FIRST FINANCIAL CORPORATION One First Financial Plaza P.O. Box 540 Terre Haute, Indiana 47808 | ||
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18, 2016
This Notice of Annual Meeting of Shareholders and the Proxy Statement are first being mailed to shareholders on or about March 17, 2014.
| Sincerely, | |
 | |
| /s/ B. Guille Cox Jr. | |
| Chairman of the Board | |
20, 2016
| (1) | To elect |
| To conduct a non-binding advisory vote to approve the compensation of our named executive officers as described in the Proxy Statement; |
| (3) | To ratify the appointment of Crowe Horwath LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016; and |
| (4) | To transact such other business as may properly be presented at the |
| By Order of the Board of Directors | |
| |
| /s/ | |
| Important Notice Regarding the Availability of Proxy Materials for the |
| Shareholder Meeting to be Held on April |
The proxy statement and annual report are available athttps:// |
| Page | |||
| QUESTIONS AND ANSWERS ABOUT THE MEETING | 1 | ||
| PROPOSAL 1: ELECTION OF DIRECTORS | |||
| · | Recommendation of the Board of Directors | ||
| ADDITIONAL INFORMATION ABOUT THE BOARD OF DIRECTORS | 7 | ||
| · | Meetings and Attendance | ||
| · | Committees | 8 | |
| · | Compensation of Directors | ||
| · | Director Stock Ownership Guidelines | ||
| · | Anti-Hedging Policy | ||
| · | Compensation Committee Interlocks and Insider Participation | ||
| · | Certain Relationships and Related Transactions | 10 | |
| INFORMATION ABOUT NAMED EXECUTIVE OFFICERS | 11 | ||
| CORPORATE GOVERNANCE | 12 | ||
| · | General | 12 | |
| · | Consideration of Director Candidates | ||
| · | Board Leadership Structure and Lead Independent Director | ||
| · | Risk Oversight | ||
| · | Director Independence | ||
| · | Corporate Governance Guidelines | ||
| · | Code of Ethics | ||
| · | Communications with | ||
| · | Governance Documents | ||
| EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS | |||
| EXECUTIVE COMPENSATION | 25 | ||
| · | Summary Compensation Table | ||
| · | Grants of Plan-Based Awards | ||
| · | Outstanding Equity Awards at Fiscal Year-End | ||
| · | Option Exercises and Stock Vested in | ||
| · | Pension Benefits | ||
| · | Nonqualified Deferred Compensation For | ||
| · | Employment | ||
| · | Potential Payments Upon Termination or Change in Control | ||
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |||
| SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | |||
| PROPOSAL 2: NON-BINDING ADVISORY VOTE TO APPROVETHE COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS | 33 | ||
| PROPOSAL 3: RATIFICATION OF APPOINTMENT OF CROWE HORWATH LLP AS THE CORPORATION’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| ||
| MATTERS RELATING TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 35 | ||
| · | Fees Paid to Crowe Horwath LLP | ||
| · | Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent |
| |
| SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS | |||
| IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE 2016 ANNUAL MEETING | |||
| HOUSEHOLDING | |||
| ADDITIONAL INFORMATION | |||
| OTHER MATTERS | |||
and First Financial Bank, N.A. is referred to as “the Bank.”
Q: What areoutstanding, each of which entitles the Board’s recommendations?
holder to one vote.
| Q: | What are the Board’s recommendations? |
Q: What if other matters come up during the meeting?
Board.
| Q: | What if other matters come up during the meeting? |
If for any reason
Q: Who can attend the meeting?
| Q: | Who can attend the meeting? |
Q:
| Q: | What constitutes a quorum? |
A majority of the voting power of the outstanding shares of common stock of the Corporation, represented in person or by proxy, constitutes a quorum for the annual meeting. As of the record date, 13,355,27212,679,098 shares of common stock were outstanding. Proxies received but marked as abstentions and “broker non-votes” (as described below) will be included in the calculation of the number of shares considered to be present at the meeting for purposes of establishing a quorum.
Q: How do I vote?
| Q: | How do I vote? |
Telephone:
You can submit a proxy for your shares by telephone until 11:59 p.m. Eastern Daylight Time on April 19, 2016 by calling the toll-free telephone number on the enclosed proxy card, (800) 690-6903. Telephone proxy submission is available 24 hours a day. Easy-to-follow voice prompts allow you to submit a proxy for your shares and confirm that your instructions have been properly recorded. Our telephone proxy submission procedures are designed to authenticate shareholders by using individual control numbers.If your shares are held in the name of a bank, broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted. The availability of telephonic or Internet voting will depend on the bank’s or broker’s voting process. Please check with your bank or broker and follow the voting procedures your bank or broker provides to vote your shares. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote in person at the Annual Meeting,annual meeting, you must request a legal proxy from your bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Annual Meeting.
annual meeting.
| Q: | If I am the beneficial owner of shares held in |
directors or any other proposal.
The proposal for approval of the compensation of our named executive officers will be approved on an advisory basis if the votes cast for the proposal exceed those cast against the proposal. Abstentions will not be counted as votes cast either for or against these proposals.
Four
B. Guille Cox, Jr., Age 68
Mr. Cox has served on the Board of First Financial Corporation since 1987 and is the Chairman of the Corporation’s Board of Directors and of the Board of Directors of First Financial Bank, NA. He also is the Chairman of the Bank’s Trust Committee and serves on the Bank’s Investment and Loan Committees as well as the Corporation’s 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.
Anton H. George, Age 54
Mr. George joined the Board in 1987 and serves on the Corporation’s Audit, Compensation and Employee Benefits, and Executive Committees. He also serves on the Bank’s Loan Committee. Mr. George is the president of Vision Investments, LLC and Vision Enterprises Global, LLC. 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.
Gregory L. Gibson, Age 51
Mr. Gibson joined the Board in 1994 and serves on the Corporation’s Loan Review Committee as well as the Bank’s Loan Committee. Mr. Gibson is the president of ReTec, Inc. and serves on the boards 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 Institute of Technology.
Virginia L. Smith, Age 66
Ms. Smith joined the Board in 1987 and serves on the Corporation’s Loan Review, Loan Policy and Procedures, Affirmative Action, and Executive Committees as well as the Bank’s Loan Committee. Ms. Smith has been the president of Princeton Mining Company, Inc. since 1990. She also serves on the boards of Deep Vein Coal Company, Inc., Princeton Mining Company, Inc., R.J. Oil Company, Inc. and the Sheldon Swope Art Museum. Ms. Smith received a B.S. degree in Education from Indiana State University and a B.S. in Business Administration from Saint Mary-of-the-Woods College.
Directors whose term expires in 2016:
2019:
Mr.Krieble
College of Financial Services.
2017
65
69
61
Our board of directors unanimously recommends that you vote
W. CURTIS BRIGHTON, WILLIAM R. KRIEBLE AND RONALD K. RICH, THE PERSONS NOMINATED BY THE GOVERNANCE AND NOMINATING COMMITTEE TO BE ELECTED AS DIRECTORS.
Having served on
William R. Krieble
INFORMATION ABOUT THE BOARD OF DIRECTORS
2015.
2015.
during 2015. Bank. In addition, Mr. Cox received a fee of $5,000 in connection with his services as Chairman of the Board. their service on the boards or board committees of the Corporation and the Bank. $142,416. This plan was closed to new participants in 2011. During 2015, no directors deferred amounts under this plan, and those directors who have attained age 65 received payments attributable to previously-deferred amounts under the plan in the following amounts: Mr. Dinkel - $27,000, Mr. Krieble - $10,363, Mr. Norman L. Lowery - $118,930 and Ms. Smith - $74,914. the board of directors of Princeton Mining Company, Inc., for which Virginia Smith, one of our directors, serves as President. Corporation (the “Code of Ethics”). The Certified Sales Trainer. Board meetings. 2015. Governance Documents REPORT (our “CEO”). shareholders; ” The Committee. Base Salary.Base salary is the fixed component of total cash compensation. The Compensation Committee attempts to set base salaries for a particular executive position at a level that recognizes the executive’s contributions and importance to the organization, and will facilitate the attraction and retention of a skilled management team. finance industries. Holliday and Ms. Milienu were set at $206,000, $210,000, $210,000 and $156,000 respectively, reflecting increases ranging from 4% to 5% over 2014. same as in 2014. The table below reports the SCT. 401(k) Savings “Nonqualified Deferred Compensation” table on pages 27-28. Tax Deductibility Cap on Executive Compensation . The benefits provided under the described below. for 2015 Control address those concerns. 2016. These services include accounting consultations for 2015 and 2014. years, as well as non-audit related consulting services performed in 2015 related to improvements in the Corporation’s process for compliance with non-financial regulatory requirements. Director Candidates . Secretaryof Directors has determined that Messrs. George, Krieble, Rich and Voges are independent under the rules of the NASDAQ Global Select Market. The Compensation and Employee Benefits Committee met five times in 2013. named executive officers and senior management. In addition, among other responsibilities, the Compensation and Employee Benefits Committee administersestablishes guidelines and oversees the administration of executive compensation plans of the Corporation.and arrangements, as well as certain employee benefit plans. 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.”Board of Directors.Board. In setting compensation, the Board considers compensation levels of directors of other financial institutions of similar size. Each director of the Corporation is also a director of First Financial Bank, N.A. (the “Bank”), the lead subsidiary bank of the Corporation. The non-employee directors receive director fees from both the Corporation and the Bank. During 2013,2015, nonemployee directors received a $40,000 retainer from the Corporation and a $5,000 retainer from the Bank. During 2013,2015, each non-employee director of the Corporation and the Bank received a fee of $750 for each board meeting attended for the Corporation andor the Bank, respectively.meetings attended.2013.2013 2015. TABLE Fees Earned or Name Paid in Cash Total W. Curtis Brighton $ 76,000 (1) $ 76,000 B. Guille Cox 80,000 80,000 Thomas Dinkel 80,500 80,500 Anton H. George 85,000 85,000 Gregory L. Gibson 74,500 74,500 William H. Krieble 78,000 78,000 Ronald K. Rich 87,500 87,500 Virginia L. Smith 77,500 77,500 William J. Voges 84,000 (1) 84,000 10(1)Members of the Board of Directors have the ability to defer a portion of their director fees under the First Financial Corporation 2005 Directors’ Deferred Compensation Plan. For a more detailed discussion of this plan, see the narrative immediately following these footnotes. Fees Earned or Name Paid in Cash Total W. Curtis Brighton $ 82,500 $ 82,500 B. Guille Cox 84,000 84,000 Thomas Dinkel 83,000 83,000 Anton H. George 84,000 84,000 Gregory L. Gibson 77,500 77,500 William H. Krieble 81,000 81,000 Ronald K. Rich 82,000 82,000 Virginia L. Smith 77,500 77,500 William J. Voges 82,000 82,000 Directors Prior to 2011, directors of the Corporation and the Bank maywere permitted to participate in the First Financial Corporation 2005 Directors’ Deferred Compensation Plan.a directors’ deferred compensation plan. Under thisthe plan, a director maycould elect to defer up to $6,000 of his or her director’s fees each year over a five-year period provided that the director timely submits a deferral election to the Corporation.period. The amount of deferred fees iswas used towill be paid to the director in addition to an amount equal to the tax savings the Corporation will receive by obtaining the proceeds from the policy on a tax-free basis.basis, will be paid to the director or his or her beneficiary. Payment will be made to the director or his or her beneficiary in 120 monthly installments beginning on the first day of the month after the earlier of the director’s 65th birthday or death. Each year from the initial date of deferral until payments begin, the Corporation accrues a non-cash expense, which will equal, in the aggregate, the amount of the payments to be made to the director over the ten-year period. If a director fails for any reason, other than death, to serve as a director during the entire five-year period, or the director fails to attend at least 12 regular or special meetings of the Board each year, the amount of benefits paid will be prorated appropriately. For 2013,2015, the allocated cost of the deferred directors’ fees was $148,686.56. 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. All directors, are requiredother than Norman L. Lowery, who is subject to the stock ownership guidelines for executive officers discussed under “Compensation Discussion and Analysis.” Under the guidelines, directors must own a number of shares of the Corporation’s common stock equal in value to three times their annual Corporation retainer for services as a director. Additionally, directors may not dispose of shares of Corporation stock until they have satisfied the guidelines. Directors are expected to complybe in compliance with the stock ownership guidelines as soon as practicable and in no eventnot 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 when the current guidelines became effective, compliance is required within five yearsby February 21, 2017. Presently, eight of the effective date. Additionally,our nine non-employee directors may not dispose of shares of Corporationhave met their stock until they have satisfied theownership levels under these guidelines.Directors,2013 and as of the date of this Proxy Statement,2015 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 other board committee performing equivalent functions or, in the absence of any othersuch committee, orthe entire board of directors performing a similar function)directors) or on the board of directors of any company that employed or employs any member of the Corporation’s Compensation and Employee Benefits Committee, andCommittee. In addition, no executive officer of the Corporation served or serves on the compensation committee (or other board committee performing equivalent functions or, in the absence of any othersuch committee, orthe entire board of directors performing a similar function)directors) of anany company one of whose executive officers servedserves on our Board, except for Norman D. Lowery, the Chief Operating Officer, who is a member of Directors. Vice Chairman, President, and Chief Executive Officer of First Financial Bank) is the father of Norman D. Lowery (the Chief Operating Officer of First Financialthe Corporation and First Financial Bank N.A.)the Bank) and the brother-in-law of Virginia L. Smith (a Directordirector of the Corporation)Corporation and the Bank). 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.2013.2015. Comparable transactions may be expected to take place in the future. During 2013,2015, 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.LoansCorporation.interest.interest or of which any director is a director, officer or trustee. The provisions of the Code of Business Conduct and Ethics apply to the directors, officers and employees of the Corporation.contractsa contract or transactionstransaction between the Corporation and any of the persons described above areis valid for all purposes, if the material facts of the contract or transactionstransaction 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. 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 interestself-interest and theirsuch person’s duties or responsibilities as a director, officer or employee of the Corporation.Senior Compliance Officersenior compliance officer is responsible for annually reaffirming compliance with the Code of Business Conduct and Ethics by the directors, officers and employees of the Corporation.Donald E. Smith served as presidentchairmanbusiness experience of each named executive officer who is not a member of the board of directorsBoard is described below:untiland the 2013 annual meetingBank and also the Secretary and Treasurer of shareholders on April 17, 2013,the Corporation, serving since 2010. He joined the Corporation in 1994. Prior to that, Mr. McHargue was employed at which point he becameBank One Indianapolis for over six years. He received a B.S. degree in Economics and Finance from Indiana State University and an M.B.A. from Indiana State University. He is also a graduate of the ABA Stonier Graduate School of Banking.Chairman Emeritus. In this role,Commercial Lending Executive at Old National Bancorp. Mr. Smith focused on public relationsHolliday received his B.S. in Business from Indiana State University and business developmentan M.B.A. from the University of Illinois. He holds a Credit Risk Certification designation through The Risk Management Association and is a graduate of Southern Illinois University School of Banking.nurturing his extensive civicserving since 2011. She joined the Corporation in 1997 and business contactsserved as the Human Resources Director. Prior to joining the Corporation Ms. Milienu held positions as an Assistant Manager and various human resources positions at Fort Wayne National Corporation. Ms. Milienu received her B.A. degree from Purdue University and M.S. degree from Indiana University. Ms. Milienu holds several professional accreditations including, Senior Professional in the Terre Haute, Indiana community. Mr. Smith retired from these duties March 1, 2014. In 2013 Mr. Smith received a salary of $148,000Human Resources, Certified Compensation Professional, Certified Sales/Management Development Trainer, and restricted stock awards for 2012 performance with a grant date fair value of $151,189, as determined pursuant to FASB Topic 718. Mr. Smith also received an allocation to his account in the Corporation’s ESOP for 2013 of $18,040.of Directors has adopted policies and procedures designed to foster the appropriate level of corporate governance. Certain of these policies and procedures are discussed below. of Directors seeks directors who represent a variety of backgrounds and experiences whichthat 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,experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time available to serve, 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. of Directors regularly reviews and assesses the effectiveness of our leadership structure and will implement any changes as it deems appropriate. In February 2013, the Board of Directors established the size of the Board at 10,ten, effective as of the 2013 annual meeting of shareholders.Board meetings and presides over meetings of the full Board.of Directors has appointed the Chairman of our Governance and NominatingCommittee,Nominating Committee, Ronald K. Rich, to serve as our Lead Independent Director to preside at all meetings of the independent directors. As Lead 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 four times during 2013.Board of Directors’Board's 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 Lead 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 and Lead Independent Director. 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.Board of Directors. Board. Legal, Operations, Human Resources, Loan Review, Auditing, Information Technology, a Senior Attorney, the Security Officer, the Chief Information Security Officer, an IT Cyber Security Analyst, and representatives from our subsidiaries The Morris Plan Company of Terre Haute and Forrest Sherer Insurance.Inc. The Director’s Enterprise Risk Management Committee is composed of Board members W. Curtis Brighton (Chairman), William R. Krieble, and Ronald K. Rich, who are 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 and the Director’s Enterprise Risk Management Committee receive regular reports from management and meet no less frequently 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.of Directors is regularly informed about such risks through committee reports. of Directors has determined that a majority of the members of the Board, including Messrs. Cox, Krieble, Rich, George, Dinkel, Voges, Brighton and Gibson, are independent, as independence is defined under revised listing standards of the NASDAQ Global Select Market applicable to the Corporation. of Directors has adopted Corporate Governance Guidelines containing general principles regarding the functions of the Board of Directors and its committees. The Governance and Nominating Committee periodically reviews the Corporate Governance Guidelines and will recommend changes to the Board as it deems appropriate. A copy of the Corporate Governance Guidelines is available on the Corporation’s web site at www.first-online.com on the “Investor Relations” page under the link “Governance Documents”. 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.SEC. A copy of the Code of Ethics is available on the Corporation’s web site at www.first-online.com on the “Investor Relations” page under the link “Governance Documents”.Independent Directorsof Directors, the Lead 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, Lead 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, Indiana 47808. Communications received electronically or in writing are distributed to the Chairman of the Board, Lead 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.14REPORT OF THE of Directors, the Audit Committee of the Board assisted the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Corporation. All of the members of the Audit Committee are independent, as defined in the Corporation’s listing requirements. During 2013,2015, the Audit Committee met four times, and the Audit Committee chair, as representative of the Audit Committee, discussed the interim financial information contained in each quarterly earnings announcement with management and the independent public accounting firm prior to public release.itsthe independent public accounting firm's objectivity and independence and satisfied itself as to the independent public accounting firm’s independence. The Audit Committee also discussed with management, the internal auditors and the independent public accounting firm the quality and adequacy of the Corporation’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The Audit Committee reviewed both with the independent and internal auditors itstheir audit plans, audit scope and identification of audit risks.2013,2015, with management and the independent public accounting firm. Management represented to the Audit Committee that the Corporation’s financial statements as of and for the year ended December 31, 20132015 were prepared in accordance with accounting principles generally accepted in the United States. Management has the primary responsibility for the preparation of the Corporation’s internal controls and financial statements and the independent public accounting firm has the responsibility for performing an independent audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.the year ended December 31, 2013, for filing with the Securities and Exchange Commission.SEC. Members of the Audit Committee Thomas T. Dinkel, Chairman Anton H. George Ronald K. Rich15W. Curtis BrightonCOMEPNSATIONCOMPENSATION DISCUSSION AND ANALYSISIntroductionWE DO HAVE THIS PRACTICE WE DO NOT HAVE THIS PRACTICE Corporation'sCorporation’s executive compensation program as it relates to the five executive officers (“named executive officers” or “NEOs”) included on the compensation tables beginning on page 29. The five executive officers listed on the compensation tables, who we refer to as "named executive officers" or "NEOs," consist of our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated executive officers.25. For 2013,2015, our named executive officers and their positions were:–- Chief Executive Officer and President, First Financial Corporation and First Financial Bank, N.A.–- Chief Financial Officer, First Financial Corporation and First Financial Bank, N.A.–- Chief Operations Officer, First Financial Corporation and First Financial Bank, N.A.–- Chief Credit Officer, First Financial Corporation and First Financial Bank, N.A.–- Director of Branch Banking, First Financial Bank, N.A.We also discuss the results of our shareholders' 2013 "Say-On-Pay" vote and the actions that we have taken, or intend to take, to respond to those results. Our discussion provides important context for the compensation tables that follow and, therefore, should be read in conjunction with those tables.("(“Compensation Committee"Committee”) is responsible for determining our executive compensation philosophy and the establishment, implementation, and monitoring of our executive compensation program. The Compensation Committee is composed entirely of independent Directors as determined under the rules of the NASDAQ Global Select market.The Compensation Committee seeksprovidemaintain a competitive, balanced compensation program that encouragesrewards our named executive officers for current year performance and for the creation of long-term shareholder value, without exposing the Corporation to unreasonable risk, including credit, interest rate, liquidity, reputation, compliance, and transaction risk. ThroughWe seek to:executive compensation program, we seek to:·Attract, motivate, and retain highly-qualified, talented executives who are focused on the long-term best interests of our shareholders;·Drive performance relative to our financial goals, balancing short-term operational objectives with long-term strategic goals;·shareholders; with those of our shareholders;·Establish Corporate, Departmental, and individual goals consistent with our strategic plan and budget that provide the basis for the annual and long-term metrics used to measure our success and the value that we create for shareholders;·Reward our executives for both Corporation and individual performance;·Align compensation and variable incentives with measurable, objective, business results and appropriate risk management; and·Allow flexibility in responding to changing laws, accounting standards, and business needs as well as the constraints and dynamic conditions in the markets in which we do business.We have implemented and operate our executive compensation program to reinforce our philosophy of aligning compensation with our short-term and long-term goals and to minimize risk to our shareholders. We currently maintain the following pay practices, which we believe enhance our pay-for-performance philosophy and further align our executives' interests with those of our shareholders:WE DO HAVE THIS PRACTICEWE DO NOT HAVE THIS PRACTICEü Tie a significant portion of executive compensation to our performance metrics in the form of "at-risk" compensation.ü Incentive award metrics that are objective and tied to key company performance metrics.ü Share ownership guidelines (for executives and directors).ü Compensation recoupment "claw-back" policy.ü Anti-hedging policy.ü Double trigger change in control severance.ü Vest equity awards over three years to promote retention.ü Non-performance based incentive awards.ü Hedging transactions by executive officers or directors.ü Excise tax gross-ups in our CEO's Employment Agreement.ü Automatic renewal ("Evergreen") provisions in our CEO's Employment Agreement.compensation isCEO and NEOs and the financial results achieved. We also believe that while we have been competitive with the pay practices of other financial institutions of comparable size, and performance and has allowed usable to attract and retain executives who make substantial contributions to our success.success, the compensation levels of some of our NEOs are below market median. We believe that theexpect to make market-based adjustments going forward. Finally, our program aligns our executives'executives’ interests with those of our shareholders by providingthrough a strong link between higher compensation and the attainment of pre-established objective performance goals.Talmer Bancorp, Inc. S&T Bancorp, Inc. First Merchants Corporation 1st Source Corporation Great Southern Bancorp Inc. Republic Bancorp Inc. First Busey Corporation Community Trust Bancorp, Inc. Lakeland Financial Corp. City Holding Co. MainSource Financial Group, Inc. Peoples Bancorp, Inc. MidWest One Financial Group, Inc. Stock Yards Bancorp, Inc. Horizon Bancorp German American Bancorp Inc. CNB Financial Corp. First Mid-Illinois Bancshares, Inc. Southwest Bancorp, Inc. We must continue to function as a high-performing financial services institution to provide value for our shareholders. To achieve this goal, we must have exceptional leadership committed to providing an outstanding customer experience, operating in a safe and sound manner, and producing results that build long-term shareholder value.executive'sexecutive’s compensation with our short-term and long-term financial goals. We focus on total direct compensation, which is the sum of base salary, short-term incentives, and long-term equity-based incentives. Our total direct compensation is weighted heavily toward results, particularly for our CEO and NEOs, with a substantial portion of direct total compensation "at“at risk."chart shows the portion of our CEO's total direct compensation at risk for 2012 and 2013. 
The total direct compensation shown above is not the total compensation reported in the Summary Compensation Table (SCT) on page 29. Total Direct Compensation above shows the Compensation Committee’s pay decisions for a specific performance year and the commensurate performance achieved by the CEO and the other NEOs. Amounts in the SCT reflect certain awards that were part of total direct compensation for one or more prior performance periods as well as non-performance based compensation such as the changes in the amount of pension values.The following charttable shows the principal components of total direct compensation for our NEOs.Howis Delivered to Our CEO and Other NEOsComponent(“TDC”) Role RoleComments 
Fixed cash compensation based on competitive pay levels, the executive’s performance, level of responsibility and experience to facilitate the acquisition and retention of talented, experienced management. In 2013,2015, base salaries were adjusted to reflect CEO and NEO performance andin line with our 3% salary increase budget, although at our CEO’s recommendation, his salary increase was less than 2%, freeing up dollars for increases elsewhere in the desired market positioning of the Corporation.organization.Award
Annual variable compensation payable in cash based on the achievement of pre-established, objective, corporate or bank performance goals to reward execution and performance improvements in asset management, operations,which support and earnings which drive shareholder value. NewPerformance measures for 2015 required performance measures were adopted in 2013achievement of our operating plan to broaden the scope of financial and operational measures and to clarify the difference between short-term and long-term performance.earn target payouts.Award
Equity compensation awarded in February of each year based on the achievement of pre-established, long-term, objective, corporate performance goals over a three-year period to align the executive'sexecutive’s compensation with the prudent management of the Corporation'sCorporation’s assets and earnings growth objectives. To date, this award under our 2011 Equity Incentive Plan has been paidLTIP awards are determined based on long-term performance and made in the form of restricted stock that vests over three years of continued service. We believe that payment in Corporation stock andSubjecting the award to a three-year vesting requirement links executives'period further aligns executives’ compensation with long-term shareholder interests and is another method of mitigatingmitigates risk.182013 Performance and CompensationCorporation had another year of solid financial performance in 2013. Financial highlights include a 4.25% growth in assets from $2.9 Billion to $3.0 Billion and an increase in non-interest income of $905,000 to $40.5 Million. Total deposits grew 8% from $2.3 Billion to $2.5 Billion, with the majority of the growth occurring in core deposits. Our continued pricing discipline allowed a 33.1% reduction in total interest expense. Book value per share at year end was $28.24, and shareholders' equity grew 3.78% to $386.2 Million. For the 25th consecutive year, we increased the dividends we paid to shareholders, providing a total dividend of $0.96 per share.We have compared key aspects of our financial performance with the performance of companiesdirect compensation described in the SNL Bank Performance Group with assets between $1.5table above reflects the Compensation Committee’s pay decisions relating to base salary and $6 billion as ofto the variable, at-risk pay earned for performance through the end of 2013. We comparedthe year. For our CEO, actual total direct compensation was $1,307,808 and $1,311,301 for performance in 2015 and 2014, respectively. These amounts are not only the total compensation reported in the Summary Compensation Table (“SCT”) on page 25. The amounts in the SCT reflect LTI awards, made in the particular year, but based on prior year’s performance measures used(the SCT table amount for stock awards in our incentive2015 reflects the February 2015 award based on 2014 performance). The total compensation shown in the SCT also includes amounts related to increases in the actuarial value of long-standing retirement plans, which are discussed below, but other performance measures keyprimarily attributable to creating shareholder value, manycontinued service and the effect of which are unique tochanges in interest rates and mortality assumptions, and not the financial services industry and reflect a focus on capital, asset quality, and regulatory oversight.The following is a partial summaryawarding of additional compensation by the benchmarking results, including the performance criteria most closely aligned with the performance criteria under our incentive compensation plans:SNL Bank Peer Group PerformanceAssets $1.5B to $6.0B2013 Financial Performance ResultsShort-Term Performance Measures Net Income
2013Y ($000) ROAA 2013Y
(%) Efficiency
Ratio 2013Y
(%) NPLs / Loans
2013 Y (%) Nonaccrual
Loans / Loans
2013 & Y (%) Deposit
Growth
Rate 2013 Y
(%) Minimum (10,146 ) (0.31 ) 105.14 0.07 0.06 (10.87 ) Median 23,687 0.94 64.71 1.67 1.08 5.03 Average 29,434 1.00 65.21 2.00 1.21 10.35 Maximum 172,075 4.18 38.07 9.16 4.16 140.20 First Financial Corp. 31,534 1.06 64.19 1.90 1.79 8.02 Percent Rank 66 % 67 % 51 % 59 % 83 % 64 % In 2013, we performed strongly with respect to the performance measures of our incentive compensation program. With a focus on net income, asset quality, and operating efficiency, we achieved third and fourth quartile results in comparison to a peer group of 110 public banks of comparable size. We are especially pleased with the low rate of nonaccruals and our improved efficiency ratio, which occurred in spite of the acquisition of eight new branches in 2013 which were part of our plan for expansion and growth but were anticipated to adversely affect our efficiency ratio. These accomplishments will drive future earnings growth and shareholder value.Long-Term Performance Measures 3 Year ROAA 3 Year ROAE 3 Year
Efficiency
Ratio 3 Year Basic
Tangible Book
Value per
Share 3 Year
NPLS/Loans Minimum (2.94 ) (18.27 ) 107.47 1.67 0.19 Median 0.94 9.35 62.80 12.56 2.28 Average 0.87 8.87 63.63 90.90 2.65 Maximum 2.26 27.33 36.07 5,465.20 10.41 First Financial Corp. 1.23 9.42 58.99 24.51 2.74 Percent Rank 83 % 51 % 68 % 90 % 63 % We are sustaining upper quartile performance against the long-term measures of ROAA and Tangible Book Value. These two measures are closely aligned with earnings efficiency and a strong balance sheet. Our rank at the 68th percentile for 3-year efficiency ratio is an indication of our strong cost-management principles and sustained non-interest income performance, despite the burden of the branch acquisitions we have completed over the past two years and their impact on our overall efficiency ratio.2013 Compensation for ExecutivesNEO'sNEO’s compensation are base salary, short-term incentive compensation, long-term incentive compensation,STIP, LTIP, and other benefits. Although the Compensation Committee has not adopted a formula for allocating a NEO'sNEO’s compensation among its various components, it believes that a significant portion of each NEO'sNEO’s compensation should be based on performance and that the percentage of total compensation at risk should increase with the NEO'sNEO’s total compensation and responsibilities with the Corporation.The following chart shows the principal elements of compensation, each of which is discussed in more detail later in this summary:Compensation ElementDescription and PurposeBase SalaryA fixed amount of cash compensation based on competitive pay levels and the executive's performance, level of responsibility, and experience.Short-term Incentive CompensationAnnual variable compensation payable in cash, based on the achievement of pre-established objective corporate performance goals. Links compensation to the achievement of short-term corporate goals.Long-term Incentive CompensationTo date, awards have been in the form of restricted stock based on the achievement of pre-established, objective, 3-year corporate performance goals. After being earned, the awards are subject to a 3-year vesting schedule. Links compensation to the achievement of longer-term corporate goals and serves as a retention incentive and to mitigate risk.Other BenefitsTax-qualified retirement plans and non-qualified deferred compensation plans encourage retention and provide important post-retirement benefits. Life insurance benefits are also provided.20 Base salaries are typically increased to reward those NEOs who have provided valuable service to the Corporation over many years. The Compensation Committee reviews market data in establishing base salaries, but it does not tie its determinations to a particular benchmark. AmongHistorically, the third-party compensation surveys that the Compensation Committee reviews arereviewed have been the Crowe Horwath Financial Institutions Compensation Survey (consisting of a survey for Indiana, Illinois, and the Midwest), the American Bankers Association Compensation and Benefits Survey and other compensation data surveys provided by AON-Hewitt, The Hay Group, The Conference Board, Mercer,for the banking and Towers Watson.NEO'sNEO’s base salary is the annual increase in the Corporation'sCorporation’s annual salary pool approved by the full Board of Directors.Board. Individual base salary increases for all employees, including the NEOs, are awarded as allocations from that salary pool. In establishing the amount of the pool, the Compensation Committee and the Board of Directors consider general economic conditions (such as inflation and recessionary factors), the performance of the Corporation and the Bank, and other sources of information, such as surveys referred to in the preceding paragraph.Committee'sCommittee’s review focuses on the NEO'sNEO’s attainment of objective performance goals established by the Compensation Committee, supervisory skills, dependability, initiative, skill level, and overall value to the Corporation. The Compensation Committee considers all of these factors as a whole, without giving a pre-established weighting to any particular factor, and determines any adjustment to the NEO'sNEO’s base salary.Chief Executive Officer's employment agreement provides for a minimum base salary of $620,297. This amount reflects Mr. Lowery's long and valuable service to the Corporation and his contributions to its success. For 2013, our CEO'sCEO’s base salary was $626,097,increased $12,000 to $642,300, a less than 2% increase from 2014, reflecting our CEO’s desire to free up part of the pool for merit raises elsewhere in the organization. The base salaries for Messrs. McHargue, Norman D. Lowery and for 2014 it will be $630,297.First Financial Corporation 2011 Short-Term Incentive Plan ("2011 STIP").STIP. Each year, the Compensation Committee establishes and approves an objective performance goals,goal for a number of Corporation, Bank or departmental performance measures, the relative weight accorded to each performance goal, and the threshold,a target and maximum award rates for each participating executive. For 2013,executive officer. The amount earned under the Compensation Committee established these criteria on February 5, 2013, and it communicated the potential awards and performance criteria to our NEOsSTIP will depend on the same date.The amount of a NEO's incentive compensation for a year under the 2011 STIP depends on his or herNEO’s target award, which is stated as a percentage of base salary, and the extent to whichof the Corporation’s, Bank’s or department’s achievement against the goals established for the year. Target awards for 2015 were 46.4% of base salary for our CEO, 35% for Messrs. McHargue, Norman D. Lowery and Holliday, and 25% for Ms. Milienu.criteriagoals for the year, are achieved or exceeded. No payments are made unless threshold performance is achieved or surpassed. At threshold performance, the payout is 80% of the NEO's target award; at target performance, 100% of the target award; and at or above maximum performance, 125% or 120%, for tiers 1 and 2 respectively, of the executive's target award. For purposes of the STIP, Mr. Norman L. Lowery was the only tier 1 executive for 2013. Awards for performance between threshold and target or between target and maximum performance are determined by interpolation.The Compensation Committee spends significant time reviewing the Corporation'sCorporation’s annual strategic plan and budget, which arewere approved by the Board of Directors in November orand December of the preceding year, and in analyzing financial measures and determining the level of performance required for threshold, target, and maximum payouts.year. The Compensation Committee establishes a target performance goal for performance measures determined by the thresholdCommittee to be important to the Corporation’s, the Bank’s or a department’s overall performance for the coming year. The performance goal for each of performance measure is intended to be a stretch goal, achievable through sustained execution of the strategic plan. The Committee assigns weights to each of performance measures, with areas of focus for achieving greater overall performance assigned higher weightings. To focus management on sustaining its continued, disciplined execution and continuing earnings growth, more weight was assigned to income and expense-related measures.that it believes(“Goal”), our results (“Actual”), the level of achievement against the goal (% of Goal), the weightings (“Weight”), and the resulting score for the CEO and other NEOs (“Score”) under the Short-Term Incentive Plan. For our CEO, Mr. Norman L. Lowery, the performance measures relate to be achievable given a sustained effort onCorporation-wide performance; the partperformance measures for the other NEOs are tied to Bank and/or departmental performance. The amount of STIP earned in 2015 by each executive officer reflects the overall score multiplied by his or her target bonus and is set forth in the Non-Equity Incentive Plan column of the namedSCT.Measure Level McHargue Holliday Milienu Operating Income Goal $ 31,007 $ 27,279 $ 27,279 $ 27,279 $ 27,279 Actual $ 30,196 $ 26,757 $ 26,757 $ 26,757 $ 26,757 % of Goal 97.38 % 98.09 % 98.09 % 98.09 % 98.09 % Weight 50.00 % 40.00 % 40.00 % 20.00 % 20.00 % Composite 48.69 % 39.23 % 39.23 % 19.62 % 19.62 % Efficiency Ratio Goal 64.70 % 68.12 % 68.12 % — — Actual 65.50 % 69.58 % 69.58 % — — % of Goal 98.70 % 97.90 % 97.90 % — — Weight 25.00 % 20.00 % 20.00 % — — Composite 24.68 % 19.58 % 19.58 % — — Non-Performing Loans Goal 2.25 % — — 2.25 % — Actual 1.84 % — — 1.82 % — % of Goal 122.28 % — — 123.63 % — Weight 7.50 % — — 10.00 % — Composite 9.17 % — — 12.36 % — Delinquency Goal 1.36 % — — 1.27 % — Actual 1.00 % — — 0.80 % — % of Goal 136.00 % — — 158.75 % — Weight 7.50 % — — 10.00 % — Composite 10.20 % — — 15.88 % — Loan Growth Goal 5.97 % 6.05 % 6.05 % 6.05 % — Actual (1.86 )% (2.07 )% (2.07 )% (2.07 )% — % of Goal — % — % — % — % — Weight 5.00 % 5.00 % 5.00 % 20.00 % — Composite — % — % — % — % — Deposit Growth Goal 3.19 % 3.10 % 3.10 % — 3.10 % Actual (0.62 )% (0.65 )% (0.65 )% — (0.65 )% % of Goal — % — % — % — — % Weight 5.00 % 5.00 % 5.00 % — 20.00 % Composite — % — % — % — % Direct Controllable Goal — $ 29,006 $ (3,714 ) $ 41,332 $ (50,427 ) Actual — $ 31,315 $ (3,381 ) $ 40,237 $ (49,256 ) % of Goal — 107.96 % 109.85 % 97.35 % 102.38 % Weight — 30.00 % 30.00 % 15.00 % 20.00 % Composite — 32.39 % 32.95 % 14.60 % 20.48 % Net Charge-Offs Goal — — — 0.24 % — % Actual — — — 0.10 % — % % of Goal — — — 240.00 % — % Weight — — — 10.00 % — % Composite — — — 24.00 % — % Loan Spread Goal — — — 3.02 % — % Actual — — — 3.02 % — % % of Goal — — — 100.00 % — % Weight — — — 15.00 % — % Composite — — — 15.00 % — % Return on Assets Goal — — — — % 0.92 % Actual — — — — % 0.93 % % of Goal — — — — % 100.09 % Weight — — — — % 20.00 % Composite — — — — % 20.22 % Return on Equity Goal — — — — % 7.27 % Actual — — — — % 7.22 % % of Goal — — — — % 99.31 % Weight — — — — % 20.00 % Composite — — — — % 19.86 % Total Composite 92.74 % 91.20 % 91.77 % 101.46 % 80.17 % maximumthe Corporation’s or Bank’s performance during the preceding three years measured against the goals that require increasingly greater effort to achieve. The annual incentive opportunities for each NEO are based upon weighted performance measures established by the Compensation Committee. The LTIP award target for awards made in February 2015 based on performance through 2014, and in February 2016 based on performance through 2015, were 60.0% for our CEO, 40% for Messrs. McHargue, Norman D. Lowery and Holliday, and 20.0% for Ms. Milienu.upon itson the Corporation’s strategic plan and budgets, and weights the goals based on the Committee’s assessment of whatthe relative importance of the measure to overall shareholder value. The amount of an executive officer’s LTIP award is importantbased on the overall score achieved and the officer’s LTIP award target. LTIP awards are made in restricted stock having value equal to the Corporation’s and the Bank’s overall performance and within the scope of the NEO's ability to achieve.To receive anLTIP award earned under the 2011 STIP, a NEO must be employedearned. The restricted stock vests in three equal installments beginning on the last dayDecember 31 of the year and, except in the case of termination on account of death, disability, or retirement, must be an employee on the payment date. The payment of amounts earned under the 2011 STIP must be made within 75 days after the end of the calendar yeargrant and the following two years. The Committee believes the use of performance criteria for whichdetermining the payment is made.The Compensation Committee commencessize of the process of establishing our incentive compensationLTIP award, followed by considering and approving objective performance goals no later than February each year (February 5, 2013) which are tied to key components of our strategic plan and budget, and balanced against corporate risk.In February, 2013, we modifieda three-year vesting schedule, reinforces the financial and operational performance measures used in our short-term and long-term incentive plans. In making those changes, we sought to align incentive compensation more closely with performance criteria that NEOs are able to influence with their performance rather than with market fluctuations over which NEOs have little, if any, control. In 2008 and 2009 many Community Banks lost significant value as a resultretention purpose of the financial crisis which First Financial successfully navigated. As a result these institutions have recognized higher shareholder returns recently but have still underperformed First Financial and the broader market over a longer time horizon.Our performance measures are designed to ensure our incentive awards promote performance improvements that will lead to the creationLTIP award while establishing an appropriate balance of shareholder value. For this reason and the importance of "real capital" to financial institutions we added 3-Year Tangible Book Value to our long-term performance goals in 2013. This measure of book value demonstrates the real value of assets on our balance sheet and, in comparison with comparable financial institutions, can be a meaningful predictor of future shareholder value. In setting performance measures, we have also sought to encourage maintenance of a high quality loan portfolio, stress operational performance with the efficiency ratio, balance growth with a sound base of customer deposits and balance risk and incentive compensation in accordance with the Guidance on Sound Incentive Compensation Policies issued by the Federal Reserve, the FDIC, the OCC, and OTC in 2010. Finally, we stress operationalwithmeasures remained the efficiency ratio and balancing growth with a sound base of customer deposits.Short-Term Incentive Plangoals ("Goal"performance measures (“Measure”), their weightings ("Weight"target performance goal (“Goal”), our results ("Actual"(“Actual”), the level of achievement against the goal (% of Goal), the weightings (“Weight”), and the 2013 resultsresulting score for the CEO and other NEOs ("Composite"(“Score”) underfor the Short-Term Incentive Plan. The goals set out below were established and approved by the Compensation Committee and communicated to participating executives onLTIP awards made in February 5, 2013, and were2016 based on our strategic plan and budget forperformance through the year.end of 2015. For 2013, our CEO, Mr. Norman L. Lowery, the99.75%in 2014 by each executive officer reflects the overall score multiplied by his or her target LTIP award. In accordance with SEC disclosure rules, the LTIP award based on 2015 performance will be reported in 2016 proxy statement. The amount of the Short-Term Incentive Plan target award.Measure Level NL
Lowery McHargue ND
Lowery Holliday Milienu Goal $ 31,778 $ 27,846 $ 27,846 $ 27,846 $ 27,846 Net Income Actual $ 31,534 $ 27,887 $ 27,887 $ 27,887 $ 27,887 % of Goal 99.23 % 100.15 % 100.15 % 100.15 % 100.15 % Weight 50.00 % 40.00 % 40.00 % 20.00 % 30.00 % Composite 49.62 % 40.06 % 40.06 % 20.03 % 30.04 % Goal 65.89 % 64.04 % 64.04 % — — Efficiency Actual 64.52 % 64.37 % 64.37 % — — Ratio % of Goal 102.12 % 99.49 % 99.49 % — — Weight 25.00 % 20.00 % 20.00 % — — Composite 25.53 % 19.90 % 19.90 % — — Goal 2.80 % — — 2.80 % — Non- Actual 2.68 % — — 2.72 % — Performing % of Goal 104.48 % — — 102.94 % — Loans Weight 7.50 % — — 10.00 % — Composite 7.84 % — — 10.29 % — Goal 2.00 % — — 2.00 % — Actual 1.60 % — — 1.88 % — Delinquency % of Goal 125.00 % — — 106.38 % — Weight 7.50 % — — 10.00 % — Composite 9.38 % — — 10.64 % — Goal 2.81 % 3.91 % 3.91 % 3.91 % — Loan Actual (4.19 )% (3.05 )% (3.05 )% (3.05 )% — Growth % of Goal 0.00 % 0.00 % 0.00 % 0.00 % — Weight 5.00 % 5.00 % 5.00 % 20.00 % — Composite 0.00 % 0.00 % 0.00 % 0.00 % — Goal 3.35 % 4.94 % 4.94 % — 4.94 % Deposit Actual 4.95 % 5.19 % 5.19 % — 5.19 % Growth % of Goal 147.76 % 105.06 % 105.06 % — 105.06 % Weight 5.00 % 5.00 % 5.00 % — 35.00 % Composite 7.39 % 5.25 % 5.25 % 36.77 % Goal — $ 3,598 $ (3,959 ) $ 48,853 $ 13,470 Departmental Actual — $ 4,079 $ (3,449 ) $ 41,980 $ 14,180 Controllable % of Goal — 113.37 % 114.79 % 85.93 % 105.27 % Income/Expense Weight — 30.00 % 30.00 % 15.00 % 35.00 % Composite — 34.01 % 34.44 % 12.89 % 36.84 % Goal — — — 0.41 % — Net Actual — — — 0.37 % — Charge-Offs % of Goal — — — 110.81 % — Weight — — — 10.00 % — Composite — — — 11.08 % — Goal — — — 2.88 % — Loan Actual — — — 3.28 % — Spread % of Goal — — — 113.89 % — Weight — — — 15.00 % — Composite — — — 17.08 % — TOTAL 99.75 % 99.22 % 99.65 % 82.02 % 103.66 % 23Long-Term Incentive PlanThe Compensation Committee believes that equity-based compensationLTIP awarded in February 2015, based on 2014 performance, is an effective means of strengthening the alignment between the interests of our executive officers and our shareholders and is an essential tool for attracting, retaining, and motivating talented executive officers. At the 2011 annual meeting, the Corporation’s shareholders approved the First Financial Corporation 2011 Equity Incentive Plan ("2011 EIP"), which provides for awards of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, and long-term cash incentives.Our long-term incentive measures represent the aggregate goals for the three-year period endingset forth in the year for whichStock Awards column in the award is made. They are communicated to participating executives no later than February 15 each year. For 2013, the long-term incentive measures remained the same as in 2012, with the addition of Tangible Book Value. The table below reports the goals ("Goal"), their weightings ("Weight"), our results ("Actual"), and the 2013 results for the CEO and other NEOs ("Composite") under the Long-Term Incentive Plan. As noted on the table, the actual earned award of restricted stock is calculated as percentage of the target award. For 2013, our CEO earned 111.99% of the Long-Term Incentive Plan target award.Measure Level NL
Lowery McHargue ND
Lowery Holliday Milienu 3 Year Goal 1.11 % 1.06 % 1.06 % 1.06 % 1.06 % Average Actual 1.23 % 1.14 % 1.14 % 1.14 % 1.14 % Return on % of Goal 110.81 % 107.55 % 107.55 % 107.55 % 107.55 % Assets Weight 20.00 % 20.00 % 20.00 % 20.00 % 20.00 % Composite 22.16 % 21.51 % 21.51 % 21.51 % 21.51 % 3 Year Goal 8.63 % 8.68 % 8.68 % 8.68 % 8.68 % Average Actual 9.36 % 9.25 % 9.25 % 9.25 % 9.25 % Return on % of Goal 108.46 % 106.57 % 106.57 % 106.57 % 106.57 % Equity Weight 15.00 % 15.00 % 15.00 % 15.00 % 15.00 % Composite 16.27 % 15.99 % 15.99 % 15.99 % 15.99 % Goal $ 25.18 $ 25.18 $ 25.18 $ 25.18 $ 25.18 Tangible Actual $ 24.91 $ 24.91 $ 24.91 $ 24.91 $ 24.91 Book % of Goal 98.93 % 98.93 % 98.93 % 98.93 % 98.93 % Value Weight 30.00 % 30.00 % 30.00 % 30.00 % 30.00 % Composite 29.68 % 29.68 % 29.68 % 29.68 % 29.68 % 3 Year Goal 4.02 % 4.02 % 4.02 % 4.02 % 4.02 % Earnings Actual 5.04 % 5.04 % 5.04 % 5.04 % 5.04 % Per Share % of Goal 125.37 % 125.37 % 125.37 % 125.37 % 125.37 % Growth Weight 35.00 % 35.00 % 35.00 % 35.00 % 35.00 % Composite 43.88 % 43.88 % 43.88 % 43.88 % 43.88 % TOTAL 111.99 % 111.05 % 111.05 % 111.05 % 111.05 % Measure Level N.L. Lowery McHargue N.D. Lowery Holliday Milienu Goal 1.04 % 0.94 % 0.94 % 0.94 % 0.94 % 3 year Actual 1.06 % 0.98 % 0.98 % 0.98 % 0.98 % Return on % of Goal 101.92 % 104.26 % 104.26 % 104.26 % 104.26 % Assets Weight 20.00 % 20.00 % 20.00 % 20.00 % 20.00 % Composite 20.38 % 20.85 % 20.85 % 20.85 % 20.85 % Goal 8.00 % 7.70 % 7.70 % 7.70 % 7.70 % 3 year Actual 8.06 % 7.84 % 7.84 % 7.84 % 7.84 % Return on % of Goal 100.75 % 101.82 % 101.82 % 101.82 % 101.82 % Equity Weight 15.00 % 15.00 % 15.00 % 15.00 % 15.00 % Composite 15.11 % 15.27 % 15.27 % 15.27 % 15.27 % Goal $29.66 $29.66 $29.66 $29.66 $29.66 Tangible Actual $29.72 $29.72 $29.72 $29.72 $29.72 Book % of Goal 100.20 % 100.20 % 100.20 % 100.20 % 100.20 % Value Weight 30.00 % 30.00 % 30.00 % 30.00 % 30.00 % Composite 30.06 % 30.06 % 30.06 % 30.06 % 30.06 % Goal $2.39 $2.39 $2.39 $2.39 $2.39 Earnings Actual $2.42 $2.42 $2.42 $2.42 $2.42 Per Share % of Goal 101.26 % 101.26 % 101.26 % 101.26 % 101.26 % Weight 35.00 % 35.00 % 35.00 % 35.00 % 35.00 % Composite 35.44 % 35.44 % 35.44 % 35.44 % 35.44 % Total Composite 101.00 % 101.62 % 101.62 % 101.62 % 101.62 % Plan BenefitsOverview that retirement and other post-employment benefits can be a powerful motivational tool for attracting and retaining key executives. Our retirement plans consist of three tax qualified retirement plans, which cover most employees of the Corporation and participating subsidiaries. The Internal Revenue Code limits on qualified plan benefits that result in certain executive employees receiving a substantially lower benefit (as a percentage of compensation) than other participating employees. We have adopted nonqualified retirement plans to make-up for these benefit reductions.("(“Savings Plan"Plan”), the First Financial Corporation Stock Ownership Plan ("ESOP"(“ESOP”), and the First Financial Corporation Employees'Employees’ Pension Plan ("(“Pension Plan"Plan”).24Qualified Retirement PlansPlanPlan. The Savings Plan allows eligible employees to contribute a portion of their compensation on a before-tax basis. Participants may direct the investment of their plan accounts among a diversified range of investment options. For those participants who are not eligible for future benefit accruals under the Pension Plan, the Corporation may, in its discretion, match the participant'sparticipant’s contributions (up to 4% of compensation) and make non-matching contributions.ESOPDirectors of the Corporation. The value of a participating employee'semployee’s benefit under the ESOP depends on the value of the shares of Corporation stock and any other amounts allocated to his or her account.participant'sparticipant’s compensation and service, which is then offset by the value of the participant'sparticipant’s benefit under the ESOP. This type of arrangement is commonly referred to as a floor-offset arrangement. Future accruals under the Pension Plan have beenwere frozen for all participants at the end of 2012, except thosefor certain long-service, retirement-eligible or other employees who aswere grandfathered at that time. Each of December 31, 2012, (i) had reached age 65, completed at least 30 years of service, or had a combined years of ageour CEO and vesting service of at least 70, or (ii) were participants in the Short-Term Incentive Plan.Nonqualified Retirement PlanThe Corporation's nonqualified retirement plans provide supplemental retirementother named executive officers, other than Mr. Holliday, continue to accrue benefits for a select group of management or highly compensated employees to replace benefit reductions under the qualified retirement plans due to Internal Revenue Code limitations on compensation that may be considered in calculating benefits and on the total benefits for any employee. As the Corporation maintains both a qualified defined benefit plan and qualified defined contribution plans, it maintains separate nonqualified plans to make up for lost benefits under each type of plan. The Executives' Deferred Compensation Plan consists of an original plan, which is exempt from Internal Revenue Code Section 409A ("EDC Plan"), and a 2005 plan, which is subject to Section 409A ("2005 EDC Plan"). The EDC and the 2005 EDC permit participating executives to defer compensation without regard to the limitations imposed by the Internal Revenue Code applicable to qualified retirement plans and provides for a supplemental ESOP to make up for benefit reductions to comply with Internal Revenue Code limits. The Executive Supplemental Retirement Plan consists of an original plan, which is exempt from Internal Revenue Code Section 409A ("ESRP"), and a 2005 plan, which is subject to Section 409A ("2005 ESRP"). The ESRP and the 2005 ESRP make up for benefit reductions under the Pension Plan imposed to comply with Plan.Plan benefits. Benefits underplans can result in highly paid individuals, such as our executive officers, receiving a substantially lower benefit (as a percentage of compensation) than other participating employees. We have adopted nonqualified retirement plans to make-up for these benefit reductions. Information relating to qualified and nonqualified plans accompanies the ESRP and 2005 ESRP are reduced by amounts payable under the supplemental ESOP portion of the EDC Plan“Pension Benefits” table and the 2005 EDC Plan, just as amounts payable under the Pension Plan are reduced by the value of benefits payable under the ESOP.The Process for Setting Executive CompensationRole of the Compensation CommitteeEach year, the Compensation Committee reviews our executive compensation program to assure that the program and the compensation for each NEO are consistent with our compensation philosophy and, specifically, that a substantial portion of our NEOs' compensation is paid only if pre-established objective performance goals are met or exceeded. In exercising its duties, the Compensation Committee considers all elements of our executive compensation program, as well as individual performance, Corporation performance, and market compensation considerations.The Compensation Committee determines the appropriate allocation of each NEO's potential compensation among base salary, short-term incentive compensation, long-term incentive compensation, and other components. Based on our strategic plan and budget, the Compensation Committee sets the appropriate goals and measures under the short-term and long-term incentive components of the program and communicates those goals and measures to covered NEOs on or before February 15 of the year. Each year, the Compensation Committee also reviews our performance compared to short-term and long-term objectives, reviews our executive officer pay practices, evaluates risks associated with our executive compensation program, and approves all awards under our short-term and long-term incentive plans. The Compensation Committee reports its decisions to the Board of Directors.Role of Company PersonnelEach year, prior to any adjustments in compensation, our Chief Executive Officer provides the Compensation Committee with a review of our strategic and financial performance and the compensation and performance of all executive officers other than himself. He also develops recommendations regarding the compensation of those executive officers and presents his recommendations to the Compensation Committee for review and approval. The Compensation Committee generally requests information relevant to its determinations from Corporation personnel, including our Chief Financial Officer. However, no executive officer other than our Chief Executive Officer attends Compensation Committee meetings. The Compensation Committee invites our Chief Executive Officer to attend Committee meetings at which it discusses the compensation of executive officers other than himself. Our Chief Executive Officer does not attend the portion of Compensation Committee meetings at which his compensation is discussed, nor does he make recommendations regarding his own compensation. The Corporation's Human Resources Management provides information and other support to our Chief Executive Officer and the Compensation Committee in connection with the Compensation Committee's deliberations.Role of Outside ConsultantsThe Compensation Committee is authorized to retain its own advisors. In April 2010, the Compensation Committee retained Grant Thornton LLP as its independent compensation consultant. Grant Thornton did not perform any services for management, and it interacted with members of management only under the Compensation Committee’s oversight and with the knowledge and permission of the Compensation Committee chair. Grant Thornton’s duties included (i) design of a short-term incentive compensation plan, (ii) design of a long-term incentive plan for key executive officers, (iii) review of director compensation, and (iv) confirmation of the competitiveness of total compensation for certain executive officers. In connection with Grant Thornton’s recommendations, the Board adopted the 2011 Short Term Incentive Compensation Plan and the 2011 Omnibus Equity Incentive Plan which approved by our shareholders at our 2011 annual meeting and is described under the heading "Incentive Compensation" on page 21.In 2013, the Compensation Committee again retained Grant Thornton to provide advice regarding our compensation policies and practices. Grant Thornton provided a banking industry update, a regulatory update on compensation and corporate governance topics, and other topics related to the Corporation and its compensation plans. In connection with its retention of Grant Thornton, the Compensation Committee determined that no conflict of interest existed that would impair the ability of Grant Thornton to serve as a compensation consultant to the Compensation Committee.Shareholder's 2013 Advisory Approval of the Corporation's Executive CompensationAt our most recent annual meeting, held on April 17, 2013, the Corporation held a non-binding advisory vote on the compensation program for our named executive officers, as disclosed in our proxy statement dated March 18, 2013. This type of vote is commonly referred to as "Say-On-Pay". At the meeting, approximately 52% of the represented shares voted to approve the executive compensation program, while approximately 30% voted against. Even though the executive compensation program did not change from 2011 to 2012, the number of shareholders approving the program decreased, and the number of shareholders voting against approval increased. The Committee believes that the increase in the number of "no" votes in 2013 was influenced by the recommendation of Institutional Shareholder Services ("ISS") to vote against the executive compensation program.The Compensation Committee also believes the vote of our shareholders was influenced, in part, by the conclusion drawn by ISS that "the CEO’s annual cash incentive award was paid at target, despite below-target achievement in two of the three performance metrics". While it is correct that two of the three performance metrics for the CEO were slightly below target (Net Income – 97.8% of target and Return on Equity – 96.05% of target), it is not correct the CEO was paid at target, as he was compensated at 97.8404% of target based on these results and the performance achieved on a third goal, Return on Assets.Among the other reasons provided by ISS for its no-vote recommendation was that equity grants under the long-term incentive plan, while performance-based, were determined using the same performance metrics that were used for annual cash-based awards under the short-term plan, albeit using three-year averages instead of one-year results. While the Corporation and the Compensation Committee believe the metrics used in 2012 were appropriate for both the long-term equity incentive plan and annual cash based incentive awards, the Compensation Committee changed the metrics in February, 2013, prior to last year’s annual meeting of shareholders and the ISS recommendation, so that the metrics under the short-term incentive plan and the long-term incentive plan, while still appropriate, differ.The Compensation Committee has considered the ISS recommendations and the vote of our shareholders as a part of its review of the Corporation’s overall executive compensation program, including the appropriateness of the compensation philosophy, our objectives, and the level of compensation provided to the NEOs. Based on an analysis of these factors, the Compensation Committee has determined our Executive Compensation Philosophy and the application of the philosophy is appropriate.includesinclude credit, interest rate, liquidity, reputation, compliance, and transaction risk as well as the added potential for loss that could result from any of our compensation programs. The Committee also charges the Corporation’s General Auditor with performing a risk assessment of the incentive compensation program. Based on a review of these risks and the report of the General Auditor, the Committee has determined that the Corporation’s compensation arrangements and policies do not encourage excessive risk-taking. of Directors has adopted stock ownership guidelines applicable to our named executive officers. Under those guidelines, our CEO is required to own a number of shares of the Corporation’s common stock equal in value to $500,000, and other NEOs are required to own a number of shares equal in value to $150,000. Except for purposes of exercising statutory diversification rights under the ESOP, our covered executives may not dispose of shares until they have satisfied the guidelines. Covered executives are expected to comply with the guidelines as soon as practicable, and in no event later than five years after the date they become a covered executive. In the case of individuals who were covered executives when the guidelines became effective, compliance is required within five years of the effective date. Messrs. Norman L. Lowery, McHargue, Norman D. Lowery, Holliday and Ms. Milienu currently meet the guidelines.27highly compensatednamed executive officers. Qualifying performance-based compensation is not subject to this deduction limit. It isThe amount of base salary and STIP paid to our CEO and other named executive officers has been below the Committee’s objective to maximize$1 million deduction limit. However, LTI and other compensation paid may not be deductible because it exceeds the limitations or does not meet the performance-based or other requirements for deductibility under Section 162(m) to the extent consistent with the Committee’s assessment of the interests of the Company and its shareholders."claw back"“claw back” all or a portion of an incentive compensation payment which was based on erroneous data due to our material noncompliance with any financial reporting requirement under securities laws which resulted in an accounting restatement. The claw back applies to incentive compensation described above which was paid within three years preceding the date of the accounting restatement. In that instance, the participant is required to repay the excess amount which would not have been paid to the participant but for the accounting restatement.thethis Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions,discussion, the Committee (i) is satisfied that the Compensation Discussion and Analysis represents the philosophy, intent and actions of the Committee with regard to executive compensation, and (ii) recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement on Schedule 14A.Statement. Anton H. George,Ronald K. Rich2013 "Named“Named Executive Officers"Officers”) during the years ended December 31, 2013, 20122015, 2014 and 2011. Salary Stock
Awards
(1) Non-Equity
Incentive Plan
Compensation
(2) Change in
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings (3) All Other
Compensation
(4) Total Name and Principal Position Year ($) ($) ($) ($) ($) ($) Norman L. Lowery, 2013 626,097 (5) 459,532 282,017 - 75,862 (7) 1,443,508 Chie Executive Officer, 2012 607,615 531,563 275,845 658,135 85,538 2,158,696 First Financial Bank, N.A. and 2011 598,049 - 337,276 976,461 48,938 1,960,724 First Financial Corporation Rodger A. McHargue, 2013 196,191 (5) 94,913 68,823 34.472 11,278 (7) 405,677 Chief Financial Officer, 2012 189,826 92,306 65,004 148,717 6,992 502,845 First Financial Bank, N.A. and 2011 184,612 - 77,537 154,452 3,477 420,078 First Financial Corporation Steven H. Holliday, 2013 190,565 (6) - 54,578 - 13,281 258,424 Chief Credit Officer, 2012 78,506 - 62,000 - 7,532 148,038 First Financial Bank, N.A. 2011 - - - - - - Norman D. Lowery, 2013 191,014 92,816 67,351 3,442 16,349 (7) 370,972 Chief Operations Officer, 2012 185,631 90,466 63,568 115,998 11,309 466,972 First Financial Bank, N.A. and 2011 180,937 - 75,991 90,414 7,385 354,727 First Financial Corporation Karen L. Milienu, 2013 145,590 31,127 37,811 17,717 3,245 (7) 235,490 Director of Branch Banking, 2012 141,487 17,778 43,479 - 600 203,344 First Financial Bank, N.A 2011 121,472 - 30,491 - 600 152,563 Donald E. Smith, (8) 2013 148,000 151,189 - - 18,040 317,229 Chairman of the Board 2012 200,000 638,938 91,137 - 2,464 932,539 and President Emeritus, 2011 712,129 - 419,685 - - 1,131,814 First Financial Corporation Salary Total Name and Principal Position Year ($) ($) ($) ($) ($) ($) Norman L. Lowery, 2015 642,300 388,587 276,286 656,290 79,307 2,042,770 Chief Executive Officer, 2014 630,297 417,894 292,417 1,233,378 83,428 2,657,414 First Financial Bank, N.A. and 2013 626,097 459,532 282,017 — 75,862 1,443,508 First Financial Corporation Rodger A. McHargue, 2015 211,300 (5) 82,750 67,447 107,839 9,049 478,385 Chief Financial Officer, 2014 201,209 87,332 67,005 324,486 8,403 688,435 First Financial Bank, N.A. and 2013 196,191 94,913 68,823 34,472 11,278 405,677 First Financial Corporation Steven H. Holliday, 2015 210,200 (6) 82,253 74,571 — 15,566 382,590 Chief Credit Officer, 2014 200,200 85,173 61,472 — 14,022 360,867 First Financial Bank, N.A. 2013 190,565 — 54,578 — 13,281 258,424 First Financial Corporation Norman D. Lowery, 2015 210,000 82,253 67,263 70,195 13,169 442,880 Chief Operations Officer, 2014 200,000 85,463 69,079 207,812 14,028 576,382 First Financial Bank, N.A. and 2013 191,014 92,816 67,351 3,442 16,349 370,972 First Financial Corporation Karen L. Milienu, 2015 156,000 30,845 31,254 89,464 4,256 311,819 Director of Branch Banking, 2014 150,000 32,570 34,368 195,604 3,810 416,352 First Financial Bank, N.A 2013 145,590 31,127 37,811 17,717 3,245 235,490 (1) for 2012based on prior years’ performance, determined pursuant to FASB ASC Topic 718. These amounts do not reflect whether the recipient will realize a financial benefit from the awards (such as becoming vested over the three-year graded vesting period). The grant date fair values have been determined based on the assumptions and methodologies set forth in the Corporation’s 20132015 Annual Report on Form 10-K (note 16)[16]).(2) The amounts in this column reflect amounts earned under the 2011 STIP on December 31, 2013, which were paid on February 15, 2014. The 2011 STIP is discussed in detail in the "Compensation Discussion and Analysis" section of this Proxy Statement.STIP.(3) The amounts in this column do not reflect amounts paid. The amounts reflect the actuarial increase in the present value of the named executive officers'officers’ benefits under the Pension Plan and our nonqualified defined benefit plans ("ESRP"(“ESRP” and "2005 ESRP"“2005 ESRP”), determined using interest rate and mortality rate assumptions consistent with those used in the Corporation'sCorporation’s financial statements, and they include amounts that the named executive officer may not be able to receive because such amounts are not vested. Because the ESOP and the Pension Plan constitute a "floor offset" retirement program, this column represents amounts required to be paid under the Pension Plan and nonqualified defined benefit plans because they are not offset by the named executive officer's ESOP benefit or the portion of the nonqualified defined contribution plans ("'EDC Plan" and "2005 EDC Plan") attributable to the ESOP make-up.statements.(4) 2013,2015, which are properly includedwould be includable in this column, were not calculable as of the date of this Proxy Statement. Such amounts for 20122014 were as follows: $12,097$12,166 for Mr. Norman L. Lowery; $12,097$12,166 for Mr. McHargue; $12,097$12,166 for Mr. Norman D. Lowery; $8,351$7,869 for Mr. Holliday; and $8,905 for Ms. Milienu and $13,203 for Mr. Smith.Milienu.(5) Includes $4,800 for service as a director of Portfolio Management Specialist A (a subsidiary of the Bank), Portfolio Management Specialist B (an indirect subsidiary of the Bank) and Global Portfolio Limited Partnership (an indirect subsidiary of the Bank), and $1,000$500 for service as a director of FFB Risk Management Company, Inc. (a subsidiary of the Corporation).(6) Includes $200 for service as a manager of First Financial Real Estate LLP (a real estate investment trust of the Bank). (7)Includes (i) the premiums paid by the Corporation pursuant to a life insurance program for named executive officers, (ii) amounts contributed by the Corporation under the 2005 EDC, which were $41,682 for Norman L. Lowery, $189 for Mr. McHargue, and $360 for Norman D. Lowery, and (iii) dividends on restricted stock.(8)Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014.plan basedplan-based grants during the fiscal year ended December 31, 2013,2015, consisting of opportunities for cash awards made under the 2011 STIPShort-Term Incentive Compensation Plan (the “2011 STIP”) and equity grants under the 2011 EIP,Omnibus Equity Incentive Plan (the “2011 EIP”), which are discussed in more detail in the "Compensation“Compensation Discussion and Analysis"Analysis” section of this Proxy Statement.Name Grant Date Plan Name Estimated Payouts
Under Non-Equity
Incentive Plan
Awards ($)(1) Estimated Future
Payouts Under
Equity Incentive
Plan Awards ($)(2) Grant Date
Fair Value
($)(3) Norman L. Lowery 2011 STIP 282,017 2/1/2014 2011 EIP 417,894 32.17 Rodger A. McHargue 2011 STIP 68,823 2/1/2014 2011 EIP 87,332 32.17 Steven H. Holliday 2011 STIP 54,578 2/1/2014 2011 EIP 85,173 32.17 Norman D. Lowery 2011 STIP 67,351 2/1/2014 2011 EIP 85,463 32.17 Karen L. Milienu 2011 STIP 37,811 2/1/2014 2011 EIP 32,570 32.17 Donald E. Smith (4) 2011 STIP - - 2011 EIP - 32.17 Closing Market Price on Grant Date ($/sh) Name Grant Date Plan Name Threshold ($) Target ($) Maximum ($) Norman L. Lowery 2011 STIP 238,293 298,027 372,534 2/3/2015 2011 EIP 11,474 33.865 388,587 Rodger A. McHargue 2011 STIP 59,164 73,955 88,746 2/3/2015 2011 EIP 2,443 33.865 82,750 Steven H. Holliday 2011 STIP 58,800 73,500 88,200 2/3/2015 2011 EIP 2,428 33.865 82,253 Norman D. Lowery 2011 STIP 58,800 73,500 88,200 2/3/2015 2011 EIP 2,428 33.865 82,253 Karen L. Milienu 2011 STIP 35,100 39,000 42,900 2/3/2015 2011 EIP 910 33.865 30,845 (1) The amounts in this columnthese columns represent the threshold, target and maximum fiscal year 20132015 awards available under the 2011 STIP. To receive a payout under the 2011 STIP, a participant must remain employed with the Corporation through the date payment is made, which is within 75 days of the end of the performance period, (exceptexcept in the case of death, disability, retirement, termination without cause or a terminationresignation for good reason, which terms are defined in the 2011 STIP).STIP. The amounts in these columns represent award opportunities; the actual amount of the award earned for 2015 for each named executive officer is included under the column “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table.(2) The awardsamounts in this column represent performance based restricted stock awards madegranted in 20142015 based on performance during 2013. For the fiscal year 2013, thethree-years ending in 2014. The shares vest in three substantially equal installments on December 31, of 2014, 2015, 2016 and 2016.2017. Vesting is contingent upon the executive officers remaining employed during the required service period.period, unless employment terminates due to death, disability, termination, by the Corporation without cause, resignation for good reason, or retirement (each as defined in the 2011 EIP), in which case the restricted stock award vests in full. No automatic acceleration of vesting occurs upon a change in control. Award recipients are entitled to dividends on the restricted shares during the vesting period.(3) The grant date fair market value of the performance based restricted stock awards reported in this column is the grant date value of the awards as determined under FASB ASC Topic 718.(4)Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014. Stock Awards Name Number of Shares of
Stock that Have Not Vested (1) Market Value of Shares of
Stock that Have Not Vested Norman L. Lowery 14,833 $ 542,294.48 Rodger A. McHargue 2,905 $ 106,206.80 Norman D. Lowery 2,844 $ 103,976.64 Steven H. Holliday - - Karen L. Milienu 841 $ 30,747 Donald E. Smith (2) 9,075 $ 331,782 Stock Awards Name Norman L. Lowery 11,980 $ 406,961 Rodger A. McHargue 2,534 86,080 Norman D. Lowery 2,505 85,095 Steven H. Holliday 2,502 84,993 Karen L. Milienu 945 32,102 (1) This award represents performance basedThese shares represent restricted stock awards based on performance during 2011 and 2012. The restricted shares willthat vest in installments on December 31, 2014,2016 and December 31, 2015,2017, provided the executive is still employed on such date.date(s). In the event of involuntary termination due to death, disability, termination without cause or resignation for good reason, or upon retirement after age 65, the awards will vest in full. No automatic acceleration of vesting occurs upon a change in control.(2) Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014.The market value is based on $33.97 per share, the closing price for our stock on December 31, 2015.2013 Stock Awards Name Number of Shares
Acquired on Vesting Value Realized
on Vesting Norman L. Lowery 9,817 $ 358,909.52 Rodger A. McHargue 1,869 $ 68,330.64 Norman D. Lowery 1,829 $ 66,868.24 Steven H. Holliday - - Karen L. Milienu 499 $ 18,243 Donald E. Smith 7,423 $ 271,385
201531 Stock Awards Name Norman L. Lowery 13,168 $ 447,317 Rodger A. McHargue 2,755 93,587 Norman D. Lowery 2,707 91,957 Steven H. Holliday 1,691 57,443 Karen L. Milienu 980 33,291 such named executive officer, under the Pension Plan, the ESRP, and the 2005 ESRP. The benefits werepresent value was based upon the accrued benefit as of December 31, 2015 and determined using interest rate and mortality rate assumptions consistent with those used in the Corporation’s financial statements andstatements. The amounts shown do not reflect amounts actually paid or payable to the named executive officer. Benefits are not payable as a lump sum; theysum but are generally paid as a monthly annuity for the life of the retiree.Name
(a) Plan Name
(b) Number of
Years Credited
Service
(c) Present Value
of
Accumulated
Benefit ($)
(d)(1) Payments During
Last Fiscal Year
(e) Norman L. Lowery Qualified Pension Plan 17 1,108,589 (2) 0 ESRP 17 769,059 (3) 0 2005 ESRP 17 1,605,711 (3) 0 Rodger A. McHargue Qualified Pension Plan 19 398,501 (2) 0 2005 ESRP 19 7,341 (3) 0 Steven H. Holliday Qualified Pension Plan 1 - 0 2005 ESRP 1 - 0 Norman D. Lowery Qualified Pension Plan 23 213,823 (2) 0 2005 ESRP 23 5,940 (3) 0 Karen L. Milienu Qualified Pension Plan 15 218,785 (2) 0 Donald E. Smith (5) Qualified Pension Plan 44 0 (4) 0 Name Plan Name Norman L. Lowery Qualified Pension Plan 20 1,505,355 (2) — ESRP 20 1,044,307 (3) — 2005 ESRP 20 2,823,365 (3) — Rodger A. McHargue Qualified Pension Plan 22 805,770 (2) — 2005 ESRP 22 32,397 (3) — Steven H. Holliday Qualified Pension Plan 4 — — 2005 ESRP 4 — — Norman D. Lowery Qualified Pension Plan 26 462,729 (2) — 2005 ESRP 26 35,041 (3) — Karen L. Milienu Qualified Pension Plan 18 503,853 (2)(4) — (1) The calculation of present value of accumulated benefit assumes a discount rate of 4.95%4.34% and mortality based on the 20132015 IRS Current Liability Tables. Benefits are not payable as a lump sum; they are generally paid as a monthly annuity for the life of the retiree.(2) These amounts represent the amount that Messrs. Norman L. Lowery, McHargue, Norman D. Lowery, and Ms. Milienu’s Pension Plan benefit exceeds their ESOP benefit pursuant to the floor offset arrangement.arrangements.(3) This amount represents the amount by which Messrs. Norman L. Lowery, McHargue, and Norman D. Lowery’s Executive Supplemental Retirement benefit exceeds his Executive Deferred Compensation benefit. (4) Mr. Smith is not entitledMs. Milienu was over 55 years of age and had more than five years of service as of December 31, 2015, and would have qualified for early retirement benefits equal to aapproximately 50% of the full retirement benefit from the Pension Plan because the value of his ESOP benefit exceeds the value of his Pension Plan benefit pursuant to the floor offset arrangement.if she had retired on December 31, 2015.(5)Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014. The offset works infollowing manner. If a participant’s ESOP benefit exceeds the benefit he hasamount of benefits that may be accrued under the Pension Plan, the participant will receive his ESOP benefit in lieu of the Pension Plan benefit. For example, a participant’s ESOP benefit is $120,000 and his Pension Plan benefit is $100,000. The $120,000 benefit will be paid from the ESOP and $0 will be paid fromqualified plan, such as the Pension Plan. However, if a participant’s Pension Plan benefit exceeds his ESOP benefit, then the participant will receive his ESOP benefit along with the amount the Pension Plan benefit exceeded the ESOP benefit paid from the Pension Plan. For example, a participant’s ESOP benefit is $100,000 and his Pension benefit is $120,000. The $100,000 benefit will be paid from the ESOP and $20,000 will be paid from the Pension Plan.Executive Supplemental Retirement Plan (“ESRP)ESRP and 2005 ESRP are intended to provide benefits that would be paid under the Pension Plan but for such limitations. These benefits are subject to offset by the benefits providedpayable under the Executive Deferred Compensation Plan (“EDC”) and the 2005 EDC respectively. The offset works in the following manner. The offset between the ESRP and the EDC works in the same manner as the ESOP/Pension Plan offset. If a participant’s EDC benefit exceeds the benefit he has accrued under the ESRP, the participant will receive his EDC benefit in lieu of the ESRP benefit. For example, a participant’s EDC benefit is $120,000 and his ESRP benefit is $100,000. The $120,000 benefit will be paid from the EDC and $0 will be paid from the ESRP. However, if a participant’s ESRP benefit exceeds his EDC benefit, then the participant will receive his EDC benefit along with the amount the ESRP benefit exceeded the EDC benefit paid from the ESRP. For example, a participant’s EDC benefit is $100,000 and his ESRP is $120,000. The $100,000 benefit will be paid from the EDC and $20,000 will be paid from the ESRP.For 2013 the EDC and the 2005 EDC, we permit certain executive officers and highly compensated employees to defer a portion of their current compensation and also provide supplemental benefits to certain highly compensated employees to recompense the employees for benefits lost due to the imposition of Code limitations in the ESOP. The amounts shown below represent the accumulated benefit cost to the Corporation for these plans. The table also shows amounts which were earned and deferred under the 2001 LTIP and 2005 LTIP.Name Plan Name Executive
Contributions
in last Fiscal
Year ($) Registrant
Contributions
in Last Fiscal
Year ($)
(1) Aggregate
Earnings in
Last Fiscal
Year ($) Aggregate
Withdrawals /
Distributions
($) Aggregate
Balance at Last
Fiscal Year-
End ($) Norman L. Lowery EDC - 50,372 459,666 2005 EDC 41,682 47,542 309,694 2001 LTIP 85,404 140,228 1,201,732 2005 LTIP 136,420 223,992 1,919,578 Roger A. McHargue 2005 LTIP 7,821 227,708 2005 EIP 189 540 Steven H. Holliday 2005 EDC Norman D. Lowery 2001 LTIP 5,056 147,205 2005 LTIP 7,821 227,708 2005 EDC 360 878 Karen L. Milienu 2001 LTIP 5,056 147,205 2005 LTIP 7,821 227,708 Donald E. Smith (2) 2001 LTIP 85,805 155,875 1,200,409 2005 LTIP 138,022 250,734 1,930,927 Name Plan Name Norman L. Lowery EDC — — (24,796 ) — 490,800 2005 EDC — 46,498 9,298 — 380,272 2001 LTIP — — 77,191 140,228 1,079,908 2005 LTIP — — 123,301 223,992 1,724,983 Roger A. McHargue 2005 EDC — 571 (61 ) — 1,482 2005 LTIP — — 16,067 25,286 226,587 Steven H. Holliday 2005 EDC — 875 — — 1,210 Norman D. Lowery 2005 EDC — 1,034 (107 ) — 2,595 2001 LTIP — — 10,387 16,347 146,481 2005 LTIP — — 16,067 25,286 226,587 Karen L. Milienu 2001 LTIP — — 10,387 16,347 146,481 2005 LTIP — — 16,067 25,286 226,587 (1) These amounts are included in the named executive officer’s compensation in the Summary Compensation Table. (2)Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014.
Employment Agreements33Our CEO has been party to a writtenseries of employment agreement ("Agreement")agreements with the Corporation.Corporation and the Bank pursuant to which he is employed as President and Chief Executive Officer of the Corporation and the Bank. Our employment agreements with Mr. Lowery provide for a fixed term and do not automatically renew. The material terms of that Agreement can behis current agreement, dated July 1, 2015, are summarized as follows:Agreement wasagreement is effective Decemberas of July 1, 2012,2015, and is for aan initial period of three years. (the "Employment Agreement").24 months. The term may be extended for one-year periods by the Compensation Committee. On February 2, 2016, the Committee extended the term to July 1, 2018.Restrictive CovenantsAgreement requires that our CEO comply withagreement provides for an initial base salary of $642,300, which may be increased from time to time. Prior to a change-in-control, base salary may be decreased if the restrictive covenantsCorporation’s operating results are significantly less favorable than those for the fiscal year ended December 31, 2014, and the Corporation makes similar decreases in the Agreement, includingbase salaries of the other executive officers. Mr. Lowery is entitled to participate in other compensation programs and benefits as provided to other senior officers of the Corporation and as provided in the agreement.requirements to receive the severance benefits in addition to any benefits to which he is entitled under the Corporation’s qualified and nonqualified employee benefit plans.requirements. In general, the non-solicitation and non-disclosure requirementsnon‑competition remain in effect for one year after termination of our CEO's employment.employment for any reason.Forfor Cause, Death or Disability: If our CEO's employment is terminated for "cause"“cause” (as defined in the Agreement)agreement), death, or disability, heMr. Lowery (or his estate) is entitled only to his base salary, bonuses, vested rights, and other benefits due to him through his date of termination and anyor, in the case of death, the last day of the month of death. Any benefits payable under insurance, health, retirement, bonus, incentive, performance or other plans as a result of his participation in such plans through suchthe date of termination will be paid in accordance with those plans.Forfor Good Reason: If our CEOMr. Lowery is terminated without "cause,"“just cause,” or if he terminates his employment for "good reason"“good reason” (as defined in the Agreement)agreement), and such termination does not occur in connection with, or within 12 months after a "change“change in control"control” (as defined in the Agreement)agreement), he will receive an amount equal to the sum of the following benefits, as ifamounts he had terminated employment on December 31, 2013 provided, inwould have received through the event of a good reason termination, he gives proper noticeexpiration date of the circumstances giving rise to the termination which are not remedied by the Corporation or the Bank:agreement: (i) three times his base salary and bonuses;bonuses (based on prior year bonus); (ii) the Corporation’s portion of the cost to Mr. Lowery of obtaining health insurance for himself, and his spouse and child living in his home for a period of three years;household; (iii) the cost of obtaining disability insurance for a period of three years; (v)certain other benefits; (iv) the cost of obtaining life insurance for a period of three years; (vi) the cost of existing professional and club dues, for a period of three years, (vii)(v) the cost of continuing legal education for a period of three years; (viii)education; (vi) the cost of automobile benefits; (vii) benefits for a period of three years; (ix) three times the benefit accrued in 2013 under the 2005 ESRP; (x) three timesPension Plan and ESRP based on the benefit accrued in 2013most recent year’s accruals; and (viii) benefits under the ESOP and 2005 EDC; (xi) three timesEDC based on the benefit accrued in 2013 under the Employees’ Pension Plan; (xii) three times the benefit accrued in 2013 under the Employee Stock Ownership Plan.most recent year’s contributions. The amounts provided in the prior sentence will be provided net of all income and payroll taxes that would not have been payable by Mr. Lowery had he continued participation in the benefit plan or program instead of receiving cash reimbursement.Termination due to Retirement: If our CEO retires after reaching age 65 (which has occurred), he will receive full health, life and disability coverage for himself, his spouse, and his children living in his home until both he and his spouse are eligible for Medicare. When both Mr. Lowery and his spouse are eligible for Medicare, the Bank agrees to pay for supplemental coverage until both his and his spouse’s death. He is also entitled to receive a life insurance policy on his life in the amount of $350,000 and a life insurance policy on his life in the amount established by the Bank’s insurance program for executive officers."change“change in control"control” (as defined in his Employment Agreement)the agreement), and in connection with or within 12 months following the “change in control” our CEO'sMr. Lowery’s employment is terminated for other than "cause”“just cause” or he is constructively discharged,resigns for “good reason,” then following hissuch termination or constructive discharge he would be entitled to an amount equal to the greater of the (i) amount he would receive if he was terminated by the Corporation without cause;just cause as described above, or (ii) the product of 2.99 times the sum of (i)(A) his base salary in effect as of the date of the change in control; (ii)(B) an amount equal to the bonusesany annual discretionary or performance-based incentive bonus received by or payable to him in or for the calendar year prior to the year in which the change in control occurs; and (iii)(C) cash reimbursementsreimbursement in an amount equal to his cost of obtaining for a period of three years, beginning on the date of termination, allcertain benefits which he was eligible to participate in or receive as of the date of termination. Our CEO would also be entitled to the payment provided for in this paragraph if a change in control occurred that was not approved by a majority of the Board, regardless of whether his employment were terminated within 12 months. If, as a result of a change in control, our CEOMr. Lowery becomes entitled to any payments which are determined to be payments subject to the Code Section 280G, then his benefit will be equal to the greater of (i) his benefit under the agreement reduced to the maximum amount payable such that when it is aggregated with payments and benefits under all other plans and arrangements it will not result in an "excess“excess parachute payment"payment” under Code Section 280G, or (ii) his benefit under the agreement after taking into account the amount of the excise tax imposed under Code Section 280G due to the benefit payment. Mr. Lowery is not entitled to any excise tax "gross up"“gross up” payments under the terms of the Employment Agreement.agreement.our CEOMr. Lowery following termination of employment may be delayed until six months following his termination of employment.Potential Payments Upon Termination or Change in Control of the Corporation2001 and 2005 Long-Term Incentive PlansThe Corporation entered into award agreements Norman L. Lowery, McHargue, Norman D. Lowery, Rodger A. McHargue, Steven H. Holliday and Ms.Karen L. Milienu. On December 28, 2015, we entered into employment agreements with our other named executive officers. The agreements became effective January 1, 2016. Each of Norman D. Lowery, Rodger A. McHargue and Steven H. Holliday has an employment agreement with the Corporation and the Bank and Karen L. Milienu underhas an employment agreement with the 2001 and 2005 LTIPs.Bank. The awards were subject to the achievementagreements have substantially similar terms, which are summarized as follows:objective award criteria established and approved12 months. The term may be extended for one-year periods by the Compensation Committee. Upon(as defined in the 2001 and 2005 LTIP and Agreements), Mssrs. Lowery, McHargue, Lowery, and Ms. Milienu will beexecutive becomes entitled to the following benefits::Mr. Norman L. Lowery: In addition to the benefits otherwise payable, if Mr. Lowery is terminated within 12 months following a change in control for reasons other than cause, disability or death, he will be paid the vested account balance under the 2001 and 2005 LTIPs. Anyany payments from the Corporation or the Bank whichthat are determined to be payments subject to the "golden parachute" rules ofCode Section 280G, then the Code, the amount duebenefit will be increased to include payment equal to the greater of his or her benefit under the agreement reduced to the maximum amount payable such that when it is aggregated with payments and benefits under all other plans and arrangements it will not result in an “excess parachute payment” under Code Section 280G, or his or her benefit under the agreement after taking into account the amount of the excise tax imposed under Code SectionsSection 280G and 4999 (the "Excise Tax Payment") anddue to the amount necessarybenefit payment. The executives are not entitled to provideany excise tax “gross up” payments under the Excise Tax Payment netterms of all income, payroll and excise taxes. The applicable amount will be paid in one single sum, for the 2001 and 2005 Plans, within 180 daysagreements.employment.Messrs. McHargue, Norman D. Lowery, and Ms. Milienu: In addition to the benefits otherwise payable, if either Messrs. McHargue Norman D. Lowery, or Ms. Milienu is terminated within 12employment may be delayed until six months following a changetermination of employment.control, for reasons other than cause, disability or death, they will be paid the vested account balance under the 2001 and 2005 LTIPs as of the December 31 of the year preceding the year of termination.change in control benefits forstock awards payable to each named executive officer under the specifically described scenarios as if suchretirement, termination of employment or change in control andcontrol-related termination occurred as of December 31, 2013. 2015. No amounts are shown for the occurrence of a change in control without termination of employment, because no automatic acceleration of outstanding stock awards or other amounts arise upon a change in control. No amounts are shown with respect to employment agreements with our named executive officers other than Mr. Norman L. Lowery, as the employment agreements for the other named executive officers were not in effect at December 31, 2015.includingsuch as accrued salary and vacation pay, or payments of vested amounts under the Savings Plan,qualified and nonqualified pension plans and deferred compensation plans. Amounts attributable to the ESOP and Pension Plan.Name Plan Name Termination of Employment
(Executive Deferred
Compensation, 2005 Executive
Deferred Compensation,
Executive Supplemental
Retirement, 2005 Executive
Supplemental Retirement,
2001 LTIP, 2005 LTIP) ($) Termination Due to
Retirement ($) Termination by
Corporation Without
Cause, by Executive
for Good Reason or
Within 12 Months
After Change in
Control (Employment
Agreement) ($) Norman L. Lowery 2001 LTIP 1,201,732 - - 2005 LTIP 1,919,578 - - 2011 EIP 542,294 (4) - - EDC 459,666 - - 2005 EDC 309,694 - Employment Agreement 330,864 (1)(2) 2,624,946 (3) Rodger A. McHargue 2005 LTIP 227,708 - - 2011 EIP 106,207 (4) - - 2005 EDC 540 Steven H. Holliday 2011 EIP - - - 2005 EDC - - - Norman D. Lowery 2001 LTIP 147,205 - - 2005 LTIP 227,708 - - 2011 EIP 103,977 (4) - - 2005 EDC 878 Karen L. Milienu 2001 LTIP 147,205 2005 LTIP 227,708 2011 EIP 30,747 (4) Donald E. Smith (5) 2001 LTIP 1,200,409 2005 LTIP 1,930,927 2011 EIP 331,782 (4) Name Plan Name Norman L. Lowery 2011 EIP 406,961 — — Employment Agreement 372,211 2,779,795 (4) 4,839,915 (5) Rodger A. McHargue 2011 EIP — 86,080 86,080 Steven H. Holliday 2011 EIP — 84,993 84,993 Norman D. Lowery 2011 EIP — 85,095 85,095 Karen L. Milienu 2011 EIP — 32,102 32,102 (1) Calculation of the health insurance amounts were based on the assumptions used for financial reporting purposes under generally accepted accounting principles assuming (i) termination occurred on December 31, 2013; (ii) termination was as a result of retirement or change in control; and (iii) a 4.95% discount rate. Calculation of the life insurance amounts were based on the cost of buying a fully paid policy asAs of December 31, 2013.(2)This amount consists of (i) $189,300 for health, life and disability coverage; and (ii) $136,6692015, only Mr. Norman L. Lowery had attained retirement age. The amounts shown in this column for the $350,0002011 EIP reflect the value of outstanding restricted stock awards which would vest upon retirement, and for the Employment Agreement include the value of continuation of Medicare supplemental coverage and life insurance policy.(3)This amount consists of (i) $1,884,488 for base salary and bonuses; (ii) $189,300 for health, life and disability coverage; (iii) $136,669 for the $350,000 life insurance policy; (iv) $14,029 for professional and club dues; (v) $2,392 for continuing legal education; (vi) $3,880 for automobile benefits; (vii) $0 for his Pension Plan benefit; (viii) $36,173 for his ESOP benefit; (ix) $124,629 for his ESRP benefit; (x) $220,670 representing the payment of items (ii)-(vi) net of all income and payroll taxes.(4)All participants in the plans are entitled to receive their respective vested benefits upon the occurrence of any change of control as defined in the plan.benefits.(2) Amounts in this column reflect the severance benefits and the value of accelerated vesting of restricted stock that would become payable upon termination without cause or resignation for good reason. For Mr. Norman L. Lowery, the amounts shown in this column are in addition to the amounts to which he would be entitled upon retirement described in footnote (1) above. For the other NEOs, the 2011 EIP amount reflects the value of outstanding restricted stock awards which would vest in full upon termination without cause or resignation for good reason. (3) Amounts in this column reflect the severance benefits and the value of accelerated vesting of restricted stock that would become payable if the termination without cause or resignation for good reason was in connection with a change in control. For Mr. Norman L. Lowery, the amounts shown in this column are in addition to the amounts to which he would be entitled upon retirement described in footnote (1) above. For the other NEOs, the 2011 EIP amount reflects the value of outstanding restricted stock awards which would vest in full upon termination without cause or resignation for good reason. (4) This cash severance amount consists of (a) 1.5 times (i) 2015 annual base salary of $642,300 and 2014 STIP bonus of $292,417, (ii) annual amounts paid for dues and professional associations, automobile allowance and continuing education of $12,330, and (iii) annual ESOP and EDC contributions of $88,816, plus (b) pension accruals of $1,135,042. Also includes $141,531 to reimburse taxes due on payments for benefits that would not be taxable if provided in connection with continuing employment. (5) Mr. Smith served as an Executive Officer until April 17, 2013an employee until his retirement March 1, 2014.2014 STIP bonus of $292,417, (ii) annual amounts paid for dues and professional associations, automobile allowance and continuing education of $24,578, and (iii) annual ESOP and EDC contributions of $177,041, plus (b) pension accruals of $1,696,888. Also includes $146,604 to reimburse taxes due on payments for benefits that would not be taxable if provided in connection with continuing employment.March 3, 2014,February 26, 2016, there were 13,355,27212,679,098 shares of our common stock issued and outstanding. The followingMarch 3 2014,February 26, 2016, the number and percentage of our common stock held by each person known to us to ownINIndiana 47808, and each person has sole voting and investment control of the shares specified.Five Percent Shareholders,
Directors, Nominee and
Certain Executive Officers Amount and
Nature of
Beneficial
Ownership Percent of
Outstanding
Shares W. Curtis Brighton 13,500 * B. Guille Cox 79,349 (1) * Thomas T. Dinkel 15,426 * Anton H. George 2,668 * Gregory L. Gibson 95,972 * William R. Krieble 3,230 * Steven H. Holliday 3,647 (12) * Norman D. Lowery 29,704 (2)(12) * Norman L. Lowery 58,814 (3)(12) * Rodger A. McHargue 10,374 (4)(12) * Karen L. Milienu 5,007 (5)(12) * Ronald K. Rich 4,050 * Virginia L. Smith 1,471 * Donald E. Smith (13) 208,397 (6)(12) * William J. Voges 240,724 (7) 1.80 % Princeton Mining Company 1,310,074 (8) 9.81 % First Financial Corporation Employee Stock Ownership Plan 876,489 (9) 6.56 % Blackrock, Inc. 738,189 (10) 5.53 % Dimensional Fund Advisors LP 690,277 (11) 5.17 % All Executive Officers and Directors as a Group (15 persons) 772,333 5.78 % Directors and Named Executive Officers: W. Curtis Brighton 13,500 * B. Guille Cox, Jr. 79,349 (1) * Thomas T. Dinkel 16,092 * Anton H. George 3,868 * Gregory L. Gibson 96,738 * Steven H. Holliday 9,380 (2)(12) * William R. Krieble 4,922 * Norman D. Lowery 33,352 (3)(12) * Norman L. Lowery 70,861 (4)(12) * Rodger A. McHargue 13,889 (5)(12) * Karen L. Milienu 6,860 (6)(12) * Ronald K. Rich 4,050 * Virginia L. Smith 1,471 * William J. Voges 134,668 (7) 1.06 % All Executive Officers and Directors as a Group (15 persons) 489,000 3.86 % Five Percent Shareholders: BlackRock, Inc. 722,726 (8) 5.70 % Dimensional Fund Advisors LP 604,153 (9) 4.76 % First Financial Corporation Employee Stock Ownership Plan 661,407 (10) 5.22 % Princeton Mining Company, Inc. 1,310,074 (11) 10.33 % * Less than 1%. (1) Mr. Cox, under certain circumstances,as trustee, has the power with the consent of others, to vote an additional 117,968 shares (.88%).117,986 shares. These shares are not reflected in the number of shares or percent of class attributed to him in the above table.(2) Includes 4,818238 shares held for Mr. Holliday’s account in the ESOP.(3) Includes 5,818 shares held for Mr. Norman D. Lowery’s account in the ESOP. (3)(4) Includes 7,1748,295 shares held for Mr. Norman L. Lowery’s account in the ESOP.(4)(5) Includes 3,1954,111 shares held for Mr. McHargue’s account in the ESOP.(5)(6) Includes 2,7163,406 shares held for Ms. Milienu’s account in the ESOP.(6)Includes 185,390 shares held for Mr. Smith’s account in the ESOP.(7) Includes 227,384114,557 shares held in trust. Mr. Voges, as Trustee, has the power to vote these shares.(8) Based solely on information provided by Princeton Mining Company,BlackRock, Inc. in a Schedule 13G/A filed with the SEC on January 26, 2016. The Schedule 13G/A indicates that the reporting person has sole power to vote and/or dispose of all shares beneficially owned. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.(9) Based solely on information provided by Dimensional Fund Advisors LP in a Schedule 13G/A filed with the SEC on February 9, 2016. The Schedule 13G/A indicates that the reporting person has sole power to vote and/or dispose of all shares beneficially owned and that the reporting person expressly disclaims beneficial ownership of these securities. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. (10) Based solely on information provided by the First Financial Corporation Employee Stock Ownership Plan in a Schedule 13G filed with the Securities and Exchange CommissionSEC on January 31, 2014. The Company has been advised that the shares held by Princeton Mining Company are voted by the President of Princeton Mining Company, Virginia L. Smith, at the direction of its Board of Directors. The Board of Directors of Princeton Mining Company is comprised of 6 individuals, including the following directors of the Corporation: Virginia L. Smith; Anton H. George; and, W. Curtis Brighton. In addition, Sarah J. Lowery, the daughter of Mr. Smith and the wife of Norman L. Lowery (the Vice Chairman and Chief Executive Officer of the Corporation) is a director of Princeton Mining Company.February 4, 2016. The address of Princeton Mining Companythe First Financial Corporation Employee Stock Ownership Plan is State Road 46 South,One First Financial Corporation, P.O. Box 540, Terre Haute, IN 47803.(9)Indiana 47808. Unless the terms of the ESOP or the fiduciary duties of the ESOP trustee require otherwise, the trustee will vote the ESOP shares as instructed by the participant. If the participant does not return the voting instruction card in a timely manner or if the voting instruction card is returned unsigned or without indicating how to vote the shares allocated to the ESOP account, the Compensation and Employee Benefits Committee will direct the ESOP trustee to vote the shares allocated in the same proportion and in the same manner as the shares with respect to which timely and proper instructions by participants were received. The CompensationSee “Additional Information About the Board of Directors-Compensation and Employee Benefits Committee, consists of Anton H. George, Ronald K. Rich, and William J. Voges. The Compensation and Employee Benefits Committee is appointed by” which identifies the Board of Directors and may be changed by the Board at any time.directors serving on this committee.(10)Based solely on information provided by Blackrock, Inc. in a Schedule 13G/A filed with the Securities and Exchange Commission on January 17, 2014. The Schedule 13G/A indicates that the reporting person has sole power to vote and/or dispose of all shares beneficially owned and that the reporting person expressly disclaims beneficial ownership of these securities. The address of Blackrock, Inc. is 40 East 52nd Street, New York, NY 10022.(11) Based solely on information provided by Dimensional Fund Advisors, LPPrinceton Mining Company, Inc. in a Schedule 13G/A13G filed with the Securities and Exchange CommissionSEC on February 10, 2014.4, 2016. The Schedule 13G/A indicatesCorporation has been advised that the reporting person has sole power to vote and/or disposeshares held by Princeton Mining Company, Inc. are voted by the President of all shares beneficially ownedPrinceton Mining Company, Inc., Virginia L. Smith, at the direction of its board of directors. The board of directors of Princeton Mining Company, Inc. is comprised of nine individuals: Virginia L. Smith, a current director of the Corporation; Anton H. George, a current director of the Corporation; Norman D. Lowery, the Chief Operating Officer of the Corporation; Sarah J. Lowery, the wife of Norman L. Lowery, who is the Vice Chairman, Chief Executive Officer and thatPresident of the reporting person expressly disclaims beneficial ownershipCorporation; Lesley V. Bell, the daughter of these securities.Virginia L. Smith; Anton H. George, Jr., the son of Anton H. George; Richard Shagley; Henry T. Smith, the son of Virginia L. Smith; and Jeffrey B. Smith, the son of Virginia L. Smith. The address of Dimensional Fund Advisors, LPPrinceton Mining Company, Inc. is Palisades West Building One, 6300 Bee CaveState Road Austin, TX 78746.46 South, Terre Haute, Indiana 47803.(12) Includes 51,676 shares of restricted common stock of the Corporation issued to our named executive officers as award opportunities under our 2011Omnibus Equity Incentive Plan2011 EIP as follows: Mr. Norman L. Lowery, 27,82324,012 shares; Mr. McHargue, 5,6195,189 shares; Mr. Holliday, 2,647;5,140 shares; Mr. Norman D. Lowery, 5,5005,143 shares; and Ms. Milienu, 1,0121,925 shares. Upon issuance, shares and Mr. Smith 9,075 shares. These shares are restricted in accordance with our 2011 Omnibus Equity Incentive Plan and aof restricted stock award agreement with each named executive officer, and will vest annually in one-third increments over a three-year period commencing on December 31, 2014, December 31, 2015 and December 31, 2016, respectively.period.(13)Mr. Smith served as an Executive Officer until April 17, 2013 and an employee until his retirement March 1, 2014.Securities and Exchange Commission (“SEC”)SEC initial reports of ownership and reports of changes in ownership of Corporation common stock and other equity securities of the Corporation. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Corporation with copies of all Section 16(a) formsreports they file. To the best knowledge of the Corporation, during the most recent fiscal year all executive officers, directors and greater than ten percent beneficial owners of the Corporation timely filed all statements of beneficial ownership required to be filed with the SEC in 2013 with the exception of William J. Voges, who is one of our Directors, files2015, except for a late Form 4 relatedfiled late with respect to three transactions totaling 13,815shares delivered to the Corporation in payment of tax liability upon the vesting of restricted stock by each of Ms. Milienu and Messrs. Holliday, Norman D. Lowery, Norman L. Lowery and McHargue; and a Form 4 filed late with respect to purchases of shares of the Corporation’scommon stock held in trust which Mr. Voges is Trustee.by each of Messrs. Dinkel and Krieble. In making thisthe foregoing disclosure, we havethe Corporation has relied solely upon written representations of our directors and executive officers and copies of reports that those persons have filed with the SEC and provided to us.providedAnalysis, the compensation tables and other narrative executive compensation disclosures).us.2:3: RATIFICATION OF APPOINTMENT OF CROWE HORWATH LLP AS THE CORPORATION’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM4, 20148, 2016 meeting, the Audit Committee of the Board of Directors recommended and approved the appointment of Crowe Horwath LLP as the Corporation’s independent registered public accounting firm to audit the books, records and accounts of the Corporation for 2014.2016. The Corporation is seeking ratification of such action. Crowe Horwath LLP has been our independent registered public accounting firm since fiscal year 1999. Representatives of Crowe Horwath LLP are expected to be in attendance at the annual meeting and will be provided an opportunity to make a statement should they desire to do so and to respond to appropriate inquiries from the shareholders.20142016 annual meeting of shareholders Crowe Horwath LLP ceases to act as our independent registered public accounting firm, then the Audit Committee will reconsider the selection of an independent registered public accounting firm. OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE“FOR” THE RATIFICATION OF THE APPOINTMENT OF CROWE HORWATH LLP AS THE CORPORATION’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2014.20132015 and fiscal year 20122014 and for other services rendered during fiscal year 20132015 and fiscal year 20122014 on behalf of the Corporation and its subsidiaries, as well as all out-of-pocket costs incurred in connection with these services, which have been billed to the Corporation: 2013 2012 Audit Fees 363,500 328,500 Audit Related Fees 3,500 33,750 Tax Fees 79,100 44,650 All Other Fees 16,775 5,300 Total 462,875 412,200 2015 2014 Audit Fees $ 381,500 $ 367,000 Audit-Related Fees 3,500 3,500 Tax Fees 106,650 96,300 All Other Fees 151,431 5,300 Total $ 643,081 $ 472,100 Consists.Audit fees consist of fees billed for professional services rendered for (i) the audit of the Corporation’s consolidated financial statements, (ii) the integrated audit over internal controls as required under Section 404 of the Sarbanes-Oxley Act, (iii) the review of the interim condensed consolidated financial statements included in quarterly reports, (iv) the audit of the Captive Insurance Agency, (v) the services that are normally provided by Crowe Horwath in connection with statutory and regulatory filings or engagements, and (v) attestation(vi) attest services, except those not required by statute or regulation.Consists.Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s consolidated financial statements and are not reported under “Audit Fees.” Consists.Tax fees consist of tax compliance/preparation and other tax services. Tax compliance/preparation consists of fees billed for professional services related to federal and state tax compliance, and assistance with tax audits and appeals. Other tax services consist of fees billed for other miscellaneous tax consulting and planning.FeesFees. All other fees include Sarbanes-Oxley Section 404 and internal audit software licensing fees in both years.PROPOSAL 3:NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATIONPAID TO NAMED EXECUTIVE OFFICERSOur executive compensation philosophy seeks to provide a competitive compensation program that encourages current year performance and the creation of long-term shareholder value without exposing the Corporation to unreasonable risks, including credit, interest rate, liquidity, reputation, compliance and transition risk. Through our executive compensation program, we seek to:·Attract, motivate and retain highly-qualified, talented executives who are focused on the long-term best interest of our shareholders;·Drive performance relative to our financial goals, balancing short-term operational objectives with long-term strategic goals;·Link the interest of our executives with those of our shareholders;·Establish Corporate, Departmental and individual goals consistent with our strategic plan and budget that provide the basis for the annual and long-term metrics used to measure our success and the value we create for shareholders;·Reward our executives for both Corporation and individual performance;·Align compensation and variable incentives with measurable, objective business results and appropriate risk management; and,·Allow flexibility in responding to changing laws, accounting standards and business needs as well as the constraints and dynamic conditions in the markets in which we do business.We implement and operate our executive compensation program to reinforce our philosophy of aligning compensation with our short-term and long-term goals and to minimize risk to our shareholders.We currently maintain the following pay practices, which we believe enhance our pay-for-performance philosophy and further align our executives’ interest with those of our shareholders.WE HAVE THIS PRACTICE:·Tie a significant portion of executive compensation to our performance metrics in the form of “at-risk” compensation;·Incentive award metrics that are objective and tied to key company performance metrics;·Share ownership guidelines (for executives and directors);·Compensation recoupment “claw-back” policy;·Anti-hedging policy;·Double trigger change in control severance; and,·Vest equity awards over three years to promote retention.WE DO NOT HAVE THIS PRACTICE:·Non-performance based incentive awards;·Hedging transaction by executive officers or directors;·Excise tax gross-ups in our CEO’s Employment Agreement; and,·Automatic renewal (“Evergreen”) provisions in our CEO’s Employment Agreement.The Compensation Committee believes our executive compensation program has achieved its intended results. The Committee believes our compensation is competitive with the pay practices of other financial institutions of comparable size and performance and has allowed us to attract and retain executives who make substantial contributions to our success. We believe the program aligns our executives’ interest with those of our shareholders by providing a strong link between higher compensation and the attainment of pre-established objective performance goals.We urge our shareholders to read the Compensation Discussion and Analysis section of this proxy statement for a detailed discussion of our executive compensation programs and how they reflect our philosophy and our link to corporate performance.We recognize executive compensation is important to our shareholders and we value their opinions on our compensation philosophy and programs. We are asking our shareholders to vote on an advisory basis to approve the compensation of our named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executive officers and the philosophy, policies and practices described in this proxy statement. This proposal, which is required by Section 14A of the Securities Exchange Act, is commonly known as a “Say-On-Pay” proposal and gives our shareholders the opportunity to express their views on our named executive officers’ compensation to the following resolution:RESOLVED, that the stockholders approve the 2013 compensation of the named executive officers, as disclosed in this proxy statement, pursuant to Item 402 of Regulation S-K of the Securities and Exchange Commission (including the Compensation Discussion and Analysis, the compensation tables and other narrative executive compensation disclosures).The vote on this proposal is advisory, and therefore not binding on the Corporation, the Compensation Committee or our Board of Directors. To the extent there is any significant vote against the executive officer compensation proposal, however, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE“FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.In addition to the advance notice requirements under our by-laws described below, a shareholder who desires to include a proposal in our proxy soliciting materials relating to our 2015 annual meeting of shareholders must send the proposal in writing to Mr. Rodger A. McHargue, our Secretary, such that we receive it at our principal executive office at One First Financial Plaza, Terre Haute, Indiana 47808 no later than November 17, 2014. Any such proposal must be made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934.InternetSEC’s website of the Securities and Exchange Commission atwww.sec.gov.be, or by our Board of Directors.be. In order for a shareholder to make such a nomination or proposal, the Corporation’s Secretary must receive notice thereof in writing not less than 120 days prior to the date of the annual meeting; provided, however, that in the event that less than 130 days’ notice or prior public disclosure of the date of the annual meeting is given or made to shareholders (which notice or public disclosure shall include the date of the annual meeting specified in our by-laws, if the annual meeting is held on such date), notice by the shareholder to be timely must be received by us no later than the close of the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. No noticeany kindshareholders must send the proposal in writing to Mr. Rodger A. McHargue, our Secretary, such that we receive it at our principal executive office at One First Financial Plaza, Terre Haute, Indiana 47808 no later than November 18, 2016. Any such proposal must be made in accordance with Rule 14a-8 under this procedure is required for any nominations for the election as directors or any proposals for any business or matter made by or at the directionSecurities Exchange Act of our Board1934.Directors.must promptlywill be asked to provide any other information relating to his or her nominee as may be reasonably requested by us.Each notice given by a shareholder with respect to proposals for any business or other matter to be presented at any meeting of shareholders must set forth as to each matter: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholders proposing such business, (iii) the class and number of shares of our stock beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. The shareholder making a proposal also must promptly provide any other information relating to his or her proposal as may be reasonably requested by us.If any nomination or proposal is not made in accordance with the requirements of this notice procedure, the chairman of the annual meeting of shareholders at which such nomination or proposal is sought to be presented may determine that the nomination or proposal was not made in accordance with the notice procedure and, in such event, he may declare to the meeting that the defective nomination or proposal is out of order and will be disregarded and not presented for a vote of the shareholders. This notice procedure does not require the Corporation to hold any meeting of shareholders for the purpose of considering any nomination or proposal made by any shareholder.20142016 ANNUAL MEETINGU.S. Securities and Exchange Commission’sSEC’s e-proxy rules require companies to post their proxy materials on the internet and permit them to provide only a Notice of Internet Availability of Proxy Materials to shareholders. For this proxy statement, we have chosen to follow the SEC’s “full set” delivery option, and therefore, although we are posting a full set of our proxy materials (this proxy statement and our Annual Report to Shareholders for the fiscal year ended December 31, 2013)2015) online, we are also mailing a full set of our proxy materials to our shareholders. The Company’sCorporation’s Proxy Statement for the 20142016 Annual Meeting of Shareholders, Proxy Card and Annual Report to Shareholders for the fiscal year ended December 31, 2013,2015, are available at:https://www.First-Online.com/at of record on or about March 17, 2014.18, 2016. On this date, all shareholders of record and beneficial owners will have the ability to access all of the proxy materials on the website referred to above. These proxy materials will be available free of charge.stockholders,shareholders, we are relying on SEC rules that permit us to deliver only one proxy statement to multiple stockholdersshareholders who share an address unless we receive contrary instructions from any stockholdershareholder at that address. This practice, known as “householding,” reduces duplicate mailings, saves printing and postage costs as well as natural resources and will not affect dividend check mailings. If you wish to receive a separate copy of the annual report or proxy statement, or if you wish to receive separate copies of future annual reports or proxy statements, please contact Rodger McHargue by phone at (812) 238-6000 or by mail at First Financial Corporation, One First Financial Plaza, P.O. Box 540, Terre Haute, INIndiana 47808. We will deliver the requested documents promptly upon your request. If you and other stockholdersshareholders of record with whom you share an address currently receive multiple copies of annual reports or proxy statements, or if you hold our stock in more than one account and, in either case, you wish to receive only a single copy of the annual report or proxy statement, please contact Rodger McHargue by phone at (812) 238-6000 or by mail at First Financial Corporation, One First Financial Plaza, P.O. Box 540, Terre Haute, INIndiana 47808, with the names in which all accounts are registered and the name of the account for which you wish to receive mailings.annual report2015 Annual Report on Form 10-K, which is required to be filed with the Securities and Exchange Commission for the year ended December 31, 2013.SEC. Address all requests to:SecretaryChief Financial Officer and Treasurerof Directors or, in the absence of such a recommendation, in accordance with the best judgment of the proxy holder.By Order of the Board of Directors /s/ B. Guille Cox, Jr.Chairman of the BoardMarch 17, 2014
By Order of the Board of Directors 
