SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2003 ---------------- Commission File Number 0-16759 ------- FIRST FINANCIAL CORPORATION --------------------------- (Exact name of registrant as specified in its charter) INDIANA 35-1546989 ------- ---------- (State or other jurisdiction (I.R.S. Employer Incorporation or organization) Identification No.) One First Financial Plaza, Terre Haute, IN 47807 - ------------------------------------------ ----- (Address of principal executive office) (Zip Code) (812)238-6000 ------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No --- --- As of April 30, 2003 were outstanding 6,794,085 shares without par value, of the registrant. FIRST FINANCIAL CORPORATION FORM 10-Q INDEX PART I. Financial Information Page No. ------- Item 1. Financial Statements: Consolidated Statements of Condition.............................................................. 3 Consolidated Statements of Income................................................................. 4 Consolidated Statements of Shareholders' Equity and Comprehensive Income.......................... 5 Consolidated Statements of Cash Flows............................................................. 6 Notes to Consolidated Financial Statements........................................................ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 8 Item 3. Interest Rate Risk and Quantitative and Qualitative Disclosures about Market Risk......... 9 Item 4. Controls and Procedures................................................................... 11 PART II. Other Information: Item 6. Exhibits and Reports on Form 8-K............................................................ 11 Signatures........................................................................................... 12 Certification of Financial Results................................................................... 15 2 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CONDITION (Dollar amounts in thousands, except per share data) March 31, December 31, 2003 2002 ----------- ----------- (Unaudited) ASSETS Cash and due from banks $ 80,398 $ 96,043 Federal funds sold and short-term investments 2,592 50 Securities, available-for-sale 515,439 511,548 Loans: Commercial, financial and agricultural 327,846 331,316 Real estate - construction 36,889 42,930 Real estate - mortgage 764,459 789,618 Installment 262,379 268,067 Lease financing 4,327 1,281 ----------- ----------- 1,395,900 1,433,212 Less: Unearned income (595) (648) Allowance for loan losses (21,814) (21,249) ----------- ----------- 1,373,491 1,411,315 Accrued interest receivable 13,621 15,199 Premises and equipment, net 29,486 29,809 Bank-owned life insurance 48,369 47,736 Goodwill 7,102 7,102 Other intangible assets 4,114 4,289 Other real estate owned 4,474 5,006 Other assets 33,490 41,651 ----------- ----------- TOTAL ASSETS $ 2,112,576 $ 2,169,748 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 147,568 $ 146,585 Interest-bearing: Certificates of deposit of $100 or more 185,678 200,325 Other interest-bearing deposits 1,088,497 1,087,744 ----------- ----------- 1,421,743 1,434,654 Short-term borrowings 21,513 34,355 Other borrowings 391,873 423,290 Other liabilities 30,558 35,478 ----------- ----------- TOTAL LIABILITIES 1,865,687 1,927,777 ----------- ----------- Shareholders' equity Common stock, $.125 stated value per share; Authorized shares--40,000,000 Issued shares-7,225,483 Outstanding shares--6,794,085 in 2003 and 6,809,445 in 2002 903 903 Additional capital 66,809 66,809 Retained earnings 185,242 178,209 Accumulated other comprehensive income 12,884 14,276 Treasury shares at cost 431,398 in 2003 and 416,038 in 2002 (18,949) (18,226) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 246,889 241,971 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,112,576 $ 2,169,748 =========== =========== See accompanying notes. 3 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollar amounts in thousands, except per share data) Three Months Ended March 31, 2003 2002 ------- ------- (Unaudited) (Unaudited) INTEREST INCOME: Loans, including related fees $24,735 $26,535 Securities: Taxable 4,318 4,945 Tax-exempt 1,971 2,052 Other 642 773 ------- ------- TOTAL INTEREST INCOME 31,666 34,305 ------- ------- INTEREST EXPENSE: Deposits 7,302 8,977 Short-term borrowings 84 250 Other borrowings 5,351 5,612 ------- ------- TOTAL INTEREST EXPENSE 12,737 14,839 ------- ------- NET INTEREST INCOME 18,929 19,466 Provision for loan losses 2,227 1,932 ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 16,702 17,534 ------- ------- NON-INTEREST INCOME: Trust and financial services 914 842 Service charges and fees on deposit accounts 1,532 1,506 Other service charges and fees 2,116 1,255 Securities gains -- 1 Insurance commissions 1,505 1,324 Sales of mortgage loans 1,058 566 Other 954 679 ------- ------- TOTAL NON-INTEREST INCOME 8,079 6,173 ------- ------- NON-INTEREST EXPENSE: Salaries and employee benefits 9,012 8,509 Occupancy expense 1,066 939 Equipment expense 860 852 Other 4,487 4,528 ------- ------- TOTAL NON-INTEREST EXPENSE 15,425 14,828 ------- ------- INCOME BEFORE INCOME TAXES 9,356 8,879 Provision for income taxes 2,323 2,151 ------- ------- NET INCOME $ 7,033 $ 6,728 ======= ======= EARNINGS PER SHARE: Basic and Diluted $ 1.04 $ 0.98 ======= ======= Weighted average number of shares outstanding (in thousands) 6,794 6,832 ======= ======= See accompanying notes. 4 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME Three Months Ended March 31, 2003, and 2002 (Dollar amounts in thousands, except per share data) (Unaudited) Accumulated Other Common Additional Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total Balance, January 1, 2003 $ 903 $ 66,809 $ 178,209 $ 14,276 $ (18,226) $ 241,971 Comprehensive income: Net income 7,033 7,033 Change in net unrealized gains/(losses) on available- for-sale securities (1,392) (1,392) Total comprehensive income 5,641 Treasury stock purchase (723) (723) --------- --------- --------- --------- --------- --------- Balance, March 31, 2003 $ 903 $ 66,809 $ 185,242 $ 12,884 $ (18,949) $ 246,889 ========= ========= ========= ========= ========= ========= Balance, January 1, 2002 $ 903 $ 66,680 $ 158,038 $ 8,299 $ (16,409) $ 217,511 Comprehensive income: Net income 6,728 6,728 Change in net unrealized gains/(losses) on available-for- sale securities (412) (412) Total comprehensive income 6,316 Treasury stock purchase (516) (516) --------- --------- --------- --------- --------- --------- Balance, March 31, 2002 $ 903 $ 66,680 $ 164,766 $ 7,887 $ (16,925) $ 223,311 ========= ========= ========= ========= ========= ========= See accompanying notes. 5 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands) Three Months Ended March 31, 2003 2002 -------- -------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 7,033 $ 6,728 Adjustments to reconcile net income to net cash provided by operating activities: Net accretion of discounts on investments (31) (411) Provision for loan losses 2,227 1,932 Securities gains -- 1 Depreciation and amortization 766 791 Other, net 10,409 1,838 -------- -------- NET CASH FROM OPERATING ACTIVITIES 20,404 10,879 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Sales of available-for-sale securities -- 22,776 Maturities and principal reductions on available-for-sale securities 54,118 41,634 Purchases of available-for-sale securities (60,298) (79,662) Loans made to customers, net of repayments 35,063 5,580 Net change in federal funds sold (2,542) 42,206 Purchase of First Community Financial Corp. -- 14,554 Additions to premises and equipment (268) (622) -------- -------- NET CASH FROM INVESTING ACTIVITIES 26,073 46,466 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in deposits (12,911) (41,591) Net change in short-term borrowings (12,842) (21,423) Dividends paid (4,229) (3,973) Purchase of treasury stock (723) (516) Proceeds from other borrowings -- 21,005 Repayments on other borrowings (31,417) (15,669) -------- -------- NET CASH FROM FINANCING ACTIVITIES (62,122) (62,167) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS (15,645) (4,822) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 96,043 68,205 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 80,398 $ 63,383 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 13,309 $ 15,792 ======== ======== Income taxes paid $ -- $ 350 ======== ======== See accompanying notes. 6 FIRST FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying March 31, 2003 and 2002 consolidated financial statements are unaudited. The December 31, 2002 consolidated financial statements are as reported in the First Financial Corporation (the Corporation) 2002 annual report. The following notes should be read together with notes to the consolidated financial statements included in the 2002 annual report filed with the Securities and Exchange Commission as an exhibit to Form 10-K. 1. The significant accounting policies followed by the Corporation and its subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated financial statements and are of a normal recurring nature. The Corporation reports financial information for only one segment, banking. 2. A loan is considered to be impaired when, based upon current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan. Impairment is primarily measured based on the fair value of the loan's collateral. The following table summarizes impaired loan information: (000's) March 31, December 31, 2003 2002 --------- ------------- Impaired loans with related allowance for loan losses calculated under SFAS No. 114.............................................................. $9,007 $8,812 Interest payments on impaired loans are typically applied to principal unless collection of the principal amount is deemed to be fully assured, in which case interest is recognized on a cash basis. 3. Securities The amortized cost and fair value of the Corporation's investments at March 31, 2003 are shown below. All securities are classified as available-for-sale. (000's) March 31, 2003 Amortized Cost Fair Value -------------- ---------- United States Government and its agencies $178,139 $181,955 Collateralized Mortgage Obligations 67,173 69,729 States and Municipal 156,080 165,145 Corporate Obligations 96,781 98,610 -------- -------- $498,173 $515,439 ======== ======== 4. Short-Term Borrowings Period-end short-term borrowings were comprised of the following: (000's) March 31, December 31, 2003 2002 --------- ------------ Federal Funds Purchased $10,115 $16,311 Repurchase Agreements 10,404 13,237 Note Payable - U.S. Government 994 4,807 ------- ------- $21,513 $34,355 ======= ======= 5. Other Borrowings Other borrowings at period-end are summarized as follows: (000's) March 31, December 31, 2003 2002 -------- ------------ FHLB advances $367,273 $397,190 Note payable to a financial institution 18,000 19,500 City of Terre Haute, Indiana economic development revenue bonds 6,600 6,600 -------- -------- $391,873 $423,290 ======== ======== 7 FIRST FINANCIAL CORPORATION ITEMS 2. and 3. Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk The purpose of this discussion is to point out key factors in the Corporation's recent performance compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page four of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation's annual report for 2002. Forward-looking statements contained in the following discussion are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Corporation's control and are subject to change. These uncertainties can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements in this discussion. Summary of Operating Results Net income for the three months ended March 31, 2003 was $7.0 million, a 4.5% improvement from the $6.7 million in the same period in 2002. Basic earnings per share increased to $1.04 for the first quarter of 2003 compared to $0.98 for 2002, an 6.1% improvement. The primary components of income and expense affecting net income are discussed in the following analysis. Net Interest Income The Corporation's primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest paid for deposits and other sources of funds. Net interest income decreased to $18.9 million in the first three months of 2003 from $19.5 million in the same period of 2002, a 2.8% decrease. This was the result of a decrease of $23.1 million in average interest earning assets and a reduced net interest margin for 2003. The net interest margin decreased from 4.09% in 2002 to 4.02% in 2003, a 1.7% decrease driven by a greater decline in the yield on earning assets than in the average cost of funds. Non-Interest Income The financial results for the quarter were driven by a $1.9 million, or 30.9%, increase over comparable 2002 non-interest income. Mortgage interest rates continue to hover at all-time lows. Selling these low fixed-rate mortgages in the secondary market has been the over-riding strategy of the Corporation. Net cash gains on these sales in 2003 account for $492 thousand of the $1.9 million increase. Non-Interest Expenses Non-interest expenses increased $597 thousand, or 4.0%. This would include one additional month of expenses for First Community in 2003 than in 2002, due to the acquisition occurring on February 1, 2002. Other cost increases would include merit increases in salaries and higher fringe benefit costs. 8 Allowance for Loan Losses The Corporation's provision for loan losses increased to $2.2 million for the first three months of 2003 compared to $1.9 million in the same period of 2002. At March 31, 2003, the allowance for loan losses was 1.56% of total loans, an increase from 1.48% at December 31, 2002. Net chargeoffs for the first three months of 2003 were $1.7 million compared to only $1.5 million for the same period of 2002. Based on management's analysis of the current portfolio, an evaluation that includes consideration of historical loss experience and potential loss exposure on identified problem loans, management believes the allowance of $21.8 million at March 31, 2003 is adequate. UNDER-PERFORMING LOANS Under-performing loans consist of (1) nonaccrual loans on which the ultimate collectability of the full amount of interest is uncertain, (2) loans which have been renegotiated to provide for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, and (3) loans past due ninety days or more as to principal or interest. A summary of under-performing loans at March 31, 2003 and December 31, 2002 follows: (000's) March 31, 2003 December 31, 2002 -------------- ----------------- Nonaccrual loans $11,550 $11,807 Restructured loans 122 546 ------- ------- 11,672 12,353 Accruing loans past due over 90 days 4,786 5,899 ------- ------- $16,458 $18,252 ======= ======= Ratio of the allowance for loan losses as a percentage of under-performing loans 133% 116% The following loan categories comprise significant components of the nonperforming loans: (000's) March 31, 2003 December 31, 2002 -------------- ----------------- Non-Accrual Loans: 1-4 family residential $ 2,227 $ 2,382 Commercial loans 7,725 7,813 Installment loans 1,595 1,612 Other, various 3 -- ------- ------- $11,550 $11,807 ======= ======= Past due 90 days or more: 1-4 family residential $ 2,549 $ 2,817 Commercial loans 1,397 1,934 Installment loans 840 1,128 Other, various -- 20 ------- ------- $ 4,786 $ 5,899 ======= ======= 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. 9 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 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 earning simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short-term and long-term exposure to interest rate risk. Simulation modeling measures the effects of changes in interest rates, changes in the shape of the yield curve and the effects of embedded options on net interest income. This measure projects earnings in the various environments over the next three years. It is important to note that measures of interest rate risk have limitations and are dependent on various assumptions. These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income. Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions. The Committee has performed a thorough analysis of these assumptions and believes them to be valid and theoretically sound. These assumptions are continuously monitored for behavioral changes. The Corporation from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation's risk management strategy. The table below shows the Corporation's estimated sensitivity profile as of March 31, 2003. The change in interest rates assumes a parallel shift in interest rates of 100 and 200 basis points. Given a 100 basis point increase in rates, net interest income would increase 3.85% over the next 12 months and increase 7.90% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would decrease 2.41% over the next 12 months and decrease 6.37% over the following 12 months. These estimates assume all rate changes occur overnight and management takes no action as a result of this change. Percentage Change in Net Interest Income Basis Point ----------------------------------------- Interest Rate Change 12 months 24 months 36 months - ----------------------------------------------------------------------------- Down 200 -6.25 -13.40 -16.53 Down 100 -2.41 -6.37 -8.24 Up 100 3.85 7.90 10.01 Up 200 6.77 14.61 18.70 Typical rate shock analysis does not reflect management's ability to react and thereby reduce the effect of rate changes, and represents a worst-case scenario. Liquidity Risk Liquidity is measured by each 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 $6.6 million of investments that mature throughout the coming 12 months. The Corporation also anticipates $126.7 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $26.5 million in securities to be called within the next 12 months. With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers. Financial Condition Comparing the first quarter of 2003 to 2002, average loans are down $30.9 million due primarily to continued refinancing and sales of fixed-rate mortgages. Average deposits were up $11.9 million. These resources were used to pay down average bank borrowings by $42.5 million. Average shareholders' equity increased $22.5 million, or 10.1%. Strong financial performance and increased unrealized gains on securities pushed book value per share up 11.2% to $36.34 in 2003 from $32.68 in 2002. Book value per share is calculated by dividing the total equity by the number of shares outstanding. Capital Adequacy As of March 31, 2003, the most recent notification from the respective regulatory agencies categorized the Corporation and its subsidiary banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as 10 adequately capitalized the Corporation must maintain minimum total risk-based, Tier I risk-based and Tier I leverage rations as set forth in the table. There are no conditions or events since that notification that management believes have changed the Corporation's category. To Be Well March 31, 2003 December 31,2002 Capitalized -------------- ---------------- ----------- Total risk-based capital ratio 16.68% 14.83% =>10.0% Tier I risk-based capital ratio 15.49% 13.58% =>6.0% Tier I leverage capital ratio 10.94% 9.79% =>5.0% ITEM 4. Controls and Procedures (a) Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of First Financial Corporation's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective. (b) Subsequent to the date of their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in First Financial Corporation's internal controls or in other factors that could significantly affect its internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits 3(i) Amended and Restated Articles of Incorporation of First Financial Corporation, by reference to Exhibit 3(i) to Form 10-Q as filed for September 30, 2002 3(ii) Code of By-Laws of First Financial Corporation, by reference to Exhibit 3(ii) to Form 10-Q as filed for September 30, 2002. 10.1 Deferred Compensation Agreement and Split Dollar Insurance Agreement for Donald E. Smith, by reference to Exhibit 10.1 to Form 10-Q as filed for September 30, 2002. 10.2 Employment Agreement for Norman L. Lowery 10.3 2001 Long-Term Incentive Plan of First Financial Corporation, by reference to Exhibit 10.3 to Form 10-Q as filed for September 30, 2002. 99.1 Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 (b) No reports on Form 8-K were filed during the quarter of the fiscal year for which this report is filed. 11 FIRST FINANCIAL CORPORATION PART II OTHER INFORMATION FORM 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST FINANCIAL CORPORATION --------------------------- (Registrant) Date: May 9, 2003 By /s/ DONALD E. SMITH ------------------------------------ Donald E. Smith, Chairman Date: May 9, 2003 By /s/ NORMAN L. LOWER ------------------------------------ Norman L. Lowery, Vice Chairman Date: May 9, 2003 By /s/ MICHAEL A. CARTY ------------------------------------ Michael A. Carty, Treasurer & CFO 12 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Norman L. Lowery, certify that: 1 I have reviewed this quarterly report on Form 10-Q of First Financial Corporation; 2 Based on my knowledge, this quarterly 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 quarterly report; 3 Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4 The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures 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 quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5 The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6 The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 Signed: /s/ NORMAN L. LOWERY ------------------------------- Norman L. Lowery, Vice Chairman and CEO 13 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Michael A. Carty, certify that: 1 I have reviewed this quarterly report on Form 10-Q of First Financial Corporation; 2 Based on my knowledge, this quarterly 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 quarterly report; 3 Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4 The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures 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 quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5 The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6 The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 Signed: /s/ MICHAEL A. CARTY ------------------------------- Michael A. Carty, Treasurer and CFO 14