Installment loans
    
    
    144
    
    
    
    444$
    5,192
    
    
    $
    8,218
  17




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##### Table of Contents



(000s)
    
    
    (000s)June 30,
    
    
    December 31,2010
    
    
    2009Non-accrual loans1-4 family residential
    
    $
    440
    
    
    $
    168Commercial loans
    
    
    6,473
    
    
    
    7,396Installment loans
    
    
    
    
    
    
    $
    6,913
    
    
    $
    7,564
 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
    
    
    -0.38
    %
    
    
    -2.60
    %
    
    
    -4.21
    %Down 100
    
    
    0.07
    
    
    
    -0.89
    
    
    
    -1.67Up 100
    
    
    0.78
    
    
    
    3.20
    
    
    
    5.49Up 200
    
    
    0.81
    
    
    
    5.03
    
    
    
    9.45
  Liquidity Risk
   18




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##### Table of Contents



Financial Condition
  Capital Adequacy
  June 30, 2010
    
    
    December 31, 2009
    
    
    To Be Well CapitalizedTotal risk-based capitalCorporation
    
    
    16.88
    %
    
    
    16.44
    %
    
    
    N/AFirst Financial Bank
    
    
    16.54
    %
    
    
    16.09
    %
    
    
    10.00
    %Tier I risk-based capitalCorporation
    
    
    15.86
    %
    
    
    15.45
    %
    
    
    N/AFirst Financial Bank
    
    
    15.66
    %
    
    
    15.23
    %
    
    
    6.00
    %Tier I leverage capitalCorporation
    
    
    12.46
    %
    
    
    12.01
    %
    
    
    N/AFirst Financial Bank
    
    
    12.14
    %
    
    
    11.86
    %
    
    
    5.00
    %
 
 Controls and Procedures
  
 PART II  Other Information
 
 Legal Proceedings.
  
 Risk Factors.
   19




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##### Table of Contents



Unregistered Sales of Equity Securities and Use of Proceeds.
     
 Defaults upon Senior Securities.
  
 ITEM 4. (Removed and Reserved)
 
 Other Information.
  
 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 June 30, 2010 by Principal Executive Officer, dated August 6, 201031.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2010 by Principal Financial Officer, dated August 6, 2010.32.1
    
    
    Certification, dated August 6, 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 June 30, 2010.
  20




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##### Table of Contents



FIRST FINANCIAL CORPORATION
(Registrant)Date: August 6, 2010
    By:
    /s/ Donald E. SmithDonald E. Smith, ChairmanDate: August 6, 2010
    By:
    /s/ Norman L. LoweryNorman L. Lowery, Vice Chairman and CEO(Principal Executive Officer)Date: August 6, 2010
    By:
    /s/ Rodger A. McHargueRodger A. McHargue, Treasurer and CFO(Principal Financial Officer)  21




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##### Table of Contents



Exhibit No.: Description of Exhibit:
 
 Exhibit Index
 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 June 30, 2010 by Principal Executive Officer, dated August 6, 201031.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2010 by Principal Financial Officer, dated August 6, 2010.32.1
    
    
    Certification, dated August 6, 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 June 30, 2010.
  22