##### 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, 2009
 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)
 Yes þ No o.
 Yes o No o.
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    17PART II. Other Information:Item 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds
    
    
    17Item 3. Defaults upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18Signatures
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCash and due from banks
    
    $
    54,664
    
    
    $
    67,298Federal funds sold and short-term investments
    
    
    5,500
    
    
    
    9,530Securities available-for-sale
    
    
    587,454
    
    
    
    596,915Loans:Commercial, financial and agricultural
    
    
    513,436
    
    
    
    499,636Real estate  construction
    
    
    25,118
    
    
    
    26,137Real estate  mortgage
    
    
    667,893
    
    
    
    628,027Installment
    
    
    324,788
    
    
    
    302,977Lease financing
    
    
    2,000
    
    
    
    1,8781,533,235
    
    
    
    1,458,655Less:Unearned Income
    
    
    (87
    )
    
    
    (128
    )Allowance for loan losses
    
    
    (17,037
    )
    
    
    (16,280
    )1,516,111
    
    
    
    1,442,247Credit card loans held-for-sale
    
    
    11,924
    
    
    
    12,800Restricted Stock
    
    
    26,227
    
    
    
    26,227Accrued interest receivable
    
    
    11,907
    
    
    
    13,081Premises and equipment, net
    
    
    31,728
    
    
    
    32,145Bank-owned life insurance
    
    
    63,029
    
    
    
    62,107Goodwill
    
    
    7,102
    
    
    
    7,102Other intangible assets
    
    
    1,300
    
    
    
    1,512Other real estate owned
    
    
    2,920
    
    
    
    3,200Other assets
    
    
    31,987
    
    
    
    28,511TOTAL ASSETS
    
    $
    2,351,853
    
    
    $
    2,302,675LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    235,431
    
    
    $
    236,249Interest-bearing:Certificates of deposit of $100 or more
    
    
    206,935
    
    
    
    211,107Other interest-bearing deposits
    
    
    1,142,260
    
    
    
    1,116,1421,584,626
    
    
    
    1,563,498Short-term borrowings
    
    
    95,569
    
    
    
    21,500Other borrowings
    
    
    332,824
    
    
    
    385,153Other liabilities
    
    
    46,177
    
    
    
    45,680TOTAL LIABILITIES
    
    
    2,059,196
    
    
    
    2,015,831Shareholders equityCommon stock, $.125 stated value per share;Authorized shares-40,000,000Issued shares-14,450,966Outstanding shares-13,116,630 in 2009 and 13,098,615 in 2008
    
    
    1,806
    
    
    
    1,806Additional paid-in capital
    
    
    68,654
    
    
    
    68,654Retained earnings
    
    
    269,696
    
    
    
    263,115Accumulated other comprehensive income (loss)
    
    
    (13,714
    )
    
    
    (12,946
    )Treasury shares at cost-1,334,336 in 2009 and 1,352,351 in 2008
    
    
    (33,785
    )
    
    
    (33,785
    )TOTAL SHAREHOLDERS EQUITY
    
    
    292,657
    
    
    
    286,844TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,351,853
    
    
    $
    2,302,675
   3




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)INTEREST INCOME:Loans, including related fees
    
    $
    22,730
    
    
    $
    24,681
    
    
    $
    45,637
    
    
    $
    50,457Securities:Taxable
    
    
    5,819
    
    
    
    6,385
    
    
    
    11,987
    
    
    
    12,382Tax-exempt
    
    
    1,648
    
    
    
    1,581
    
    
    
    3,289
    
    
    
    3,178Other
    
    
    461
    
    
    
    624
    
    
    
    931
    
    
    
    1541TOTAL INTEREST INCOME
    
    
    30,658
    
    
    
    33,271
    
    
    
    61,844
    
    
    
    67,558INTEREST EXPENSE:Deposits
    
    
    5,573
    
    
    
    8,376
    
    
    
    11,777
    
    
    
    18,593Short-term borrowings
    
    
    137
    
    
    
    200
    
    
    
    280
    
    
    
    567Other borrowings
    
    
    4,372
    
    
    
    4,735
    
    
    
    8,748
    
    
    
    9,482TOTAL INTEREST EXPENSE
    
    
    10,082
    
    
    
    13,311
    
    
    
    20,805
    
    
    
    28,642NET INTEREST INCOME
    
    
    20,576
    
    
    
    19,960
    
    
    
    41,039
    
    
    
    38,916Provision for loan losses
    
    
    2,860
    
    
    
    1,735
    
    
    
    5,690
    
    
    
    3,660NET INTEREST
INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    17,716
    
    
    
    18,225
    
    
    
    35,349
    
    
    
    35,256NON-INTEREST INCOME:Trust and financial services
    
    
    932
    
    
    
    990
    
    
    
    1,946
    
    
    
    2,109Service charges and fees on deposit accounts
    
    
    2,767
    
    
    
    2,988
    
    
    
    5,264
    
    
    
    5,780Other service charges and fees
    
    
    1,652
    
    
    
    1,477
    
    
    
    3,184
    
    
    
    2,871Securities gains/(losses), net
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    355Insurance commissions
    
    
    1,577
    
    
    
    1,637
    
    
    
    3,016
    
    
    
    3,196Gain on sales of mortgage loans
    
    
    608
    
    
    
    185
    
    
    
    1184
    
    
    
    410Other
    
    
    177
    
    
    
    363
    
    
    
    844
    
    
    
    1,569TOTAL NON-INTEREST INCOME
    
    
    7,715
    
    
    
    7,641
    
    
    
    15,440
    
    
    
    16,290OTHER THAN TEMPORARY IMPAIRMENTTotal Impairment Losses
    
    
    (22,532
    )
    
    
    
    
    
    
    (25,511
    )
    
    
    Loss recognized in other comprehensive loss
    
    
    20,946
    
    
    
    
    
    
    
    20,946
    
    
    
    Net impairment loss recognized in earnings
    
    
    (1,586
    )
    
    
    
    
    
    
    (4,565
    )
    
    
    NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    10,014
    
    
    
    10,125
    
    
    
    20,194
    
    
    
    20,458Occupancy expense
    
    
    1,027
    
    
    
    988
    
    
    
    2,119
    
    
    
    2,037Equipment expense
    
    
    1,109
    
    
    
    1,126
    
    
    
    2,230
    
    
    
    2,239FDIC Expense
    
    
    1,601
    
    
    
    55
    
    
    
    1,907
    
    
    
    99Other
    
    
    4,251
    
    
    
    3,936
    
    
    
    8,249
    
    
    
    7,821TOTAL NON-INTEREST EXPENSE
    
    
    18,002
    
    
    
    16,230
    
    
    
    34,699
    
    
    
    32,654INCOME BEFORE INCOME TAXES
    
    
    5,843
    
    
    
    9,636
    
    
    
    11,525
    
    
    
    18,892Provision for income taxes
    
    
    1,222
    
    
    
    2,493
    
    
    
    2,374
    
    
    
    4,799NET INCOME
    
    $
    4,621
    
    
    $
    7,143
    
    
    $
    9,151
    
    
    $
    14,093PER SHARE DATABasic and Diluted
    
    $
    0.35
    
    
    $
    0.55
    
    
    $
    0.70
    
    
    $
    1.07Dividends Per Share
    
    $
    0.45
    
    
    $
    0.44
    
    
    $
    0.45
    
    
    $
    0.44Weighted average number of shares outstanding (in thousands)
    
    
    13,117
    
    
    
    13,102
    
    
    
    13,117
    
    
    
    13,112
   4




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##### Table of Contents



AccoumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,069
    )
    
    
    
    
    
    
    (2,069
    )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
SFAS 115-2 and SFAS 124-2, 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
    )
    
    $
    292,657Balance, April 1, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    256,961
    
    
    $
    292
    
    
    $
    (34,043
    )
    
    $
    293,228Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    7,143
    
    
    
    
    
    
    
    
    
    
    
    7,143Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,872
    )
    
    
    
    
    
    
    (12,872
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    128Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,601
    )Cash Dividends, $.44 per share
    
    
    
    
    
    
    
    
    
    
    (5,763
    )
    
    
    
    
    
    
    
    
    
    
    (5,763
    )Treasury stock purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    (147
    )Balance, June 30, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    258,341
    
    
    $
    (12,452
    )
    
    $
    (34,190
    )
    
    $
    281,717
  5




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##### Table of Contents



AccoumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Stock
    
    
    TotalBalance, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,383
    
    
    
    
    
    
    
    2,383Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    182Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,716Cumulative Effect of change in
accounting principle, adoption of FSP
SFAS 115-2 and SFAS 124-2, 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
    )
    
    $
    292,657Balance, January 1, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    250,011
    
    
    $
    (5,181
    )
    
    $
    (33,156
    )
    
    $
    281,692Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    14,093
    
    
    
    
    
    
    
    
    
    
    
    14,093Change in net unrealized
gains/(losses) on securities
available for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,527
    )
    
    
    
    
    
    
    (7,527
    )Change in net unrealized gains/
(losses) on retirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    256Total comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,822Cash Dividends, $.44 per share
    
    
    
    
    
    
    
    
    
    
    (5,763
    )
    
    
    
    
    
    
    
    
    
    
    (5,763
    )Treasury stock purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,034
    )
    
    
    (1,034
    )Balance, June 30, 2008
    
    $
    1,806
    
    
    $
    68,212
    
    
    $
    258,341
    
    
    $
    (12,452
    )
    
    $
    (34,190
    )
    
    $
    281,717
  6




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##### Table of Contents



Six Months EndedJune 30,2009
    
    
    2008(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    9,151
    
    
    $
    14,093Adjustments to reconcile net income to net cash
provided by operating activities:Net amortization (accretion) of premiums and discounts on investments
    
    
    (1,501
    )
    
    
    (1,390
    )Provision for loan losses
    
    
    5,690
    
    
    
    3,660Securities (gains) losses
    
    
    4,563
    
    
    
    (355
    )(Gain) loss on sale of other real estate
    
    
    36
    
    
    
    (57
    )Depreciation and amortization
    
    
    1,821
    
    
    
    1,715Other, net
    
    
    (5,281
    )
    
    
    1,892NET CASH FROM OPERATING ACTIVITIES
    
    
    14,479
    
    
    
    19,558CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of securities available-for-sale
    
    
    
    
    
    
    355Proceeds from sales of restricted stock
    
    
    
    
    
    
    2,386Calls, maturities and principal reductions on securities available-for-sale
    
    
    58,507
    
    
    
    48,722Purchases of securities available-for-sale
    
    
    (46,989
    )
    
    
    (108,399
    )Loans made to customers, net of repayment
    
    
    (79,917
    )
    
    
    (21,722
    )Proceeds from sales of other real estate owned
    
    
    1,483
    
    
    
    1,009Net change in federal funds sold
    
    
    4,030
    
    
    
    (144
    )Additions to premises and equipment
    
    
    (1,192
    )
    
    
    (1,411
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    (64,078
    )
    
    
    (79,204
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net change in deposits
    
    
    21,128
    
    
    
    81,114Net change in short-term borrowings
    
    
    74,069
    
    
    
    1,530Dividends paid
    
    
    (5,903
    )
    
    
    (5,785
    )Purchase of treasury stock
    
    
    
    
    
    
    (1,034
    )Proceeds from other borrowings
    
    
    70,000
    
    
    
    56,000Repayments on other borrowings
    
    
    (122,329
    )
    
    
    (61,452
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    36,965
    
    
    
    70,373NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (12,634
    )
    
    
    10,727CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    67,298
    
    
    
    70,082CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    54,664
    
    
    $
    80,809
   7




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##### Table of Contents



Significant Accounting Policies
  Allowance for Loan Losses
  June 30,(Dollar amounts in thousands)
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    16,280
    
    
    $
    15,351Provision for loan losses
    
    
    5,690
    
    
    
    3,660Recoveries of loans previously charged off
    
    
    1,087
    
    
    
    1,441Loans charged off
    
    
    (6,020
    )
    
    
    (4,899
    )BALANCE AT END OF PERIOD
    
    $
    17,037
    
    
    $
    15,553
  (000s)June 30,
    
    
    December 31,2009
    
    
    2008Impaired Loans with related allowance for loan losses calculated under SFAS No. 114
    
    $
    20,690
    
    
    $
    16,959Impaired Loans with no related allowance for loan losses
    
    
    1,350
    
    
    
    $
    22,040
    
    
    $
    16,959Amount of allowance allocated to impaired loans
    
    $
    3,898
    
    
    $
    4,735
  Securities
  (000s)June 30, 2009Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueUnited States Government entity mortgage-backed securities
    
    $
    149
    
    
    $
    3
    
    
    $
    0
    
    
    $
    152Mortgage Backed Securities  Residential
    
    
    346,978
    
    
    
    11,562
    
    
    
    286
    
    
    
    358,254Collateralized Mortgage Obligations
    
    
    64,974
    
    
    
    2,150
    
    
    
    0
    
    
    
    67,124State and Municipal Obligations
    
    
    145,193
    
    
    
    3,061
    
    
    
    1,766
    
    
    
    146,488Collateralized Debt Obligations
    
    
    25,518
    
    
    
    0
    
    
    
    22,562
    
    
    
    2,956Other Securities
    
    
    7,005
    
    
    
    0
    
    
    
    576
    
    
    
    6,429Equity Securities
    
    
    5,662
    
    
    
    1,790
    
    
    
    1,401
    
    
    
    6,051$
    595,479
    
    
    $
    18,566
    
    
    $
    26,591
    
    
    $
    587,454
  8




---



##### Table of Contents



(000s)December 31, 2008Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueUnited States Government entity mortgage-backed securities
    
    $
    148
    
    
    $
    6
    
    
    $
    0
    
    
    $
    154Mortgage Backed Securities  Residential
    
    
    354,308
    
    
    
    11,179
    
    
    
    10
    
    
    
    365,477Collateralized Mortgage Obligations
    
    
    68,838
    
    
    
    1,389
    
    
    
    
    
    
    
    70,227State and Municipal Obligations
    
    
    143,224
    
    
    
    2,439
    
    
    
    1,822
    
    
    
    143,841Collateralized Debt Obligations
    
    
    22,177
    
    
    
    
    
    
    
    20,341
    
    
    
    1,836Other Securities
    
    
    9,409
    
    
    
    
    
    
    
    612
    
    
    
    8,797Equity Securities
    
    
    5,649
    
    
    
    2,097
    
    
    
    1,163
    
    
    
    6,583$
    603,753
    
    
    $
    17,110
    
    
    $
    23,948
    
    
    $
    596,915
  June 30, 2009Available-for-SaleAmortized
    
    
    Fair(Dollar amounts in thousands)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    10,820
    
    
    $
    10,928Due after one but within five years
    
    
    45,610
    
    
    
    46,493Due after five but within ten years
    
    
    39,416
    
    
    
    40,148Due after ten years
    
    
    146,844
    
    
    
    125,428242,690
    
    
    
    222,997Mortgage-backed securities and equities
    
    
    352,789
    
    
    
    364,457TOTAL
    
    $
    595,479
    
    
    $
    587,454
   June 30, 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
    
    $
    15,221
    
    
    $
    (214
    )
    
    $
    7
    
    
    $
    0
    
    
    $
    15,228
    
    
    $
    (214
    )Collateralized mortgage obligations
    
    
    5,569
    
    
    
    (70
    )
    
    
    110
    
    
    
    (3
    )
    
    $
    5,679
    
    
    $
    (73
    )State and municipal obligations
    
    
    45,287
    
    
    
    (1,292
    )
    
    
    4,963
    
    
    
    (473
    )
    
    $
    50,250
    
    
    $
    (1,765
    )Collateralized Debt Obligations
    
    
    
    
    
    
    
    
    
    
    2,956
    
    
    
    (22,562
    )
    
    $
    2,956
    
    
    $
    (22,562
    )Other Securities
    
    
    0
    
    
    
    
    
    
    
    6,429
    
    
    
    (576
    )
    
    $
    6,429
    
    
    $
    (576
    )Equities
    
    
    373
    
    
    
    (92
    )
    
    
    1,500
    
    
    
    (1,309
    )
    
    $
    1,873
    
    
    $
    (1,401
    )Total temporarily impaired securities
    
    $
    66,450
    
    
    $
    (1,668
    )
    
    $
    15,965
    
    
    $
    (24,923
    )
    
    $
    82,415
    
    
    $
    (26,591
    )
 December 31, 2008Less 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
    
    $
    1,735
    
    
    $
    (7
    )
    
    $
    84
    
    
    $
    (3
    )
    
    $
    1,819
    
    
    $
    (10
    )State and municipal obligations
    
    
    51,011
    
    
    
    (1,797
    )
    
    
    321
    
    
    
    (25
    )
    
    
    51,332
    
    
    
    (1,822
    )Collateralized Debt Obligations
    
    
    
    
    
    
    
    
    
    
    4,239
    
    
    
    (20,341
    )
    
    
    4,239
    
    
    
    (20,341
    )Other Securities
    
    
    6,394
    
    
    
    (612
    )
    
    
    
    
    
    
    
    
    
    
    6,394
    
    
    
    (612
    )Equities
    
    
    1,668
    
    
    
    (1,163
    )
    
    
    0
    
    
    
    0
    
    
    
    1,668
    
    
    
    (1,163
    )Total temporarily impaired securities
    
    $
    60,808
    
    
    $
    (3,579
    )
    
    $
    4,644
    
    
    $
    (20,369
    )
    
    $
    65,452
    
    
    $
    (23,948
    )
  9




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##### Table of Contents



Accounting for Certain Investments in Debt and
Equity Securities Recognition of Interest Income and Impairment on Purchased Beneficial Interests
and Beneficial Interests that Continue to be Held by a Transfer in Securitized Financial Assets.
       10




---



##### Table of Contents



Beginning balance, April 1, 2009
    
    $
    2,979Amounts related to credit loss for which an other-than-temporary
impairment was not previously recognized
    
    
    1,192Additions/SubtractionsAmounts realized for securities sold during the period
    
    
    Amounts related to securities for which the company
intends to sell or that it will be more likely than not
that the company will be required to sell prior to
recovery of amortized cost basis
    
    
    Reductions for increase in cash flows expected to be
collected that are recognized over the remaining
life of the security
    
    
    Increases to the amount related to the credit
loss for which other-than-temporary was previously
recognized
    
    
    394Ending balance, June 30, 2009
    
    $
    4,565
 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.
   (000s)Fair Value Measurements UsingJune 30,
    
    
    December 31,2009
    
    
    2008Securities available-for-sale (1)Level 1
    
    $
    2,329
    
    
    $
    2,827Level 2
    
    
    578,846
    
    
    
    586,094Level 3
    
    
    6,679
    
    
    
    7,994Carrying Value
    
    $
    587,854
    
    
    $
    596,915
 (1)
    
    The fair value of securities reported using Level 1 inputs include U.S. Treasuries for
which quoted market prices for identical assets are readily available, and Level 3 inputs include
certain investments in bank equities and collateralized debt obligations for which Level 1 and
Level 2 inputs are not available.  11




---



##### Table of Contents



(000s)Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Beginning Balance
    
    $
    7,161
    
    
    $
    31,833
    
    
    $
    7,994
    
    
    $
    33,745Total gains or losses (realized/unrealized)
    
    
    (482
    )
    
    
    (3,427
    )
    
    
    (1,263
    )
    
    
    (5,101
    )Purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paydowns and Maturities
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    (238
    )Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending Balance
    
    $
    6,679
    
    
    $
    28,406
    
    
    $
    6,679
    
    
    $
    28,406
     Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(Dollar amounts in thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueCash and due from banks $
    
    
    54,664
    
    
    
    54,664
    
    
    
    67,298
    
    
    
    67,298Federal funds sold
    
    
    5,500
    
    
    
    5,500
    
    
    
    9,530
    
    
    
    9,530Securities availableforsale
    
    
    587,454
    
    
    
    587,454
    
    
    
    596,915
    
    
    
    596,915Loans, net *
    
    
    1,528,035
    
    
    
    1,536,457
    
    
    
    1,455,047
    
    
    
    1,457,842Accrued interest receivable
    
    
    11,907
    
    
    
    11,907
    
    
    
    13,081
    
    
    
    13,081Deposits
    
    
    (1,584,626
    )
    
    
    (1,574,121
    )
    
    
    (1,563,498
    )
    
    
    (1,554,912
    )Shortterm borrowings
    
    
    (95,569
    )
    
    
    (95,569
    )
    
    
    (21,500
    )
    
    
    (21,500
    )Federal Home Loan Bank advances
    
    
    (326,224
    )
    
    
    (344,101
    )
    
    
    (378,553
    )
    
    
    (390,296
    )Other borrowings
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )
    
    
    (6,600
    )Accrued interest payable
    
    
    (3,035
    )
    
    
    (3,035
    )
    
    
    (3,871
    )
    
    
    (3,871
    )
 *
    
    includes credit card loans held for sale  12




---



##### Table of Contents



Short-Term Borrowings
  (000s)June 30,
    
    
    December 31,2009
    
    
    2008Federal Funds Purchased
    
    $
    72,764
    
    
    $
    1,111Repurchase Agreements
    
    
    19,923
    
    
    
    19,405Note Payable  U.S. Government
    
    
    2,882
    
    
    
    984$
    95,569
    
    
    $
    21,500
 Other Borrowings
  (000s)June 30,
    
    
    December 31,2009
    
    
    2008FHLB Advances
    
    $
    326,224
    
    
    $
    378,553City of Terre Haute, Indiana economic development revenue bonds
    
    
    6,600
    
    
    
    6,600$
    332,824
    
    
    $
    385,153
 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 Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    768
    
    
    $
    758
    
    
    $
    27
    
    
    $
    31
    
    
    $
    1,536
    
    
    $
    1,515
    
    
    $
    55
    
    
    $
    62Interest cost
    
    
    693
    
    
    
    727
    
    
    
    60
    
    
    
    60
    
    
    
    1,387
    
    
    
    1,454
    
    
    
    120
    
    
    
    119Expected return on plan assets
    
    
    (911
    )
    
    
    (823
    )
    
    
    
    
    
    
    
    
    
    
    (1,822
    )
    
    
    (1,646
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30Net amortization of prior service cost
    
    
    (5
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    Net amortization of net (gain) loss
    
    
    116
    
    
    
    182
    
    
    
    0
    
    
    
    3
    
    
    
    231
    
    
    
    365
    
    
    
    0
    
    
    
    6Net Periodic Benefit Cost
    
    $
    661
    
    
    $
    839
    
    
    $
    102
    
    
    $
    109
    
    
    $
    1,323
    
    
    $
    1,679
    
    
    $
    205
    
    
    $
    217
 Employer Contributions
  8. New accounting standards
   13




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##### Table of Contents



9. Subsequent Events
  
 Managements Discussion and Analysis of Financial Condition and Results of
Operations and Quantitative and Qualitative Disclosures About Market Risk
   Critical Accounting Policies
 10-K.
  14




---



##### 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)June 30,
    
    
    December 31,2009
    
    
    2008Non-accrual loans
    
    $
    31,114
    
    
    $
    12,486Restructured loans
    
    
    94
    
    
    
    98Accruing loans past due over 90 days
    
    
    5,426
    
    
    
    3,624$
    36,634
    
    
    $
    16,208Ratio of the allowance for loan losses
as a percentage of non-performing loans
    
    
    47
    %
    
    
    100
    %
  15




---



##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008Non-accrual loans1-4 family residential
    
    $
    3,054
    
    
    $
    1,835Commercial loans
    
    
    26,290
    
    
    
    9,210Installment loans
    
    
    1,770
    
    
    
    1,441$
    31,114
    
    
    $
    12,486Past due 90 days or more1-4 family residential
    
    $
    847
    
    
    $
    1,495Commercial loans
    
    
    4,092
    
    
    
    1,582Installment loans
    
    
    487
    
    
    
    547$
    5,426
    
    
    $
    3,624
 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
    
    
    0.12
    %
    
    
    0.43
    %
    
    
    0.70
    %Down 100
    
    
    0.07
    
    
    
    0.27
    
    
    
    0.44Up 100
    
    
    1.27
    
    
    
    1.99
    
    
    
    4.00Up 200
    
    
    2.02
    
    
    
    2.83
    
    
    
    6.64
   16




---



##### Table of Contents



Liquidity Risk
  Financial Condition
  Capital Adequacy
  June 30, 2009
    
    
    December 31, 2008
    
    
    To Be Well CapitalizedTotal risk-based capitalCorporation
    
    
    17.05
    %
    
    
    17.32
    %
    
    
    N/AFirst Financial Bank
    
    
    16.78
    %
    
    
    17.11
    %
    
    
    10.00
    %Tier I risk-based capitalCorporation
    
    
    16.13
    %
    
    
    16.40
    %
    
    
    N/AFirst Financial Bank
    
    
    16.00
    %
    
    
    16.34
    %
    
    
    6.00
    %Tier I leverage capitalCorporation
    
    
    12.84
    %
    
    
    12.72
    %
    
    
    N/AFirst Financial Bank
    
    
    12.71
    %
    
    
    12.64
    %
    
    
    5.00
    %
 
 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
  17




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##### Table of Contents



Defaults upon Senior Securities.
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of the shareholders of the Corporation was held on April 15, 2009.
 (b)
    
    The following were elected Directors of the Corporation for a three year term as
follows:
 Votes for
    
    
    Votes Against
    
    
    AbstentionsThomas T. Dinkel
    
    
    10,348,741
    
    
    
    93,050
    
    
    
    108,781Norman L. Lowery
    
    
    9,299,778
    
    
    
    1,142,013
    
    
    
    108,781William J. Voges
    
    
    10,357,935
    
    
    
    83,856
    
    
    
    108,781
  (c)
    
    At the annual meeting, the items for consideration were the election of the four
directors and to ratify the appointment of Crowe Horwath LLP as the independent registered
public accounting firm of the Corporation for the fiscal year ending December 31, 2009. The
votes to ratify appointment of Crowe Horwath LLP were 10,435,883 voted for, 18,684 votes
against and 168,360 vote abstentions. The vote tabulations for the election of such
Directors is set forth above.
 (d)
    
    Not applicable.
 
 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 25, 2009 and effective
January 1, 2009, incorporated by reference to Exhibit 10.1 of the Corporation Form 10-Q
filed for the quarter ended March 31, 2009.10.2
    
    
    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
    
    
    2009 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, 2008.10.4
    
    
    2009 Schedule of Named Executive Officer Compensation, incorporated by
reference to the Corporations Form 10-K filed for the fiscal year ended December 31,
2008.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009 by Principal Executive Officer, dated August 7, 2009.31.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009 by Principal Financial Officer, dated August 7, 2009.32.1
    
    
    Certification, dated August 7, 2009, 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, 2009.
  18




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##### Table of Contents



FIRST FINANCIAL CORPORATION
(Registrant)Date: August 7, 2009
    By:
    /s/ Donald E. SmithDonald E. Smith, ChairmanDate: August 7, 2009
    By:
    /s/ Norman L. LoweryNorman L. Lowery, Vice Chairman and CEODate: August 7, 2009
    By:
    /s/ Michael A. CartyMichael A. Carty, Treasurer and CFO  19




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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 25, 2009 and effective
January 1, 2009, incorporated by reference to Exhibit 10.1 of the Corporation Form 10-Q
filed for the quarter ended March 31, 2009.10.2
    
    
    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
    
    
    2009 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, 2008.10.4
    
    
    2009 Schedule of Named Executive Officer Compensation, incorporated by
reference to the Corporations Form 10-K filed for the fiscal year ended December 31,
2008.31.1
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009 by Principal Executive Officer, dated August 7, 200931.2
    
    
    Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009 by Principal Financial Officer, dated August 7, 2009.32.1
    
    
    Certification, dated August 7, 2009, 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, 2009.
  20