SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2005 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, 2005 were outstanding 13,491,938 shares without par value, of the registrant. FIRST FINANCIAL CORPORATION FORM 10-Q INDEX Page No. -------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets.................................................................... 3 Consolidated Statements of Income.............................................................. 4 Consolidated Statements of Shareholders' Equity................................................ 5 Consolidated Statements of Cash Flows.......................................................... 6 Notes to Consolidated Financial Statements..................................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................... 10 Item 4. Controls and Procedures.................................................................. 11 PART II. Other Information: Item 2. Changes in Securities and Use of Proceeds................................................ 12 Item 5. Other Information........................................................................ 12 Item 6. Exhibits................................................................................ 13 Signatures....................................................................................... 14 2 Part I - Financial Information Item 1. Financial Statements FIRST FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands, except per share data) March 31, December 31, 2005 2004 ------------ ------------ (Unaudited) ASSETS Cash and due from banks $ 76,266 $ 94,928 Federal funds sold and short-term investments 1,150 5,400 Securities available-for-sale 511,040 507,990 Loans: Commercial, financial and agricultural 393,012 401,724 Real estate - construction 33,544 32,810 Real estate - mortgage 748,622 753,826 Installment 270,173 272,261 Lease financing 3,213 3,658 ------------ ------------ 1,448,564 1,464,279 Less: Unearned income (379) (408) Allowance for loan losses (20,074) (19,918) ------------ ------------ 1,428,111 1,443,953 ------------ Accrued interest receivable 11,039 12,016 Premises and equipment, net 31,197 31,154 Bank-owned life insurance 49,795 49,177 Goodwill 7,102 7,102 Other intangible assets 2,953 3,093 Other real estate owned 3,686 3,262 Other assets 25,112 25,917 ------------ ------------ TOTAL ASSETS $ 2,147,451 $ 2,183,992 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 176,223 $ 145,852 Interest-bearing: Certificates of deposit of $100 or more 190,371 184,604 Other interest-bearing deposits 1,099,763 1,112,665 ------------ ------------ 1,466,457 1,443,121 Short-term borrowings 20,834 75,527 Other borrowings 362,476 362,486 Other liabilities 27,510 34,523 ------------ ------------ TOTAL LIABILITIES 1,877,277 1,915,657 ------------ ------------ Shareholders' equity Common stock, $.125 stated value per share; Authorized shares -- 40,000,000 Issued shares-14,450,966 Outstanding shares -- 13,491,938 in 2005 and 13,535,770 in 2004 1,806 1,806 Additional paid-in capital 67,519 67,519 Retained earnings 217,934 211,623 Accumulated other comprehensive income 5,252 8,357 Treasury shares at cost 959,028 in 2005 and 915,196 in 2004 (22,337) (20,970) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 270,174 268,335 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,147,451 $ 2,183,992 ============ ============ See accompanying notes. 3 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollar amounts in thousands, except per share data) Three Months Ended March 31, 2005 2004 ----------- ----------- (Unaudited) (Unaudited) INTEREST INCOME: Loans, including related fees $ 23,294 $ 22,922 Securities: Taxable 3,757 3,909 Tax-exempt 1,652 1,841 Other 662 604 --------- --------- TOTAL INTEREST INCOME 29,365 29,276 --------- --------- INTEREST EXPENSE: Deposits 5,953 6,073 Short-term borrowings 198 224 Other borrowings 4,871 5,046 --------- --------- TOTAL INTEREST EXPENSE 11,022 11,343 --------- --------- NET INTEREST INCOME 18,343 17,933 Provision for loan losses 2,223 1,923 --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 16,120 16,010 --------- --------- NON-INTEREST INCOME: Trust and financial services 975 1,013 Service charges and fees on deposit accounts 2,605 2,656 Other service charges and fees 1,617 1,530 Securities gains 6 13 Insurance commissions 1,339 1,388 Sales of mortgage loans 187 411 Gain on life insurance benefit -- 4,113 Other 1,003 1,453 --------- --------- TOTAL NON-INTEREST INCOME 7,732 12,577 --------- --------- NON-INTEREST EXPENSE: Salaries and employee benefits 9,264 9,353 Occupancy expense 989 970 Equipment expense 918 834 Other 4,170 4,375 --------- --------- TOTAL NON-INTEREST EXPENSE 15,341 15,532 --------- --------- INCOME BEFORE INCOME TAXES 8,511 13,055 Provision for income taxes 2,200 2,370 --------- --------- NET INCOME $ 6,311 $ 10,685 ========= ========= EARNINGS PER SHARE: Basic and Diluted $ .48 $ .79 ========= ========= Weighted average number of shares outstanding (in thousands) 13,221 13,557 ========= ========= See accompanying notes. 4 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three Months Ended March 31, 2005, and 2004 (Dollar amounts in thousands, except per share data) (Unaudited) Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income/(Loss) Stock Total Balance, January 1, 2004 $1,806 $67,181 $194,294 $11,463 $(19,465) $255,279 Comprehensive income: Net income 10,685 10,685 Change in net unrealized gains/(losses) on available for-sale securities 1,543 1,543 -------- Total comprehensive income 12,228 Treasury stock purchase (1,374) (1,374) ------ ------- -------- ------- --------- -------- Balance, March 31, 2004 $1,806 $67,181 $204,979 $13,006 $(20,839) $266,133 ====== ======= ======== ======= ========= ======== Balance, January 1, 2005 $1,806 $67,519 $211,623 $ 8,357 $(20,970) $268,335 Comprehensive income: Net income 6,311 6,311 Change in net unrealized gains/(losses) on available for-sale securities (3,105) (3,105) -------- Total comprehensive income 3,206 Treasury stock purchase (1,367) (1,367) ------ ------- -------- ------- --------- -------- Balance, March 31, 2005 $1,806 $67,519 $217,934 $ 5,252 $ (22,337) $270,174 ====== ======= ======== ======= ========= ======== See accompanying notes. 5 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands, except per share data) Three Months Ended March 31, 2005 2004 ---------- ---------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 6,311 $ 10,685 Adjustments to reconcile net income to net cash provided by operating activities: Net accretion of discounts on investments (141) (520) Provision for loan losses 2,223 1,923 Securities gains (losses) (6) (13) Depreciation and amortization 832 734 Gain on life insurance benefit -- (4,113) Other, net 2,023 (3,792) ---------- ---------- NET CASH FROM OPERATING ACTIVITIES 11,242 4,904 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Sales of securities available-for-sale 1,629 12,636 Maturities and principal reductions on securities available-for-sale 32,141 17,432 Purchases of securities available-for-sale (41,854) (20,211) Loans made to customers, net of repayments 12,813 (4,970) Net change in federal funds sold 4,250 (7,766) Proceeds from life insurance benefit -- 7,267 Additions to premises and equipment (735) (1,324) ---------- ---------- NET CASH FROM INVESTING ACTIVITIES 8,244 3,064 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in deposits 23,336 (46,852) Net change in short-term borrowings (54,693) (16,471) Dividends paid (5,414) (4,889) Purchase of treasury stock (1,367) (1,374) Proceeds from other borrowings -- 2,005 Repayments on other borrowings (10) (4,575) ---------- ---------- NET CASH FROM FINANCING ACTIVITIES (38,148) (39,214) ---------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS (18,662) (31,246) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 94,928 94,198 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 76,266 $ 62,952 ========== ========== See accompanying notes. 6 FIRST FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying March 31, 2005 and 2004 consolidated financial statements are unaudited. The December 31, 2004 consolidated financial statements are as reported in the First Financial Corporation (the "Corporation") 2004 annual report. The following notes should be read together with notes to the consolidated financial statements included in the 2004 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, 2005 2004 --------- ------------ Impaired loans with related allowance for loan losses calculated under SFAS No. 114............ $ 18,130 $ 18,822 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, 2005 and December 31, 2004 are shown below. All securities are classified as available-for-sale. (000's) (000's) March 31, 2005 December 31, 2004 Amortized Cost Fair Value Amortized Cost Fair Value -------------- ------------ -------------- ------------ United States Government entity mortgage-backed securities $ 247,797 $ 245,562 $ 227,927 $ 229,028 Collateralized Mortgage Obligations 15,957 15,926 19,895 19,866 State and Municipal Obligations 132,207 138,153 137,206 144,294 Corporate Obligations 102,014 103,101 104,754 106,077 Equity Securities 4,312 8,298 4,280 8,725 ------------ ------------ ------------ ------------ $ 502,287 $ 511,040 $ 494,062 $ 507,990 ============ ============ ============ ============ 4. Short-Term Borrowings Period - end short-term borrowings were comprised of the following: (000's) March 31, December 31, 2005 2004 --------- ------------ Federal Funds Purchased $ 14,636 $ 69,002 Repurchase Agreements 5,571 5,597 Note Payable - U.S. Government 627 928 --------- --------- $ 20,834 $ 75,527 ========= ========= 7 5. Other Borrowings Other borrowings at period-end are summarized as follows: (000's) March 31, December 31, 2005 2004 --------- ------------ FHLB advances $ 337,876 $ 337,886 Note payable to a financial institution 18,000 18,000 City of Terre Haute, Indiana economic development revenue bonds 6,600 6,600 --------- ---------- $ 362,476 $ 362,486 ========= ========== 6. Components of Net Periodic Benefit Cost (000's) Post-Retirement Pension Benefits Health Benefits Three Months ended March 31, 2005 2004 2005 2004 ------- ------- ------- ------- Service cost $ 701 $ 646 $ 35 $ 21 Interest cost 622 551 80 61 Expected return on plan assets (821) (700) -- -- Amortization of transition obligation -- -- 15 15 Amortization of prior service cost 14 14 -- Amortization of net (gain) loss 62 62 63 34 ------- ------- ------- Net Periodic Benefit Cost $ 578 $ 573 $ 193 $ 131 ======= ======= ======= ======= Employer Contributions First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2004 that it expected to contribute $1.5 and $1.2 million respectively to its Pension Plan and ESOP and $300,000 to the Post Retirement Health Benefits Plan in 2005. A contribution to the Pension Plan of $350,000 for the quarter ended March 31, 2005 was made on April 11, 2005. First Financial Corporation anticipates contributing an additional $1.1 and $1.2 million respectively to its Pension Plan and ESOP in 2005. Contributions of $75,000 have been made through the first quarter of 2005 for the Post Retirement Health Benefits plan. First Financial Corporation anticipates contributing an additional $225,000 to the Post Retirement Health Benefits plan in 2005. ITEMS 2. and 3. Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk The purpose of this discussion is to point out key factors in the Corporation's recent performance compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page three of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation's annual report for 2004. 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, 2005 was $6.3 million compared to $10.7 million in the same period in 2004. The three months ended March 31, 2004 net income included $4.1 million non taxable gain on life insurance benefit. There was no gain on life insurance benefit in 2005. Basic earnings per share decreased to $0.48 for the first quarter of 2005 compared to $0.79 for 2004, a 39.2% decrease. The primary components of income and expense affecting net income are discussed in the following analysis. 8 Net Interest Income The Corporation's primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest paid for deposits and other sources of funds. Net interest income increased to $18.3 million in the first three months of 2005 from $17.9 million in the same period in 2004, a 2.3% increase. The net interest margin increased to 3.92% in 2005 from 3.78% in 2004, a 3.7% increase, driven by a greater increase in the yield on earning assets than in the average cost of funds. Interest rate increases in 2005 are a factor in the margin increase. Non-Interest Income The Non-interest income for the quarter was $7.7 million. The gain on life insurance benefit of $4.1 million that was realized during the first three months of 2004 was the major difference between these results and the $12.6 million of non-interest income for the same period in 2004. The gain on sale of mortgage loans was less in the first quarter of 2005 by $224,000 than the same period of 2004 due to a decrease in the volume of loans being sold. Increased interest rates in the last half of 2004 caused less fixed rate loans to be made which leads to fewer loans being sold. Non-Interest Expenses The Corporation reduced the amount of non-interest expense for the quarter ended March 31, 2005 compared to the same period in 2004 by $191 thousand or 1.2% Expenses related to the sale of loans were less during the first quarter of 2005 for the same reason discussed in non-interest income. The Corporation has also realized some cost savings through efficiencies gained from the consolidation of several of its affiliate banks into the lead bank, First Financial Bank. Cost increases included merit increases in salaries and higher benefit costs. Income tax expense remained relatively level, despite higher pre-tax income in the same period in 2004. The gain from life insurance benefits is non-taxable. The effective tax rate for both periods was 26%, after adjusting for the gain on life insurance benefits. Allowance for Loan Losses The Corporation's provision for loan losses increased to $2.2 million for the first three months of 2005 compared to $1.9 million in the same period of 2004. Net charge-offs for the first three months of 2005 were $2.1 million compared to $1.8 million for the same period in 2004. The allowance for loan losses has decreased from 1.49% of gross loans, or $21.4 million at March 31, 2004 to 1.38% of gross loans, or $20.1 million at March 31, 2005. Based on management's analysis of the current portfolio, an evaluation that includes consideration of historical loss experience and probable incurred losses on identified problem loans, management believes the allowance is adequate. Non-performing Loans Non-performing loans consist of (A) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain, (B) 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 (C) loans past due ninety days or more as to principal or interest. A summary of non-performing loans at March 31, 2005 and December 31, 2004 follows: (000's) March 31, December 31, 2005 2004 --------- ------------ Non-accrual loans $ 19,827 $ 19,862 Restructured loans 370 430 --------- --------- 20,197 20,292 Accruing loans past due over 90 days 6,585 7,813 --------- --------- $ 26,782 $ 28,105 ========= ========= Ratio of the allowance for loan losses as a percentage of non-performing loans 75% 71% 9 The following loan categories comprise significant components of the nonperforming loans: (000's) March 31, 2005 December 31, 2004 -------------- ----------------- Non-Accrual Loans: 1-4 family residential $ 978 $ 608 Commercial loans 17,298 17,635 Installment loans 1,551 1,619 ----------- ----------- $ 19,827 $ 19,862 =========== =========== Past due 90 days or more: 1-4 family residential $ 3,633 $ 3,723 Commercial loans 1,500 2,159 Installment loans 1,452 1,931 ----------- ----------- $ 6,585 $ 7,813 =========== =========== 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 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, 2005. 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 4.05% over the next 12 months and increase 7.53% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would decrease 2.49% over the next 12 months and decrease 5.90% 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 -6.96 -13.87 -18.97 Down 100 -2.49 -5.90 -8.56 Up 100 4.05 7.53 10.97 Up 200 4.65 10.89 16.52 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. 10 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 $32.7 million of investments that mature throughout the coming 12 months. The Corporation also anticipates $82.7 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $16.2 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 2005 to the same period in 2004, average loans were up $16.9 million. Average deposits were up $5.1 million. The investment portfolio decreased by an average of $64.6 million. Reductions in the average cash and due from banks balances of $3.3 million combined with the reduction of investments also allowed the Corporation to reduce borrowings $60.0 million. Average shareholders' equity increased $11.3 million, or 4.3%. This financial performance increased book value per share 1.8% to $20.02 at March 31, 2005 from $19.67 at March 31, 2004. Book value per share is calculated by dividing the total shareholders' equity by the number of shares outstanding. Capital Adequacy As of March 31, 2005, the most recent notification from the respective regulatory agencies categorized the Corporation and subsidiary banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Corporation must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as 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, 2005 December 31, 2004 Capitalized -------------- ----------------- ------------- Total risk-based capital ratio 17.13% 16.55% > or =10.0% Tier I risk-based capital ratio 15.88% 15.32% > or = 6.0% Tier I leverage capital ratio 11.87% 11.42% > or = 5.0% ITEM 4. Controls and Procedures First Financial Corporation's management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2005, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures as of March 31, 2005 were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. Additionally, there were no changes in the Corporation's internal control over financial reporting that occurred during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. 11 PART II - Other Information Item 2. Changes in Securities and Use of Proceeds. (e) Purchases of Equity Securities The Corporation periodically acquires shares of its common stock directly from shareholders in individually negotiated transactions. The Corporation has not adopted a formal policy or adopted a formal program for repurchases of shares of its common stock. Following is certain information regarding shares of common stock purchased by the Corporation during the quarter covered by this report. (c) Total Number Of Shares Purchased As (d) (a) (b) Part Of Publicly Maximum Number Total Number Of Average Price Announced Plans Or Of Shares That May Shares Purchased Paid Per Share Programs * Yet Be Purchased * ---------------- -------------- ------------------- ------------------ January 1 - 31, 2005 0 N/A N/A N/A February 1 - 28, 2005 24,832 31.54 N/A N/A March 1 - 31, 2005 19,000 30.76 N/A N/A Total 43,832 31.20 N/A N/A * The Corporation has not adopted a formal policy or program regarding repurchases of its shares of stock. ITEM 5. Other Information. On March 8, 2005 First Financial Bank, the wholly-owned subsidiary of First Financial Corporation, extended the term of the Employment Agreement with Norman L. Lowery, its President and Chief Executive Officer, effective January 1, 2005. The Employment Agreement is a five-year agreement which may be extended each year by the Board of Directors for an additional one-year term. Under the Employment Agreement, Mr. Lowery receives an annual salary equal to his current salary, which is $417,219 for 2005, subject to increases approved by the Board of Directors, and is entitled to participate in other bonus and fringe benefit plans available to the Corporation's and FFB's employees. A copy of the agreement is attached hereto as Exhibit 10.1. If Mr. Lowery is terminated for other than "just cause" or is "constructively discharged," and such termination does not occur within 12 months after a "change in control" (as such terms are defined in the Employment Agreement), he would receive an amount equal to the sum of his base salary through the end of the then-current term of the Employment Agreement. He also would be entitled to elect to receive, at his sole discretion, either (i) cash in an amount equal to his cost of obtaining all benefits which he would have been eligible to participate in or receive through the term of the Employment Agreement, or (ii) continued participation under such benefit plans through the term of the Employment Agreement, if he continued to qualify for participation in such benefit plans. If Mr. Lowery is terminated for other than just cause or is constructively discharged, and this occurs within 12 months following a change in control, he would be entitled to an amount equal to or the greater of the compensation and benefits described above if the termination did not occur within 12 months following a change in control; or, the product of 2.99 times the sum of his base salary in effect as of the date of the change in control and an amount equal to the bonuses received by or payable to him in or for the calendar year prior to the year in which the change in control occurs; and, at his sole discretion, either cash in an amount equal to his cost of obtaining for a period of three years, beginning on the date of termination, all benefits which he was eligible to participate in or receive, or continued participation under such benefit plans for a period of three years, beginning on the date of termination, if he continued to qualify for participation in such benefit plan. 12 ITEM 6. Exhibits. Exhibit No: Description of Exhibit: - ----------- ----------------------- 3.1 Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 3.2 Code of By-Laws of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 10.1 Employment Agreement for Norman L. Lowery, dated January 1, 2005. 10.2 2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 10.3 2005 Schedule of Director Compensation, incorporated by reference to the Corporation Form 10-K filed for the fiscal year ended December 31, 2004. 10.4 2005 Schedule of Named Executive Officer Compensation, incorporated by reference to the Corporation Form 10-K filed for the fiscal year ended December 31, 2004. 31.1 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 by Principal Executive Officer, dated May 10, 2005. 31.2 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 by Principal Financial Officer, dated May 10, 2005. 32.1 Certification, dated May 10, 2005, of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2004 on Form 10-Q for the quarter ended March 31, 2005. 13 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 10, 2005 By /s/ Donald E. Smith --------------------------------- Donald E. Smith, Chairman Date: May 10, 2005 By /s/ Norman L. Lowery --------------------------------- Norman L. Lowery, Vice Chairman Date: May 10, 2005 By /s/ Michael A. Carty --------------------------------- Michael A. Carty, Treasurer 14 Exhibit Index Exhibit No: Description of Exhibit: - ----------- ----------------------- 3.1 Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 3.2 Code of By-Laws of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 10.1 Employment Agreement for Norman L. Lowery, dated January 1, 2005. 10.2 2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to the Corporation's Form 10-Q filed for the quarter ended September 30, 2004. 10.3 2005 Schedule of Director Compensation, incorporated by reference to the Corporation Form 10-K filed for the fiscal year ended December 31, 2004. 10.4 2005 Schedule of Named Executive Officer Compensation, incorporated by reference to the Corporation Form 10-K filed for the fiscal year ended December 31, 2004. 31.1 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 by Principal Executive Officer, dated May 10, 2005. 31.2 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 by Principal Financial Officer, dated May 10, 2005. 32.1 Certification, dated May 10, 2005, of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2004 on Form 10-Q for the quarter ended March 31, 2005. 15