10-Q

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 March 31, 2010

Commission File Number 0-16759

FIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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)

(812)238-6000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ.

As of May 6, 2010, the registrant had outstanding 13,112,630 shares of common stock, without par value.

FIRST FINANCIAL CORPORATION

FORM 10-Q

INDEX

	Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Shareholders’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures about Market Risk		14
Item 4. Controls and Procedures		18
PART II. Other Information:
Item 1. Legal Proceedings		18
Item 1A. Risk Factors		18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		18
Item 3. Defaults upon Senior Securities		18
Item 4. Submission of Matters to a Vote of Security Holders		18
Item 5. Other Information		18
Item 6. Exhibits		19
Signatures		20
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

2

Part I — Financial Information

Item 1. Financial Statements

FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)

	March 31,			December 31,
	2010			2009
	(unaudited)
ASSETS
Cash and due from banks	$	65,202		$	84,371
Federal funds sold and short-term investments		12,645			21,576
Securities available-for-sale		578,364			587,246
Loans:
Commercial, financial and agricultural		556,995			558,211
Real estate — construction		27,078			27,231
Real estate — mortgage		726,750			729,668
Installment		307,692			314,417
Lease financing		2,245			2,313
		1,620,760			1,631,840
Less:
Unearned Income		(70	)		(76	)
Allowance for loan losses		(19,378	)		(19,437	)
		1,601,312			1,612,327
Restricted Stock		27,835			27,835
Accrued interest receivable		10,933			12,005
Premises and equipment, net		35,430			35,551
Bank-owned life insurance		64,589			64,057
Goodwill		7,102			7,102
Other intangible assets		4,546			4,916
Other real estate owned		5,439			5,885
FDIC Indimnification Asset		13,500			12,124
Other assets		46,159			43,727
TOTAL ASSETS	$	2,473,056		$	2,518,722
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	283,083		$	312,990
Interest-bearing:
Certificates of deposit of $100 or more		253,620			238,830
Other interest-bearing deposits		1,269,839			1,237,881
		1,806,542			1,789,701
Short-term borrowings		38,686			30,436
Other borrowings		252,737			332,737
Other liabilities		58,995			59,365
TOTAL LIABILITIES		2,156,960			2,212,239
Shareholders’ equity
Common stock, $.125 stated value per share; Authorized shares-40,000,000 Issued shares-14,450,966 Outstanding shares-13,112,630 in 2010 and 13,116,630 in 2009		1,806			1,806
Additional paid-in capital		68,739			68,739
Retained earnings		283,043			277,357
Accumulated other comprehensive income (loss)		(3,526	)		(7,904	)
Treasury shares at cost-1,338,336 in 2010 and 1,334,336 in 2009		(33,966	)		(33,515	)
TOTAL SHAREHOLDERS’ EQUITY		316,096			306,483
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,473,056		$	2,518,722

See accompanying notes.

3

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)

	Three Months Ended
	March 31,
	2010			2009
	(unaudited)			(unaudited)
INTEREST INCOME:
Loans, including related fees	$	24,021		$	22,907
Securities:
Taxable		5,008			6,168
Tax-exempt		1,627			1,641
Other		536			470
TOTAL INTEREST INCOME		31,192			31,186
INTEREST EXPENSE:
Deposits		4,398			6,204
Short-term borrowings		90			143
Other borrowings		3,423			4,376
TOTAL INTEREST EXPENSE		7,911			10,723
NET INTEREST INCOME		23,281			20,463
Provision for loan losses		2,430			2,830
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		20,851			17,633
NON-INTEREST INCOME:
Trust and financial services		1,259			1,014
Service charges and fees on deposit accounts		2,402			2,497
Other service charges and fees		1,821			1,532
Securities gains/(losses), net		245			—
Total impairment loss		(6,295	)		(2,979	)
Loss recognized in other comprehensive income		3,196			—
Net impairment loss recognized in earnings		(3,099	)		(2,979	)
Insurance commissions		1,670			1,439
Gain on sales of mortgage loans		272			576
Other		444			667
TOTAL NON-INTEREST INCOME		5,014			4,746
NON-INTEREST EXPENSE:
Salaries and employee benefits		10,830			10,180
Occupancy expense		1,251			1,092
Equipment expense		1,216			1,121
Other		4,984			4,304
TOTAL NON-INTEREST EXPENSE		18,281			16,697
INCOME BEFORE INCOME TAXES		7,584			5,682
Provision for income taxes		1,898			1,152
NET INCOME	$	5,686		$	4,530
PER SHARE DATA
Basic and Diluted Earnings per Share	$	0.43		$	0.35
Weighted average number of shares outstanding (in thousands)		13,120			13,117

4

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Three Months Ended
March 31, 2010, and 2009
(Dollar amounts in thousands, except per share data)
(Unaudited)

							Accoumulated
							Other
	Common		Additional		Retained		Comprehensive			Treasury
	Stock		Capital		Earnings		Income/(Loss)			Stock			Total
Balance, January 1, 2009	$	1,806	$	68,654	$	263,115	$	(12,946	)	$	(33,785	)	$	286,844
Comprehensive income:
Net income		—		—		4,530		—			—			4,530
Change in net unrealized gains/(losses) on securities available for-sale		—		—		—		4,452			—			4,452
Change in net unrealized gains/ (losses) on retirement plans		—		—		—		91			—			91
Total comprehensive income/(loss)														9,073
Treasury stock purchase		—		—		—		—			—			—
Balance, March 31, 2009	$	1,806	$	68,654	$	267,645	$	(8,403	)	$	(33,785	)	$	295,917
Balance, January 1, 2010	$	1,806	$	68,739	$	277,357	$	(7,904	)	$	(33,515	)	$	306,483
Comprehensive income:
Net income		—		—		5,686		—			—			5,686
Change in net unrealized gains/(losses) on securities available for-sale		—		—		—		4,200			—			4,200
Change in net unrealized gains/ (losses) on retirement plans		—		—		—		178			—			178
Total comprehensive income/(loss)														10,064
Treasury stock purchase (17,000 shares)		—		—		—		—			(451	)		(451	)
Balance, March 31, 2010	$	1,806	$	68,739	$	283,043	$	(3,526	)	$	(33,966	)	$	316,096

See accompanying notes.

5

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands, except per share data)

	Three Months Ended
	March 31,
	2010			2009
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	5,686		$	4,530
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization (accretion) of premiums and discounts on investments		(325	)		(788	)
Provision for loan losses		2,430			2,830
Securities (gains) losses		(245	)		—
Securities impairment loss		3,099			2,979
Gain on sale of other real estate		(16	)		(63	)
Depreciation and amortization		1,187			910
Other, net		(347	)		1,952
NET CASH FROM OPERATING ACTIVITIES		11,469			12,350
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available-for-sale		7,250			—
Calls, maturities and principal reductions on securities available-for-sale		39,281			25,848
Purchases of securities available-for-sale		(33,179	)		(24,481	)
Loans made to customers, net of repayment		8,359			(16,182	)
Proceeds from sales of other real estate owned		729			490
Net change in federal funds sold		8,931			9,530
Additions to premises and equipment		(696	)		(825	)
NET CASH FROM INVESTING ACTIVITIES		30,675			(5,620	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		16,796			17,825
Net change in short-term borrowings		8,250			17,316
Dividends paid		(5,908	)		(5,902	)
Purchase of treasury stock		(451	)		—
Proceeds from other borrowings		—			20,000
Repayments on other borrowings		(80,000	)		(72,000	)
NET CASH FROM FINANCING ACTIVITIES		(61,313	)		(22,761	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(19,169	)		(16,031	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		84,371			67,298
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	65,202		$	51,267

See accompanying notes.

6

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying March 31, 2010 and 2009 consolidated financial statements are unaudited. The December 31, 2009 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2009 annual report. The information presented does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The following notes should be read together with notes to the consolidated financial statements included in the 2009 annual report filed with the Securities and Exchange Commission as an exhibit to Form 10-K filed for the fiscal year ended December 31, 2009.

1. Significant Accounting Policies

The significant accounting policies followed by the Corporation and its subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated financial statements and are of a normal recurring nature. The Corporation reports financial information for only one segment, banking. Some items in the prior year financials were reclassified to conform to the current presentation.

2. Allowance for Loan Losses

The activity in the Corporation’s allowance for loan losses is shown in the following analysis:

	March 31,
	2010			2009
Balance at beginning of quarter	$	19,437		$	16,280
Provision for loan losses		2,430			2,830
Recoveries of loans previously charged off		851			608
Loans charged off		(3,340	)		(2,689	)
Balance at end of quarter	$	19,378		$	17,029

A loan is considered to be impaired when, based upon current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan. Large groups of smaller balance homogeneous loans, such as consumer, residential real estate and smaller commercial loans are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures. Also included in impaired loans are loans acquired in the First National Bank of Danville acquisition. See Note 9 for further discussion of these loans. Impairment is primarily measured based on the fair value of the loan’s collateral. The following table summarizes impaired loan information:

	March 31,		December 31,
	2010		2009
Impaired Loans with allocated allowance for loan losses	$	18,119	$	18,620
Impaired Loans with no allocated allowance for loan losses		8,346		6,054
	$	26,465	$	24,674

Interest payments on impaired loans are typically applied to principal unless collection of the principal amount is deemed to be fully assured, in which case interest is recognized on a cash basis.

3. Securities

The amortized cost and fair value of the Corporation’s investments are shown below. All securities are classified as available-for-sale.

			(000’s)
			March 31, 2010
	Amortized		Unrealized
(Dollar amounts in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government sponcored entities and entity mortgage-backed securities	$	4,076	$	42	$	0		$	4,118
Mortgage Backed Securities-residential		283,472		15,087		(25	)		298,534
Mortgage Backed Securities-commercial		156		5		0			161
Collateralized mortgage obligations		109,429		2,933		(40	)		112,322
State and municipal		146,819		8,043		(135	)		154,727
Collateralized debt obligations		16,017		—		(13,887	)		2,130
Equities		5,672		1,446		(746	)		6,372
TOTAL	$	565,641	$	27,556	$	(14,833	)	$	578,364

7

			December 31, 2009
	Amortized		Unrealized
(Dollar amounts in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government sponcored entities and entity mortgage-backed securities	$	4,103	$	45	$	0		$	4,148
Mortgage Backed Securities-residential		285,964		14,260		(40	)		300,184
Mortgage Backed Securities-commercial		162		6		0			168
Collateralized mortgage obligations		116,330		3,334		(100	)		119,564
State and municipal		143,039		5,926		(232	)		148,733
Collateralized debt obligations		19,253		—		(17,837	)		1,416
Other Securities		7,004		257		(189	)		7,072
Equities		5,668		1,462		(1,169	)		5,961
TOTAL	$	581,523	$	25,290	$	(19,567	)	$	587,246

Contractual maturities of debt securities at March 31, 2010 were as follows. Securities not due at a single maturity or with no maturity date, primarily mortgage-backed and equity securities are shown separately.

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	8,510	$	8,620
Due after one but within five years		38,440		40,680
Due after five but within ten years		40,309		42,898
Due after ten years		189,082		181,099
		276,341		273,297
Mortgage-backed securities and equities		289,300		305,067
TOTAL	$	565,641	$	578,364

There were $320 thousand in gains and $75 thousand in losses realized by the Corporation on investment sales for the three months ended March 31, 2010.

The following tables show the securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at March 31, 2010 and December 31, 2009.

						March 31, 2010
	Less Than 12 Months					More Than 12 Months							Total
			Unrealized					Unrealized					Unrealized
(Dollar amounts in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Mortgage Backed Securities — Residential	$	5,028	$	(24	)	$	46	$	(1	)	$	5,074	$	(25	)
Mortgage Backed Securities — Commercial		—		—			—		—			—		—
Collateralized mortgage obligations		12,154		(40	)		—		—			12,154		(40	)
State and municipal obligations		1,508		(66	)		2,905		(69	)		4,413		(135	)
Collateralized Debt Obligations		—		—			2,130		(13,887	)		2,130		(13,887	)
Equities		574		(222	)		1,543		(524	)		2,117		(746	)
Total temporarily impaired securities	$	19,264	$	(352	)	$	6,624	$	(14,481	)	$	25,888	$	(14,833	)

						December 31, 2009
	Less Than 12 Months					More Than 12 Months							Total
			Unrealized					Unrealized					Unrealized
(Dollar amounts in thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Mortgage Backed Securities — Residential	$	6,985	$	(38	)	$	47	$	(2	)	$	7,032	$	(40	)
Mortgage Backed Securities — Commercial		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	)

8

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Investments — Debt and Equity Securities. However, certain purchased beneficial interests, including non-agency mortgage-backed securities, asset-backed securities, and collateralized debt obligations, that had credit ratings at the time of purchase of below AA are evaluated using the model outlined in FASB ASC 325-40, Beneficial Interests in Securitized Financial Assets.

In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

The second segment of the portfolio uses the OTTI guidance provided by FASB ASC 325 that is specific to purchased beneficial interests that, on the purchase date, were rated below AA. Under the FASB ASC 325 model, the Company compares the present value of the remaining cash flows as estimated at the preceding evaluation date to the current expected remaining cash flows. An OTTI is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Gross unrealized losses on investment securities were $14.8 million as of March 31, 2010 and $19.6 million as of December 31, 2009. A majority of these losses represent negative adjustments to market value relative to the illiquidity in the markets on the securities and not losses related to the creditworthiness of the issuer. Unrealized losses on equity securities relate to investments in bank stocks held at the holding company. Bank stock values have been negatively impacted by the current economic environment and market pessimism. The largest part of this unrealized loss ($411 or 55%) relates to the Corporations ownership of stock in Fifth Third Corporation. The stock price of this issuer has improved since last quarter and supports that the decline in value in temporary. Based upon our review of the issuers, we do not believe these investments to be other than temporarily impaired. Management does not intend to sell these securities and it is not more likely than not that we will be required to sell them before their anticipated recovery.

A significant portion of the total unrealized loss in investment securities relates to collateralized debt obligations that were separately evaluated under FASB ASC 325-40, Beneficial Interests in Securitized Financial Assets. Based upon qualitative considerations, such as a down grade in credit rating or further defaults of underlying issuers during the quarter, and an analysis of expected cash flows, we determined that four CDO’s included in collateralized debt obligations were other-than-temporarily impaired and wrote our investments in those CDO’s totaling $16.95 million down to their present value of expected cash flows through earnings of $13.75 million at March 31, 2010 to properly reflect credit losses associated those CDO’s. The issuers in these securities are primarily banks, but some of the pools do include a limited number of insurance companies. The Company uses the OTTI evaluation model to compare the present value of expected cash flows to the previous estimate to ensure there are no adverse changes in cash flows during the quarter. The OTTI model considers the structure and term of the CDO and the financial condition of the underlying issuers. Specifically, the model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. Cash flows are projected using a forward rate LIBOR curve, as these CDOs are variable rate instruments. An average rate is then computed using this same forward rate curve to determine an appropriate discount rate (3 month LIBOR plus margin ranging from 160 to 180 basis points). The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. Assumptions used in the model include expected future default rates and prepayments. We assume no recoveries on defaults and treat all interest payment deferrals as defaults. In addition we use the model to “stress” each CDO, or make assumptions more severe than expected activity, to determine the degree to which assumptions could deteriorate before the CDO could no longer fully support repayment of the Company’s note class.

Collateralized debt obligations include an additional investments in a CDO consisting of pooled trust preferred securities in which the issuers are primarily banks. This CDO with an amortized cost of $2.3 million and a fair value of $1.5 million is rated BAA1 and is the senior tranche, is not in the scope of FASB ASC 325 and is not considered to be other-than-temporarily impaired based on its credit quality.

Management has consistently used Standard & Poors pricing to value these investments. There are a number of other pricing sources available to determine fair value for these investments. These sources utilize a variety of methods to determine fair value. The result is a wide range of estimates of fair value for these securities. The Standard & Poors pricing ranges from .54 to 8.003 while Moody Investor Service pricing ranges from 12.00 to 59.00, with others falling somewhere in between. We recognize that the Standard & Poors pricing utilized is likely a conservative estimate, but have been consistent in using this source and its estimate of fair value.

9

The table below presents a rollforward of the credit losses recognized in earnings for the three month periods ended March 31, 2010 and 2009:

	Three Months Ended March 31,
	2010		2009
Beginning balance	$	11,359	$	6,145
Increases to the amount related to the credit loss for which other-than-temporary was previously recognized		3,099		2,979
Ending balance	$	14,458	$	9,124

4. Fair Value

FASB ASC No. 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure 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.

The fair value of securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

For those securities that cannot be priced using quoted market prices or observable inputs a Level 3 valuation is determined. These securities are primarily trust preferred securities, which are priced using Level 3 due to current market illiquidity and certain investments in bank equities. The fair value of the trust preferred securities is computed based upon discounted cash flows estimated using interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation to the note classes. Current estimates of expected cash flows is based on the most recent trustee reports and any other relevant market information, including announcements of interest payment deferrals or defaults of underlying issuers. The payment, default and recovery assumptions are believed to reflect the assumptions of market participants. Cash flows are discounted at appropriate market rates, including consideration of credit spreads and illiquidity discounts. The fair value of investments in bank equities is based on the prices of recent stock trades and is considered Level 3 because these stocks are not publicly traded.

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).

	March 31, 2010
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2			Level 3		Carrying Value
U.S. Government sponcored entities and entity mortgage-backed securities	$	0	$	4,118		$	0	$	4,118
Mortgage Backed Securities-residential		—		298,534			—		298,534
Mortgage Backed Securities-commercial		—	$	161			—		161
Collateralized mortgage obligations		—		112,322			—		112,322
State and municipal		—		154,727			—		154,727
Collateralized debt obligations		—		—			2,130		2,130
Equities		3,018		—			3,354		6,372
TOTAL	$	3,018	$	569,862		$	5,484	$	578,364
Derivitive Assets				772
Derivitive Liabilities				(772	)

10

	December 31, 2009
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2			Level 3		Carrying Value
U.S. Government sponcored entities and entity mortgage-backed securities	$	0	$	4,148		$	0	$	4,148
Mortgage Backed Securities-residential		—		300,184			—		300,184
Mortgage Backed Securities-commercial		—	$	168			—		168
Collateralized mortgage obligations		—		119,564			—		119,564
State and municipal		—		148,733			—		148,733
Collateralized debt obligations		—		0			1,416		1,416
Other Securities		—		7,072			—		7,072
Equities		2,600		0			3,361		5,961
TOTAL	$	2,600	$	579,869		$	4,777	$	587,246
Derivitive Assets				889
Derivitive Liabilities				(889	)

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2010 and 2009.

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	March 31,			March 31
	2010			2009
Beginning Balance	$	4,777		$	7,994
Total realized/unrealized gains or losses
Included in earnings		(3,099	)		(2,979	)
Included in other comprehensive income		3,908			2,198
Settlements		(102	)		(52	)
Transfers into Level 3		—			—
Ending Balance	$	5,484		$	7,161

Changes in unrealized gains and losses recorded in earnings for the three months ended March 31, 2010 for Level 3 assets and liabilities that are still held at March 31, 2010 were approximately $3.1 million.

All impaired loans disclosed in footnote 2 are valued at Level 3 and are carried at a fair value of $20.2 million, net of a valuation allowance of $6.3 million at March 31, 2010. At December 31, 2009 impaired loans valued at Level 3 were carried at a fair value of $19.3 million, net of a valuation allowance of $5.4 million. The impact to the provision for loan losses was $1.3 million for the three months ended March 31, 2010, and was $1.7 million for the year ended December 31, 2009. Fair value is measured based on the value of the collateral securing those loans, and is determined using several methods. Generally the fair value of real estate is determined based on appraisals by qualified licensed appraisers. If an appraisal is not available, the fair value may be determined by using a cash flow analysis, a broker’s opinion of value, the net present value of future cash flows, or an observable market price from an active market. Fair value on non real estate loans is determined using similar methods.

The carrying amounts and estimated fair value of financial instruments at March 31, 2010 and December 31, 2009, are shown below. Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully. Security fair values were described previously. For fixed-rate loans or deposits, variable rate loans or deposits with infrequent repricing or repricing limits, and for longer-term borrowings, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair values of loans held for sale are based on market bids on the loans or similar loans. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. Fair value of debt is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.

11

The carrying amount and estimated fair value of financial instruments are presented in the table below and were determined based on the above assumptions:

	March 31, 2010						December 31, 2009
	Carrying			Fair			Carrying			Fair
(Dollar amounts in thousands)	Value			Value			Value			Value
Cash and due from banks		65,202			65,202			84,371			84,371
Federal funds sold		12,645			12,645			21,576			21,576
Securities available—for—sale		578,364			578,364			587,246			587,246
Federal Home Loan Bank Stock		26,181			n/a			26,181			n/a
Loans, net *		1,601,312			1,594,547			1,612,327			1,604,412
Accrued interest receivable		10,933			10,933			12,005			12,005
Deposits		(1,806,542	)		(1,814,212	)		(1,789,701	)		(1,798,059	)
Short—term borrowings		(38,636	)		(38,636	)		(30,436	)		(30,436	)
Federal Home Loan Bank advances		(246,137	)		(254,140	)		(326,137	)		(337,847	)
Other borrowings		(6,600	)		(6,600	)		(6,600	)		(6,600	)
Accrued interest payable		(2,609	)		(2,609	)		(3,127	)		(3,127	)

* includes credit card loans held for sale

5. Short-Term Borrowings

Period-end short-term borrowings were comprised of the following:

	(000’s)
	March 31,		December 31,
	2010		2009
Federal Funds Purchased	$	11,066	$	5,754
Repurchase Agreements		25,030		22,578
Note Payable — U.S. Government		2,590		2,104
	$	38,686	$	30,436

6. Other Borrowings

Other borrowings at period-end are summarized as follows:

	(000’s)
	March 31,		December 31,
	2010		2009
FHLB Advances	$	246,137	$	326,137
City of Terre Haute, Indiana economic development revenue bonds		6,600		6,600
	$	252,737	$	332,737

7. Components of Net Periodic Benefit Cost

	Three Months ended March 31,
	(000’s)
							Post-Retirement
	Pension Benefits						Health Benefits
	2010			2009			2010		2009
Service cost	$	773		$	768		$	16	$	27
Interest cost		828			693			55		60
Expected return on plan assets		(850	)		(910	)		—		—
Amortization of transition obligation		—			—			15		15
Net amortization of prior service cost		(4	)		(5	)		—		—
Net amortization of net (gain) loss		245			116			3		—
Net Periodic Benefit Cost	$	992		$	662		$	89	$	102

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Employer Contributions

First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2009 that it expected to contribute $1.6 and $1.2 million respectively to its Pension Plan and ESOP and $185,000 to the Post Retirement Health Benefits Plan in 2010. Contributions of $51 thousand have been made through the first three months of 2009 for the Post Retirement Health Benefits plan.

8. New accounting standards

In June 2009, the FASB amended previous guidance relating to transfers of financial assets and eliminates the concept of a qualifying special purpose entity. This guidance must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. This guidance must be applied to transfers occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. The disclosure provisions were also amended and apply to transfers that occurred both before and after the effective date of this guidance. The adoption of this standard did not have a material effect on the Corporation’s results of operations or financial position.

In June 2009, the FASB amended guidance for consolidation of variable interest entity guidance by replacing the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity.

Additional disclosures about an enterprise’s involvement in variable interest entities are also required. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early adoption is prohibited. The adoption of this standard did not have a material effect on the Corporation’s results of operations or financial position.

9. Acquisitions

On July 2, 2009, the Bank entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”) to assume all of the deposits (excluding brokered deposits) and certain assets of The First National Bank of Danville., a full service commercial bank headquartered in Danville, Illinois that had failed and been placed in receivership with the FDIC. The acquisition consisted of assets with a fair value of approximately $151.8 million, including $77.5 million of loans, $24.2 million of investment securities, $31.0 million of cash and cash equivalents, and $146.3 million in liabilities, including $145.7 million of deposits. A customer-related core deposit intangible asset of $4.6 million was also recorded. In addition to the excess of liabilities over assets, the Bank received approximately $14.6 million in cash from the FDIC and entered into a loss sharing agreement with the FDIC. Under the loss sharing agreement, the Bank will share in the losses on assets covered under the agreement (referred to as covered assets). On losses up to $29 million, the FDIC has agreed to reimburse the Bank for 80 percent of the losses. On losses exceeding $29 million, the FDIC has agreed to reimburse the bank for 95 percent of the losses. The loss sharing agreement is subject to following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their estimated fair value of $12.1 million on the acquisition date. At March 31, 2010 the indemnification was $13.5 million and subsequent to March 31, 2010 the first claims were filed for $7.2 million. The increase of $1.4 million in the indemnification assets is the result of losses on acquired loans not previously identified. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. The transaction resulted in a gain of $5.1 million, which was included in Non-Interest Income in the 2009 Consolidated Statement of Operations. Because of the short time period between the July 2, 2009 closing of the transaction and the end of the Company’s fiscal quarter on March 31, 2010, the Company continues to analyze its estimates of the fair values of the loans acquired and the indemnification asset recorded. The Company expects to finalize its analysis of these assets and, therefore, adjustments to the recorded carrying values may occur. Pro forma income statement information is not disclosed as the acquisition is immaterial to the Corporation.

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FASB ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. FASB ASC 310-10 prohibits carrying over or creating an allowance for loan losses upon initial recognition. The carrying amount of covered assets at March 31, 2010, consisted of loans accounted for in accordance with FASB ASC 310-30, loans not subject to FASB ASC 310-30 and other assets as shown in the following table:

	March 31, 2010
	ASC 310-30		Non ASC 310-30
	Loans		Loans		Other		Total
Loans	$	15,737	$	41,363	$	—	$	57,100
Foreclosed Assets		—		—		1,163		1,163
Total Covered Assets	$	15,737	$	41,363	$	1,163	$	58,263

	December 31, 2009
	ASC 310-30		Non ASC 310-30
	Loans		Loans		Other		Total
Loans	$	16,849	$	55,025	$	—	$	71,874
Foreclosed Assets		—		—		1,256		1,256
Total Covered Assets	$	16,849	$	55,025	$	1,256	$	73,130

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all ASC 310-10 loans acquired in the acquisition were $31.6 million, the cash flows expected to be collected were $18.4 million including interest, and the estimated fair value of the loans were $16.7 million. These amounts were determined based upon the estimated remaining life of the underlying loans, which include the effects of estimated prepayments. At March 31, 2010, a majority of these loans were valued based on the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. There was $99 thousand allowance for credit losses related to these loans at March 31, 2010. Because of the short time period between the closing of the transaction and March 31, 2010, certain amounts related to the FASB ASC 310-30 loans are preliminary estimates and changes in the carrying amount and accretable yield for these loans from the acquisition date and March 31, 2010 were not material. The Company expects to finalize its analysis of these loans and, therefore, adjustments to the estimated amounts may occur.

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all Non FASB ASC 310-30 loans acquired in the acquisition were $58.4 million and the estimated fair value of the loans were $60.7 million.

ITEMS 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk

The purpose of this discussion is to point out key factors in the Corporation’s recent performance compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page three of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation’s annual report for 2009 filed as an exhibit to the Corporation’s 10-K filed for the fiscal year ended December 31, 2009.

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Corporation’s business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and subsequent filings with the United States Securities and Exchange Commission (SEC). Copies of these filings are available at no cost on the SEC’s Web site at www.sec.gov or on the Corporation’s Web site at www.first-online.com. Management may elect to update forward-looking statements at some future point; however, it specifically disclaims any obligation to do so.

14

Critical Accounting Policies

Certain of the Corporation’s accounting policies are important to the portrayal of the Corporation’s financial condition and results of operations, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses and the valuation of goodwill and valuing investment securities. See further discussion of these critical accounting policies in the 2009 Annual Report on Form 10-K.

Summary of Operating Results

Net income for the three months ended March 31, 2010 was $5.7 compared to $4.5 for the same period of 2009. Basic earnings per share increased to $0.43 for the first quarter of 2009 compared to $0.35 for same period of 2009. Return on Assets and Return on Equity were 0.92% and 7.29% respectively for the three months ended March 31, 2010, compared to 0.79%and 6.17% for the three months ended March 31, 2009.

The primary components of income and expense affecting net income are discussed in the following analysis.

Net Interest Income

The Corporation’s primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest paid for deposits and other sources of funds. Net interest income increased $2.8 million in the three months ended March 31, 2010 to $23.3 million from $20.5 million in the same period in 2009. The net interest margin for the first three months of 2009 is 4.26% compared to 4.03% for the same period of 2009, a 5.7% increase, driven by a greater decrease in funding costs than the decline in the rates of return on earning assets.

Non-Interest Income

Non-interest income for the three months ended March 31, 2010 was $5.0 million compared to the $4.7 million for the same period of 2009. Non-interest income was reduced by the other than temporary impairment loss on securities of $3.1 and $3.0 million respectively for the three month periods ending March 31, 2010 and 2009. Further discussion on OTTI is included in Note 3.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended March 31, 2010 increased by $1.6 million compared to the same periods in 2009 due to increased FDIC expenses of $396 thousand and increased personnel and occupancy costs of $809 thousand associated in part with the acquisition of the business unit discussed in Note 9.

Allowance for Loan Losses

The Corporation’s provision for loan losses decreased $400 thousand for the first quarter of 2010 compared to the same period of 2009. The provision was $2.4 million for the three months ended March 31, 2010, compared to $2.8 million for the same period of 2009, while net charge-offs for the same periods increased by $408 thousand. Many of the charge-offs in the first 3 months of 2010 were specifically reserved for at December 31, 2009. The volume of impaired and non-accrual loans both increased reflecting management’s proactive approach to the recognition of problem credits as well as from the acquisition of a failed financial institution from the FDIC. The allowance for loan losses has remained virtually the same at 1.20% of gross loans, or $19.4 million at March 31, 2010 compared to 1.19% of gross loans, or $19.4 million at December 31, 2009. Based on management’s analysis of the current portfolio, an evaluation that includes consideration of historical loss experience, non-performing loans trends, and probable incurred losses on identified problem loans, management believes the allowance is adequate.

15

Non-performing Loans

Non-performing loans consist of (1) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain, (2) loans which have been renegotiated to provide for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, and (3) loans past due ninety days or more as to principal or interest. A summary of non-performing loans at March 31, 2010 and December 31, 2009 follows:

	(000’s)
	March 31,			December 31,
	2010			2009
Non-accrual loans	$	38,584		$	35,953
Restructured loans		89			90
Accruing loans past due over 90 days		6,444			8,218
	$	45,117		$	44,261
Ratio of the allowance for loan losses as a percentage of non-performing loans		43	%		44	%

The following loan categories comprise significant components of the nonperforming loans:

	(000’s)
	March 31,		December 31,
Non-accrual loans	2010		2009
1-4 family residential	$	4,160	$	2,917
Commercial loans		32,431		30,961
Installment loans		1,993		2,075
	$	38,584	$	35,953
Past due 90 days or more
1-4 family residential	$	660	$	1,837
Commercial loans		5,333		5,937
Installment loans		451		444
	$	6,444	$	8,218

The following table is information on the non-accrual loans at March 31, 2010 and December 31, 2009 that were from the acquisition of assets from The First National Bank of Danville

	(000’s)		(000’s)
	March 31,		December 31,
Non-accrual loans	2010		2009
1-4 family residential	$	318	$	168
Commercial loans		7,968		7,396
Installment loans		—		—
	$	8,286	$	7,564

Interest Rate Sensitivity and Liquidity

First Financial Corporation has established risk measures, limits and policy guidelines for managing interest rate risk and liquidity. Responsibility for management of these functions resides with the Asset Liability Committee. The primary goal of the Asset Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors.

Interest Rate Risk

Management considers interest rate risk to be the Corporation’s most significant market risk. Interest rate risk is the exposure to changes in net interest income as a result of changes in interest rates. Consistency in the Corporation’s net interest income is largely dependent on the effective management of this risk.

16

The Asset Liability position is measured using sophisticated risk management tools, including earning simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short-term and long-term exposure to interest rate risk. Simulation modeling measures the effects of changes in interest rates, changes in the shape of the yield curve and the effects of embedded options on net interest income. This measure projects earnings in the various environments over the next three years. It is important to note that measures of interest rate risk have limitations and are dependent on various assumptions. These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income. Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions. The Committee has performed a thorough analysis of these assumptions and believes them to be valid and theoretically sound. These assumptions are continuously monitored for behavioral changes.

The Corporation from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation’s risk management strategy.

The table below shows the Corporation’s estimated sensitivity profile as of March 31, 2010. The change in interest rates assumes a parallel shift in interest rates of 100 and 200 basis points. Given a 100 basis point increase in rates, net interest income would increase 0.66% over the next 12 months and increase 2.36% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would increase 0.05% over the next 12 months and decrease 0.06% over the following 12 months. These estimates assume all rate changes occur overnight and management takes no action as a result of this change.

Basis Point	Percentage Change in Net Interest Income
Interest Rate Change	12 months			24 months			36 months
Down 200		0.38	%		0.23	%		0.26	%
Down 100		0.05			-0.06			-0.09
Up 100		0.66			2.36			4.17
Up 200		-0.55			2.49			6.06

Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effect of rate changes, and represents a worst-case scenario.

Liquidity Risk

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers, and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Generally the Corporation relies on deposits, loan repayments and repayments of investment securities as its primary sources of funds. The Corporation has $8.6 million of investments that mature throughout the next 12 months. The Corporation also anticipates $114.6 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $16.3 million in securities to be called within the next 12 months. The Corporation also has unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, several Correspondent Banks and the Federal Reserve Bank of Chicago. With these many sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers.

Financial Condition

Comparing the first quarter of 2010 to the same period in 2009, loans net of unearned discount are up 9.15% or $135.9 million. Deposits are up $225.2 million at March 31, 2010, a 14.2% increase from the balances at the same time in 2009. Shareholders’ equity increased $20.1 million from March 31, 2009. This financial performance increased book value per share 6.8% to $24.10 at March 31, 2010 from $22.56 at March 31, 2009. Book value per share is calculated by dividing the total shareholders’ equity by the number of shares outstanding.

Capital Adequacy

As of March 31, 2010, the most recent notification from the respective regulatory agencies categorized the subsidiary banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the banks must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the bank’s category. Below are the capital ratios for the Corporation and lead bank.

	March 31, 2010			December 31, 2009			To Be Well Capitalized
Total risk-based capital
Corporation		17.08	%		16.44	%		N/A
First Financial Bank		16.75	%		16.09	%		10.00	%
Tier I risk-based capital
Corporation		16.07	%		15.45	%		N/A
First Financial Bank		15.88	%		15.23	%		6.00	%
Tier I leverage capital
Corporation		12.46	%		12.01	%		N/A
First Financial Bank		12.33	%		11.86	%		5.00	%

17

ITEM 4. Controls and Procedures

First Financial Corporation’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2010, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, management, including the principal executive officer and principal financial officer, concluded that the Corporation’s disclosure controls and procedures as of March 31, 2010 were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. Additionally, there was no change in the Corporation’s internal control over financial reporting that occurred during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II — Other Information

ITEM 1. Legal Proceedings.

There are no material pending legal proceedings, other than routine litigation incidental to the business of the Corporation or its subsidiaries, to which the Corporation or any of the subsidiaries is a party or of which any of their respective property is subject. Further, there is no material legal proceeding in which any director, officer, principal shareholder, or affiliate of the Corporation or any of its subsidiaries, or any associate of such director, officer, principal shareholder or affiliate is a party, or has a material interest, adverse to the Corporation or any of its subsidiaries.

ITEM 1 A. Risk Factors.

There have been no material changes in the risk factors from those disclosed in the Corporation’s 2009 Annual Report on Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) Not applicable.

(c) Purchases of Equity Securities

The Corporation periodically acquires shares of its common stock directly from shareholders in individually negotiated transactions. The Corporation has not adopted a formal policy or adopted a formal program for repurchases of shares of its common stock. Following is certain information regarding shares of common stock purchased by the Corporation during the quarter covered by this report.

					(c)
					Total Number Of Shares		(d)
	(a)		(b)		Purchased As Part Of		Maximum Number Of
	Total Number Of		Average Price		Publicly Announced Plans		Shares That May Yet
	Shares Purchased		Paid Per Share		Or Programs		Be Purchased
January 1 - 31, 2010		3,000		28.55		N/A		N/A
February 1 - 28, 2010		14,000		26.08		N/A		N/A
March 1 - 31, 2010		0		0.00		N/A		N/A
Total		17,000		26.51		N/A		N/A

ITEM 3. Defaults upon Senior Securities.

Not applicable.

ITEM 4. (Removed and Reserved)

ITEM 5. Other Information.

Not applicable.

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ITEM 6. 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.
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 March 31, 2010 by Principal Executive Officer, dated May 7, 2010
31.2	Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 by Principal Financial Officer, dated May 7, 2010.
32.1	Certification, dated May 7, 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 March 31, 2010.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST FINANCIAL CORPORATION (Registrant)
Date: May 7, 2010	By	/s/ Donald E. Smith
		Donald E. Smith, Chairman
Date: May 7, 2010	By	/s/ Norman L. Lowery
		Norman L. Lowery, Vice Chairman and CEO
		(Principal Executive Officer)
Date: May 7, 2010	By	/s/ Rodger A. McHargue
		Rodger A. McHargue, Treasurer and CFO
		(Principal Financial Officer)

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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.
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 March 31, 2010 by Principal Executive Officer, dated May 7, 2010
31.2	Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 by Principal Financial Officer, dated May 7, 2010.
32.1	Certification, dated May 7, 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 March 31, 2010.

21

EX-10.1

Exhibit No 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), entered into and effective as of the 1st day of January, 2010 (the “Effective Date”), by and between First Financial Bank, N.A. (the “Bank”) and Norman L. Lowery (the “Employee”).

WHEREAS, the Employee has heretofore been employed by the Bank as its President and Chief Executive Officer and has performed valuable services for the Bank; and

WHEREAS, the Board of Directors of the Bank (the “Board”) believes it is in the best interest of the Bank to enter into this Agreement with the Employee in order to assure continuity of management of the Bank to reinforce and encourage the continued attention and dedication of the Employee to his assigned duties; and

WHEREAS, the parties desire, by this writing, to set forth the continuing employment relationship between the Bank and the Employee.

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Employee and the Bank agree as follows:

1. Employment. The Employee is employed as the President and Chief Executive Officer of the Bank. The Employee shall render such administrative and management services for the Bank as are currently rendered and as are currently performed by persons situated in a similar executive capacity. The Employee shall also promote, by entertainment or otherwise, as and to the extent permitted by law, the business of the Bank. The Employee’s other duties shall be such as the Board may, from time to time, reasonably direct, including normal duties as an officer of the Bank. During the term of this Agreement, the Employee shall be nominated and elected to serve as a Director of the Bank or of any successor to the Bank.

2. Base Compensation. The Bank agrees to pay the Employee during the term of this Agreement a base salary at the rate of $500,074.10 per annum, payable in cash not less frequently than monthly. Such base salary shall be effective and calculated commencing as of the Effective Date. The Bank may consider and declare from time to time increases in the base salary it pays the Employee. Prior to a Change in Control (as hereinafter defined), the Bank may also declare decreases in the base salary it pays the Employee if the operating results of the Bank are significantly less favorable than those for the fiscal year ending December 31, 2009, and the Bank makes similar decreases in the base salary it pays to other executive officers of the Bank. After a Change in Control, the Bank shall consider and declare salary increases in base salary based upon the following standards:

(a) Inflation;

(b) Adjustments to the base salaries of other senior management personnel;

(c) Past performance of the Employee; and

(d) The contribution which the Employee makes to the business and profits of the Bank during the term of this Agreement.

3. Bonuses. The Employee shall participate in any year end bonus granted to other employees by the Board. The Employee shall further participate in an equitable manner with all other senior management employees of the Bank in any discretionary bonuses that the Board may award from time to time to the Bank’s senior management employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate in such discretionary bonuses.

4. Benefits.

(a) Participation in Retirement, Medical and Other Benefit Plans. During the term of this Agreement, the Employee shall be eligible to participate in the following benefit plans; group hospitalization, disability, health, dental, sick leave, retirement, supplemental retirement, pension, 401(k), employee stock ownership plan, and all other present or future qualified and/or nonqualified plans provided by the Bank generally, or to executive officers of the Bank, which benefits, taken as a whole, must be at least as favorable as those in effect on the Effective Date, unless the continued operation of such plans or changes in the accounting, legal or tax treatment of such plans would adversely affect the Bank’s operating results or financial condition in a material way, and the Board concludes that modifications to such plans are necessary to avoid such adverse effects and such modifications apply consistently to all employees of the Bank participating in the affected plans. In addition, the Employee shall be eligible to participate in any fringe benefits which are or may become available to the Bank’s senior management employees, including, for example, any stock option or incentive compensation (including, but not limited to the First Financial Corporation 2001 Long-Term Incentive Plan and 2005 Long-Term Incentive Plan (“LTIP”)) or performance-based plans, any insurance programs (including, but not limited to, any group and executive life insurance programs), and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. All the employee benefits referenced in this subsection 4(a) are collectively referred to hereinafter as “Employee Benefits.”

(b) Benefits After Retirement. Upon retirement of the Employee during the term of this Agreement, the Bank agrees to continue, at no greater cost to Employee than is generally allocated to all employees, full coverage for the Employee, his spouse and his children living in his household under the health, life and disability plans as adopted by the Bank which shall be no less favorable than those in effect on the Effective Date of this Agreement. The Bank agrees to continue such health coverage until both the Employee and his spouse are eligible for coverage by Medicare. When both the Employee and his spouse become eligible for Medicare coverage, the Bank agrees to pay for supplemental coverage for both the Employee and his spouse until the death of the Employee and his spouse. The Employee shall be entitled to a life insurance policy

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on his life in the maximum amount established by the group life insurance plan from time to time which amount shall be no less than the limit on the Effective Date of three times his annual salary (subject to a $350,000 maximum), provided at the Bank’s cost. The Employee shall also be entitled to a life insurance policy on his life in the amount established by the Bank’s insurance program for executive officers from time to time. The Bank shall continue to pay to the Employee the annual premiums, which are required to keep the life insurance policy in force, on behalf of the Employee pursuant to the Bank’s insurance program for executive officers.

(c) Expenses and Membership. The Employee shall be reimbursed for all reasonable out-of-pocket business expenses which he shall incur in connection with his services under this Agreement, upon substantiation of such expenses in accordance with the policies of the Bank. In addition, the Employee shall be reimbursed for all reasonable out-of-pocket expenses incurred by him to satisfy his continuing legal education requirements for his license to practice law in the State of Indiana. So long as the Employee is employed by the Bank pursuant to this Agreement, the Employee shall be entitled to continue his memberships in the American, Indiana and Terre Haute Bar Associations, the American Association for Justice and the Indiana Trial Lawyers Association and the Country Club of Terre Haute, and Bank shall continue to pay or reimburse the Employee for the dues and assessments for such memberships.

(d) Automobile. So long as the Employee is employed by the Bank pursuant to this Agreement, the Employee shall be entitled to continue to use a Bank-owned automobile of commensurate quality and value as that presently used by him on the same terms and conditions in effect with respect to such use on the Effective Date of this Agreement. The Bank shall provide and pay the premiums for full insurance coverage on the automobile. Such insurance coverage shall be no less than the coverage provided on the Effective Date of this Agreement. The Bank shall also pay for the cost of maintenance and repair of the automobile. All benefits referenced in this subsection 4(d) are collectively referred to hereinafter as “Automobile Benefits.”

(e) Vacation, Sick Leave and Disability. The Employee shall be entitled to 30 days vacation annually and shall be entitled to the same sick leave and disability leave as other employees of the Bank.

The Employee shall not receive any additional compensation from the Bank on account of his failure to take a vacation or sick leave, and the Employee shall not accumulate unused vacation or sick leave from one fiscal year to the next, except in either case to the extent authorized by the Board or permitted for other employees of the Bank.

In addition to the aforesaid paid vacations, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment with the Bank for such additional periods of time and for such valid and legitimate reasons as the Board may in its discretion determine and to attend the continuing legal education seminars contemplated by subsection 4(c) hereof. Further, the Board may grant to the Employee a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as such Board in its discretion may determine.

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(f) Other Policies. All other matters relating to the employment of the Employee by the Bank not specifically addressed in this Agreement shall be subject to the general policies regarding employees of the Bank as in effect from time to time.

5. Term of Employment. The Bank hereby employs the Employee, and the Employee hereby accepts such employment under the terms of this Agreement, for the period commencing on the Effective Date and ending sixty months thereafter (or such earlier date as is determined in accordance with Section 8). Additionally, on each annual anniversary date from the Effective Date, the Employee’s term of employment shall be extended for an additional one-year period beyond the then effective expiration date, provided the Board determines in a duly adopted resolution that this Agreement shall be extended. Only those members of the Board who have no personal interest in this Agreement shall discuss and vote on the approval, subsequent review and extension of this Agreement. The initial term of this Agreement and all extensions thereof are hereinafter referred to individually and collectively as the “Term.”

6. Covenants.

(a) Loyalty.

(i) During the period of his employment hereunder and except for illnesses, reasonable vacation periods, and reasonable leaves of absence, the Employee shall devote all of his full business time, attention, skill and efforts to the faithful performance of his duties hereunder; provided, however, from time to time, the Employee may serve on the Boards of Directors of, and hold any other offices or positions in, companies or organizations, and may perform legal services either directly or as a result of an of counsel or analogous position with a law firm for clients which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, or unfavorably affect the performance of Employee’s duties pursuant to this Agreement, or will not violate any applicable statute or regulation. “Full business time” is hereby defined as that amount of time usually devoted to like companies by similarly situated executive officers. During the term of his employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interests of the Bank, or be gainfully employed in any other position or job other than as provided above.

(ii) Nothing contained in this Section shall be deemed to prevent or limit the Employee’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank, or, solely as a passive or minority investor, in any business.

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(b) Nonsolicitation. The Employee hereby understands and acknowledges that, by virtue of his position with the Bank, he will have advantageous familiarity and personal contacts with the Bank’s customers, wherever located, and the business, operations and affairs of the Bank. Accordingly, while the Employee is employed by the Bank and for a period of one year after termination of the Employee’s employment with the Bank for any reason (whether with or without cause or whether by the Bank or the Employee) or the expiration of the Term, the Employee shall not, directly or indirectly, or individually or jointly, (i) solicit any non-legal business of any party which is a customer of the Bank at the time of such termination or any party which was a customer of the Bank during the one year period immediately preceding such termination, (ii) request or advise any customers or suppliers of the Bank to terminate, reduce, limit or change their business or relationship with the Bank, or (iii) induce, request or attempt to influence any employee of the Bank to terminate his employment with the Bank, unless such actions are taken in connection with Employee engaging in the practice of law.

For purposes of this Agreement, the term “solicit” means any direct or indirect communication of any kind whatsoever, regardless of by whom initiated, which encourages or requests any person or entity, in any manner, to cease doing business with the Bank.

(c) Noncompetition. During the period of his employment hereunder, and for a period of two years following the termination hereof, the Employee shall not, directly or indirectly:

(i) As owner, officer, director, stockholder, investor, proprietor, organizer or otherwise, engage in the same trade or business as the Bank, as conducted on the date hereof, which would conflict with the interests of the Bank or in a trade or business competitive with that of the Bank, which would conflict with the interests of the Bank, as conducted on the date hereof; or

(ii) Offer or provide employment (whether such employment is with the Employee or any other business or enterprise), either on a full-time or part-time or consulting basis, to any person who then currently is, or who within one (1) year prior to such offer or provision of employment has been, a management-level employee of the Bank. This subsection 6(c)(ii) shall only apply in the event the Employee voluntarily terminates his employment with the Bank.

The restrictions contained in this paragraph upon the activities of the Employee following termination of employment shall be limited to the following geographic areas (hereinafter referred to as “Restricted Geographical Area”):

(1) Terre Haute, Indiana; and

(2) The thirty mile radius of Terre Haute, Indiana.

Nothing contained in this Section 6 shall prevent or restrict the Employee from engaging in the practice of law, including within the Restricted Geographical Area. In addition, nothing contained in this subsection shall prevent or limit the Employee’s right to invest in the capital stock or other securities of any business dissimilar from that of the Bank, or, solely as a passive or minority investor, in any business.

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If the Employee does not comply with the provisions of this Section, the two year period of non-competition provided herein shall be tolled and deemed not to run during any period(s) of noncompliance, the intention of the parties being to provide two full years of non-competition by the Employee after the termination or expiration of this Agreement.

(d) Nondisclosure. The term “Confidential Information” as used herein shall mean any and all customer lists, computer hardware, software and related material, trade secrets (as defined in I.C. 24-2-3-2), know-how, skills, knowledge, ideas, knowledge of customer’s commercial requirements, pricing methods, sales and marketing techniques, dealer relationships and agreements, financial information, intellectual property, codes, research, development, research and development programs, processes, documentation, or devices used in or pertaining to the Bank’s business (i) which relate in any way to the Bank’s business, products or processes; or (ii) which are discovered, conceived, developed or reduced to practice by the Employee, either alone or with others either during the Term, at the Bank’s expense, or on the Bank’s premises.

(i) During the course of his services hereunder the Employee may become knowledgeable about, or become in possession of, Confidential Information. If such Confidential Information were to be divulged or become known to any competitor of the Bank or to any other person outside the employ of the Bank, or if the Employee were to consent to be employed by any competitor of the Bank or to engage in competition with the Bank, the Bank would be irreparably harmed. In addition, the Employee has or may develop relationships with the Bank’s customers which could be used to solicit the business of such customers away from the Bank. The Bank and the Employee have entered into this Agreement to guard against such potential harm.

(ii) The Employee shall not, directly or indirectly, use any Confidential Information for any purpose other than the benefit of the Bank or communicate, deliver, exhibit or provide any Confidential Information to any person, firm, partnership, corporation, organization or entity, except as required in the normal course of the Employee’s service as a consultant or as an employee of the Bank. The covenant contained in this subsection shall be binding upon the Employee during the Term and following the termination hereof until either (i) such Confidential Information becomes obsolete; or (ii) such Confidential Information becomes generally known in the Bank’s trade or industry by means other than a breach of this covenant.

(iii) The Employee agrees that all Confidential Information and all records, documents and materials relating to such Confidential Information, shall be and remain the sole and exclusive property of the Bank.

6

(e) Remedies. The Employee agrees that the Bank will suffer irreparable damage and injury and will not have an adequate remedy at law in the event of any breach by the Employee of any provision of this Section. Accordingly, in the event the Bank seeks, under law or in equity, a temporary restraining order, permanent injunction or a decree of specific performance of the provisions of this Section, no bond or other security shall be required. The Bank shall be entitled to recover from the Employee, reasonable attorneys’ fees and expenses incurred in any action wherein the Bank successfully enforces any of the provisions of this Section against the breach or threatened breach of those provisions by the Employee. The remedies described in this Section are not exclusive and are in addition to all other remedies the Bank may have at law, in equity, or otherwise.

(i) The Employee and the Bank acknowledge and agree that in the event of termination of the Employee’s employment for any reason whatsoever, the Employee can obtain other engagements or employment of a kind and nature similar to that contemplated herein outside the Restricted Geographical Area and that the issuance of an injunction to enforce the provisions of this Section will not prevent him from earning a livelihood.

(ii) The covenants on the part of the Employee contained in this Section are essential terms and conditions to the Bank entering into this Agreement, and shall be construed as independent of any other provision in this Agreement.

(f) Surrender of Records. Upon termination of the Employee’s employment for any reason, the Employee shall immediately surrender to the Bank any and all computer hardware, software and related materials, records, notes, documents, forms, manuals, photographs, instructions, lists, drawings, blueprints, programs, diagrams or other written or printed material (including any and all copies made at any time whatsoever) in his possession or control which pertain to the business of the Bank or its affiliates including any Confidential Information in the Employee’s personal notes, address books, calendars, rolodexes, personal data assistants, etc.

7. Standards. The Employee shall perform his duties under this Agreement in accordance with such reasonable standards as the Board may establish from time to time. The Bank will provide the Employee with the working facilities and staff commensurate with his position or positions and necessary or advisable for him to perform his duties.

8. Termination and Termination Pay. Subject to Section 10 hereof, the Employee’s employment hereunder may be terminated under the following circumstances:

(a) Death. The Employee’s employment shall terminate upon his death during the Term of this Agreement, in which event the Employee’s estate or designated beneficiaries shall be entitled to receive the base salary, bonuses, vested rights, and Employee Benefits due the Employee through the last day of the calendar month in which his death occurred. Any benefits payable under insurance, health, retirement, bonus, incentive (including, but not limited to, the LTIP), performance or other plans as a result of the Employee’s participation in such plans through such date shall be paid when and as due under those plans.

7

(b) Disability.

(i) The Bank may terminate the Employee’s employment, as a result of the Employee’s Disability, in a manner consistent with the Bank’s and the Employee’s rights and obligations under the Americans with Disabilities Act or other applicable state and federal laws concerning disability. For the purpose of this Agreement, “Disability” means the Employee is:

(1) Unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(2) By reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(ii) During any period that the Employee shall receive disability benefits and to the extent that the Employee shall be physically and mentally able to do so, he shall furnish such information, assistance and documents so as to assist in the continued ongoing business of the Bank.

(iii) In the event of Employee’s termination of employment by the Bank due to Disability, the Employee shall be entitled to receive the base salary, bonuses, vested rights, and Employee Benefits due the Employee through his date of termination. Any benefits payable under insurance, health, retirement, bonus, incentive (including, but not limited to, the LTIP), performance or other plans as a result of Employee’s participation in such plans through such date of termination shall be paid when and as due under those plans.

(c) Just Cause. The Board may, by written notice to the Employee, immediately terminate his employment at any time, for Just Cause. The Employee shall have no right to receive any base salary, bonuses or other Employee Benefits, except as provided by law, whatsoever for any period after his termination for Just Cause. However, the vested rights of the Employee as of his date of termination shall not be affected. Any benefits payable under insurance, health, retirement, bonus, incentive (including, but not limited to, the LTIP), performance or other plans as a result of Employee’s participation in such plans through such date of termination shall be paid when and as due under those plans. Termination for “Just Cause” shall mean termination because of:

8

(i) An intentional act of fraud, embezzlement, theft, or personal dishonesty; willful misconduct, or breach of fiduciary duty involving personal profit by the Employee in the course of his employment or director service. No act or failure to act shall be deemed to have been intentional or willful if it was due primarily to an error in judgment or negligence. An act or failure to act shall be considered intentional or willful if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in the best interest of the Bank;

(ii) Intentional wrongful damage by the Employee to the business or property of the Bank, causing material harm to the Bank;

(iii) Breach by the Employee of any confidentiality or non-disclosure agreement in effect from time to time with the Bank;

(iv) Gross negligence or insubordination by the Employee in the performance of his duties; or

(v) Removal or permanent prohibition of the Employee from participating in the conduct of Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 USC 1818(e)(4) and (g)(1).

Notwithstanding the foregoing, in the event of termination for Just Cause there shall be delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with the Employee’s counsel, to be heard before the Board), such meeting and the opportunity to be heard to be held prior to, or as soon as reasonably practicable following, termination, but in no event later than 60 days following such termination, finding that in the good faith opinion of the Board the Employee was guilty of conduct constituting Just Cause and specifying the particulars thereof in detail. If, following such meeting, the Employee is reinstated, he shall be entitled to receive the base salary, bonuses, all Employee Benefits, and all other fringe benefits provided for under this Agreement for the period following termination and continuing through reinstatement as though he was never terminated.

(d) Without Just Cause. The Board may, by written notice to the Employee, immediately terminate his employment at any time for a reason other than Just Cause, in which event the Employee shall be entitled to receive the following compensation and benefits (unless such termination occurs within the time period set forth in subsection 10(a) hereof, in which event the benefits and compensation provided for in Section 10 shall apply):

(i) The base salary provided pursuant to Section 2 hereof as in effect on the date of termination, through the Expiration Date of this Agreement as determined pursuant to Section 5 hereof (including any renewal or extension of this Agreement) (the “Expiration Date”);

9

(ii) An amount equal to the bonuses received by or payable to the Employee in the calendar year prior to the calendar year in which the Employee is terminated, for each year remaining through the Expiration Date; and

(iii) Cash reimbursement to the Employee in an amount equal to the cost to the Employee (demonstrated by submission to the Bank of invoices, bills, or other proof of payment by the Employee) of (A) all health insurance premiums for the Employee, his spouse and child living in the Employee’s household and Medicare supplement insurance, and life insurance (all as described in subsection 4(b)); (B) all other Employee Benefits (all as defined in subsection 4(a) excluding payments under the LTIP which will be made in accordance with the terms and conditions of the LTIP); and (C) professional and club dues, the cost of Employee’s continuing legal education requirements (as described in subsection 4(c)), all Automobile Benefits (as defined in subsection 4(d)) and other benefits which the Employee would otherwise have been eligible to participate in or receive, through the Expiration Date, based upon the benefit levels substantially equal to those that the Bank provided for the Employee at the date of the Employee’s termination of employment. The Employee shall also be entitled to receive an amount necessary to provide any cash payments received under this subsection 8(d)(iii) net of all income and payroll taxes that would not have been payable by the Employee had he continued participation in the benefit plan or program instead of receiving cash reimbursement.

Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under subsection 8(d) shall be reduced to the extent that on the date of the Employee’s termination of employment, the present value of the benefits payable under subsections 8(d)(i), (ii) and (iii) exceed any limitation on severance benefits that is imposed by the Office of the Comptroller of the Currency (the “OCC”) on such benefits.

All amounts payable to the Employee under subsections 8(d)(i) and (ii) shall be paid in one lump sum within ten days of such termination. All amounts payable to the Employee under subsection 8(d)(iii) shall be paid on the first day of each month following the Employee’s termination of employment, in an amount equal to the total reimbursable amount (demonstrated by invoices, bills or other proof of payment submitted by the Employee). Such amounts must be submitted for reimbursement no later than the earlier of (i) six months after the date such amounts are paid by the Employee; or (ii) March 15th of the year following the year in which the Employee paid the amount.

(e) Voluntary for Good Reason. The Employee may voluntarily terminate his employment under this Agreement for Good Reason, and the Employee shall thereupon be entitled to receive the same amount payable under subsections 8(d) (i) and (ii) hereof, within 30 days following his date of termination and under subsection 8(d)(iii) as provided in subsection 8(d). For purposes of this Agreement, “Good Reason” means the occurrence of any of the following events, which has not been consented to in advance by the Employee in writing (unless such voluntary termination occurs within the time period set forth in subsection 10(b) hereof, in which event the benefits and compensation provided for in Section 10 shall apply):

(i) The requirement that the Employee move his personal residence;

(ii) A reduction of ten percent or more in the Employee’s base salary, unless part of an institution-wide reduction and similar to the reduction in the base salary of all other executive officers of the Bank;

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(iii) The removal of the Employee from participation in any incentive compensation (including, but not limited to, the LTIP) or performance-based compensation plans or bonus plans unless the Bank terminates participation in the plan or plans with respect to all other executive officers of the Bank;

(iv) The failure by the Bank to continue to provide the Employee with the base salary, bonuses or benefits provided for under subsections 4(a), (c), (d) and (e) of this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under those Sections or under any benefit plan or program in which the Employee now or hereafter becomes eligible to participate, or the taking of any action by the Bank which would directly or indirectly reduce any such benefits or deprive the Employee of any such benefit enjoyed by him, unless part of an institution-wide reduction and applied similarly to all other executive officers of the Bank:

(v) The assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced in Section 1;

(vi) A failure to elect or re-elect the Employee to the Board or a failure on the part of First Financial Corporation to honor its obligation to nominate Employee to the Board of Directors of First Financial Corporation;

(vii) A material diminution or reduction in the Employee’s responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank; or

(viii) A material reduction in the secretarial or administrative support of the Employee.

Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under this subsection shall be reduced to the extent that on the date of the Employee’s termination of employment, the present value of the benefits payable under subsections 8(d)(i), (ii) and (iii) exceed any limitation on severance benefits that is imposed by the OCC on such benefits.

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(f) Voluntary Termination by Employee. Subject to subsection 4(b) and Section 10, the Employee may voluntarily terminate employment with the Bank during the term of this Agreement, upon at least 90 days’ prior written notice to the Board of Directors, in which case the Employee shall receive only his base salary, bonuses, vested rights and benefits up to the date of his termination, such benefits to be paid when and as due under those plans (unless such termination occurs pursuant to subsection 10(b) hereof, in which event the benefits, bonuses and base salary provided for in subsection 10(a) shall apply).

(g) Termination or Suspension Under Federal Law.

(i) If the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate, as of the effective date of the order, but vested rights of the Employee shall not be affected.

(ii) If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default; but the vested rights of the Employee shall not be affected.

(iii) All obligations under this Agreement shall terminate, except to the extent it is determined that the continuation of this Agreement is necessary for the continued operation of the Bank; (A) by the OCC or its designee, at the time that the Federal Deposit Insurance Corporation (“FDIC”) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (B) by the OCC, or its designee, at the time that the OCC or its designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the OCC to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the Employee.

(iv) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank’s affairs, the Bank’s obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. However, the vested rights of the Employee as of the date of suspension will not be affected. If the charges in the notice are dismissed, the Bank may in its discretion (A) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (B) reinstate (in whole or in part) any of its obligations which were suspended.

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(h) Separation from Service. If the Employee qualifies as a Key Employee (as defined in subsection 8(h)(i)) at the time of his Separation from Service (as defined in subsection 8(h)(ii)), the Bank may not make a payment pursuant to subsections 8(d) (disregarding subsection 8(d)(iii)(A)) and 8(e) and Section 10 (disregarding subsection 10(a)(1)(ii)(B)) earlier than six months following the date of the Employee’s Separation from Service (or, if earlier, the date of the Employee’s death). Payments to which the Key Employee would otherwise be entitled during the first six months following the date of his Separation from Service will be accumulated and paid to the Employee on the first day of the seventh month following the Employee’s Separation from Service.

(i) Key Employee means an employee who is:

(1) An officer of the Bank or First Financial Corporation having annual compensation greater than $140,000;

(2) A five percent owner of the Bank or First Financial Corporation; or

(3) A one percent owner of the Bank or First Financial Corporation having an annual compensation from the employer of more than $150,000.

The $140,000 amount in subsection 8(h)(i)(1) will be adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.

(ii) Separation from Service means the date on which the Employee dies, retires or otherwise experiences a Termination of Employment with the Bank. Provided, however, a Separation from Service does not occur if the Employee is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Employee retains a right to reemployment with the Bank under an applicable statute or by contract. For purposes of this subsection 8(h)(ii), a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Employee will return to perform services for the Bank or First Financial Corporation. If the period of leave exceeds six months and the Employee does not retain the right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his position of employment or any substantially similar position of employment, a 29-month period of absence may be substituted for such six-month period. The Employee shall incur a “Termination of Employment” for purposes of this subsection 8(h)(ii) when a termination of employment has occurred under Treasury Regulation 1.409A-1(h)(ii).

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9. No Mitigation. The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Employee in any subsequent employment.

10. Change in Control.

(a) Change in Control; Involuntary Termination.

(1) Notwithstanding any provision herein to the contrary, if the Employee’s employment under this Agreement is terminated by the Bank, without the Employee’s prior written consent and for a reason other than Just Cause, in connection with or within 12 months after a Change in Control, as defined in subsection 10(a)(4), the Employee shall be paid the greater of:

(i) The total amount payable under subsection 8(d); or

(ii) The product of 2.99 times the sum of: (A) his base salary in effect as of the date of the Change in Control; (B) an amount equal to the bonuses received by or payable to the Employee in the calendar year prior to the year in which the Change in Control occurs; and (C) cash reimbursement to the Employee in an amount equal to the cost to the Employee (demonstrated by submission to the Bank of invoices, bills or other proof of payment by the Employee) of obtaining all Employee Benefits (all as defined in subsection 4(a) excluding payments under the LTIP which will be made in accordance with the terms and conditions of the LTIP), health insurance premiums for the Employee, his spouse and child living in the Employee’s household, Medicare supplement insurance, life insurance (all as described in subsection 4(b)), professional and club dues, the cost of Employee’s continuing legal education requirements (all as described in subsection 4(c)), all Automobile Benefits (as defined in subsection 4(d)) and other benefits which the Employee would otherwise have been eligible to participate in or receive, through the Expiration Date, based upon the benefit levels substantially equal to those that the Bank provided for the Employee at the date of the Employee’s termination of employment. The Employee shall also be entitled to receive an amount necessary to provide any cash payments received under this subsection 10(a)(ii) net of all income and payroll taxes that would not have been payable by the Employee had he continued participation in the benefit plan or program instead of receiving cash reimbursement.

(2) To the extent payments received based on the Employee’s termination of employment in connection with a Change in Control, or within 12 months after a Change in Control are considered “excess parachute payments” pursuant to the Code Section 280G, the provisions of “Internal Revenue Code Section 280G Gross-Up” below shall apply.

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(3) Internal Revenue Code Section 280G Gross-Up.

(i) Additional Payment to Account for Excise Taxes. If, as a result of a termination of employment in connection with a Change in Control, or with 12 months after a Change in Control, the Employee becomes entitled to the amount payable under subsection 10(a), or under any other benefit, compensation, or incentive plan (including, but not limited to, the LTIP) or arrangement of or with the Bank or First Financial Corporation (collectively, the “Total Benefits”), and if any part of the Total Benefits is subject to the Excise Tax under Code Sections 280G and 4999 (the “Excise Tax”), the Bank or First Financial Corporation shall pay to the Employee the following additional amounts, consisting of (A) a payment equal to the Excise Tax payable by the Employee on the Total Benefits under Code Section 4999 (the “Excise Tax Payment”), and (B) a payment equal to the amount necessary to provide the Excise Tax Payment net of all income, payroll and excise taxes. Together, the additional amounts described in clauses (A) and (B) are referred to herein as the “Gross-Up Payments.”

(ii) Calculating the Excise Tax. Determination of whether any of the Total Benefits will be subject to the Excise Tax and the determination of the amount of the Excise Tax shall be made in accordance with the following:

(A) Determination of Parachute Payments Subject to the Excise Tax. Any payments or benefits received or to be received by the Employee in connection with a Change in Control or the Employee’s termination of employment in connection with a Change in Control, or within 12 months after a Change in Control (whether under the terms of this Agreement or any benefit plan or arrangement with First Financial Corporation or the Bank) shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2), and all “excess parachute payments” within the meaning of Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of the nationally-recognized certified public accounting firm, retained by the Bank or First Financial Corporation as of the date immediately before the Change in Control (the “Accounting Firm”), such payments or benefits do not constitute, in whole or in part, parachute payments, or such excess parachute payments represent, in whole or in part, reasonable compensation for services actually rendered within the meaning of Code Section 280G(b)(4) or are otherwise not subject to the Excise Tax.

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(B) Calculation of Benefits Subject to Excise Tax. The amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Total Benefits reduced by the amount of such Total Benefits that in the opinion of the Accounting Firm are not parachute payments, or (2) the amount of excess parachute payments within the meaning of Code Section 280G(b)(1) (after applying clause (A), above).

(C) Value of Non-cash Benefits and Deferred Payment. The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of Code Sections 280G(d)(3) and (4).

(iii) Assumed Marginal Income Tax Rate. For purposes of determining the amount of the Gross-Up Payments, the Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar years in which the Gross-Up Payments are to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Employee’s residence on the date on which such gross up payments are to be made, net of the reduction in federal income taxes that can be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Code Section 68 in the amount of itemized deductions allowable to the Employee applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Employee, and applicable federal FICA and Medicare withholding taxes.)

(iv) The Accounting Firm Shall Determine Whether a Gross-Up Payment is Required. Subject to paragraphs (i) through (iii) above, all determinations required to be made under paragraphs (i) through (viii), including whether and when a Gross-Up Payment is required, the amount of the Gross-Up Payment and the assumptions to be used to arrive at the determination (collectively, the “Determination”), shall be made by the Accounting Firm. The Accounting Firm shall provide detailed supporting calculations both to the Bank or First Financial Corporation and to the Employee within 15 business days after the Determination has been made, or such earlier time as is requested by the Bank, First Financial Corporation or the Employee.

(v) Fees and Expenses of the Accounting Firm and Agreement with the Accounting Firm. All fees and expenses of the Accounting Firm shall be borne solely by the Bank or First Financial Corporation.

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(vi) Accounting Firm’s Opinion. If the Accounting Firm determines that no Excise Tax is payable by the Employee, the Accounting Firm shall furnish the Employee with a written opinion to that effect, and to the effect that failure to report Excise Tax, if any, on the Employee’s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.

(vii) Accounting Firm’s Determination is Binding. The Determination by the Accounting Firm shall be binding on the Bank, First Financial Corporation and the Employee.

(viii) Underpayment and Overpayment. Because of the uncertainty in determining whether any of the Total Benefits will be subject to the Excise Tax at the time of the Determination, it is possible that Gross-Up Payments that should have been made will not have been made by the Bank or First Financial Corporation (“Underpayment”), or that Gross-Up Payments will be made that should not have been made by the Bank or First Financial Corporation (“Overpayment”).

If, after a Determination by the Accounting Firm, the Employee is required to make a payment of additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred. The Underpayment (together with any interest and penalties imposed by the Internal Revenue Service shall be paid promptly by the Bank or First Financial Corporation to or for the benefit of the Employee.

If the amount of the Gross-Up Payments exceeds the amount necessary to reimburse the Employee for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made. The Overpayment shall be repaid promptly by the Employee. Provided that his expenses are reimbursed by the Bank or First Financial Corporation, the Employee shall cooperate with any reasonable requests by the Bank or First Financial Corporation in any contests or disputes with the Internal Revenue Service relating to the Excise Tax.

(ix) Accounting Firm Conflict of Interest. If the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Employee may appoint another nationally recognized certified public accounting firm to make the Determinations required hereunder (in which case the term “Accounting Firm” as used herein shall be deemed to refer to the accounting firm appointed by the Employee under this paragraph). The Bank or First Financial Corporation shall pay all fees and expenses of the Accounting Firm appointed by the Employee.

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(4) “Change in Control” shall be deemed to have occurred if one of the following events takes place:

(i) Change in Ownership. A change in the ownership of the Bank or First Financial Corporation occurs on the date that any person, or group of persons, as defined below, acquires ownership of stock of the Bank or First Financial Corporation that, together with stock held by the person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Bank or First Financial Corporation. However, if any person or group is considered to own more than 50 percent of the total fair market value or total voting power of the stock, the acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the Bank or First Financial Corporation (or to cause a change in the effective control of the Bank or First Financial Corporation as defined in subsection 10(a)(4)(ii)). An increase in the percentage of stock owned by any person or group, as a result of a transaction in which the Bank or First Financial Corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this subsection. This subsection only applies when there is a transfer of stock of the Bank or First Financial Corporation (or issuance of stock of a corporation) and stock in the Bank or First Financial Corporation remains outstanding after the transaction.

For purposes of subsections 10(a)(4)(i) and (ii), persons will not be considered to be acting as a group solely because they purchase or own stock of the Bank or First Financial Corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the Bank or First Financial Corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

(ii) Change in the Effective Control. A change in the effective control of the Bank or First Financial Corporation will occur when: (i) any person or group (as defined in subsection 10(a)(4)(i)) acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person(s), ownership of stock of the Bank or First Financial Corporation possessing 30 percent or more of the total voting power; or (ii) a majority of members of the Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Bank’s or First Financial Corporation’s Board prior to the date of the appointment or election. However, if any person or group is considered to effectively control the Bank or First Financial Corporation, the acquisition of additional control of the Bank or First Financial Corporation by the same person(s) is not considered to cause a change in the effective control.

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(iii) Change in the Ownership of a Substantial Portion of the Bank’s or First Financial Corporation’s Assets. A change in the ownership of a substantial portion of the Bank’s or First Financial Corporation’s assets occurs on the date that any person or group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person(s), assets from the Bank or First Financial Corporation that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Bank or First Financial Corporation immediately prior to such acquisition(s). Gross fair market value means the value of the assets of the Bank or First Financial Corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

However, there is no Change in Control under this subsection when there is a transfer to an entity that is controlled by the shareholders of the Bank or First Financial Corporation immediately after the transfer. A transfer of assets by the Bank or First Financial Corporation is not treated as a change in the ownership of such assets if the assets are transferred to: (i) a shareholder of the Bank or First Financial Corporation (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Bank or First Financial Corporation; (iii) a person, or group of persons, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Bank or First Financial Corporation or (iv) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in (iii). For purposes of this subsection, except as otherwise provided, a person’s status is determined immediately after the transfer of the assets. For example, a transfer to a company in which the Bank or First Financial Corporation has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Bank or First Financial Corporation after the transaction, is not treated as a change in the ownership of the assets of the transferor Bank or First Financial Corporation.

For purposes of this subsection 10(a)(4)(iii), persons will not be considered to be acting as a group solely because they purchase assets of the Bank or First Financial Corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Bank or First Financial Corporation. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

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Notwithstanding the foregoing, the acquisition of Bank or First Financial Corporation stock by any retirement plan sponsored by the Bank or an affiliate of the Bank will not constitute a Change in Control. Additionally, notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under subsection 10(a) shall be reduced to the extent that on the date of the Employee’s termination of employment, the amount payable under subsection 10(a) exceeds any limitation on severance benefits that is imposed by the OCC.

(b) Change in Control; Voluntary Termination. Notwithstanding any other provision of this Agreement to the contrary, the Employee may voluntarily terminate his employment under this Agreement within 12 months following a Change in Control of the Bank or First Financial Corporation, as defined in subsection 10(a)(4), and the Employee shall thereupon be entitled to receive the payment described in subsections 10(a)(1), (2) and (3) of this Agreement, within 30 days following the occurrence of any of the following events, which has not been consented to in advance by the Employee in writing. During such 30-day period, the Bank shall not allow the Employee’s participation in any Employee Benefits to lapse and shall continue to provide the Employee with the Automobile Benefits described in subsection 4(d), reimbursement or payment of professional and club dues, and the cost of the Employee’s continuing legal education requirements as described in subsection 4(c). In the event subsection 8(h) applies at the time of the Employee’s termination, the six-month suspension period shall not prevent the Employee from continuing to receive reimbursement of health insurance premiums for himself, his spouse and child living in the Employee’s household, Medicare supplement insurance and life insurance (all as described in subsection 4(b)) immediately following his termination of employment, without regard to the six-month suspension applicable to cash payments and other benefit amounts.

(i) The requirement that the Employee perform his principal executive functions more than 30 miles from his Terre Haute, Indiana office.

(ii) A reduction of ten percent or more in the Employee’s base salary as in effect on the date of the Change in Control or as the same may be changed by mutual agreement from time to time, unless part of an institution-wide reduction and similar to the reduction in the base salary of all other executive officers of the Bank;

(iii) The removal of the Employee from participation in any incentive (including, but not limited to, the LTIP) or performance-based compensation plans or bonus plans unless the Bank terminates participation in the plan or plans with respect to all other executive officers of the Bank;

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(iv) The failure by the Bank to continue to provide the Employee with the base salary, bonuses or benefits provided for under subsections 4(a), (c), (d) and (e) of this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under those subsections or under any benefit plan or program in which the Employee now or hereafter becomes eligible to participate, or the taking of any action by the Bank which would directly or indirectly reduce any such benefits or deprive the Employee of any such benefit enjoyed by him, unless part of an institution-wide reduction and applied similarly to all other executive officers of the Bank;

(v) The assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced in Section 1;

(vi) A failure to elect or re-elect the Employee to the Board or a failure on the part of First Financial Corporation or its successor to honor any obligation to nominate Employee to the Board of Directors of First Financial Corporation or its successor;

(vii) A material diminution or reduction in the Employee’s responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank; or

(viii) A material reduction in the secretarial or administrative support of the Employee.

(c) Compliance with 12 U.S.C. Section 1828(k). Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.

(d) Trust.

(1) Within five business days before or after a Change in Control which was not approved in advance by a resolution of a majority of the Directors of First Financial Corporation, the Bank or First Financial Corporation shall (i) deposit, or cause to be deposited, in a grantor trust (the “Trust”), designed to conform with Revenue Procedure 93-64 (or any successor) and having a trustee independent of the Bank, an amount equal to the amounts which would be payable in a lump sum under subsections 10(a)(1), (2) and (3) hereof if those payment provisions become applicable, and (ii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust.

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(2) During the 12 consecutive month period following the date on which the Bank makes the deposit referred to in the preceding paragraph, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee, in a single sum, the amount designated in the notice as being payable pursuant to subsections 10(a)(1), (2) and (3). Within three business days after receiving said notice, the trustee of the Trust shall send a copy of the notice to the Bank via overnight and registered mail, return receipt requested. On the tenth business day after mailing said notice to the Bank, the trustee of the Trust shall pay the Employee the amount designated therein in immediately available funds, unless prior thereto the Bank provides the trustee with a written notice directing the trustee to withhold such payment. In the latter event, the trustee shall submit the dispute, within ten days of receipt of the notice from the Bank, to non-appealable binding arbitration for a determination of the amount payable to the Employee pursuant to subsections 10(a)(1), (2) and (3), and the party responsible for the payment of the costs of such arbitration (which may include any reasonable legal fees and expenses incurred by the Employee) shall be determined by the arbitrator. The trustee shall choose the arbitrator to settle the dispute, and such arbitrator shall be bound by the rules of the American Arbitration Association in making his or her determination. The Employee, the Bank and the trustee shall be bound by the results of the arbitration and, within three days of the determination by the arbitrator, the trustee shall pay from the Trust the amounts required to be paid to the Employee and/or the Bank, and in no event shall the trustee be liable to either party for making the payments as determined by the arbitrator.

(3) Upon the earlier of (i) any payment from the Trust to the Employee, or (ii) the date twelve months after the date on which the Bank makes the deposit referred to in the first paragraph of this subsection 10(d)(1), the trustee of the Trust shall pay to the Bank the entire balance remaining in the segregated account maintained for the benefit of the Employee, if any. The Employee shall thereafter have no further interest in the Trust pursuant to this Agreement. However, the termination of the Trust shall not operate as a forfeiture or relinquishment of any of the Employee’s rights under the terms of this Agreement. Furthermore, in the event of a dispute under subsection 10(d)(2), the trustee of the Trust shall continue to hold, in trust, the deposit referred to in subsection 10(b)(1) until a final decision is rendered by the arbitrator pursuant to subsection 10(b)(2).

(e) In the event that any dispute arises between the Employee and the Bank as to the terms or interpretation of this Agreement or the obligations thereunder, including this Section, whether instituted by formal legal proceedings or submitted to arbitration pursuant to subsection 10(d)(2), including any action that the Employee takes to enforce the terms of this Section or to defend against any action taken by the Bank, the Employee shall be reimbursed for all costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, provided that the Employee shall obtain a final judgment by a court of competent jurisdiction in favor of the Employee or, in the event of arbitration pursuant to subsection 10(d)(2), a determination is made by the arbitrator that the expenses should be paid by the Bank. Such reimbursement shall be paid within ten days of Employee’s furnishing to the Bank written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by the Employee.

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Should the Employee fail to obtain a final judgment in favor of the Employee and a final judgment or arbitration decision is entered in favor of the Bank and if decided by arbitration, the arbitrator, pursuant to subsection 10(d)(2), determines the Employee to be responsible for the Bank’s expenses, then the Bank shall be reimbursed for all costs and expenses, including reasonable attorneys’ fees arising from such dispute, proceedings or actions. Such reimbursement shall be paid within ten days of the Bank furnishing to the Employee written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by the Bank.

11. Stock Options. First Financial Corporation will permit the Employee or his personal representative(s) or heirs, during a period of three months following Employee’s termination of employment by the Bank for the reasons set forth in subsections 8(d), 8(e), 10(a) or 10(b), to require First Financial Corporation, upon written request, to purchase all outstanding, unexpired stock options previously granted to the Employee under any stock option plan then in effect to the extent the options are vested at a cash purchase price equal to the amount by which the aggregate “Fair Market Value” of the shares subject to such options exceeds the aggregate option price for such shares. For purposes of this Agreement, the term Fair Market Value shall mean the higher of (a) the average of the highest asked prices for shares in the over-the-counter market as reported on the NASDAQ system or other exchange if the shares are traded on such system for the 30 business days preceding such termination, or (b) the average per share price actually paid for the most highly priced one percent of the shares acquired in connection with the Change of Control by any person or group acquiring such control.

12. Federal Income Tax Withholding. The Bank may withhold all federal and state income or other taxes from any benefit payable under this Agreement as shall be required pursuant to any law or governmental regulation or ruling.

13. Successors and Assigns.

(a) Bank. This Agreement shall not be assignable by the Bank or First Financial Corporation, provided that this Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank or First Financial Corporation which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank or First Financial Corporation.

(b) Employee. Because the Bank is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank; provided, however, that nothing in this paragraph shall preclude (i) the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto.

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(c) Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

14. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by the Bank, First Financial Corporation and the Employee, except as herein otherwise specifically provided.

15. Applicable Law. Except to the extent preempted by federal law, the laws of the State of Indiana, without regard to that State’s choice of law principles, shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. Should any particular covenant, provision or clause of this Agreement be held unreasonable or unenforceable for any reason, including without limitation, the time period, geographic area and/or scope of activity covered by such covenant, provision or clause, the Bank and Employee acknowledge and agree that such covenant, provision or clause shall be given effect and enforced to whatever extent would be reasonable and enforceable under applicable law.

17. Entire Agreement. This Agreement: (a) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (b) constitutes the sole agreement between the parties with respect to this subject matter.

18. Construction. The rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

19. Headings. The headings in this Agreement have been inserted solely for ease of reference and shall not be considered in the interpretation, construction or enforcement of this Agreement.

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20. Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been given (a) if hand delivered, upon delivery to the party, or (b) if mailed, two days following deposit of the notice or communication with the United States Postal Service by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employee:	Norman L. Lowery
	93 Allendale
	Terre Haute, Indiana 47802
If to the Bank:	First Financial Bank, N.A.
	Attn: Chief Financial Officer
	One First Financial Plaza
	P.O. Box 540
	Terre Haute, Indiana 47808-0540
If to First Financial Corporation:	First Financial Corporation
	Attn: President
	One First Financial Plaza
	P.O. Box 540
	Terre Haute, Indiana 47808-0540

or to such other address as either party hereto may have furnished to the other party in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

21. Waiver. The waiver by either party of a breach of any provision of this Agreement, or failure to insist upon strict compliance with the terms of this Agreement, shall not be deemed a waiver of any subsequent breach or relinquishment of any right or power under this Agreement.

22. Review and Consultation. Employee acknowledges and agrees he (a) has read this Agreement in its entirety prior to executing it, (b) understands the provisions and effects of this Agreement and (c) has consulted with such attorneys, accountants and financial or other advisors as he has deemed appropriate in connection with the execution of this Agreement. Employee understands, acknowledges and agrees that he has not received any advice, counsel or recommendation with respect to this Agreement from Employer’s attorneys.

* * *

25

IN WITNESS WHEREOF, the parties have executed this Agreement on this 26th day of March, 2010.

ATTEST	FIRST FINANCIAL BANK, N.A.
(s) Leticia E. Wright	(s) Rodger McHargue
Title: Sr. Executive Assistant	Rodger McHargue, Secretary/Treasurer
	EMPLOYEE
	(s) Norman L. Lowery
	Norman L. Lowery

The undersigned, First Financial Corporation, sole shareholder of the Bank, agrees that if it shall be determined for any reason that any obligation on the part of the Bank is unenforceable for any reason or if the Bank fails to perform, First Financial Corporation agrees to honor the terms of this Agreement and continue to make any such payments due hereunder to Employee or to satisfy any such obligation pursuant to the terms of this Agreement. The undersigned further agrees to nominate Employee to the Board of Directors of First Financial Corporation during the term of this Agreement.

ATTEST	FIRST FINANCIAL CORPORATION
(s) Rodger A. McHargue	(s) Donald E. Smith
Title: Secretary	Donald E. Smith, President

26

EX-31.1

Exhibit 31.1

Sarbanes-Oxley Act of 2002, Section 302
Certification of Principal Executive Officer

I, Norman L. Lowery, certify that:

1	I have reviewed this quarterly report on Form 10-Q of First Financial Corporation;
2	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 7, 2010

By	/s/ Norman L. Lowery
	Norman L. Lowery,
	Vice Chairman and CEO (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Sarbanes-Oxley Act of 2002, Section 302
Certification of Principal Financial Officer

I, Rodger A. McHargue, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Financial Corporation;
2	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 7, 2010

By	/s/ Rodger A. McHargue
	Rodger A. McHargue,
	Treasurer and CFO (Principal Financial Officer)

EX-32.1

Exhibit 32.1

Sarbanes-Oxley Act of 2002, Section 906
Certification of Principal Executive and Principal Financial Officers

In connection with the Quarterly Report on Form 10-Q of First Financial Corporation (the “Company”) for the Quarterly period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Norman L. Lowery , as the Chief Executive Officer of the Company, and Rodger A. McHargue, as the Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1. This Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 7, 2010	By	/s/ Norman L. Lowery
		Norman L. Lowery, Vice Chairman & CEO
		(Principal Executive Officer)
May 7, 2010	By	/s/ Rodger A. McHargue
		Rodger A. McHargue, Treasurer & CFO
		(Principal Financial Officer)