EMPLOYEE BENEFIT PLANS

First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees and uses a December 31 measurement date for its defined benefit pension plan. First Financial made no cash contributions to fund the pension plan during the nine months ended September 30, 2013 and does not expect to make cash contributions to the plan through the remainder of the year. First Financial made no cash contributions to fund the pension plan in 2012.

During the second quarter 2013, First Financial re-measured the Company's pension assets and liabilities, and recognized pension settlement charges, as a result of the year-to-date level of lump sum distributions from the Company's pension plan. Consistent with FASB ASC Topic 715, Compensation - Retirement Benefits, pension settlement charges are an acceleration of previously deferred costs that would have been recognized in future periods and are triggered when lump sum distributions exceed an annual accounting threshold for the plan. These pension settlement charges were a result of employee-related actions, including staff retirements as well as recent efficiency initiatives, and the resulting lump sum distributions from First Financial's pension plan. First Financial recognized pension settlement charges of $1.4 million and $5.7 million for the three and nine months ended September 30, 2013, respectively.

Primarily as a result of the pension plan re-measurement and pension settlement charges during the second and third quarters, First Financial recorded $19.2 million of pre-tax adjustments to other comprehensive income related to changes in the values of the Company's pension assets and pension obligations for the nine months ended September 30, 2013. As a result of the plan’s updated actuarial projections for 2013 as well as the previously mentioned settlement charges, First Financial recorded expenses related to its pension plan of $5.3 million for the nine months ended September 30, 2013, compared to income of $0.4 million for the same period in 2012. Similarly, First Financial recorded pension plan expenses of $1.1 million in the third quarter of 2013 compared to pension plan income of $0.1 million in the third quarter of 2012.

As First Financial has exceeded the annual accounting threshold for lump sum distributions for 2013, the Company will continue to recognize a proportionate share of any further lump sum distributions from its pension plan as additional pension settlement charges through the remainder of the year. The accounting threshold for lump sum distributions will reset at the beginning of 2014.

The following table sets forth information concerning amounts recognized in First Financial’s Consolidated Balance Sheets and Consolidated Statements of Income:



	Three months ended						Nine months ended
	September 30,						September 30,
(Dollars in thousands)	2013			2012			2013			2012
Service cost	$	916		$	894		$	2,789		$	2,559
Interest cost	566			606			1,752			1,986
Expected return on assets	(2,231		)	(2,281		)	(6,755		)	(6,751		)
Amortization of prior service cost	(105		)	(106		)	(317		)	(316		)
Net actuarial loss	582			780			2,128			2,130
Settlement charge	1,396			0			5,712			0
Net periodic benefit cost (income)	$	1,124		$	(107	)	$	5,309		$	(392	)