10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-16759

FIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

INDIANA	35-1546989
(State of Incorporation)	(I.R.S. Employer Identification Number)
One First Financial Plaza
Terre Haute, Indiana	47807
(Address of Registrant’s Principal Executive Offices)	(Zip Code)

(812) 238-6000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of Exchange on Which Registered
Common Stock, no par value	The NADAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known-seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  þ

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 shorter 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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 definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act of 1934.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

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

As of June 30, 2007 the aggregate market value of the voting stock held by nonaffiliated of the registrant based on the average bid and ask prices of such stock was $347,765,670. (For purposes of this calculation, the Corporation excluded the stock owned by certain beneficial owners and management and the Corporation’s ESOP.)

Shares of Common Stock outstanding as of March 12, 2008—13,105,169 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2007 Annual Report to Shareholders are incorporated by reference into Parts I and II. Portions of the Definitive Proxy Statement for the First Financial Corporation Annual Meeting of Shareholders to be held April 16, 2008 are incorporated by reference into Part III.

Form 10-K Cross-Reference Index

	page
PART I
Item 1 Business		2
Item 1A Risk Factors		4
Item 1B Unresolved Staff Comments		6
Item 2 Properties		6
Item 3 Legal Proceedings		7
Item 4 Submission of Matters to a Vote of Security Holders		7
PART II
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		8
Item 6 Selected Financial Data		8
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 7A Quantitative and Qualitative Disclosures about Market Risk		8
Item 8 Financial Statements and Supplementary Data		8
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		9
Item 9A Controls and Procedures		9
Item 9B Other Information		9
PART III
Item 10 Directors, Executive Officers and Corporate Governance		10
Item 11 Executive Compensation		10
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		10
Item 13 Certain Relationships and Related Transactions and Director Independence		10
Item 14 Principal Accountant Fees and Services		10
PART IV
Item 15 Exhibits and Financial Statement Schedules		11
Signatures		12, 13
Exhibit 10.3
Exhibit 10.4
Exhibit 13
Exhibit 21
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

1

PART I

ITEM 1. BUSINESS

First Financial Corporation (the “Corporation”) is a financial holding company. The Corporation was originally organized as an Indiana corporation in 1984 to operate as a bank holding company. For more information on the Corporation’s business, please refer to the following sections of the 2007 Annual Report to Shareholders, which are incorporated by reference into this Form 10-K:

1.	The first 4 paragraphs on page 35.
2.	The first 5 paragraphs of Note 1 to the Consolidated Financial Statements on Page 14.

As a financial holding company, the Corporation is subject to regulation under the Bank Holding Company Act of 1956, as amended (the BHC Act), is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and any additional information that the Federal Reserve may require. With some limited exceptions, the BHC Act requires every holding company to obtain the prior approval of the Federal Reserve before acquiring another bank holding company or acquiring more than five percent of the voting shares of a bank (unless it already owns or controls the majority of such shares).

The BHC Act restricts the Corporation’s non-banking activities to those which are determined by the Federal Reserve Board to be financial in nature, incidental to such financial activity, or complementary to a financial activity. The BHC Act does not place territorial restrictions on the activities of non-bank subsidiaries of financial holding companies. The Corporation’s banking subsidiaries are subject to limitations with respect to transactions with affiliates.

The Corporation and the Bank are also subject to certain regulatory restrictions, capital adequacy guidelines and various legal and regulatory restrictions on the payment of dividends, as summarized in Note 16 to the Consolidated Financial Statements.

In accordance with Federal Reserve Board policy, the Corporation is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Corporation might not otherwise do so.

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporation information.

The Corporation’s earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

The Bank is subject to the provisions of the National Bank Act, is under the supervision of, and is subject to periodic examination by, the Comptroller of the Currency (the OCC), is subject to the rules and regulations of the OCC, Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC). The Bank is also subject to certain laws of each state in which it is located.

The Federal Reserve adopted final amendments to Regulation CC and its commentary to implement the Check Clearing for the 21st Century Act (the “Check 21 Act”). To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a “substitute check” and provides that a properly prepared substitute check is the legal equivalent of the original check for all purposes. A substitute check is a paper reproduction of the original check that can be processed just like the original check. The Check 21 Act does not require any bank to create substitute checks or to accept checks electronically. The Federal Reserve’s amendments: (i) set forth the requirements of the Check 21 Act that apply to all banks, including those that choose not to create substitute checks; (ii) provide a model disclosure and model notices relating to substitute checks; and (iii) set forth bank endorsement and identification requirements for substitute checks. The amendments also clarify some existing provisions of the rule and commentary.

2

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”) is intended to strengthen the ability of U.S. Law Enforcement to combat terrorism on a variety of fronts. The potential impact of the USA Patriot Act on financial institutions is significant and wide-ranging. The USA Patriot Act contains sweeping anti-money laundering and financial transparency laws and requires financial institutions to implement additional policies and procedures with respect to, or additional measures designed to address, any or all of the following matters, among others: money laundering and currency crimes, customer identification verification, cooperation among financial institutions, suspicious activities and currency transaction reporting.

Federal law extensively regulates other various aspects of the banking business such as reserve requirements. Current federal law also requires banks, among other things to make deposited funds available within specified time periods. In addition, with certain exceptions, a bank and a subsidiary may not extend credit, lease or sell property or furnish any services or fix or vary the consideration for the foregoing on the condition that (i) the customer must obtain or provide some additional credit, property or services from, or to, any of them, or (ii) the customer may not obtain some other credit, property or service from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of credit extended.

Interest and other charges collected or contracted by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s loan operations are also subject to federal and state laws applicable to credit transactions, such as the:

• Truth-In-Lending Act and state consumer protection laws governing disclosures of credit terms and prohibiting certain practices with regard to consumer borrowers;

• Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act of 1978 and Fair and Accurate Credit Transactions Act of 2003, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies; and rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of the Bank also are subject to the:

• Customer Information Security Guidelines. The federal bank regulatory agencies have adopted final guidelines (the “Guidelines”) for safeguarding confidential customer information. The Guidelines require each financial institution, under the supervision and ongoing oversight of its Board of Directors, to create a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of such information; protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer; and implement response programs for security breaches.

• Electronic Funds Transfer Act and Regulation E. The Electronic Funds Transfer Act, which is implemented by Regulation E, governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

• Gramm-Leach-Bliley Act, Fair and Accurate Credit Transactions Act. The Gramm-Leach-Bliley Act, the Fair and Accurate Credit Transactions Act, and the implementing regulations govern consumer financial privacy, provide disclosure requirements and restrict the sharing of certain consumer financial information with other parties.

The federal banking agencies have established guidelines which prescribe standards for depository institutions relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings, compensation fees and benefits, and management compensation. The agencies may require an institution which fails to meet the standards set forth in the guidelines to submit a compliance plan. Failure to submit an acceptable plan or adhere to an accepted plan may be grounds for further enforcement action.

3

The federal banking agencies may assess civil and criminal penalties against depository institutions and certain “institution-affiliated parties,” including management, employees, and agents of a financial institution, as well as independent contractors and consultants such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs. In addition, regulators may commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, regulators may issue cease-and-desist orders to, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the regulator to be appropriate.

Available Information

The Corporation files annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read and copied at the public reference facilities maintained by the Securities and Exchange Commission at the Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy statements, and other information. The Corporation’s filings are also accessible at no cost on the Corporation’s website at www.first-online.com.

ITEM 1A. RISK FACTORS

The Corporation Is Subject To Interest Rate Risk

Interest and fees on loans and securities, net of interest paid on deposits and borrowings, are a large part of the Corporation’s net income. Interest rates are key drivers of the Corporation’s net interest margin and subject to many factors beyond the control of management. As interest rates change, net interest income is affected. Rapid increases in interest rates in the future could result in interest expense increasing faster than interest income because of mismatches in financial instrument maturities. Further, substantially higher interest rates generally reduce loan demand and may result in slower loan growth. Decreases or increases in interest rates could have a negative effect on the spreads between the interest rates earned on assets and the rates of interest paid on liabilities, and therefore decrease net interest income.

The Corporation Is Subject To Lending Risk

There are inherent risks associated with the Corporation’s lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where the Corporation operates as well as those across Indiana, Illinois and the United States. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. The Corporation is also subject to various laws and regulations that affect its lending activities. Failure to comply with the applicable laws and regulations could subject the Corporation to regulatory enforcement action that could result in the assessment of significant civil money penalties against the Corporation.

The Corporation’s Allowance for Possible Loan Losses May Be Insufficient

The Corporation maintains an allowance for possible loan losses, which is a reserve established through a provision for possible loan losses charged to expense, that represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The level of the allowance reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for possible loan losses inherently involves a high degree of subjectivity and requires the Corporation to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Corporation’s control, may require an increase in the allowance for possible loan losses. In addition, bank regulatory agencies periodically review the Corporation’s allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for possible loan losses; the Corporation will need additional provisions to increase the allowance for possible loan losses. Any increase in the allowance for possible loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on the Corporation’s financial condition and results of operations.

4

The Corporation Operates In a Highly Competitive Industry and Market Area

The Corporation faces substantial competition in all areas of its operations from a variety of different competitors. Such competitors include banks and many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Corporation’s competitors have fewer regulatory constraints and may have lower cost structures.

The Corporation’s ability to compete successfully depends on a number of factors, including, among other things:

• The ability to develop, maintain and build upon long-term customer relationships based on top quality service, and safe, sound assets.

• The ability to expand the Corporation’s market position.

• The scope, relevance and pricing of products and services offered to meet customer needs and demands.

• The rate at which the Corporation introduces new products and services relative to its competitors.

• Customer satisfaction with the Corporation’s level of service.

• Industry and general economic trends.

Failure to perform in any of these areas could significantly weaken the Corporation’s competitive position, which could adversely affect the Corporation’s growth and profitability, which, in turn, could have a material adverse effect on the corporation’s financial condition and results of operations.

The Corporation Is Subject To Extensive Government Regulation and Supervision

The Corporation, primarily through the Bank, is subject to extensive federal regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations affect the Corporation’s lending practices, capital structure, investment practices, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Corporation in substantial and unpredictable ways. Such changes could subject the Corporation to additional costs, limit the types of financial services and products the Corporation may offer and/or increase the ability of non-banks to offer competing financial services and products among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the Corporation’s business, financial condition and results of operations. While the Corporation has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.

The Corporation’s Controls and Procedures May Fail or Be Circumvented

Management regularly reviews and updates the Corporation’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the Corporation’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Corporation’s business, results of operations and financial condition.

The Corporation Is Dependent On Certain Key Management and Staff

The Corporation relies on key personnel to manage and operate its business. The loss of key staff may adversely affect our ability to maintain and manage these portfolios effectively, which could negatively affect our revenues. In addition, loss of key personnel could result in increased recruiting and hiring expenses, which could cause a decrease in the Corporation’s net income.

5

The Corporation’s Information Systems May Experience an Interruption or Breach in Security

The Corporation relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Corporation’s customer relationship management, general ledger, deposit, loan and other systems. While the Corporation has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, it they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of the Corporation’s information systems could damage the Corporation’s reputation, result in a loss of customer business, subject the Corporation to additional regulatory scrutiny, or expose the Corporation to civil litigation and possible financial liability, any of which could have a material adverse effect on the Corporation’s financial condition and results of operations.

The Corporation Continually Encounters Technological Change

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Corporation’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Corporation’s operations. Failure to successfully keep pace with the technological change affecting the financial services industry could have a material adverse impact on the Corporation’s business and, in turn, the Corporation’s financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

First Financial Corporation is located in a four-story office building in downtown Terre Haute, Indiana that was first occupied in June 1988. It is leased to First Financial Bank N.A., a wholly-owned subsidiary (the Bank). The Bank also owns three other facilities in downtown Terre Haute. Two are leased to other parties and the third is a 50,000-square-foot building housing operations and administrative staff and equipment. In addition, the Bank holds in fee five other branch buildings. One of the branch buildings is a single-story 36,000-square-foot building which is located in a Terre Haute suburban area. Six other branch bank buildings are leased by the Bank. The expiration dates on five of the leases are June 30, 2012, May 31, 2011, February 14, 2011, December 31, 2008, and February 14, 2011. The sixth lease is on a month-to-month basis.

Facilities of the Corporation’s banking centers in Clay County include three offices in Brazil, Indiana and offices in Clay City and Poland, Indiana. All five buildings are held in fee.

Facilities of the Corporation’s banking centers in Vermillion County include two offices in Clinton, Indiana and offices in Cayuga and Newport, Indiana. All four buildings are held in fee.

Facilities of the Corporation’s banking centers in Sullivan County include offices in Sullivan, Carlisle, Dugger, Farmersburg and Hymera, Indiana. All five buildings are held in fee.

Facilities of the Corporation’s banking center in Greene County include an office in Worthington, Indiana. This building is held in fee.

Facilities of the Corporation’s banking centers in Knox County include offices in Monroe City, Sandborn and Vincennes, Indiana. All three buildings are held in fee.

Facilities of the Corporation’s banking centers in Parke County include two offices in Rockville, Indiana and offices in Marshall, Montezuma and Rosedale, Indiana. All five buildings are held in fee.

Facilities of the Corporation’s banking center in Putnam County include an office in Greencastle, Indiana. This building is held in fee.

Facilities of the Corporation’s banking centers in Crawford County include its main office and a drive-up facility in Robinson, Illinois and a branch facility in Oblong, Illinois. All three of the buildings are held in fee.

6

Facilities of the Corporation’s banking centers in Lawrence County include offices in Sumner and Lawrenceville, Illinois. Both of the buildings are held in fee.

Facilities of the Corporation’s banking center in Wayne County include an office in Fairfield, Illinois. This building is held in fee.

Facilities of the Corporation’s banking center in Jasper County include an office in Newton, Illinois. This building is held in fee.

Facilities of the Corporation’s banking center in Coles County include an office in Charleston, Illinois. This building is held in fee.

Facilities of the Corporation’s banking center in Clark County include an office in Marshall, Illinois. This building is held in fee.

Facilities of the Corporation’s banking center in Vermilion County include an office in Ridge Farm, Illinois. This building is held in fee.

Facilities of the Corporation’s banking centers in Richland County include two offices in Olney, Illinois. One building is held in fee and the other building is leased. The expiration date on the lease is March 1, 2010.

The facility of the Corporation’s subsidiary, The Morris Plan Company, includes an office facility in Terre Haute, Indiana. The building is leased by The Morris Plan Company. The expiration date on the lease is August 31, 2008.

Facilities of the Corporation’s subsidiary, Forrest Sherer, Inc., include its main office and one satellite office in Terre Haute, Indiana. The buildings are held in fee by Forrest Sherer, Inc.

ITEM 3 LEGAL PROCEEDINGS

There are no material pending legal proceedings which involve the Corporation or its subsidiaries, other than ordinary routine litigation incidental to its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

7

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

See “Market and Dividend Information” on page 46 of the 2007 Annual Report. That portion of the Annual Report is incorporated by reference into this Form 10-K.

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
	(a)		(b)		Shares Purchased As		(d)
	Total Number		Average		Part Of Publicly		Maximum Number
	Of Shares		Price Paid Per		Announced Plans Or		Of Shares That May
	Purchased		Share		Programs *		Yet Be Purchased *
October 1 – 31 2007		—		—		N/A		N/A
November 1 – 30, 2007		—		—		N/A		N/A
December 1 – 30, 2007		10,000		27.90		N/A		N/A
Total		10,000		27.90		N/A		N/A

• The Corporation has not adopted a formal policy or program regarding repurchases of its shares of stock.

         The Corporation contributed 41,000 shares of treasury stock to the ESOP plan in November of 2007.

ITEM 6. SELECTED FINANCIAL DATA

See “Five Year Comparison of Selected Financial Data” on page 9 of the 2007 Annual Report to Shareholders. That portion of the Annual Report is incorporated by reference into this Form 10-K.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

See “Management’s Discussion and Analysis” on pages 34 through 44 of the 2007 Annual Report to Shareholders. That portion of the Annual Report is incorporated by reference into this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Interest Rate Sensitivity and Liquidity” section of “Management’s Discussion and Analysis” on pages 43 and 44 of the 2007 Annual Report to Shareholders. That portion of the Annual Report is incorporated by reference into this Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See “Consolidated Balance Sheets” on page 10, “Consolidated Statements of Income” on page 11, “Consolidated Statements of Changes in Shareholders Equity” on page 12, “Consolidated Statements of Cash Flows” on page 13, and “Notes to Consolidated Financial Statements” on pages 14-32. “Report of Independent Registered Public Accounting Firm on Financial Statements” can be found on page 32 of the 2007 Annual Report to Shareholders. Those portions of the Annual Report are incorporated by reference into this Form 10-K.

8

Statistical disclosure by the Corporation includes the following information in the 2007 Annual Report to Shareholders, which is incorporated by reference into this Form 10-K:

1.	“Volume/Rate Analysis,” on page 36.
2.	“Securities,” on page 38.
3.	“Loan Portfolio,” on page 39.
4.	“Allowance for Loan Losses,” on pages 40 and 41.
5.	“Nonperforming Loans,” on pages 41.
6.	“Deposits,” on page 42.
7.	“Consolidated Balance Sheet-Average Balances and Interest Rates,” on page 45.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation (the “Evaluation”), under the supervision and with the participation of our President and Chief Executive Officer (“CEO”), who serves as our principal executive officer, and Chief Financial Officer (“CFO”), who serves as our principal financial officer, of the effectiveness of our disclosure controls and procedures (“Disclosure Controls”). Based on the Evaluation, our CEO and CFO concluded that our Disclosure Controls are effective and designed to ensure that the information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There was no change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s fourth fiscal quarter of 2007 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

See “Management’s Report on Internal Control Over Financial Reporting” on page 34 of the 2007 Annual Report to Shareholders and “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting” on page 33 of the 2007 Annual Report to Shareholders. That portion of the annual report is incorporated by reference in response to this Item 9A of the Form 10-K.

ITEM 9B. OTHER INFORMATION

The Company established the compensation to be paid to Directors for the year 2008 on December 18, 2007. These amounts are set forth on Exhibit 10.3 to this Form 10-K.

The Company established the compensation to be paid to Named Executive Officers for the year 2008 on December 18, 2007. These amounts are set forth on Exhibit 10.4 to this Form 10-K.

9

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

In accordance with the provisions of General Instruction G to Form 10-K, the information required for disclosure under Item 10 is not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2007 fiscal year, which Proxy Statement will contain such information. The information required by Item 10 is incorporated by reference to such Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

In accordance with the provisions of General Instruction G to Form 10-K, the information required for disclosure under Item 11 is not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2007 fiscal year, which Proxy Statement will contain such information. The information required by Item 11 is incorporated by reference to such Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

In accordance with the provisions of General Instruction G to Form 10-K, the information required for disclosure under Item 12 is not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2007 fiscal year, which Proxy Statement will contain such information. The information required by Item 12 is incorporated by reference to such Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

In accordance with the provisions of General Instruction G to Form 10-K, the information required for disclosure under Item 13 is not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2007 fiscal year, which Proxy Statement will contain such information. The information required by Item 13 is incorporated by reference to such Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

In accordance with the provisions of General Instruction G to Form 10-K, the information required for disclosure under Item 14 is not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2007 fiscal year, which Proxy Statement will contain such information. The information required by Item 14 is incorporated by reference to such Proxy Statement.

10

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) The following consolidated financial statements of the Registrant and its subsidiaries are included in the 2007 Annual Report to Shareholders of First Financial Corporation attached:

	Consolidated Balance Sheets—December 31, 2007 and 2006
	Consolidated Statements of Income—Years ended December 31, 2007, 2006, and 2005
	Consolidated Statements of Changes in Shareholders’ Equity—Years ended December 31, 2007, 2006, and 2005
	Consolidated Statements of Cash Flows—Years ended December 31, 2007, 2006, and 2005
	Notes to Consolidated Financial Statements
(2)	Schedules to the Consolidated Financial Statements required by Article 9 of Regulation S-X are not required, inapplicable, or the required information has been disclosed elsewhere.
(3)	Listing of Exhibits:

Exhibit Number	Description
3.1	Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to Exhibit 3(i) of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002
3.2	Code of By-Laws of First Financial Corporation, incorporated by reference to Exhibit 3(ii) of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002
10.1	Employment Agreement for Norman L. Lowery, dated August 29, 2007 and effective January 1, 2007, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K filed September 4, 2007.
10.2	2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to Exhibit 10.3 of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002
10.3	2008 Schedule of Director Compensation
10.4	2008 Schedule of Named Executive Officer Compensation
13	Annual Report
21	Subsidiaries
31.1	Certification pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Executive Officer
31.2	Certification pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Financial Officer
32.1	Certification pursuant to 18 U.S.C. Section 1350 of Principal Executive Officer
32.2	Certification pursuant to 18 U.S.C. Section 1350 of Principal Financial Officer

(b)	Exhibits-Exhibits to (a) (3) listed above are attached to this report.
(c)	Financial Statements Schedules-No schedules are required to be submitted. See response to ITEM 15(a) (2).

11

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
 

/s/ Michael A. Carty  

Michael A. Carty, Secretary, Treasurer & CFO 

(Principal Financial Officer and Principal Accounting Officer) 

Date: March 12, 2008

12

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

NAME	DATE
/s/ Donald E. Smith Donald E. Smith, President and Director	March 12, 2008
/s/ Michael A. Carty Michael A. Carty, Secretary, Treasurer & CFO (Principal Financial Officer and Principal Accounting Officer)	March 12, 2008
/s/ W. Curtis Brighton W. Curtis Brighton, Director	March 12, 2008
/s/ B. Guille Cox, Jr. B. Guille Cox, Jr., Director	March 12, 2008
/s/ Thomas T. Dinkel Thomas T. Dinkel, Director	March 12, 2008
/s/ Anton H. George Anton H. George, Director	March 12, 2008
/s/ Gregory L. Gibson Gregory L. Gibson, Director	March 12, 2008
/s/ Norman L. Lowery Norman L. Lowery, Vice Chairman, CEO & Director (Principal Executive Officer)	March 12, 2008
/s/ Patrick O’Leary	March 12, 2008
Patrick O’Leary, Director
/s/ Ronald K. Rich Ronald K. Rich, Director	March 12, 2008
/s/ Virginia L. Smith Virginia L. Smith, Director	March 12, 2008

13

EXHIBIT INDEX

Exhibit
Number	Description
10.3	2008 Schedule of Director Compensation
10.4	2008 Schedule of Named Executive Officers Compensation
13	Annual Report
21	Subsidiaries
31.1	Certification Pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Executive Officer
31.2	Certification Pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Financial Officer
32.1	Certification Pursuant to Rule 18 U.S.C. Section 1350 of Principal Executive Officer
31.1	Certification Pursuant to Rule 18 U.S.C. Section 1350 of Principal Financial Officer

14

EX-10.3

EXHIBIT 10.3 — Schedule of Director Compensation

Compensation of Directors. Each director of the Corporation is also a director of First Financial Bank (“FFB”), the lead subsidiary bank of the Corporation, and receives directors’ fees from each organization. For 2008 a director of the Corporation and FFB will receive a fee of $750 for each board meeting attended.

Non-employee directors also receive a fee for meetings attended of the Audit Committee of $1,000, the Compensation Committee of $1,000, the Governance/Nominating Committee of $500, and the Loan Discount Committee of $300. Each director also will receive from FFB a semi-annual director’s fee of $2,500 on July l5th and December 16th. No non-employee director served as a director of any other subsidiary of the Corporation.

Directors of the Corporation and FFB who are not yet 70 years of age may participate in a deferred director’s fee program at each institution. Under this program, a director may defer $6,000 of his or her director’s fees each year over a five-year period. When the director reaches the age of 65 or age 70, the director may elect to receive payments over a ten-year period. The amount of the deferred fees is used to purchase an insurance product which funds these payments. Each year from the initial date of deferral until payments begin at age 65 or 70, the Corporation accrues a non-cash expense which will equal in the aggregate the amount of the payments to be made to the director over the ten-year period. The Corporation expects that the cash surrender value of the insurance policy will offset the amount of expenses accrued. If a director fails for any reason other than death to serve as a director during the entire five-year period, or the director fails to attend at least 60 regular or special meetings, the amount to be received at age 65 or 70, as applicable, will be pro-rated appropriately.

Directors also may be compensated under the Corporation’s 2005 Long-Term Incentive Plan. Under this plan, directors may receive 90, 100 or 110 percent of the director’s “award amount” if the Corporation and FFB attain certain goals established by the Corporation’s Compensation Committee. See Exhibit 10.3 to this Form 10-K for a description of this plan.

EX-10.4

EXHIBIT 10.4 — Schedule of Named Executive Officers Compensation

On December 18, 2007, the Compensation Committee of First Financial Corporation (the “Corporation”) set the 2008 annual base salaries of the named executive officers and approved the bonus amounts payable to the named executive officers for 2007. These amounts are set forth in the table below.

Name and Principal Position	2007 Bonus Award		2008 Base Salary
Donald E. Smith	$	160,000	$	580,987
President and Chairman of the Corporation; Chairman of First Financial Bank, NA
Norman L. Lowery	$	150,000	$	467,960
Vice Chairman, CEO and Vice President of the Corporation; President and CEO of First Financial Bank, NA
Michael A. Carty	$	20,000	$	187,304
CFO, Secretary and Treasurer of the Corporation; Senior Vice President and CFO of First Financial Bank, NA
Richard O. White	$	12,000	$	157,630
Senior Vice President of First Financial Bank, NA
Thomas S. Clary	$	15,000	$	156,499
Senior Vice President and CCO of First Financial Bank, NA

EX-13

Exhibit 13

2007 ANNUAL REPORT

Five Year Comparison of Selected Financial Data

(Dollar amounts in thousands,
except per share amounts)	2007			2006			2005			2004			2003
BALANCE SHEET DATA:
Total assets	$	2,231,562		$	2,175,998		$	2,136,918		$	2,183,992		$	2,223,057
Securities		586,633			559,053			536,291			507,990			576,950
Loans, net of unearned fees*		1,443,067			1,392,755			1,395,741			1,463,871			1,429,525
Deposits		1,529,721			1,502,682			1,464,918			1,443,121			1,479,347
Borrowings		368,616			358,008			370,090			438,013			451,862
Shareholders’ equity		281,692			271,260			269,323			268,335			255,279
INCOME STATEMENT DATA:
Interest income		137,734			130,832			121,647			116,888			122,661
Interest expense		62,961			57,129			47,469			44,686			48,225
Net interest income		74,773			73,703			74,178			72,202			74,436
Provision for loan losses		6,580			6,983			11,698			8,292			7,455
Other income		31,497			28,826			32,025			35,754			30,819
Other expenses		64,726			64,656			63,538			63,656			62,461
Net income		25,580			23,539			23,054			28,009			26,493
PER SHARE DATA:
Net income		1.94			1.77			1.72			2.07			1.95
Cash dividends		0.87			0.85			.82			.79			.70
PERFORMANCE RATIOS:
Net income to average assets		1.16	%		1.10	%		1.07	%		1.28	%		1.21	%
Net income to average shareholders’ equity		9.20			8.57			8.52			10.45			10.57
Average total capital to average assets		13.35			13.56			13.35			13.24			12.45
Average shareholders’ equity to average assets		12.64			12.79			12.51			12.23			11.43
Dividend payout		44.76			44.18			47.57			38.13			35.88

* 2007 includes $14,068 of credit card loans that are held-for-sale.

9

FIRST FINANCIAL CORPORATION

Consolidated Balance Sheets

	December 31,
(Dollar amounts in thousands, except per share data)	2007			2006
ASSETS
Cash and due from banks	$	70,082		$	77,682
Federal funds sold		4,201			21,437
Securities available-for-sale		586,633			559,053
Loans, net of allowance of $15,351 in 2007 and $16,169 in 2006		1,413,648			1,376,586
Credit card loans held-for-sale		14,068			–
Accrued interest receivable		13,698			13,972
Premises and equipment, net		32,632			33,267
Bank-owned life insurance		59,950			57,905
Goodwill		7,102			7,102
Other intangible assets		1,937			2,363
Other real estate owned		1,472			3,194
Other assets		26,139			23,437
Total Assets	$	2,231,562		$	2,175,998
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing	$	225,549		$	227,808
Interest-bearing:
Certificates of deposit of $100 or more		193,901			189,323
Other interest-bearing deposits		1,110,271			1,085,551
		1,529,721			1,502,682
Short-term borrowings		27,331			16,203
Other borrowings		341,285			341,805
Other liabilities		51,533			44,048
Total Liabilities		1,949,870			1,904,738
Shareholders’ equity
Common stock, $.125 stated value per share,
Authorized shares — 40,000,000
Issued shares — 14,450,966
Outstanding shares — 13,136,359 in 2007 and 13,270,321 in 2006		1,806			1,806
Additional paid-in capital		68,212			68,003
Retained earnings		250,011			235,967
Accumulated other comprehensive income (loss)		(5,181	)		(5,494	)
Less: Treasury shares at cost — 1,314,607 in 2007 and 1,180,645 in 2006		(33,156	)		(29,022	)
Total Shareholders’ Equity		281,692			271,260
Total Liabilities And Shareholders’ Equity	$	2,231,562		$	2,175,998

See accompanying notes.

10

2007 ANNUAL REPORT

Consolidated Statements of Income

	Years Ended December 31,
(Dollar amounts in thousands, except per share data)	2007		2006		2005
INTEREST AND DIVIDEND INCOME:
Loans, including related fees	$	104,950	$	99,850	$	96,388
Securities:
Taxable		23,336		21,877		16,802
Tax-exempt		6,635		6,243		6,306
Other		2,813		2,862		2,151
Total Interest and Dividend Income		137,734		130,832		121,647
INTEREST EXPENSE:
Deposits		41,956		37,285		27,184
Short-term borrowings		1,611		746		783
Other borrowings		19,394		19,098		19,502
Total Interest Expense		62,961		57,129		47,469
Net Interest Income		74,773		73,703		74,178
Provision for loan losses		6,580		6,983		11,698
Net Interest Income After Provision For Loan Losses		68,193		66,720		62,480
NON-INTEREST INCOME:
Trust and financial services		3,697		3,766		3,626
Service charges and fees on deposit accounts		11,877		11,639		11,732
Other service charges and fees		5,783		5,279		6,440
Securities gains (losses)		211		6		571
Insurance commissions		6,541		6,323		5,995
Gain on sale of mortgage loans		816		191		1,289
Other		2,572		1,622		2,372
Total Non-Interest Income		31,497		28,826		32,025
NON-INTEREST EXPENSES:
Salaries and employee benefits		39,432		39,739		38,617
Occupancy expense		4,034		3,994		3,796
Equipment expense		4,322		4,305		3,861
Other		16,938		16,618		17,264
Total Non-Interest Expense		64,726		64,656		63,538
Income Before Income Taxes		34,964		30,890		30,967
Provision for income taxes		9,384		7,351		7,913
Net Income	$	25,580	$	23,539	$	23,054
EARNINGS PER SHARE:
Basic and Diluted	$	1.94	$	1.77	$	1.72
Weighted average number of shares outstanding (in thousands)		13,178		13,295		13,433

See accompanying notes.

11

FIRST FINANCIAL CORPORATION

Consolidated Statements of Changes in Shareholders’ Equity

								Accumulated
								Other
	Common		Additional		Retained			Comprehensive			Treasury
(Dollar amounts in thousands, except per share data)	Stock		Paid-In Capital		Earnings			Income (Loss)			Stock			Total
Balance, January 1, 2005	$	1,806	$	67,519	$	211,623		$	8,357		$	(20,970	)	$	268,335
Comprehensive income:
Net income		—		—		23,054			—			—			23,054
Other comprehensive income, net of tax:
Change in net unrealized gains/losses on securities available-for-sale, net		—		—		—			(6,454	)		—			(6,454	)
Total comprehensive income															16,600
Contribution of 36,000 shares to ESOP		—		151		—			—			993			1,144
Treasury stock purchases (79,000 shares)		—		—		—			—			(5,789	)		(5,789	)
Cash dividends, $ .79 per share		—		—		(10,967	)		—			—			(10,967	)
Balance, December 31, 2005		1,806		67,670		223,710			1,903			(25,766	)		269,323
Comprehensive income:
Net income		—		—		23,539			—			—			23,539
Other comprehensive loss, net of tax:
Change in net unrealized gains/losses on securities available-for-sale, net		—		—		—			1,161			—			1,161
Total comprehensive income															24,700
Adjustment to initially apply SFAS No. 158, net of tax (Note 1)		—		—		—			(8,558	)		—			(8,558	)
Contribution of 34,000 shares to ESOP		—		333		—			—			831			1,164
Treasury stock purchases (137,249 shares)		—		—		—			—			(4,087	)		(4,087	)
Cash dividends, $ .85 per share		—		—		(11,282	)		—			—			(11,282	)
Balance, December 31, 2006		1,806		68,003		235,967			(5,494	)		(29,022	)		271,260
Comprehensive income:
Net income		—		—		25,580			—			—			25,580
Other comprehensive loss, net of tax:
Change in net unrealized gains/losses on securities available-for-sale, net		—		—		—			1,110			—			1,110
Change in unrealized gains/losses on retirement plans		—		—		—			(797	)		—			(797	)
Total comprehensive income															25,893
Adjustment to initially apply FIN No. 48, net of tax (Note 1)		—		—		(86	)		—			—			(86	)
Contribution of 41,000 shares to ESOP		—		209		—			—			1,033			1,242
Treasury stock purchases (174,962 shares)		—		—		—			—			(5,167	)		(5,167	)
Cash dividends, $ .87 per share		—		—		(11,450	)		—			—			(11,450	)
Balance, December 31, 2007	$	1,806	$	68,212	$	250,011		$	(5,181	)	$	(33,156	)	$	281,692

See accompanying notes.

12

2007 ANNUAL REPORT

Consolidated Statements of Cash Flows

	Years Ended December 31,
(Dollar amounts in thousands, except per share data)	2007			2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	25,580		$	23,539		$	23,054
Adjustments to reconcile net income to net cash provided by operating activities:
Net (accretion) amortization on securities		(2,619	)		(2,540	)		(1,462	)
Provision for loan losses		6,580			6,983			11,698
Securities (gains) losses		(211	)		(6	)		(571	)
Depreciation and amortization		3,443			3,515			3,363
Provision for deferred income taxes		27			(3,579	)		1,716
Net change in accrued interest receivable		274			(1,435	)		(521	)
Contribution of shares to ESOP		1,242			1,164			1,144
Gains on sales of other real estate		(116	)		—			—
Other, net		1,302			9,688			592
Net Cash from Operating Activities		35,502			37,329			39,013
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of securities available-for-sale		3,170			5,080			11,376
Calls, maturities and principal reductions on securities available- for-sale		94,587			157,031			373,741
Purchases of securities available-for-sale		(120,657	)		(180,393	)		(422,141	)
Loans made to customers, net of repayments		(60,485	)		(6,510	)		49,806
Net change in federal funds sold		17,236			(18,455	)		2,418
Purchase of bank-owned life insurance		—			—			(5,000	)
Purchase of customer list		—			—			(338	)
Sale of other real estate		4,322			—			—
Additions to premises and equipment		(2,382	)		(5,015	)		(2,908	)
Net Cash from Investing Activities		(64,209	)		(48,262	)		6,954
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		27,039			37,764			21,797
Net change in other short-term borrowings		11,128			(10,021	)		(49,303	)
Dividends paid		(11,373	)		(11,181	)		(10,779	)
Purchases of treasury stock		(5,167	)		(4,087	)		(5,789	)
Proceeds from other borrowings		81,750			—			—
Repayments on other borrowings		(82,270	)		(2,061	)		(18,620	)
Net Cash from Financing Activities		21,107			10,414			(62,694	)
Net Change in Cash and Cash Equivalents		(7,600	)		(519	)		(16,727	)
Cash and Cash Equivalents, Beginning of Year		77,682			78,201			94,928
Cash and Cash Equivalents, End of Year	$	70,082		$	77,682		$	78,201
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NONCASH INFORMATION:
Cash paid during the year for:
Interest	$	62,080		$	56,150		$	46,919
Income taxes	$	8,494		$	11,202		$	5,413
Transfers from loans to loans held-for-sale	$	14,608			—			—

See accompanying notes.

13

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

1.	BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
	BUSINESS
	Organization: The consolidated financial statements of First Financial Corporation and its subsidiaries (the Corporation) include the parent company and its wholly-owned subsidiaries, First Financial Bank, N.A. of Vigo County, Indiana, The Morris Plan Company of Terre Haute (Morris Plan), First Financial Reinsurance Company, a corporation incorporated in the country of Turks and Caicos Islands (FFRC), and Forrest Sherer Inc., a full-line insurance agency headquartered in Terre Haute, Indiana. Inter-company transactions and balances have been eliminated. First Financial Reinsurance Company was dissolved during 2007 with no material impact to the financial statements of the Corporation.
	First Financial Bank also has two investment subsidiaries, Portfolio Management Specialists A (Specialists A) and Portfolio Management Specialists B (Specialists B), which were established to hold and manage certain assets as part of a strategy to better manage various income streams and provide opportunities for capital creation as needed. Specialists A and Specialists B subsequently entered into a limited partnership agreement, Global Portfolio Limited Partners. Portfolio Management Specialists B also owns First Financial Real Estate, LLC. At December 31, 2007, $531.0 million of securities and loans were owned by these subsidiaries. Specialists A, Specialists B, Global Portfolio Limited Partners and First Financial Real Estate LLC are included in the consolidated financial statements.
	The Corporation, which is headquartered in Terre Haute, Indiana, offers a wide variety of financial services including commercial, mortgage and consumer lending, lease financing, trust account services and depositor services through its four subsidiaries. The Corporation’s primary source of revenue is derived from loans to customers, primarily middle-income individuals, and investment activities.
	The Corporation operates 48 branches in west-central Indiana and east-central Illinois. First Financial Bank is the largest bank in Vigo County. It operates 12 full-service banking branches within the county; five in Clay County, Indiana; one in Greene County, Indiana; three in Knox County, Indiana; five in Parke County, Indiana; one in Putnam County, Indiana; five in Sullivan County, Indiana; four in Vermillion County, Indiana; one in Clark County, Illinois; one in Coles County, Illinois; three in Crawford County, Illinois; one in Jasper County, Illinois; two in Lawrence County, Illinois; two in Richland County, Illinois; one in Vermilion County, Illinois; and one in Wayne County, Illinois. It also has a main office in downtown Terre Haute and an operations center/office building in southern Terre Haute.
	Regulatory Agencies: First Financial Corporation is a multi-bank holding company and as such is regulated by various banking agencies. The holding company is regulated by the Seventh District of the Federal Reserve System. The national bank subsidiary is regulated by the Office of the Comptroller of the Currency. The state bank subsidiary is jointly regulated by the state banking organization and the Federal Deposit Insurance Corporation.
	Significant Accounting Policies
	Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. The allowance for loan losses, carrying value of intangible assets, loan servicing rights and the fair values of financial instruments are particularly subject to change.
	Cash Flows: Cash and cash equivalents include cash and demand deposits with other financial institutions. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings.
	Securities: The Corporation classifies all securities as “available for sale.” Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value with unrealized holdings gains and losses, net of taxes, reported in other comprehensive income within shareholders’ equity.
	Interest income includes amortization of purchase premium or discount. Premiums and discounts are amortized on the level yield method without anticipating prepayments. Mortgage-backed securities are amortized over the expected life. Realized gains and losses on sales are based on the amortized cost of the security sold. Declines in the fair value of securities below their cost that are other than temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: 1) the length of time and extent that fair value has been less than cost; 2) the financial condition and near term prospects of the issuer; and 3) the Corporation’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.
	Loans: Loans that management has the intent and ability to hold for the foreseeable future until maturity or pay-off are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis.
	Interest income is accrued on the unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term without anticipating prepayments. Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are significantly past due.
	All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. In all cases, loans are placed on non-accrual or charged-off if collection of principal or interest is considered doubtful.

14

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgages, consumer and credit card loans, and on an individual basis for other loans. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows, using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures.

Foreclosed Assets: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less estimated selling costs when acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the useful lives of the assets, which range from 3 to 33 years for furniture and equipment and 5 to 39 years for buildings and leasehold improvements.

Federal Home Loan Bank (FHLB) Stock: The Corporation is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost and periodically evaluated for impairment. Because this stock is viewed as a long-term investment, impairment is based on ultimate recovery of par value. Both cash and stock dividends are reported as income. FHLB stock is included with securities.

Servicing Rights: Servicing rights are recognized separately when they are acquired through sales of loans. For sales of mortgage loans prior to January 1, 2007, a portion of the cost of the loan was allocated to the servicing right based on relative fair values. The Corporation adopted SFAS No. 156 on January 1, 2007, and for sales of mortgage loans beginning in 2007, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on third-party valuations that incorporate assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, ancillary income, prepayment speeds and default rates and losses. All classes of servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Corporation later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with Other Service Fees on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is included in Other Service Fees on the income statement, is for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Servicing fees totaled $947 thousand, $1.01 million and $1.00 million for the years ended December 31, 2007, 2006 and 2005. Late fees and ancillary fees related to loan servicing are not material .

Bank-Owned Life Insurance: The Corporation has purchased life insurance policies on certain key executives. Bank-owned life insurance is recorded at its cash surrender value, or the amount that can be realized. Income on the investments in life insurance is included in other interest income.

Goodwill and Other Intangible Assets: Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from the whole bank, insurance agency and branch acquisitions. They are initially measured at fair value and then are amortized over their estimated useful lives, which are 12 and 10 years, respectively.

Long-Term Assets: Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Benefit Plans: Pension expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. The amount contributed is determined by a formula as decided by the Board of Directors. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

15

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

Employee Stock Ownership Plan: Shares of treasury stock are issued to the ESOP and compensation expense is recognized based upon the total market price of shares when contributed.

Deferred Compensation Plan: A deferred compensation plan covers all directors. Under the plan, the Corporation pays each director, or their beneficiary, the amount of fees deferred plus interest over 10 years, beginning when the director achieves age 65. A liability is accrued for the obligation under these plans. The expense incurred for the deferred compensation for each of the last three years was $177 thousand, $201 thousand and $164 thousand, resulting in a deferred compensation liability of $2.3 million and $2.2 million as of year-end 2007 and 2006.

Long-Term Incentive Plan: A long-term incentive plan provides for the payment of incentive rewards as a 15-year annuity to all directors and certain key officers. The plan expires December 31, 2009, and compensation expense is recognized over the service period. Payments under the plan generally do not begin until the earlier of January 1, 2015, or the January 1 immediately following the year in which the participant reaches age 65. Compensation expense for each of the last three years was $2.0 million, $1.7 million and $1.6 million, resulting in a liability of $11.3 million and $9.4 million as of year-end 2007 and 2006.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

The Corporation adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of FIN 48 on January 1, 2007 reduced retained earnings and increased liabilities by $86 thousand.

The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense.

Loan Commitments and Related Financial Instruments: Financial instruments include credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Earnings Per Share: Earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. The Corporation does not have any potentially dilutive securities. Earnings and dividends per share are restated for stock splits and dividends through the date of issue of the financial statements.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, which are also recognized as separate components of equity.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount of range of loss can be reasonably estimated. Management does not believe there are currently such matters that will have a material effect on the financial statements.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or market conditions could significantly affect the estimates.

Operating Segment: While the Corporation’s chief decision-makers monitor the revenue streams of the various products and services, the operating results of significant segments are similar and operations are managed and financial performance is evaluated on a corporate-wide basis. Accordingly, all of the Corporation’s financial service operations are considered by management to be aggregated in one reportable operating segment, which is banking.

Adoption of New Accounting Standards: In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments” (SFAS No. 155), which permits fair value remeasurement for hybrid financial instruments that contain an embedded derivative that otherwise would require bifurcation. Additionally, SFAS No. 155 clarifies the accounting guidance for beneficial interests in securitizations. Under SFAS No. 155, all beneficial interests in a securitization will require an assessment in accordance with SFAS No. 133 to determine if an embedded derivative exists within the instrument. In January 2007, the FASB issued “Derivatives Implementation Group Issue B40, Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets” (DIG Issue B40). DIG Issue B40 provides an exemption from the embedded derivative test of paragraph 13(b) of SFAS No. 133 for instruments that would otherwise require bifurcation if the test is met solely because of a prepayment feature included within the securitized interest and prepayment is not controlled by the security holder. SFAS No. 155 and DIG Issue B40 are effective for fiscal years beginning after September 15, 2006. The adoption of SFAS No. 155 and DIG Issue B40 did not have a material impact on the Corporation’s consolidated financial position or results of operations.

16

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

	In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5, “Accounting for Purchases of Life Insurance–Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases of Life Insurance) {Issue}.” This Issue requires that a policyholder consider contractual terms of a life insurance policy in determining the amount that could be realized under the insurance contract. It also requires that if the contract provides for a greater surrender value if all individual policies in a group are surrendered at the same time, that the surrender value be determined based on the assumption that policies will be surrendered on an individual basis. Lastly, the Issue requires disclosure when there are contractual restrictions on the Corporation’s ability to surrender a policy. The adoption of EITF 06-5 on January 1, 2007 had no impact on the Corporation’s financial conditions or results of operation.
	Effect of Newly Issued But Not Yet Effective Accounting Standards: In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. The impact of adoption is not expected to be material.
	In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective for the Corporation on January 1, 2008. The Corporation did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.
	In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” This issue requires that a liability be recorded during the service period when a split-dollar life insurance agreement continues after participants’ employment or retirement. The required accrued liability will be based on either the post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. This issue is effective for fiscal years beginning after December 15, 2007. There was no impact to the adoption of this issue as the Corporation has no split-dollar life insurance arrangements.
	Reclassifications: Some items in prior year financial statements were reclassified to conform to the current presentation.
2.	FAIR VALUES OF FINANCIAL INSTRUMENTS:
	Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, Federal Home Loan Bank stock, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. 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 for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair values of loans held for sale are based on market bids on the loans or similar loans. Fair value of debt is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.
	The carrying amount and estimated fair value of financial instruments are presented in the table below and were determined based on the above assumptions:

	December 31,
	2007						2006
	Carrying			Fair			Carrying			Fair
(Dollar amounts in thousands)	Value			Value			Value			Value
Cash and due from banks	$	70,082		$	70,082		$	77,682		$	77,682
Federal funds sold		4,201			4,201			21,437			21,437
Securities available-for-sale		586,633			586,633			559,053			559,053
Loans, net		1,427,716			1,427,272			1,376,586			1,366,848
Accrued interest receivable		13,698			13,698			13,972			13,972
Deposits		(1,529,721	)		(1,536,205	)		(1,502,682	)		(1,506,761	)
Short-term borrowings		(27,331	)		(27,331	)		(16,203	)		(16,203	)
Federal Home Loan Bank advances		(334,685	)		(339,300	)		(335,205	)		(336,231	)
Other borrowings		(6,600	)		(6,600	)		(6,600	)		(6,600	)
Accrued interest payable		(5,549	)		(5,549	)		(4,668	)		(4,668	)

17

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

3.	RESTRICTIONS ON CASH AND DUE FROM BANKS:
	Certain affiliate banks are required to maintain average reserve balances with the Federal Reserve Bank that do not earn interest. The amount of those reserve balances was approximately $9.3 million and $7.4 million at December 31, 2007 and 2006, respectively.
4.	SECURITIES:
	The fair value of securities available-for-sale and related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

	December 31, 2007
	Amortized		Unrealized					Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. Government sponsored entities and entity mortgage-backed securities	$	288,742	$	2,181	$	(1,219	)	$	289,704
Collateralized mortgage obligations		76,730		587		(143	)		77,174
State and municipal		142,862		3,824		(171	)		146,515
Corporate obligations		66,623		52		(1,219	)		65,456
Equities		4,721		3,063		—			7,784
Total	$	579,678	$	9,707	$	(2,752	)	$	586,633

	December 31, 2006
	Amortized		Unrealized					Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. Government sponsored entities and entity mortgage-backed securities	$	283,968	$	914	$	(4,126	)	$	280,756
Collateralized mortgage obligations		60,350		148		(438	)		60,060
State and municipal		136,124		4,163		(217	)		140,070
Corporate obligations		68,952		520		—			69,472
Equities		4,556		4,139		—			8,695
Total	$	553,950	$	9,884	$	(4,781	)	$	559,053

As of December 31, 2007, the Corporation does not have any securities from any issuer, other than the U.S. Government, with an aggregate book or fair value that exceeds ten percent of shareholders’ equity.

Securities with a carrying value of approximately $71.6 million and $51.4 million at December 31, 2007 and 2006, respectively, were pledged as collateral for short-term borrowings and for other purposes.

Below is a summary of the gross gains and losses realized by the Corporation on investment sales during the years ended December 31, 2007, 2006 and 2005, respectively.

(Dollar amounts in thousands)	2007		2006		2005
Proceeds	$	3,170		—	$	11,376
Gross gains		192		—		537
Gross losses		10		—		—

Additional gains of $29 thousand in 2007 and $6 thousand in 2006 resulted from redemption premiums on called securities.

The Corporation evaluates securities for other-than-temporary impairment on a quarterly basis. Factors considered include length of time impaired, reason for impairment, outlook and the Corporation’s ability to hold the investment to allow for recovery of fair value. There were no securities considered to be other-than-temporarily impaired at December 31, 2007 or December 31, 2006.

18

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

Contractual maturities of debt securities at year-end 2007 were as follows. Securities not due at a single maturity or with no maturity date, primarily mortgage-backed and equity securities, are shown separately.

	Available-for-Sale
	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	14,128	$	14,184
Due after one but within five years		42,137		43,347
Due after five but within ten years		47,328		49,317
Due after ten years		189,970		182,651
		286,563		289,499
Mortgage-backed securities and equities		293,115		297,134
Total	$	579,678	$	586,633

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 December 31, 2007 and 2006.

	December 31, 2007
	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
U.S. Government entity mortgage-backed securities	$	226	$	(1	)	$	110,861	$	(1,218	)	$	111,087	$	(1,219	)
Collateralized mortgage obligations		21,680		(104	)		5,377		(39	)		27,057		(143	)
State and municipal obligations		10,411		(61	)		9,307		(110	)		19,718		(171	)
Corporate obligations		29,795		(1,219	)		—		—			29,795		(1,219	)
Total temporarily impaired securities	$	62,112	$	(1,385	)	$	125,545	$	(1,367	)	$	187,657	$	(2,752	)

	December 31, 2006
	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
U.S. Government entity mortgage-backed securities	$	47,001	$	(183	)	$	162,684	$	(3,943	)	$	209,685	$	(4,126	)
Collateralized mortgage obligations		14,138		(13	)		29,740		(425	)		43,878		(438	)
State and municipal obligations		5,950		(62	)		13,422		(155	)		19,372		(217	)
Corporate obligations		—		—			—		—			—		—
Total temporarily impaired securities	$	67,089	$	(258	)	$	205,846	$	(4,523	)	$	272,935	$	(4,781	)

These losses represent negative adjustments to market value relative to the rate of interest paid on the securities and not losses related to the creditworthiness of the issuer. Management has the intent and ability to hold for the foreseeable future and believes the value will recover as the securities approach maturity or market rates change.

19

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

5.	LOANS:
	Loans are summarized as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006
Commercial, financial and agricultural	$	461,086		$	407,995
Real estate — construction		29,637			33,336
Real estate — residential		437,051			447,865
Real estate — commercial		236,304			244,124
Consumer		262,858			257,065
Lease financing		2,275			2,064
Total gross loans		1,429,211			1,392,989
Less: unearned income		(212	)		(234	)
Allowance for loan losses		(15,351	)		(16,169	)
Total	$	1,413,648		$	1,376,586

The Corporation’s credit card portfolio was reclassified to held-for-sale at December 31, 2007, which reduced the allowance for loan losses allocation for this type of loan by $242 thousand.

In the normal course of business, the Corporation’s subsidiary banks make loans to directors and executive officers and to their associates. In 2007 the aggregate dollar amount of these loans to directors and executive officers who held office at the end of the year amounted to $24.3 million at the beginning of the year. During 2007, advances of $30.4 million and repayments of $18.0 million were made with respect to related party loans for an aggregate dollar amount outstanding of $36.7 million at December 31, 2007.

Loans serviced for others, which are not reported as assets, total $364.0 million and $382.2 million at year-end 2007 and 2006. Custodial escrow balances maintained in connection with serviced loans were $933 thousand and $1.38 million at year-end 2007 and 2006.

Activity for capitalized mortgage servicing rights (included in other assets) was as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006			2005
Servicing rights:
Beginning of year	$	2,319		$	2,931		$	2,960
Additions		218			114			735
Amortized to expense		(628	)		(726	)		(764	)
End of year	$	1,909		$	2,319		$	2,931

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $3.3 million and $3.4 million at year end 2007 and 2006. There was no valuation allowance in 2007, 2006 or 2005.

6.	ALLOWANCE FOR LOAN LOSSES:
	Changes in the allowance for loan losses are summarized as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006			2005
Balance at beginning of year	$	16,169		$	16,042		$	19,918
Provision for loan losses		6,580			6,983			11,698
Recoveries of loans previously charged off		2,778			3,653			1,918
Loans charged off		(10,176	)		(10,509	)		(17,492	)
Balance at End of Year	$	15,351		$	16,169		$	16,042

20

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

Impaired loans were as follows:

	December 31,
(Dollar amounts in thousands)	2007		2006
Year-end loans with no allocated allowance for loan losses	$	—	$	503
Year-end loans with allocated allowance for loan losses		2,203		4,865
Total	$	2,203	$	5,368
Amount of the allowance for loan losses allocated	$	729	$	2,480
Nonperforming loans:
Loans past due over 90 days still on accrual		4,462		4,691
Non-accrual loans		7,971		9,893

Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

(Dollar amounts in thousands)	2007		2006		2005
Average of impaired loans during the year	$	3,505	$	3,336	$	11,992
Interest income recognized during impairment		11		13		126
Cash-basis interest income recognized		1		—		11

7.	PREMISES AND EQUIPMENT:
	Premises and equipment are summarized as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006
Land	$	5,653		$	5,653
Building and leasehold improvements		38,948			38,047
Furniture and equipment		30,916			31,717
		75,517			75,417
Less accumulated depreciation		(42,885	)		(42,150	)
Total	$	32,632		$	33,267

	Aggregate depreciation expense was $3.02 million, $3.02 million and $2.79 million for 2007, 2006 and 2005, respectively.
8.	GOODWILL AND INTANGIBLE ASSETS:
	The Corporation completed its annual impairment testing of goodwill during the second quarter of 2007 and 2006. Management does not believe any amount of goodwill is impaired.
	Intangible assets subject to amortization at December 31, 2007 and 2006 are as follows:

	2007				2006
	Gross		Accumulated		Gross		Accumulated
(Dollar amounts in thousands)	Amount		Amortization		Amount		Amortization
Customer list intangible	$	3,446	$	2,303	$	3,446	$	1,997
Core deposit intangible		2,193		1,399		2,193		1,279
Non-compete agreements		500		500		500		500
	$	6,139	$	4,202	$	6,139	$	3,776

Aggregate amortization expense was $426 thousand, $497 thousand and $571 thousand for 2007, 2006 and 2005, respectively.

Estimated amortization expense for the next five years is as follows:

	In thousands
2008	$	425
2009		425
2010		425
2011		245
2012		154

21

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

9.	DEPOSITS:
	Scheduled maturities of time deposits for the next five years are as follows:

2008	$	513,361
2009		87,915
2010		27,931
2011		9,466
2012		9,713

10.	SHORT-TERM BORROWINGS:
	A summary of the carrying value of the Corporation’s short-term borrowings at December 31, 2007 and 2006 is presented below:

(Dollar amounts in thousands)	2007		2006
Federal funds purchased	$	3,032	$	10,179
Repurchase agreements		22,656		5,407
Other short-term borrowings		1,643		617
	$	27,331	$	16,203

(Dollar amounts in thousands)	2007			2006
Average amount outstanding	$	32,042		$	15,691
Maximum amount outstanding at a month end		59,364			38,940
Average interest rate during year		5.03	%		4.77	%
Interest rate at year-end		4.57	%		4.74	%

	Federal funds purchased are generally due in one day and bear interest at market rates. Other borrowings, primarily note payable–U.S. government, are due on demand, secured by a pledge of securities and bear interest at market rates.
	Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance. The Corporation maintains possession of and control over these securities.
11.	OTHER BORROWINGS:
	Other borrowings at December 31, 2007 and 2006 are summarized as follows:

(Dollar amounts in thousands)	2007		2006
FHLB advances	$	334,685	$	335,205
City of Terre Haute, Indiana economic development revenue bonds		6,600		6,600
Total	$	341,285	$	341,805

The aggregate minimum annual retirements of other borrowings are as follows:

2008	$	90,232
2009		47,416
2010		202,344
2011		634
2012		90
Thereafter		569
	$	341,285

22

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

	The Corporation’s subsidiary banks are members of the Federal Home Loan Bank (FHLB) and accordingly are permitted to obtain advances. The advances from the FHLB, aggregating $334.7 million at December 31, 2007, and $335.2 million at December 31, 2006, accrue interest, payable monthly, at annual rates, primarily fixed, varying from 3.6% to 6.6% in 2007 and 4.9% to 6.6% in 2006. The advances are due at various dates through August 2017. FHLB advances are, generally, due in full at maturity. They are secured by eligible securities totaling $197.5 million at December 31, 2006, and $203.6 million at December 31, 2007, and a blanket pledge on real estate loan collateral. Based on this collateral and the Corporation’s holdings of FHLB stock, the Corporation is eligible to borrow up to $428.8 million at year end 2007. Certain advances may be prepaid, without penalty, prior to maturity. The FHLB can adjust the interest rate from fixed to variable on certain advances, but those advances may then be prepaid, without penalty.
	The economic development revenue bonds (bonds) require periodic interest payments each year until maturity or redemption. The interest rate, which was 3.46% at December 31, 2007, and 3.97% at December 31, 2006, is determined by a formula which considers rates for comparable bonds and is adjusted periodically. The bonds are collateralized by a first mortgage on the Corporation’s headquarters building. The bonds mature December 1, 2015, but bondholders may periodically require earlier redemption.
	The debt agreement for the bonds requires the Corporation to meet certain financial covenants. These covenants require the Corporation to maintain a Tier I capital ratio of at least 6.2% and net income to average assets of 0.6%. At December 31, 2007 and 2006, the Corporation was in compliance with all of its debt covenants.
	The Corporation maintains a letter of credit with another financial institution, which could be used to repay the bonds, should they be called. The letter of credit expired November 1, 2007, and was automatically extended for one year. Assuming redemption will be funded by the letter of credit, or by other similar borrowings, there are no anticipated principal maturities of the bonds within the next five years.
12.	INCOME TAXES:
	Income tax expense is summarized as follows:

(Dollar amounts in thousands)	2007			2006			2005
Federal:
Currently payable	$	8,520		$	10,409		$	6,202
Deferred		242			(3,335	)		1,334
		8,762			7,074			7,536
State:
Currently payable		837			521			(5	)
Deferred		(215	)		(244	)		382
		622			277			377
Total	$	9,384		$	7,351		$	7,913

The reconciliation of income tax expense with the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes is summarized as follows:

(Dollar amounts in thousands)	2007			2006			2005
Federal income taxes computed at the statutory rate	$	12,238		$	10,812		$	10,839
Add (deduct) tax effect of:
Tax exempt income		(3,263	)		(3,056	)		(2,902	)
State tax, net of federal benefit		404			180			245
Affordable housing credits		(113	)		(329	)		(327	)
Other, net		118			(256	)		58
Total	$	9,384		$	7,351		$	7,913

23

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2007 and 2006, are as follows:

(Dollar amounts in thousands)	2007			2006
Deferred tax assets:
Net unrealized losses on retirement plans	$	5,913		$	5,705
Loan losses provision		6,146			6,448
Deferred compensation		5,476			4,675
Compensated absences		520			513
Post-retirement benefits		1,172			1,068
Other		1,036			1,025
Gross Deferred Assets		20,263			19,434
Deferred tax liabilities:
Net unrealized gains on securities available-for-sale		(2,782	)		(2,042	)
Depreciation		(1,379	)		(1,435	)
Federal Home Loan Bank stock dividends		(751	)		(751	)
Mortgage servicing rights		(763	)		(924	)
Pensions		(2,369	)		(2,361	)
Other		(2,138	)		(1,281	)
Gross Deferred Liabilities		(10,182	)		(8,794	)
Net Deferred Tax Assets (Liabilities)	$	10,081		$	10,640

Unrecognized Tax Benefits — A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2007	$	601
Additions based on tax positions related to the current year		290
Additions for tax positions of prior years		—
Reductions for tax positions of prior years		—
Reductions due to the statute of limitations		(88	)
Settlements		—
Balance at December 31, 2007	$	803

	Of this total, $803 represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.
	The total amount of interest and penalties recorded in the income statement for the year ended December 31, 2007 was $30, and the amount accrued for interest and penalties at December 31, 2007 was $112.
	The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Indiana and Illinois. The Corporation is no longer subject to examination by taxing authorities for years before 2004. We are currently under audit by the Internal Revenue Service for the 2004 and 2005 tax years. The anticipated effect on unrecognized tax benefits resulting from this audit cannot be determined at this time.
13.	FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
	The Corporation is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include conditional commitments and commercial letters of credit. The financial instruments involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. The Corporation’s maximum exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans is limited generally by the contractual amount of those instruments. The Corporation follows the same credit policy to make such commitments as is followed for those loans recorded in the consolidated financial statements.

24

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

Commitment and contingent liabilities are summarized as follows at December 31:

(Dollar amounts in thousands)	2007		2006
Home equity	$	38,612	$	38,205
Credit card lines		48,523		46,238
Commercial operating lines		134,068		159,630
Other commitments		54,453		51,018
	$	275,656	$	295,091
Commercial letters of credit		17,336		17,289

	The majority of commercial operating lines and home equity lines are variable rate, while the majority of other commitments to fund loans are fixed rate. Since many commitments to make loans expire without being used, these amounts do not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management’s credit evaluation of the borrower, and may include accounts receivable, inventory, property, land and other items. The approximate duration of these commitments is generally one year or less.
14.	RETIREMENT PLANS:
	Substantially all employees of the Corporation are covered by a retirement program that consists of a defined benefit plan and an employee stock ownership plan (ESOP). Plan assets consist primarily of the Corporation’s stock and obligations of U.S. Government agencies. Benefits under the defined benefit plan are actuarially determined based on an employee’s service and compensation, as defined, and funded as necessary.
	Assets in the ESOP are considered in calculating the funding to the defined benefit plan required to provide such benefits. Any shortfall of benefits under the ESOP are to be provided by the defined benefit plan. The ESOP may provide benefits beyond those determined under the defined benefit plan. Contributions to the ESOP are determined by the Corporation’s Board of Directors. The Corporation made contributions to the defined benefit plan of $1.02 million, $1.96 million and $1.41 million in 2007, 2006 and 2005. The Corporation contributed $1.24 million, $1.16 million and $1.14 million to the ESOP in 2007, 2006 and 2005.
	The Corporation uses a measurement date of December 31, 2007.
	Net periodic benefit cost and other amounts recognized in other comprehensive income included the following components:

(Dollar amounts in thousands)	2007			2006			2005
Service cost – benefits earned	$	3,073		$	2,919		$	2,725
Interest cost on projected benefit obligation		2,773			2,328			2,451
Expected return on plan assets		(3,644	)		(2,793	)		(3,285	)
Net amortization and deferral		444			744			229
Net periodic pension cost	$	2,646		$	3,198		$	2,120
Net loss (gain) during the period	$	3,422		$	—		$	—
Amortization of prior service cost		18			—			—
Amortization of unrecognized gain (loss)		(462	)		—			—
Total recognized in other comprehensive income	$	2,978		$	—		$	—
Total recognized net periodic pension cost and other comprehensive income	$	5,624		$	—		$	—

The estimated net loss and prior service costs for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $729 thousand and $(18) thousand.

The information on the following page sets forth the change in projected benefit obligation, reconciliation of plan assets, and the funded status of the Corporation’s retirement program. Actuarial present value of benefits is based on service to date and present pay levels.

25

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollar amounts in thousands)	2007			2006
Change in benefit obligation:
Benefit obligation at January 1	$	49,920		$	42,541
Service cost		3,073			2,919
Interest cost		2,773			2,328
Actuarial (gain) loss		(4,938	)		3,602
Benefits paid		(1,384	)		(1,470	)
Benefit obligation at December 31		49,444			49,920
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1		45,056			34,488
Actual return on plan assets		(5,136	)		8,911
Employer contributions		2,267			3,127
Benefits paid		(1,384	)		(1,470	)
Fair value of plan assets at December 31		40,803			45,056
Funded status at December 31 (plan assets less benefit obligations)	$	(8,641	)	$	(4,864	)

Amounts recognized in accumulated other comprehensive income at December 31, 2007 and 2006 consist of:

(Dollar amounts in thousands)	2007			2006
Net loss (gain)	$	14,314		$	10,935
Prior service cost (credit)		(121	)		(140	)
	$	14,193		$	10,795

The accumulated benefit obligation for the defined benefit pension plan was $40,298 and $42,152 at year-end 2007 and 2006.

	2007			2006
Principal assumptions used:
Discount rate		5.91	%		5.50	%
Rate of increase in compensation levels		3.75			3.75
Expected long-term rate of return on plan assets		8.00			8.00

The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the plan’s target asset allocation. Management estimated the rate by which plan assets would perform based on historical experience as adjusted for changes in asset allocations and expectations for future return on equities as compared to past periods.

Plan Assets — The Corporation’s pension plan weighted-average asset allocation for the years 2007 and 2006 by asset category are as follows:

							Pension Plan						ESOP
	Pension Plan			ESOP			Percentage of Plan						Percentage of Plan
	Target Allocation			Target Allocation			Assets at December 31,						Assets at December 31,
Asset Category	2008			2008			2007			2006			2007			2006
Equity securities		50-60	%		100-100	%		60	%		64	%		100	%		94	%
Debt securities		30-40			0-0			39			35			0			0
Other		1-5			0-0			1			1			0			6
TOTAL								100	%		100	%		100	%		100	%

The investment objective for the retirement program is to maximize total return without exposure to undue risk. Asset allocation favors equities, with a target allocation of approximately 88%. This target includes the Corporation’s ESOP, which is 100% invested in corporate stock. Other investment allocations include fixed income securities and cash.

Equity securities include First Financial Corporation common stock in the amount of $24.9 million (60 percent of total plan assets) and $30.1 million (67 percent of total plan assets) at December 31, 2007 and 2006, respectively.

Contributions — The Corporation expects to contribute $1.7 million to its pension plan and $1.3 million to its ESOP in 2008.

26

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

	Pension Benefits
	(Dollar amounts in thousands)
2008	$	623
2009		706
2010		849
2011		964
2012		1,192
2013–2017		9,297

Supplemental Executive Retirement Plan — The Corporation has established a Supplemental Executive Retirement Plan (SERP) for certain executive officers. The provisions of the SERP allow the Plan’s participants who are also participants in the Corporation’s defined benefit pension plan to receive supplemental retirement benefits to help recompense for benefits lost due to imposition of IRS limitations on benefits under the Corporation’s tax qualified defined benefit pension plan. Expenses related to the plan were $183 thousand in 2007 and $199 thousand in 2006. The SERP has expected benefit payments $138 thousand in five years and $661 thousand after five years, which reflects expected future service. The plan is unfunded and has a measurement date of December 31. The amounts recognized in other comprehensive income in the current year are as follows:

(Dollar amounts in thousands)	2007			2006		2005
Net loss (gain) during the period	$	(179	)	$	—	$	—
Amortization of prior service cost		(74	)		—		—
Amortization of unrecognized gain (loss)		17			—		—
Total recognized in other comprehensive income	$	(236	)	$	—	$	—

The Corporation has $945 thousand and $1.0 million recognized in the balance sheet as a liability at December 31, 2007 and 2006. Amounts recognized in accumulated other comprehensive income consist of $114 thousand net gain and $296 thousand in prior service cost at December 31, 2007 and $165 thousand net gain and $370 thousand in prior service cost at December 31, 2006. The estimated loss and prior service costs for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $(5) thousand and $74 thousand.

The Corporation also provides medical benefits to its employees subsequent to their retirement. The Corporation uses a measurement date of December 31, 2007. During 2007 the Corporation changed the post-retirement medical plan from being self-insured to fully insured. Accrued post-retirement benefits as of December 31, 2007 and 2006 are as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006
Change in benefit obligation:
Benefit obligation at January 1	$	5,592		$	5,500
Service cost		118			116
Interest cost		310			302
Plan participants’ contributions		15			144
Actuarial (gain) loss		(1,786	)		5
Benefits paid		(191	)		(475	)
Benefit obligation at December 31	$	4,058		$	5,592
Funded status at December 31	$	(4,058	)	$	(5,592	)

Amounts recognized in accumulated other comprehensive income consist of a net loss of $531 thousand and $361 thousand in transition obligation at December 31, 2007 and $2.5 million net loss and $422 thousand in transition obligation at December 31, 2006. The post-retirement benefits paid in 2007 and 2006 of $191 thousand and $475 thousand, respectively, were fully funded by company and participant contributions.

27

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

The estimated net loss and transition obligation for the post-retirement benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $11 thousand and $60 thousand.

Weighted-average assumptions as of December 31:

	December 31,
	2007			2006
Discount rate		6.00	%		5.75	%
Initial weighted health care cost trend rate		9.00			9.50
Ultimate health care cost trend rate		5.00			5.00
Year in which the rate is assumed to stabilize and remain unchanged		2016			2016

Post-retirement health benefit expense included the following components:

	Years Ended December 31,
(Dollar amounts in thousands)	2007			2006		2005
Service cost	$	118		$	116	$	141
Interest cost		310			302		319
Amortization of transition obligation		60			60		60
Recognized actuarial loss		172			240		250
Net periodic benefit cost	$	660		$	718	$	770
Net loss (gain) during the period	$	(1,506	)	$	—	$	—
Amortization of prior service cost		(60	)		—		—
Amortization of unrecognized gain (loss)		(172	)		—		—
Total recognized in other comprehensive income	$	(1,738	)	$	—	$	—
Total recognized net periodic benefit cost and other comprehensive income	$	(1,078	)	$	—	$	—

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

	1% Point		1% Point
(Dollar amounts in thousands)	Increase		Decrease
Effect on total of service and interest cost components	$	9	$	(8	)
Effect on post-retirement benefit obligation		163		(138	)

Contributions — The Corporation expects to contribute $185 thousand to its other post-retirement benefit plan in 2008.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

	Post-Retirement Medical Benefits
	(Dollar amounts in thousands)
2008	$	165
2009		173
2010		182
2011		191
2012		201
2013–2017		1,123

28

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

15.	OTHER COMPREHENSIVE INCOME (LOSS):
	Other comprehensive income (loss) components and related taxes were as follows:

	December 31,
(Dollar amounts in thousands)	2007			2006			2005
Unrealized holding gains and (losses) on securities available-for-sale	$	2,063		$	1,938		$	(10,186	)
Reclassification adjustments for (gains) and losses later recognized in income		(211	)		(6	)		(571	)
Net unrealized gains and losses		1,852			1,932			(10,757	)
Tax effect		(742	)		(771	)		4,303
Other comprehensive income (loss)	$	1,110		$	1,161		$	(6,454	)
Unrecognized gains and (losses) on benefit plans	$	(1,737	)	$	—		$	—
Amortization of prior service cost included in net periodic pension cost		116			—			—
Amortization of unrecognized gains (losses) included in net periodic pension cost		617			—			—
Benefit plans, net		(1,004	)		—			—
Tax effect		207			—			—
Other comprehensive income (loss)	$	(797	)	$	—		$	—

The following is a summary of the accumulated other comprehensive income balances, net of tax:

	Balance			Current			Balance
	at			Period			at
(Dollar amounts in thousands)	12/31/06			Change			12/31/07
Unrealized gains (losses) on securities available-for-sale	$	3,064		$	1,110		$	4,174
Unrealized loss on benefit plans		(8,558	)		(797	)		(9,355	)
Total	$	(5,494	)	$	313		$	(5,181	)

16.	REGULATORY MATTERS:
	The Corporation and its bank affiliates are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements.
	Further, the Corporation’s primary source of funds to pay dividends to shareholders is dividends from its subsidiary banks and compliance with these capital requirements can affect the ability of the Corporation and its banking affiliates to pay dividends. At December 31, 2007, approximately $24.2 million of undistributed earnings of the subsidiary banks, included in consolidated retained earnings, were available for distribution to the Corporation without regulatory approval.
	Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and Banks must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation’s and Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
	Quantitative measures established by regulation to ensure capital adequacy require the Corporation and Banks to maintain minimum amounts and ratios of Total and Tier I Capital to risk-weighted assets, and of Tier I Capital to average assets. Management believes, as of December 31, 2007 and 2006, that the Corporation meets all capital adequacy requirements to which it is subject.
	As of December 31, 2007, 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 banks’ category.

29

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

The following table presents the actual and required capital amounts and related ratios for the Corporation and First Financial Bank, N.A., at year end 2007 and 2006.

											To Be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
(Dollar amounts in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital
Corporation – 2007	$	292,995		18.18	%	$	128,965		8.00	%		N/A		N/A
Corporation – 2006		283,226		17.78	%		127,423		8.00	%		N/A		N/A
First Financial Bank – 2007		281,819		18.13	%		124,355		8.00	%		155,443		10.00	%
First Financial Bank – 2006		272,455		17.74	%		122,834		8.00	%		153,542		10.00	%
Tier I risk-based capital
Corporation – 2007	$	277,644		17.22	%	$	64,483		4.00	%		N/A		N/A
Corporation – 2006		267,057		16.77	%		63,711		4.00	%		N/A		N/A
First Financial Bank – 2007		269,412		17.33	%		62,177		4.00	%		93,266		6.00	%
First Financial Bank – 2006		259,431		16.90	%		61,417		4.00	%		92,125		6.00	%
Tier I leverage capital
Corporation – 2007	$	277,644		12.44	%	$	89,273		4.00	%		N/A		N/A
Corporation – 2006		267,057		12.43	%		85,919		4.00	%		N/A		N/A
First Financial Bank – 2007		269,412		12.60	%		85,499		4.00	%		106,874		5.00	%
First Financial Bank – 2006		259,431		12.48	%		83,146		4.00	%		103,932		5.00	%

17.	PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:
	The parent company’s condensed balance sheets as of December 31, 2007 and 2006, and the related condensed statements of income and cash flows for each of the three years in the period ended December 31, 2007, are as follows:

CONDENSED BALANCE SHEETS

	December 31,
(Dollar amounts in thousands)	2007		2006
ASSETS
Cash deposits in affiliated banks	$	7,040	$	7,730
Investments in subsidiaries		281,510		270,693
Land and headquarters building, net		5,807		6,043
Other		9,035		9,120
Total Assets	$	303,392	$	293,586
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Borrowings (including $3.4 and $4.0 million from subsidiary)	$	10,036	$	10,636
Dividends payable		5,785		5,708
Other liabilities		5,879		5,982
Total Liabilities		21,700		22,326
Shareholders’ equity		281,692		271,260
Total Liabilities and Shareholders’ Equity	$	303,392	$	293,586

30

2007 ANNUAL REPORT

Notes to Consolidated Financial Statements

CONDENSED STATEMENTS OF INCOME

	Years Ended December 31,
(Dollar amounts in thousands)	2007			2006			2005
Dividends from subsidiaries	$	16,500		$	14,192		$	33,828
Other income		1,026			984			1,013
Interest on borrowings		(655	)		(615	)		(943	)
Other operating expenses		(3,343	)		(3,074	)		(3,017	)
Income before income taxes and equity in undistributed earnings of subsidiaries		13,528			11,487			30,881
Income tax benefit		1,230			1,121			1,177
Income before equity in undistributed earnings of subsidiaries		14,758			12,608			32,058
Equity in undistributed (dividends in excess of) earnings of subsidiaries		10,822			10,931			(9,004	)
Net income	$	25,580		$	23,539		$	23,054

CONDENSED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
(Dollar amounts in thousands)	2007			2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	25,580		$	23,539		$	23,054
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for depreciation and amortization		260			260			258
(Equity in undistributed earnings) dividends in excess of subsidiaries		(10,822	)		(10,931	)		9,004
Contribution of shares to ESOP		1,242			1,164			1,144
Increase (decrease) in other liabilities		239			872			479
(Increase) decrease in other assets		(41	)		(227	)		(392	)
Net Cash from Operating Activities		16,458			14,677			33,547
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and fixtures		(8	)		(43	)		(325	)
Net Cash from Investing Activities		(8	)		(43	)		(325	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings		(600	)		—			(18,000	)
Purchase of treasury stock		(5,167	)		(4,087	)		(5,789	)
Dividends paid		(11,373	)		(11,181	)		(10,779	)
Net Cash from Financing Activities		(17,140	)		(15,268	)		(34,568	)
Net (Decrease) Increase in Cash		(690	)		(634	)		(1,346	)
Cash, Beginning of Year		7,730			8,364			9,710
Cash, End of Year	$	7,040		$	7,730		$	8,364
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	657		$	612		$	938
Income taxes	$	8,494		$	11,202		$	5,413

31

FIRST FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

18. SELECTED QUARTERLY DATA (UNAUDITED)

	2007
					Net		Provision
	Interest		Interest		Interest		for Loan		Net		Net Income
(Dollar amounts in thousands)	Income		Expense		Income		Losses		Income		Per Share
March 31	$	33,622	$	15,165	$	18,457	$	1,690	$	6,423	$	.48
June 30	$	34,204	$	15,639	$	18,565	$	1,240	$	6,413	$	.49
September 30	$	34,915	$	16,166	$	18,749	$	1,575	$	6,362	$	.48
December 31	$	34,993	$	15,991	$	19,002	$	2,075	$	6,382	$	.49

	2006
					Net		Provision
	Interest		Interest		Interest		for Loan		Net		Net Income
(Dollar amounts in thousands)	Income		Expense		Income		Losses		Income		Per Share
March 31	$	31,423	$	13,027	$	18,396	$	2,203	$	5,509	$	.41
June 30	$	32,777	$	14,266	$	18,511	$	645	$	6,425	$	.48
September 30	$	33,012	$	14,768	$	18,244	$	2,495	$	5,455	$	.41
December 31	$	33,620	$	15,068	$	18,552	$	1,640	$	6,150	$	.47

Report of Independent Registered Public Accounting Firm on Financial Statements

To the Shareholders and Board of Directors of First Financial Corporation:

We have audited the accompanying consolidated balance sheets of First Financial Corporation as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Financial Corporation as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), First Financial Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report, dated February 28, 2008, expressed an unqualified opinion thereon.

Indianapolis, Indiana
February 28, 2008

32

2007 ANNUAL REPORT

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

To the Shareholders and Board of Directors of First Financial Corporation:

We have audited First Financial Corporation’s (Corporation) internal control over financial reporting as of December 31, 2007, based on criteria established in “Internal Control–Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). First Financial Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U. S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, First Financial Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in “Internal Control–Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 of First Financial Corporation and our report dated February 28, 2008 expressed an unqualified opinion.

Indianapolis, Indiana
February 28, 2008

33

FIRST FINANCIAL CORPORATION

Management’s Report on Internal Control Over Financial Reporting

The management of First Financial Corporation (the “Corporation”) has prepared and is responsible for the preparation and accuracy of the consolidated financial statements and related financial information included in the Annual Report.

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Corporation’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Corporation’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of management and directors of the Corporation; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2007, in relation to criteria for effective internal control over financial reporting as described in “Internal Control–Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2007, its system of internal control over financial reporting is effective and meets the criteria of the “Internal Control–Integrated Framework.”

Crowe Chizek and Company LLC, independent registered public accounting firm, has issued a report dated February 28, 2008 on the Corporation’s internal control over financial reporting.

Management’s Discussion and Analysis

Management’s discussion and analysis reviews the financial condition of First Financial Corporation at December 31, 2007 and 2006, and the results of its operations for the three years ended December 31, 2007. Where appropriate, factors that may affect future financial performance are also discussed. The discussion should be read in conjunction with the accompanying consolidated financial statements, related footnotes and selected financial data.

A cautionary note about forward-looking statements: In its oral and written communication, First Financial Corporation from time to time includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can include statements about estimated cost savings, plans and objectives for future operations and expectations about performance, as well as economic and market conditions and trends. They often can be identified by the use of words such as “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe” or “anticipate.” First Financial Corporation may include forward-looking statements in filings with the Securities and Exchange Commission, in other written materials such as this Annual Report and in oral statements made by senior management to analysts, investors, representatives of the media and others. It is intended that these forward-looking statements speak only as of the date they are made, and First Financial Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the forward-looking statement is made or to reflect the occurrence of unanticipated events.

By their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties and other factors. Actual results may differ materially from those contained in the forward-looking statement. The discussion in this “Management’s Discussion and Analysis of Results of Operations and Financial Condition” lists some of the factors which could cause actual results to vary materially from those in any forward-looking statements. Other uncertainties which could affect First Financial Corporation’s future performance include the effects of competition, technological changes and regulatory developments; changes in fiscal, monetary and tax policies; market, economic, operational, liquidity, credit and interest rate risks associated with First Financial Corporation’s business; inflation; competition in the financial services industry; changes in general economic conditions, either nationally or regionally, resulting in, among other things, credit quality deterioration; and changes in securities markets. Investors should consider these risks, uncertainties and other factors in addition to those mentioned by First Financial Corporation in its other filings from time to time when considering any forward-looking statement.

34

2007 ANNUAL REPORT

Management’s Discussion and Analysis

First Financial Corporation (the Corporation) is a financial services company. The Corporation, which is headquartered in Terre Haute, Ind., offers a wide variety of financial services including commercial, mortgage and consumer lending, lease financing, trust account services and depositor services through its three subsidiaries. At the close of business in 2007 the Corporation and its subsidiaries had 790 full-time equivalent employees.

First Financial Bank is the largest bank in Vigo County, Ind. It operates 12 full-service banking branches within the county; five in Clay County, Ind.; one in Greene County, Ind.; three in Knox County, Ind.; five in Parke County, Ind.; one in Putnam County, Ind., five in Sullivan County, Ind.; four in Vermillion County, Ind.; one in Clark County, Ill.; one in Coles County, Ill.; three in Crawford County, Ill.; one in Jasper County, Ill.; two in Lawrence County, Ill.; two in Richland County, Ill.; one in Vermilion County, Ill.; and one in Wayne County, Ill. In addition to its branches, it has a main office in downtown Terre Haute and a 50,000-square-foot commercial building on South Third Street in Terre Haute, which serves as the Corporation’s operations center and provides additional office space. Morris Plan has one office and is located in Vigo County.

First Financial Bank and Morris Plan face competition from other financial institutions. These competitors consist of commercial banks, a mutual savings bank and other financial institutions, including consumer finance companies, insurance companies, brokerage firms and credit unions.

The Corporation’s business activities are centered in west-central Indiana and east-central Illinois. The Corporation has no foreign activities other than periodically investing available funds in time deposits held in foreign branches of domestic banks.

Forrest Sherer Inc. is a premier regional supplier of insurance, surety and other financial products. The Forrest Sherer brand is well recognized in the Midwest, with more than 60 professionals and over 86 years of successful service to both businesses and households in their market area. The agency has representation agreements with more than 40 regional and national insurers to market their products of property and casualty insurance, surety bonds, employee benefit plans, life insurance and annuities.

Critical Accounting Policies and Estimates

The Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as disclosures found elsewhere in this report are based upon First Financial Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and goodwill. Actual results could differ from those estimates.

Allowance for loan losses. The allowance for loan losses represents management’s estimate of losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The allowance for loan losses is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on segments of the loan portfolio, historical loan loss experience and the level of classified and nonperforming loans.

Loans are considered impaired if, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest according to the contractual terms of the loan agreement. When a loan is deemed impaired, impairment is measured by using the fair value of underlying collateral, the present value of the future cash flows discounted at the effective interest rate stipulated in the loan agreement, or the estimated market value of the loan. In measuring the fair value of the collateral, management uses assumptions (e.g., discount rate) and methodologies (e.g., comparison to the recent selling price of similar assets) consistent with those that would be utilized by unrelated third parties.

Changes in the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for loan losses and the associated provision for loan losses. Should cash flow assumptions or market conditions change, a different amount may be recorded for the allowance for loan losses and the associated provision for loan losses.

Goodwill. The carrying value of goodwill requires management to use estimates and assumptions about the fair value of the reporting unit compared to its book value. An impairment analysis is prepared on an annual basis. Fair values of the reporting units are determined by an analysis which considers cash flows streams, profitability and estimated market values of the reporting unit. The majority of the Corporation’s goodwill is recorded at Forest Sherer, Inc.

Management believes the accounting estimates related to the allowance for loan losses and the valuation of goodwill are “critical accounting estimates” because: (1) the estimates are highly susceptible to change from period to period because they require management to make assumptions concerning, among other factors, the changes in the types and volumes of the portfolios, valuation assumptions, and economic conditions, and (2) the impact of recognizing an impairment or loan loss could have a material effect on the Corporation’s assets reported on the balance sheet as well as net income.

35

FIRST FINANCIAL CORPORATION

Results of Operations — Summary for 2007

Net income for 2007 was $25.6 million, or $1.94 per share. This represents an 8.7% increase in net income and a 9.6% increase in earnings per share, compared to 2006. Return on assets at December 31, 2007 increased 5.5% to 1.16% compared to 1.10% at December 31, 2006.

NET INTEREST INCOME

The principal source of the Corporation’s earnings is net interest income, which represents the difference between interest earned on loans and investments and the interest cost associated with deposits and other sources of funding.

Net interest income was increased in 2007 to $74.8 million compared to $73.7 million in 2006. Total average interest-earning assets grew to $2.06 billion in 2007 from $2.01 billion in 2006. The tax-equivalent yield on these assets increased to 6.98% in 2007 from 6.77% in 2006. Total average interest-bearing liabilities increased to $1.65 billion in 2007 from $1.64 billion in 2006. The average cost of these interest-bearing liabilities increased to 3.81% in 2007 from 3.48% in 2006.

The net interest margin decreased slightly from 3.93% in 2006 to 3.92% in 2007. This decrease is primarily the result of the increased costs of funding provided by interest-bearing liabilities. Earning asset yields increased 21 basis points while the rate on interest-bearing liabilities increased by 33 basis points.

The following table sets forth the components of net interest income due to changes in volume and rate. The table information compares 2007 to 2006 and 2006 to 2005.

	2007 Compared to 2006												2006 Compared to 2005
	Increase (Decrease) Due to												Increase (Decrease) Due to
							Volume/												Volume/
(Dollar amounts in thousands)	Volume			Rate			Rate			Total			Volume			Rate			Rate			Total
Interest earned on interest-earning assets:
Loans (1) (2)	$	1,808		$	3,459		$	62		$	5,329		$	(3,842	)	$	7,662		$	(304	)	$	3,516
Taxable investment securities		698			940			30			1,668			1,875			2,878			321			5,074
Tax-exempt investment securities (2)		870			(290	)		(20	)		560			302			238			6			546
Federal funds sold		(70	)		54			(5	)		(21	)		88			175			31			294
Total interest income		3,306			4,163			67			7,536			(1,577	)		10,953			54			9,430
Interest paid on interest-bearing liabilities:
Transaction accounts		(55	)		1,853			(9	)		1,789			(765	)		5,138			(559	)		3,814
Time deposits		(82	)		2,980			(9	)		2,889			801			5,276			210			6,287
Short-term borrowings		775			44			46			865			(304	)		437			(170	)		(37	)
Other borrowings		42			254			1			297			(750	)		360			(14	)		(404	)
Total interest expense		680			5,131			29			5,840			(1,018	)		11,211			(533	)		9,660
Net interest income	$	2,626		$	(968	)	$	38		$	1,696		$	(559	)	$	(258	)	$	587		$	(230	)

(1)	For purposes of these computations, nonaccruing loans are included in the daily average loan amounts outstanding.
(2)	Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 35%.

36

2007 ANNUAL REPORT

Results of Operations — Summary for 2007

PROVISION FOR LOAN LOSSES

The provision for loan losses charged to expense is based upon credit loss experience and the results of a detailed analysis estimating an appropriate and adequate allowance for loan losses. The analysis includes the evaluation of impaired loans as prescribed under Statement of Financial Accounting Standards (SFAS) Nos. 114 and 118, pooled loans as prescribed under SFAS No. 5, and economic and other risk factors as outlined in various Joint Interagency Statements issued by the bank regulatory agencies. For the year ended December 31, 2007, the provision for loan losses was $6.6 million, a decrease of $403 thousand, or 5.8%, compared to 2006. The decrease was the result of several components related to the analysis of the Corporation’s Allowance for Loan and Lease Losses, including improving nonperforming and impaired loan trends.

Net charge-offs for 2007 were $7.4 million as compared to $6.8 million for 2006 and $15.6 million for 2005. Delinquent loans as a percentage of total outstanding loans declined to 2.1% at December 31, 2007 compared to 2.3% at December 31, 2006. Non-accrual loans decreased 19.2% to $8.0 million at December 31, 2007 from $9.9 million at December 31, 2006. At December 31, 2007, the resulting allowance for loan losses was $15.4 million or 1.07% of total loans, net of unearned income. A year earlier the allowance was $16.2 million or 1.16% of total loans.

NON-INTEREST INCOME

Non-interest income of $31.5 million increased $2.7 million from the $28.8 million earned in 2006. This increase was in all areas with the exception of brokerage fees. Gain on investment securities and mortgage sales accounted for 31% of the increase.

NON-INTEREST EXPENSES

Non-interest expenses remained stable at $64.7 million for 2007 and 2006. Salaries and employee benefits decreased $307 thousand while other expenses increased $320 thousand. Occupancy and equipment expenses were relatively unchanged. Benefits of the consolidation of bank subsidiaries near the end of 2005 are still being realized.

INCOME TAXES

The Corporation’s federal income tax provision was $9.4 million in 2007 compared to a provision of $7.4 million in 2006. The overall effective tax rate in 2007 of 26.8% compares to a 2006 effective rate of 23.8%. The Corporation had reduced amounts of tax-exempt income relative to the total income in 2007 compared to 2006.

COMPARISON OF 2006 TO 2005

Net income for 2006 was $23.5 million or $1.77 per share compared to $23.1 million in 2005 or $1.72 per share. This stable income was the result of a reduced provision for loan losses effectively offsetting the decrease in net interest and non-interest income combined with a slight increase in non-interest expense in 2006. Total average interest-earning assets were unchanged in 2006 compared to 2005. The tax equivalent net interest margin increased slightly to 3.93% in 2006 from 3.92% in 2005. This increase was primarily the result of increased funding provided by non-interest bearing liabilities.

The provision for loan losses decreased $4.7 million from $11.7 million in 2005 to $7.0 million in 2006, and net charge-offs decreased $8.8 million from $15.6 million in 2005 to $6.8 million in 2006.

Net non-interest income and expense declined $4.3 million from 2005 to 2006. Non-interest expenses increased $1.1 million while non-interest income decreased $3.2 million. The decrease in non-interest income resulted primarily from reduced gains on sales of investment securities and loans in 2006.

The provision for income taxes fell $562 thousand from 2005 to 2006, decreasing the effective tax rate from 25.6% in 2005 to 23.8% in 2006.

37

FIRST FINANCIAL CORPORATION

Financial Condition — Summary

The Corporation’s total assets increased 2.6% or $55.6 million at December 31, 2007, from a year earlier. Available-for-sale securities increased $27.6 million at December 31, 2007, from the previous year. Loans, net of unearned income, increased by $36.2 million, to $1.43 billion. Deposits increased $27.0 million while borrowings increased by $10.6 million.

Total shareholders’ equity increased $10.4 million to $281.7 million at December 31, 2007. Net income was partially offset by higher dividends and the continued repurchase of corporate stock. The Corporation had increased purchases of treasury stock in 2007, acquiring 174,962 shares at a cost of $5.2 million compared to 137,249 shares during 2006 at a cost of $4.1 million. There were also 41,000 shares from the treasury with a value of $1.24 million that were contributed to the ESOP plan. Restructuring of the investment portfolio with maturities and purchases increased other comprehensive income as the Corporation recorded a net unrealized gain on available-for-sale securities of $1.1 million. Other comprehensive income was then reduced because of the increase in the unrealized loss on post-retirement benefits in accordance with SFAS No. 158.

Following is an analysis of the components of the Corporation’s balance sheet.

SECURITIES

The Corporation’s investment strategy seeks to maximize income from the investment portfolio while using it as a risk management tool and ensuring safety of principal and capital. During 2007 the portfolio’s balance increased by 4.93%. During 2007 the Federal Reserve decreased the fed funds rate by 1.00% to 4.25%. The average life of the portfolio declined from 4.38 years in 2006 to 4.08 years in 2007. The portfolio structure will continue to provide cash flows to be reinvested during 2008.

Year-end securities maturity schedules were comprised of the following:

	1 Year and Less					1 to 5 Years					5 to 10 Years					Over 10 Years					2007
(Dollar amounts in thousands)	Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate			Total
U.S. government sponsored entity mortgage-backed securities and agencies	$	212		5.08	%	$	1,366		4.60	%	$	65,393		4.44	%	$	222,733		5.26	%	$	289,704
Collateralized mortgage obligations (1)		—		—			4		11.50			27		6.94			77,143		5.27			77,174
States and political subdivisions		6,933		5.49			43,192		7.37			49,290		7.54			47,100		6.19			146,515
Corporate obligations		7,048		6.40			—		—			—		—			58,408		5.07			65,456
Total		14,193		5.93			44,562		7.29			114,710		5.77			405,384		5.34			578,849
Equities		—		—			—		—			—		—			7,784		—			7,784
TOTAL	$	14,193				$	44,562				$	114,710				$	413,168				$	586,633

⁽¹⁾ Distribution of maturities is based on the estimated average life of the asset.

38

2007 ANNUAL REPORT

Financial Condition — Summary

LOAN PORTFOLIO

Loans outstanding by major category as of December 31 for each of the last five years and the maturities at year-end 2007 are set forth in the following analyses.

(Dollar amounts in thousands)	2007		2006		2005		2004		2003
Loan Category
Commercial, financial and agricultural	$	461,086	$	407,995	$	382,214	$	401,724	$	374,638
Real estate — construction		29,637		33,336		31,918		32,810		35,361
Real estate — mortgage		673,355		691,989		707,008		753,826		766,911
Consumer		262,858		257,065		272,062		272,261		248,290
Lease financing		2,275		2,604		2,845		3,658		4,884
Total	$	1,429,211	$	1,392,989	$	1,396,047	$	1,464,279	$	1,430,084
Credit card loans held-for-sale	$	14,068		—		—		—		—

			After One
	Within		But Within		After Five
(Dollar amounts in thousands)	One Year		Five Years		Years		Total
Maturity Distribution
Commercial, financial and agricultural	$	223,954	$	193,781	$	43,351	$	461,086
Real estate — construction		12,869		7,441		9,327		29,637
Total	$	236,823	$	201,222	$	52,678		490,723
Real estate — mortgage								673,355
Consumer								262,858
Lease financing								2,275
Total							$	1,429,211
Credit card loans held-for-sale							$	14,068
Loans maturing after one year with:
Fixed interest rates			$	73,688	$	42,213
Variable interest rates				127,534		10,465
Total			$	201,222	$	52,678

39

FIRST FINANCIAL CORPORATION

Financial Condition — Summary

ALLOWANCE FOR LOAN LOSSES

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

(Dollar amounts in thousands)	2007			2006			2005			2004			2003
Amount of loans outstanding at December 31,	$	1,429,211		$	1,392,989		$	1,396,047		$	1,464,279		$	1,430,084
Average amount of loans by year	$	1,409,051		$	1,384,138		$	1,441,247		$	1,452,572		$	1,417,026
Allowance for loan losses at beginning of year	$	16,169		$	16,042		$	19,918		$	21,239		$	21,249
Loans charged off:
Commercial, financial and agricultural		3,433			2,066			6,093			4,080			2,253
Real estate — mortgage		1,026			1,617			2,590			623			1,101
Consumer		5,712			6,826			8,809			6,680			5,586
Leasing		5			—			—			1			—
Total loans charged off		10,176			10,509			17,492			11,384			8,940
Recoveries of loans previously charged off:
Commercial, financial and agricultural		389			1,262			284			452			432
Real estate — mortgage		139			187			343			37			166
Consumer		2,250			2,204			1,291			1,281			877
Leasing		—			—			—			1			—
Total recoveries		2,778			3,653			1,918			1,771			1,475
Net loans charged off		7,398			6,856			15,574			9,613			7,465
Provision charged to expense		6,580			6,983			11,698			8,292			7,455
Balance at end of year	$	15,351		$	16,169		$	16,042		$	19,918		$	21,239
Ratio of net charge-offs during period to average loans outstanding		.53	%		.50	%		1.08	%		.66	%		.53	%

The allowance is maintained at an amount management believes sufficient to absorb probable incurred losses in the loan portfolio. Monitoring loan quality and maintaining an adequate allowance is an ongoing process overseen by senior management and the loan review function. On at least a quarterly basis, a formal analysis of the adequacy of the allowance is prepared and reviewed by management and the Board of Directors. This analysis serves as a point in time assessment of the level of the allowance and serves as a basis for provisions for loan losses. The loan quality monitoring process includes assigning loan grades and the use of a watch list to identify loans of concern.

The analysis of the allowance for loan losses includes the allocation of specific amounts of the allowance to individual problem loans, generally based on an analysis of the collateral securing those loans. Portions of the allowance are also allocated to loan portfolios, based upon a variety of factors including historical loss experience, trends in the type and volume of the loan portfolios, trends in delinquent and non-performing loans, and economic trends affecting our market. These components are added together and compared to the balance of our allowance at the evaluation date. The following table presents the allocation of the allowance to the loan portfolios at year-end.

40

2007 ANNUAL REPORT

Financial Condition — Summary

	Years Ended December 31,
(Dollar amounts in thousands)	2007		2006		2005		2004		2003
Commercial, financial and agricultural	$	10,090	$	9,043	$	8,148	$	11,840	$	13,844
Real estate — mortgage		1,245		1,364		867		850		1,254
Consumer		4,016		5,762		7,027		7,228		6,141
Total Allowance for Loan Losses	$	15,351	$	16,169	$	16,042	$	19,918	$	21,239

NONPERFORMING LOANS

Management monitors the components and status of nonperforming loans as a part of the evaluation procedures used in determining the adequacy of the allowance for loan losses. It is the Corporation’s policy to discontinue the accrual of interest on loans where, in management’s opinion, serious doubt exists as to collectibility. The amounts shown below represent non-accrual loans, loans which have been restructured to provide for a reduction or deferral of interest or principal because of deterioration in the financial condition of the borrower and those loans which are past due more than 90 days where the Corporation continues to accrue interest.

(Dollar amounts in thousands)	2007		2006		2005		2004		2003
Non-accrual loans	$	7,971	$	9,893	$	8,464	$	19,862	$	8,429
Restructured loans		50		52		57		430		542
Accruing loans past due over 90 days		4,462		4,691		6,354		7,813		5,384
	$	12,483	$	14,636	$	14,875	$	28,105	$	14,355

The ratio of the allowance for loan losses as a percentage of nonperforming loans was 123% at December 31, 2007, compared to 110% in 2006. The following loan categories comprise significant components of the nonperforming loans at December 31, 2007 and 2006:

(Dollar amounts in thousands)	2007				2006
Non-accrual loans:
1-4 family residential	$	2,574	32	%	$	1,598	16	%
Commercial loans		3,938	50			6,551	66
Consumer loans		1,459	18			1,744	18
	$	7,971	100	%	$	9,893	100	%
Past due 90 days or more:
1-4 family residential	$	1,230	28	%	$	1,607	34	%
Commercial loans		2,795	62			2,542	54
Consumer loans		437	10			542	12
	$	4,462	100	%	$	4,691	100	%

41

FIRST FINANCIAL CORPORATION

Financial Condition — Summary

DEPOSITS

The information below presents the average amount of deposits and rates paid on those deposits for 2007, 2006 and 2005.

	2007					2006					2005
(Dollar amounts in thousands)	Amount		Rate			Amount		Rate			Amount		Rate
Non-interest-bearing demand deposits	$	226,822				$	206,839				$	153,027
Interest-bearing demand deposits		198,368		0.94	%		201,928		1.14	%		294,344		0.77	%
Savings deposits		410,919		2.62	%		410,458		1.87	%		392,791		1.21	%
Time deposits:
$100,000 or more		189,501		4.66	%		188,572		4.27	%		185,436		3.11	%
Other time deposits		477,114		4.30	%		480,116		4.01	%		457,685		3.11	%
TOTAL	$	1,502,724				$	1,487,913				$	1,483,283

The maturities of certificates of deposit of $100 thousand or more outstanding at December 31, 2007, are summarized as follows:

3 months or less	$	11,402
Over 3 through 6 months		35,587
Over 6 through 12 months		44,677
Over 12 months		102,235
TOTAL	$	193,901

42

2007 ANNUAL REPORT

Financial Condition — Summary

OTHER BORROWINGS

Advances from the Federal Home Loan Bank decreased slightly to $334.7 million in 2007 compared to $335.2 million in 2006. The Asset/Liability Committee reviews these investments and funding sources and considers the related strategies on a weekly basis. See Interest Rate Sensitivity and Liquidity below for more information.

CAPITAL RESOURCES

Bank regulatory agencies have established capital adequacy standards which are used extensively in their monitoring and control of the industry. These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance-sheet activity. As shown in the footnote to the consolidated financial statements (“Regulatory Matters”), the Corporation’s capital exceeds the requirements to be considered well capitalized at December 31, 2007.

First Financial Corporation’s objective continues to be to maintain adequate capital to merit the confidence of its customers and shareholders. To warrant this confidence, the Corporation’s management maintains a capital position which they believe is sufficient to absorb unforeseen financial shocks without unnecessarily restricting dividends to its shareholders. The Corporation’s dividend payout ratio for 2007 and 2006 was 44.8% and 44.2%, respectively. The Corporation expects to continue its policy of paying regular cash dividends, subject to future earnings and regulatory restrictions and capital requirements.

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.

The Asset Liability position is measured using sophisticated risk management tools, including earnings simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short- 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 on the following page shows the Corporation’s estimated sensitivity profile as of December 31, 2007. 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 decrease 0.54% over the next 12 months and increase 0.93% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would increase 0.27% over the next 12 months and decrease 1.31% over the following 12 months. These estimates assume all rate changes occur overnight and management takes no action as a result of this change.

43

FIRST FINANCIAL CORPORATION

Financial Condition — Summary

Basis Point	Percentage Change in Net Interest Income
Interest Rate Change	12 months			24 months			36 months
Down 200		0.46	%		-3.63	%		-7.16	%
Down 100		0.27			-1.31			-2.92
Up 100		-0.54			0.93			2.48
Up 200		-4.32			-1.59			2.51

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

Liquidity Risk: Liquidity is measured by the bank’s ability to raise funds to meet the obligations of its customers, including deposit withdrawals and credit needs. This is accomplished primarily by maintaining sufficient liquid assets in the form of investment securities and core deposits. The Corporation has $13.8 million of investments that mature throughout the coming 12 months. The Corporation also anticipates $66.9 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $28.2 million in securities to be called within the next 12 months.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS

The Corporation has various financial obligations, including contractual obligations and commitments, that may require future cash payments.

Contractual Obligations: The following table presents, as of December 31, 2007, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

	Payments Due In
	Note		One Year		One to		Three to		Over Five
(Dollar amounts in thousands)	Reference		or Less		Three Years		Five Years		Years		Total
Deposits without a stated maturity			$	881,114	$	—	$	—	$	—	$	881,114
Consumer certificates of deposit				513,361		115,846		19,179		221		648,607
Short-term borrowings		10		27,331		—		—		—		27,331
Other borrowings		11		90,232		249,760		724		569		341,285

Commitments: The following table details the amount and expected maturities of significant commitments as of December 31, 2007. Further discussion of these commitments is included in Note 13 to the consolidated financial statements.

	Total Amount		One Year		Over One
(Dollar amounts in thousands)	Committed		or Less		Year
Commitments to extend credit:
Unused loan commitments	$	275,656	$	178,285	$	97,371
Commercial letters of credit		17,336		13,685		3,651

Commitments to extend credit, including loan commitments, standby and commercial letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.

OUTLOOK

The Corporation’s primary market is west-central Indiana and east-central Illinois. Typically, this market does not expand or contract at rates that are experienced by both the state and national economies. This area continues to be driven primarily by the retail, higher education and health care industries. During 2007 most of the Corporation’s markets experienced stable labor market conditions. There are limited significant growth opportunities currently available.

44

2007 ANNUAL REPORT

Consolidated Balance Sheet — Average Balances And Interest Rates

	December 31,
	2007								2006								2005
	Average					Yield/			Average					Yield/			Average					Yield/
(Dollar amounts in thousands)	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Interest-earning assets:
Loans (1) (2)	$	1,409,051			105,804		7.51	%	$	1,384,138			100,475		7.26	%	$	1,441,247			96,957		6.73	%
Taxable investment securities		444,220			23,545		5.30			430,492			21,877		5.08			387,269			16,802		4.34
Tax-exempt investments (2)		188,012			13,354		7.10			176,044			12,794		7.27			171,802			12,248		7.13
Federal funds sold		14,756			768		5.20			16,203			788		4.87			13,772			496		3.60
Total interest-earning assets		2,056,039			143,471		6.98	%		2,006,877			135,934		6.77	%		2,014,090			126,503		6.28	%
Non-interest earning assets:
Cash and due from banks		61,655								66,302								74,005
Premises and equipment, net		32,762								31,309								30,720
Other assets		64,801								59,363								62,779
Less allowance for loan losses		(15,665	)							(16,533	)							(18,298	)
Totals	$	2,199,592							$	2,147,318							$	2,163,296
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction accounts	$	609,287			12,634		2.07	%	$	612,387			10,845		1.77	%	$	687,135			7,031		1.02	%
Time deposits		666,615			29,322		4.40			668,687			26,440		3.95			643,121			20,153		3.13
Short-term borrowings		32,140			1,611		5.01			15,759			746		4.73			25,766			783		3.04
Other borrowings		343,767			19,394		5.64			343,014			19,098		5.57			356,728			19,502		5.47
Total interest-bearing liabilities:		1,651,809			62,961		3.81	%		1,639,847			57,129		3.48	%		1,712,750			47,469		2.77	%
Non interest-bearing liabilities:
Demand deposits		226,822								206,839								153,027
Other		42,974								25,958								26,942
		1,921,605								1,872,644								1,892,719
Shareholders’ equity		277,987								274,674								270,577
Totals	$	2,199,592							$	2,147,318							$	2,163,296
Net interest earnings				$	80,510							$	78,805							$	79,034
Net yield on interest-earning assets							3.92	%							3.93	%							3.92	%

(1)	For purposes of these computations, nonaccruing loans are included in the daily average loan amounts outstanding.
(2)	Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 35%.

45

FIRST FINANCIAL CORPORATION

MARKET AND DIVIDEND INFORMATION

At year-end 2007 shareholders owned 13,136,359 shares of the Corporation’s common stock. The stock is traded on the NASDAQ Global under the symbol THFF.

Historically, the Corporation has paid cash dividends semi-annually and currently expects that comparable cash dividends will continue to be paid in the future. The following table gives quarterly high and low trade prices and dividends per share during each quarter for 2007 and 2006.

	2007						2006
					Cash						Cash
	Trade Price				Dividends		Trade Price				Dividends
Quarter ended	High		Low		Declared		High		Low		Declared
March 31	$	35.74	$	28.20			$	29.80	$	27.00
June 30	$	32.45	$	27.26	$	.43	$	31.91	$	27.42	$	.42
September 30	$	32.78	$	23.48			$	33.45	$	28.21
December 31	$	32.29	$	26.93	$	.44	$	35.92	$	31.50	$	.43

TOTAL RETURN PERFORMANCE

	Period Ending
Index	12/31/02		12/31/03		12/31/04		12/31/05		12/31/06		12/31/07
First Financial Corporation	$	100.00	$	126.43	$	151.23	$	120.06	$	161.93	$	133.53
Russell 2000		100.00		147.25		174.24		182.18		215.64		212.26
SNL $1B-$5B Bank Index		100.00		135.99		167.83		164.97		190.90		139.06

46

EX-21

Exhibit 21 — Subsidiaries of the Registrant

First Financial Bank N.A. is a wholly-owned subsidiary of the Registrant. It is a national banking association. The bank conducts its business under the name of First Financial Bank N.A.

The Morris Plan Company is a wholly-owned subsidiary of the Registrant. It is an Indiana corporation. The company conducts its business under the name of The Morris Plan Company of Terre Haute, Inc.

Forrest Sherer, Inc. is a wholly-owned subsidiary of the Registrant. It is an Indiana corporation. It is a full-line insurance agency and conducts its business under the name Forrest Sherer, Inc.

EX-31.1

Exhibit 31.1 — Certification pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Executive Officer

I, Norman L. Lowery, certify that:

1	I have reviewed this annual report on Form 10-K 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 control over financial reporting.

Date: March 12, 2008
By	/s/ Norman L. Lowery
	Norman L. Lowery, Vice Chairman and CEO

EX-31.2

Exhibit 31.2 —  Certification pursuant to Rule 13a-14(a) for Annual Report of Form 10-K by Principal Financial Officer

I, Michael A. Carty, certify that:

1	I have reviewed this annual report on Form 10-K 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 control over financial reporting.

Date: March 12, 2008
By	/s/ Michael A. Carty
	Michael A. Carty,
	Treasurer and CFO

EX-32.1

Exhibit 32.1 —  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of First Financial Corporation (the “Corporation”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman L. Lowery, Vice Chairman and CEO of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of section 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 Corporation.

This certification is furnished solely pursuant to 18 U.S.C. section 1350 and is not being filed for any other purpose.

Date: March 12, 2008

/s/ Norman L. Lowery

Norman L. Lowery

EX-32.2

Exhibit 32.2 —  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of First Financial Corporation (the “Corporation”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Carty, Secretary, Treasurer and CFO of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of section 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 Corporation.

This certification is furnished solely pursuant to 18 U.S.C. section 1350 and is not being filed for any other purpose.

Date: March 12, 2008

/s/ Michael A. Carty                  

Michael A. Carty