The Boardboard of Directors is currently compriseddirectors as of eleven (11) members. The Corporation’s Articlesthe 2013 annual meeting of Incorporation divide the Boardshareholders will consist of Directorsten members, divided into three classes as nearlyof approximately equal in size as possible, with one class of directorsthat are elected each year for a term extending to the third succeeding annual meeting after such election. The Boardstaggered three-year terms.The board believes that this Board structure provides important benefits to the Corporation and our shareholders. Primarily, this structure is designedhelps to maintain continuity and stability and to prevent sudden disruptive changes to the Board’s composition. This ensures we have directors serving on the Boardboard who have substantial knowledge of the Corporation, all of which the Boardboard believes facilitates long-term value for our shareholders.

Three directors are to be elected. W. Curtis Brighton, William R. Krieble, and Ronald K. Richhave each been nominated for election as directora term of three years and until their respective successors have been elected and qualified. They are nominatedall members of the present board of directors. If, at the time of this annual meeting, any nominee is unable or declines to serve, the discretionary authority provided in the proxy may be exercised to vote for termsa substitute or substitutes. The board of directors has no reason to expire at the 2014 Annual Meeting of Shareholders. Eachbelieve that any substitute nominee is a current director of the Corporation. The following information is provided concerning each nomineeor nominees will be required.

Name, Age, Principal Occupation(s) and each incumbent director continuing in office.

W. Curtis Brightonjoined the Board in 2004 and is a current member of the Loan Review, Enterprise Risk Management, Loan and Loan Policy and Procedures Committees. Mr. Brighton is the President of Hulman and Company. Prior to accepting that position in 2009, he was Executive Vice President and General Counsel. Mr. Brighton has been the General Manager of Lynch Coal Operators Reciprocal Association since 1985 and was a private practice Attorney for 12 years. He serves on the Boards of Templeton Coal Company, Inc., Deep Vein Coal Company, Inc., Princeton Mining Company, Inc., R.J. Oil Company, Inc., Union Hospital, Inc. and Lynch Coal Operators Reciprocal Association. Mr. Brighton earned a B.S. degree in Business Administration from Indiana State University and a Doctor of Jurisprudence degree from Drake University.

Mr. Brighton’s history as a private practice attorney provides the Board with an enhanced legal and regulatory perspective.

B. Guille Cox, Jr.has served on the First Financial Corporation Board since 1983 and is the Chairman of the Trust Committee. He also serves on the Investment, Loan, and Governance and Nominating Committees. Mr. Cox has been a Senior Partner in the Law Firm Cox, Zwerner, Gambill & Sullivan since 1980. He also serves on the Boards of Hendrich Title Company and Katzenbach Inc. As a Rose Hulman Institute of Technology Board Member Mr. Cox serves on the Executive and Investment Committees. Mr. Cox received a B.S. degree in Physics from MIT and a Doctor of Jurisprudence degree from Harvard Law School.

Having served on the Board of the Corporation for such a long time,since 1987, Mr. Cox also provides a historical perspective of both the Corporation and the industry for our Board. His legal practice provides the Board with counsel on legal issues as well as issues in our markets.

Anton H. Georgejoined the Board in 1989 and serves on the Loan Committee, as well as, Chairperson of both the Audit and Compensation and Employee Benefits Committees. Mr. George is the past President and Chief Executive Officer of the Indianapolis Motor Speedway and Hulman and Company. He also is a current Director of Vectren Corporation. Mr. George earned a B.S. degree in Business Administration from Indiana State University.

Mr. George’s experience on various boards of directors provides valuable advice on governance issues. As a former president and an established Midwest entrepreneur, Mr. George has greatersignificant knowledge of the Indiana markets.

Gregory L. Gibsonjoined the First Financial Corporation Board in 1994 and serves on the Loan Review and Loan Committee. Mr. Gibson is the President of ReTec, Inc. and serves on the Board of Rose Hulman Institute of Technology and Saint Mary-of-the-Woods College. Mr. Gibson has also served on the Indiana Judicial Commission and is currently serving on the Indiana Port Commission as well as the Board of Directors for the Methodist Health Foundation in Indianapolis. He holds a B.S. degree from Rose Hulman.

As a businessman and entrepreneur, Mr. Gibson has a variety of business interests. This provides the Board with invaluable knowledge into these segments of our clients and the markets. As a Developer,developer, Mr. Gibson provides counsel for market expansion. His service on our Boards also provides valuable political and governance perspectives.

William R. Krieblejoined the Board in 2009 and serves on the Loan, Community Reinvestment Act, Enterprise Risk Management, and Affirmative Action Committees. Mr. Krieble is the Program Director for the Division of Disability and Rehabilitative Services of the State of Indiana where he has served since 1970. He received B.S. and M.S. degrees from Indiana State University.

Mr. Krieble’s long service to the State of Indiana provides the Board with valuable political and governmental perspectives.

Norman L. Loweryjoined the First Financial Corporation Board in 1989. He serves on the Acquisition, Affirmative Action, Asset Liability, Community Reinvestment Act, Disaster Recovery, Disclosure, Loan, Executive, Enterprise Risk Management, Loan Policy and Procedures, Loan Review and the Strategic Planning Committees. Mr. Lowery is the Vice Chairman and Chief Executive Officer of First Financial Corporation. He is also the President and Chief Executive Officer of First Financial Bank, serving since 1996. Prior to joining First Financial Corporation, Mr. Lowery was a Partner in the law firm of Wright, Shagley and Lowery where he practiced for 19 years. Mr. Lowery is a member of the Boards of Lynch Coal Operators Reciprocal Association, Indiana State University Board of Trustees, and the Regional Board of Ivy Tech Community College. He received a B.S. degree in Political Science from Indiana State University and a Doctor of Jurisprudence degree from Indiana University.

As Chief Executive Officer, Mr. Lowery is intimately familiar with First Financial Corporation, its customers and its employees. Mr. Loweryemployees and provides the Board great leadership. Hiswith valuable leadership, particularly through his keen insight into the industry and the markets we serve is invaluable.serve. His legal background also provides a critical element inwith respect to governance and regulatory issues.issues affecting the Corporation and the Bank. Mr. Lowery bringsalso provides valuable counsel to the Board great counsel inwith respect to our strategic and other matters.

Ronald K. Richjoined the Board in 2005 and serves as the Chairman of the Governance and Nominating Committee. He is also a member of the Loan, Compensation and Employee Benefits, Enterprise Risk Management, and Audit Committees. Mr. Rich has been a Financial Representative for Northwestern Mutual Financial Network since 1963. He holds CLU and CHFC designations from American College.

Virginia L. Smithhas served on the Board since 1987. She is a member of the Loan Review, Loan Policy and Procedures, Affirmative Action, Loan and Executive Committees. Ms. Smith has been the President of Princeton Mining Company, Inc. since 1990. She serves on the Boards of Deep Vein Coal Company, Princeton Mining Company, R.J. Oil Company and Saint Mary-of-the-Woods College. Ms. Smith received a B.S. degree in Education from Indiana State University and a B.S. in Business Administration from St. Mary of the Woods College.

Ms. Smith’s service as president of a local retail company provides the Board with informationvaluable insight regarding our market area. Also, as a female businesswoman,business leader, she provides important perspectives on women-owned businesses.

William J. Vogesjoined the Board in 2008 and serves on the Compensation and Employee Benefits, Governance and Nominating and Loan Committees. Mr. Voges has served as President and Chief Executive Officer of the Root Company since 1996 and as General Counsel since 1990 of the Root Company. Prior to joining Root Company he was a Partner in Fink, Loucks, Sweet, and Voges for 9 years. Mr. Voges also serves as Chairman of the Board for Consolidated-Tomoka Land Company (a public company listed on the NYSE-AMEX under the symbol CTO), where he has prior service on the Audit, Executive and Corporate Governance Committees. He has prior experience on the Boards of several financial institutions. Mr. Voges received his B.S. in Business Administration from Stetson University and his J.D. from Stetson College of Law.

Mr. Voges’ past service on the boards of financial institutions provides additional perspectives of the issues facing boards of financial institutions.our Board. His legal background, coupled with thishis past experience, provides tremendous value on legal, governance and regulatory matters. Mr. Voges also complements the Board with his keen strategic insight.

ADDITIONAL information about the Board of directors

Meetings and Attendance

During the year ended December 31, 2010,2012, the Board of Directors of the Corporation met 1819 times. Each director attended more than 75% of the aggregate of (i) all meetings of the Board held while he or she was a director and (ii) all meetings of committees on which he or she served during the period that he or she served on the committee. Although the Corporation has no formal policy on director attendance at annual meetings of shareholders, they are encouraged to attend such meetings. All directors attended the 20102012 Annual Meeting of Shareholders.

Committees

The Board of Directors has established a number of committees which facilitate the administration and oversight of the Corporation. Among these committees are the Governance and Nominating, Audit and Compensation and Employee Benefits Committees.

Governance and Nominating Committee. Members consist of B. Guille Cox, Jr., Ronald K. Rich (Chairman) and William J. Voges. The Board of Directors has determined that Messrs. Cox, Rich and Voges are independent under the rules of the NASDAQ Global Select Market. The Governance and Nominating Committee met twothree times during 2010. As specified in its charter, the2012.

The primary objectives of the Governance and Nominating Committee are to assist the Board of Directors by (i) developing and recommending corporate governance policies and guidelines for the Corporation and (ii)by identifying and nominating persons for election to the Board of Directors and appointment to the committees of the Board. A copy of the Governance and Nominating Committee Charter is available on the Corporation’s web site atwww.first-online.com on the “Investor Relations” page under the link “Governance Documents.”

Audit Committee. Members consist of Anton H. George (Chairman), Thomas T. Dinkel and Ronald K. Rich. The Board of Directors has determined that Messrs. George, Dinkel and Rich are independent under Securities and Exchange Commission (“SEC”)SEC Rule 10A-3 and the rules of the NASDAQ Global Select Market. The Audit Committee met four4 times during 2010. As specified in its charter,2012.

The primary objectives of the Audit Committee’s primary objectivesCommittee are to assist the Board of Directors in its oversight of (i) the integrity of our financial statements, (ii) the qualifications and independence of our independent registered public accounting firm, (iii) the performance of our internal audit function and independent auditors, and (iv) our compliance with certain applicable legal and regulatory requirements. A copy of the Audit

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In addition, among other responsibilities, the Audit Committee reviews the Corporation’s operations and management, accounting functions, the adequacy and effectiveness of the internal controls and internal auditing methods and procedures.

The Board of Directors has determined that each member of the Audit Committee is financially sophisticated under the applicable NASDAQ rules. The Board of Directors selected the members of the Audit Committee based on the Board’s determination that they are fully qualified to monitor the performance of management, the public disclosures by the Corporation of its financial condition and performance, our internal accounting operations and our independent auditors.registered public accountants. In addition, the Audit Committee has the ability on its own to retain independent accountants or other consultantsadvisors whenever it deems appropriate.

The Board of Directors has determined that the Corporation currently does not have a director who qualifies as a “financial expert” under federal securities laws. To be considered a “financial expert,” an individual’s past experience generally must include experience in the preparation or audit of comparable public company financial statements, or the supervision of someone in the preparation or audit of comparable public company financial statements. While it might be possible to recruit a person who meets these qualifications of a “financial expert,” the Board has determined that in order to fulfill all the functions of our Board and our Audit Committee, each member of our Board and our Audit Committee, including any “financial expert,” should ideally understand community banking and understand the markets in which the Corporation operates, and that it is not in the best interests of our Corporation to nominate as a director someone who does not have all the experience, attributes and qualifications we seek.

Compensation and Employee Benefits Committee. Members.Members consist of Anton H. George (Chairman), Ronald K. Rich and William J. Voges. The Board of Directors has determined that Messrs. George, Rich and Voges are independent under the rules of the NASDAQ Global Select Market. The Compensation and Employee Benefits Committee met eight3 times in 2010. As specified in its charter, the2012.

The primary objective of the Compensation and Employee Benefits Committee is to approve the compensation of theour named executive officers.officers and senior management. In addition, among other responsibilities, the Compensation and Employee Benefits Committee administers the compensation plans of the Corporation. A copy of the charter of the Compensation and Employee Benefits Committee is available on the Corporation’s website atwww.first-online.com on the “Investor Relations” page under the link “Governance Documents.”

The goal of our director compensation package is to attract and retain qualified candidates to serve on the Board of Directors. In setting compensation, the Board considers compensation levels of directors of other financial institutions of similar size. In 2010, the Compensation and Employee Benefits Committee retained Grant Thornton LLP to review and advise us with respect to our director compensation. Each director of the Corporation is also a director of First Financial Bank, N.A. (the “Bank”), the lead subsidiary bank of the Corporation, and receivesCorporation. The non-employee directors receive director fees from each ofboth the Corporation and the Bank. During 2010,2012, nonemployee directors received a $40,000.00 retainer from the Corporation and a $5,000.00 retainer from the Bank. During 2010,2012, each non-employee director of the Corporation and the Bank received a fee of $750 for each board meeting attended for the Corporation and the Bank, respectively.

Non-employee directors also receive a fee for each meeting attended of the Audit Committee of $1,000, the Compensation and Employee Benefits Committee of $1,000, the Governance and Nominating Committee of $500 and the Loan Committee of the Bank of $300. No non-employee director served as a director of any other subsidiary of the Corporation.

The table below summarizes the compensation paid by the Corporation to each non-employee director for the fiscal year ended December 31, 2010.

The Board of Directors believes that directors more effectively represent the Corporation’s shareholders, whose interests they are charged with protecting, if they are shareholders themselves. Therefore, the Board has adopted director stock ownership guidelines applicable to all directors, effective January 1, 2011. Subject to limited exceptions, alldirectors. All directors are required to own a number of shares of the Corporation’s common stock equal in value to onethree times their annual Corporation retainer for services as a director. Directors are expected to comply with the guidelines as soon as practicable and in no event later than five years after the date of their initial election or appointment as a director of the Corporation. In the case of individuals who were directors onwhen the guidelines became effective, date of the guidelines, compliance is required by January 1, 2016.within five years of the effective date. Additionally, directors may not dispose of shares of Corporation stock until they have satisfied the guidelines. Nine

Anti-Hedging Policy

The directors, currently meet these guidelines.

During 20102012 and as of the date of this Proxy Statement, none of the members of the Compensation and Employee Benefits Committee was or is an officer or employee of the Corporation, and no executive officer of the Corporation served or serves on the compensation committee (or any other committee or board of directors performing a similar function) of any company that employed or employs any member of the Corporation’s Compensation and Employee Benefits Committee or Board of Directors.

Certain family relationships exist among the directors and executive officers of the Corporation. Donald E. Smith (the Chairman of the Board and President of the Corporation) is the father of Virginia L. Smith (a director of the Corporation), and is the father-in-law of Norman L. Lowery (the Vice Chairman and Chief Executive Officer of the Corporation)Corporation and the President and Chief Executive Officer of First Financial Bank) and the grandfather of Norman D. Lowery (the Chief Operating Officer of First Financial Bank N.A.). Norman D. Lowery is also the son of Norman L. Lowery. There are no arrangements or understandings between any of the directors and executive officers pursuant to which any of them have been selected for their respective positions.

The Audit Committee is responsible for approving any transactions between the Corporation or its subsidiaries and any related party, including loans or extensions of credit and any sale of assets or other financial transactions. Directors and executive officers of the Corporation and their associates were customers of, and have had transactions with, the Corporation and its subsidiary bankssubsidiaries in the ordinary course of business during 2010.2012. Comparable transactions may be expected to take place in the future. During 2010,2012, various directors and executive officers of the Corporation and their respective associates were indebted to the subsidiary banks from time to time. These loans were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for similar transactions with other persons not related to the Corporation and did not involve more than the normal risk of collectability or present other unfavorable features. Loans made to directors and executive officers are in compliance with federal banking regulations and thereby are exempt from the insider loan prohibitions included in the Sarbanes-Oxley Act of 2002.

The provisions of the Articles of Incorporation apply to contracts or transactions between the Corporation and (i) any director; or (ii) any corporation, unincorporated association, business trust, estate, partnership, trust, joint venture, individual or other legal entity in which any director has a material financial interest. The provisions of the Code of Business Conduct and Ethics apply to the directors, officers and employees of the Corporation.

The Articles of Incorporation provide that contracts or transactions between the Corporation and any of the persons described above are valid for all purposes, if the material facts of the contract or transactions and the director’s interest were disclosed or known to the Board of Directors, a committee of the Board of Directors with authority to act thereon, or the shareholders entitled to vote thereon, and the Board of Directors, such committee or such shareholders authorized, approved or ratified the contract or transaction.

The Code of Business Conduct and Ethics provides that directors, officers and employees of the Corporation must make business decisions for the Corporation free of conflicting influences. Such persons are expected to avoid situations that may lead to real or apparent material conflicts between such person’s self interest and their duties or responsibilities as a director, officer or employee of the Corporation.

The Senior Compliance Officer is responsible for annually reaffirming compliance with thisthe Code of Business Conduct and Ethics by the directors, officers and employees of the Corporation.

During 2010,2012, Platolene 500, Inc., an indirect subsidiary of Deep Vein Coal Company, Inc., received payments for providing fuel and services to First Financial Bank N.A. in the amount of approximately $150,676.$196,005.06. Donald E. Smith (the Chairman of the Board and President of the Corporation), is a Director and Chairman of Platolene 500. Virginia L. Smith (the daughter of Mr. Smith and a director of the Corporation), and Sarah J. Lowery, the daughter of Mr. Smith and wife of Norman L. Lowery (the Vice Chairman and Chief Executive Officer of the Corporation), each own in the aggregate greater than a 10%27% equity interest in Deep Vein Coal Company, Inc. and serve as the Chairman, Vice President and Chief Operating Officer and Vice President, respectively, of Platolene 500, Inc.

The Corporation aspires to the highest ethical standards for its employees, officers and directors and remains committed to the interests of its shareholders. The Corporation believes it can achieve these objectives with a plan for corporate governance that clearly defines responsibilities, sets high standards of conduct and promotes compliance with the law. The Board of Directors has adopted policies and procedures designed to foster the appropriate level of corporate governance. Certain of these procedures are discussed below.

The Board of Directors seeks directors who represent a variety of backgrounds and experiences which will enhance the quality of the Board’s deliberations and decisions. When searching for new candidates, the Governance and Nominating Committee considers the evolving needs of the Board and searches for candidates who will fill any current or anticipated gaps. The Governance and Nominating Committee generally considers, among other matters, a candidate’s experiences, skills, expertise, diversity, personal and professional integrity, character, business experience, educational experience or equivalent background, stature, judgment, conflicts of interest, integrity, ethics, commitment, reputation, time available to serve, community involvement, civic mindedness,dedication, conflicts of interest and ability to oversee the Corporation’s business and affairs. The Governance and Nominating Committee does not have a formal diversity policy; however, both the Board and the Governance and Nominating Committee believe it essential that Board members represent diverse experiences and viewpoints. The Governance and Nominating Committee considers the entirety of each candidate’s credentials. With respect to directors who are nominated for re-election, the Governance and Nominating Committee also considers such director’s previous contributions to the Board.

Our Board of Directors regularly reviews and assesses the effectiveness of our leadership structure and will implement any changes as it deems appropriate. Our current leadership structure is comprised of an eleven-memberIn February 2013, the Board of Directors a majority of which is independent underestablished the requirementssize of the NASDAQ Global Select Market. Board at 10, effective as of the 2013 annual meeting of shareholders.

Our Chairman of the Board also serves as our President, and our Chief Executive Officer is also a director. The Board has separated the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction for the Corporation and the day-to-day leadership and performance of the Corporation, while the Chairman provides guidance to the Chief Executive Officer and sets the agenda for Board meetings and presides over meetings of the full Board. Because Mr. Smith,

Eight of our Chairman, is also an employee of the Corporation and is therefore notDirectors are considered independent under the requirements of the NASDAQ Global Market Select rules, ourMarket. The Board of Directors has appointed the Chairman of ourGovernance and NominatingCommittee, Ronald K. Rich, to serve as our presidinglead independent director to preside at all meetings of the independent directors. As presidinglead independent director, Mr. Rich acts as a liaison between the Board and the Chief Executive Officer. He also develops the agendas for the executive sessions. The independent directors met 4four times during 2010.

We believe that the separate responsibilities of, and coordination between, our Chairman, Chief Executive Officer and our presidinglead independent director enhances our Board of Directors’ oversight of communications with our shareholders and is an effective leadership structure for our circumstances. Our Board of Directors also believes that the separately defined roles of the Chairman, Chief Executive Officer and presidinglead independent director provide for effective corporate governance and enable the Chief Executive Officer to focus his time and energy on operating and managing the Corporation while leveraging the experiences and perspectives of the Chairman.

We recognize that no single leadership model is right for all companies and at all times. Our Board recognizes that, depending on the circumstances, other leadership models might be appropriate at some point and our Board of Directors periodically reviews its leadership structure in this regard.

Our Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the Corporation’s risks. The Board regularly reviews information regarding the Corporation’s financial results, operations and liquidity, as well as the risks associated with each. The Audit Committee oversees management of the Corporation’s financial risks, including the oversight of our internal audit function and potential conflicts of interest. The Compensation and Employee Benefits Committee is responsible for overseeing the management of risks relating to the Corporation’s executive compensation plans and arrangements. The Governance and Nominating Committee manages risks associated with the independence of the Board of Directors. The Enterprise Risk Management Committee advises and assists the Board in its oversight and management of enterprise risk. The Enterprise Risk Management Committee is comprised of Board members W. Curtis Brighton, William R. Krieble and Ronald K. Rich. TheRich, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Chief Credit Officer, andChief Risk Officer, the heads of Compliance, Legal, Operations, Human Resources, Loan Review, Auditing, and Information Technology are invited to attend the meetings.and representatives from The Morris Plan Company of Terre Haute and Forrest Sherer Insurance. The Enterprise Risk Management Committee is responsible for, among other matters, coordinating risk management issues with other Board and management level committees as well as establishing and maintaining effective policies, procedures and practices for identifying, measuring and mitigating enterprise risk. The Enterprise Risk Management Committee receives regular reports from management and meets no less than quarterly to discuss matters relating to the management of the various components of enterprise risk, including credit, interest rate, liquidity, compliance, technology, transaction, reputation and strategic risks. While each committee is responsible for evaluating certain risks and overseeing the management of these risks, the entire Board of Directors is regularly informed about such risks through committee reports about such risks.

The Board of Directors has determined that a majority of the members of the Board, including Messrs. Cox, Krieble, Rich, George, Dinkel, Voges, Brighton and Voges,Gibson, are independent, as independence is defined under revised listing standards of the NASDAQ Global Select Market applicable to the Corporation.

The CorporationBoard of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of the Corporation’s directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer and controller. The Corporation intends to disclose any amendments to the Code of Ethics by posting such amendments on its website. In addition, any waivers of the Code of Ethics for directors or executive officers of the Corporation will be disclosed in a report on Form 8-K filed with the Securities and Exchange Commission.

Any shareholder who desires to contact the Chairman of the Board of Directors, the PresidingLead Independent Director or the other members of the Board of Directors, or who desires to make a recommendation of a director candidate for consideration by the Governance and Nominating Committee, may do so electronically by sending an email to the following address: directors@ffc-in.com. Alternatively, a shareholder can contact the Chairman of the Board, PresidingLead Independent Director, Chairman of the Governance and Nominating Committee or the other members of the Board by writing to: First Financial Corporation, One First Financial Plaza, P.O. Box 540, Terre Haute, INIndiana 47808. The Governance and Nominating Committee will consider any candidate submitted by a shareholder in the manner described above. Communications received electronically or in writing are distributed to the Chairman of the Board, PresidingLead Independent Director, Chairman of the Governance and Nominating Committee or the other members of the Board as appropriate depending on the facts and circumstances outlined in the communication received. For example, if any complaints regarding accounting, internal accounting controls and auditing matters are received, then they will be forwarded by the Secretary to the Chairman of the Audit Committee for review.

For further information, including electronic versions of our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Audit Committee Charter, Compensation and Employee Benefits Committee Charter, and Governance and Nominating Committee Charter, please contact the Secretary of the Corporation, Rodger A. McHargue, First Financial Corporation, One First Financial Plaza, P.O. Box 540, Terre Haute, Indiana 47808, (812) 238-6000, or visit our website atwww.first-online.comon the “Investor Relations” page under the link “Governance Documents.”

REPORT OF THE AUDIT COMMITTEE

In accordance with its written charter adopted by the Board of our executive officers serves a term of office of one year and until his successor is duly elected and qualified, except for Norman L. Lowery whose term of office will expire on December 1, 2013 (subject to automatic one-year extensions and unless his term is not extended or ends earlier as provided in his employment agreement withDirectors, the Corporation and the Bank). Set forth below is certain information about the individuals who are serving as our executive officers as of the date of this Proxy Statement. In our discussion of “Executive Compensation,” the officers named in the Summary Compensation Table below are referred to as “named executive officers.”

2012 Overview. In 2012 the same sound business fundamentals that have served us so wellCorporation delivered solid financial performance with net income of $32.8 million, the second highest in the past as we lookhistory of the Corporation. This increase was in part driven by a 9.78% increase in net interest income to $108.9 million. The return on assets for 2012 was 1.13%. During 2012 the future.

CEO Pay. The Compensation Committee considered the following in determining the compensation programsof our Chief Executive Officer:

Other Executive Pay. The Compensation Committee considered the following in determining the compensation of our other named executive officers:

Executive Compensation Philosophy

The Committee’s executive compensation policies are designed to attract and retain highly qualified persons as named executive officers, to provide competitive levels of compensation to the named executive officers and to reward the named executive officers for achieving individual performance and for achieving performance of the Corporation as a whole. Additionally, the policies seek to provide a vehicle for itsthe Committee to evaluate and measure the performance of the Corporation and the executives in accordance with the results of those evaluations. The individual goals established in the strategic plan and budget for the Corporation and the Bank are also utilized in setting compensation levels of the named executive officers. The Committee seeks to compensate the named executive officers are administered by or under the directionthrough a blend of theboth short and long-term compensation.

The Compensation Committee’s Process for Setting Compensation

The Compensation and Employee Benefits Committee (the “Committee”) is responsible for evaluating and establishing compensation levels and compensation programs for our named executive officers. The Committee has established a range of plans and programs which are intended to encourage current year performance and create long-term shareholder value, without exposing the Corporation to excessive amounts of risk associated with the financial services industry. The Committee considers material “operational” risks of the Corporation, including: credit risk, interest rate risk, liquidity risk, reputation risk, compliance risk, transaction risk and the added potential for loss that could result from any of the compensation plans or programs provided to all employees. The Committee also charges the Corporation’s General Auditor with performing a risk assessment of the incentive compensation program. Upon review of these risks and the report of the General Auditor, the Committee determines on an annual basis that the Corporation’s compensation arrangements and policies do not encourage excessive risk-taking.

The compensation programs for our named executive officers are reviewed on an annual basis to ensure that total compensation levels and benefits are comparable to other similarly-sized corporations with comparable performance within our industry and are competitive. With respect to the named executive officers other than the Chairman of the Board and the Chief Executive Officer, the Compensation and Employee Benefits Committee reviews and compares individual performance with respect to individual goals, areadepartment goals and Corporation goals. Because the Chairman of the Board and Chief Executive Officer have greater responsibility for the overall operations of the Corporation, the Compensation and Employee Benefits Committee reviews and compares the following with respect to their compensation:

Our Chief Executive Officer, Norman L. Lowery, is a fixed componentinvited to attend Committee meetings at which compensation actions involving our executive officers other than the Chairman and the CEO are discussed. Mr. Lowery assists the Committee by making recommendations for compensation of total cash compensation and is intended to reward theour named executive officers for their past performance and to facilitate the attraction and retention of a skilled and experienced management team. The Compensation and Employee Benefits Committee establishes,other than himself and the BoardChairman. Mr. Lowery excuses himself and does not participate in any meetings of Directors approves, a total “pool” for salaries for each fiscal year, typically expressed as a percentage increase over the prior year’s total aggregate base salaries. Individual base salary increases for all employees, includingCommittee at which either his or the namedChairman’s compensation is discussed. Our other executive officers are awarded as allocations fromdo not participate in any meetings of the salary pool. InCommittee or in establishing the amountcompensation of the pool, theexecutive officers.

The Committee and the Board of Directors considers general economic conditions (such as inflation and recessionary factors), the performance of the Corporation and the Bank and other sources of information such as third-partyhas authority to retain its own advisors, including compensation surveys, including the Crowe Horwath Financial Institutions Compensation Survey, Amalfi Consulting, Towers Watson, The Conference Board, Mercer, and Culpepper Pay Trends.

In 2012 the Committee again retained Grant Thornton to consult with the Committee regarding current compensation practices. Grant Thornton provided the Compensationa banking industry update, a regulatory update on compensation and Employee Benefits Committeecorporate governance topics and other topics related to First Financial Corporation and its compensation plans.

In connection with market trend information, data and recommendations regarding the alignmentits retention of pay and performance. Grant Thornton, also recommendedthe Committee determined that no conflict of interest exists that would impair the base pay elementability of totalGrant Thornton to serve as a compensation be used as the platformconsultant for the determinationCommittee.

Components of total compensation. After reviewing third-party data sources and information from Grant Thornton, for 2010, the Committee established a pool of 2.75% over the prior year’s total aggregate base salaries.

The Committee does not use any third-party data sources, including information provided by Grant Thornton, for benchmarking the size of the salary pool, the size of base salaries or any other element of compensation for the named executive officers. Rather, such sources are revieweduses several tools to compensate and considered by the Committee in order to stay abreast of current compensation practices, levels and structures and thereby better inform its compensation decisions. The Committee considers all sources of information together and utilizes its members’ experience and judgment in determining the amount of the pool for base salary increases.

In 2012, the 2010 STIP, thresholdCommittee reviewed individual and company performance objectives must be metas well as expected trends in order for an award to be earned. Payouts for each ofexecutive compensation in the named executive officers equal 80% ofbanking industry. That review included the respective target award for performance at threshold, 100%following:

Based on its review, the respective target award for performance at target, and 125% or 120% for tiers 1 and 2 respectively, ofCommittee determined the respective target award for maximum performance. The Committee spends a significant amount of time analyzing financial measures and determining the level of performance required to receive threshold, target and maximum annual incentive payouts. The Committee established the performance objectives in amounts which it believes to be achievable given a sustained effort on the part of the named executive officers and which require increasingly greater effort to achieve the target and superior objectives.

The annual incentive opportunities for each of the named executive officers are based upon weighted factorsperformance measures which are determined by the Committee.For awards made in 2012 which are payable in 2013 and awards made 2013 which are payable in 2014 to the extent they are earned, the performance measures were/are weighted as follows:

These 2012 performance measures are compared to goal and weighted accordingly. The goals for each of these executive officers are shown in the following table. Donald E. Smith’s goals are based upon itson the performance of First Financial Corporation. Messrs N.L. Lowery, McHargue, N.D. Lowery, and Clary’s goals are based on the performance of First Financial Bank.

For awards made for 2012 performance period, the performance measures were weighted as follows for each of the named executive officers, based on the Committee’s assessment of what is important to the Corporation’s and the Bank’s overall performance and within the scope of control of the respective named executive officers. For 2010, the factors are weighted as follows:

Performance measures are compared to goal and weighted accordingly. The goals for each of the named executive officers at the various performance levels as well as the actual performance levels are listed below.