RETIREMENT PLANS:

12 Months Ended

Dec. 31, 2011

RETIREMENT PLANS:

RETIREMENT PLANS:

15.     RETIREMENT PLANS:

Substantially all employees of the Corporation are covered by a retirement program that consists of a defined benefit plan and an employee stock ownership plan (ESOP). Plan assets consist primarily of the Corporation’s stock and obligations of U.S. Government agencies. Benefits under the defined benefit plan are actuarially determined based on an employee’s service and compensation, as defined, and funded as necessary.

Assets in the ESOP are considered in calculating the funding to the defined benefit plan required to provide such benefits. Any shortfall of benefits under the ESOP are to be provided by the defined benefit plan. The ESOP may provide benefits beyond those determined under the defined benefit plan. Contributions to the ESOP are determined by the Corporation’s Board of Directors. The Corporation made contributions to the defined benefit plan of $7.11 million, $1.30 million and $1.20 million in 2011, 2010 and 2009. The Corporation contributed $1.56 million, $1.35 million and $971 thousand to the ESOP in 2011, 2010 and 2009.

The Corporation uses a measurement date of December 31, 2011.

Net periodic benefit cost and other amounts recognized in other comprehensive income included the following components:

(Dollar amounts in thousands)	2011			2010			2009
Service cost - benefits earned	$	3,542		$	3,093		$	3,100
Interest cost on projected benefit obligation	3,688			3,313			3,296
Expected return on plan assets	(4,003		)	(3,400		)	(3,857		)
Net amortization and deferral	1,152			964			625
Net periodic pension cost	4,379			3,970			3,164
Net loss (gain) during the period	17,868			4,466			4,762
Amortization of prior service cost	(166		)	18			29
Amortization of unrecognized gain (loss)	(986		)	(982		)	(353		)
Total recognized in other comprehensive income (loss)	16,716			3,502			4,438
Total recognized net periodic pension cost and other comprehensive income	$	21,095		$	7,472		$	7,602

The estimated net loss and prior service costs for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $2.3 million and $166 thousand.

The information below sets forth the change in projected benefit obligation, reconciliation of plan assets, and the funded status of the Corporation’s retirement program. Actuarial present value of benefits is based on service to date and present pay levels.

(Dollar amounts in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation at January 1	$	67,006		$	55,914
Service cost	3,542			3,093
Interest cost	3,688			3,313
Amendment	—			2,315
Actuarial (gain) loss	12,689			4,820
Benefits paid	(2,017		)	(2,449		)
Benefit obligation at December 31	84,908			67,006
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1	48,464			42,199
Actual return on plan assets	(1,176		)	6,070
Employer contributions	8,664			2,644
Benefits paid	(2,017		)	(2,449		)
Fair value of plan assets at December 31	53,935			48,464
Funded status at December 31 (plan assets less benefit obligation)	$	(30,973	)	$	(18,542	)

Amounts recognized in accumulated other comprehensive income at December 31, 2011 and 2010 consist of:

(Dollar amounts in thousands)	2011		2010
Net loss (gain)	$	17,867	$	19,164
Prior service cost (credit)	166		2,259
	$	18,033	$	21,423

The accumulated benefit obligation for the defined benefit pension plan was $73,560 and $55,304 at year-end 2011 and 2010.

	2011		2010
Principal assumptions used:
Discount rate	4.40	%	5.54	%
Rate of increase in compensation levels	3.50		3.75
Expected long-term rate of return on plan assets	6.00		8.00

The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the plan’s target asset allocation. Management estimated the rate by which plan assets would perform based on historical experience as adjusted for changes in asset allocations and expectations for future return on equities as compared to past periods.

Plan Assets — The Corporation’s pension plan weighted-average asset allocation for the years 2011 and 2010 by asset category are as follows:

			Pension				ESOP
	Pension Plan	ESOP	Pecentage of Plan				Pecentage of Plan
	Target Allocation	Target Allocation	Assets at December 31,				Assets at December 31,
ASSET CATEGORY	2012	2012	2011		2010		2011		2010
Equity securities	61-63%	99-100%	49	%	64	%	99	%	100	%
Debt securities	33-36%	0-0	36	%	33	%	0	%	0	%
Other	1-6%	0-1	15	%	3	%	1	%	0	%
TOTAL			100	%	100	%	100	%	100	%

Fair Value of Plan Assets — Fair value is the exchange price that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Corporation used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Equity, Debt, Investment Funds and Other Securities — The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

The fair value of the plan assets at December 31, 2011 and 2010, by asset category, is as follows:

			Fair Value Measurments at
			December 31, 2011 Using:
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Obsevable		Obsevable
	Carrying		Identical Assets		Inputs		Inputs
(Dollar amounts in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
Plan assets
Equity securities	$	40,475	$	40,475	$	—	$	—
Debt securities	8,566		—		8,566		—
Investment Funds	4,894		4,894		—		—
Total plan assets	$	53,935	$	45,369	$	8,566	$	—

			Fair Value Measurments at
			December 31, 2010 Using:
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Obsevable		Obsevable
	Carrying		Identical Assets		Inputs		Inputs
(Dollar amounts in thousands)	Value		(Level 1)		(Level 2)		(Level 3)
Plan assets
Equity securities	$	41,405	$	41,405	$	—	$	—
Debt securities	5,504		—		5,504		—
Investment Funds	1,555		1,555		—		—
Total plan assets	$	48,464	$	42,960	$	5,504	$	—

The investment objective for the retirement program is to maximize total return without exposure to undue risk. Asset allocation favors equities, with a target allocation of approximately 88%. This target includes the Corporation’s ESOP, which is 100% invested in corporate stock. Other investment allocations include fixed income securities and cash.

The plan is prohibited from investing in the following: private placement equity and debt transactions; letter stock and uncovered options; short-sale margin transactions and other specialized investment activity; and fixed income or interest rate futures. All other investments not prohibited by the plan are permitted.

Equity securities include First Financial Corporation common stock in the amount of $28.3 million (53 percent of total plan assets) and $29.7 million (61 percent of total plan assets) at December 31, 2011 and 2010, respectively. Other equity securities are predominantly stocks in large cap U.S. companies.

Contributions — The Corporation expects to contribute $3.8 million to its pension plan and $1.5 million to its ESOP in 2012.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

PENSION BENEFITS
(Dollar amounts in thousands)
2012	$	2,893
2013	2,984
2014	3,341
2015	3,599
2016	3,859
2017-2021	22,075

Supplemental Executive Retirement Plan — The Corporation has established a Supplemental Executive Retirement Plan (SERP) for certain executive officers. The provisions of the SERP allow the Plan’s participants who are also participants in the Corporation’s defined benefit pension plan to receive supplemental retirement benefits to help recompense for benefits lost due to the imposition of IRS limitations on benefits under the Corporation’s tax qualified defined benefit pension plan. Expenses related to the plan were $200 thousand in 2011 and $241 thousand in 2010. The plan is unfunded and has a measurement date of December 31. The amounts recognized in other comprehensive income in the current year are as follows:

(Dollar amounts in thousands)	2011			2010			2009
Net loss (gain) during the period	$	486		$	(90	)	$	—
Amortization of prior service cost	(74		)	(74		)	(74		)
Amortization of unrecognized gain (loss)	39			66			(37		)
Total recognized in other comprehensive income (loss)	$	451		$	(98	)	$	(111	)

The Corporation has $2.0 million and $1.3 million recognized in the balance sheet as a liability at December 31, 2011 and 2010. Amounts in accumulated other comprehensive income consist of $355 thousand net loss at December 31, 2011 and $170 thousand net gain and $74 thousand in prior service cost at December 31, 2010. The estimated loss for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $79 thousand.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

SERP BENEFITS
(Dollar amounts on thousands)
2012	$	158
2013	156
2014	155
2015	153
2016	152
2017-2021	721

The Corporation also provides medical benefits to certain employees subsequent to their retirement. The Corporation uses a measurement date of December 31. Accrued post-retirement benefits as of December 31, 2011 and 2010 are as follows:

	December 31,
(Dollar amounts in thousands)	2011			2010
Change in benefit obligation:
Benefit obligation at January 1	$	4,500		$	4,425
Service cost	61			63
Interest cost	194			218
Plan participants’ contributions	62			67
Actuarial (gain) loss	(472		)	—
Benefits paid	(288		)	(273		)
Benefit obligation at December 31	$	4,057		$	4,500
Funded status at December 31	$	4,057		$	4,500

Amounts recognized in accumulated other comprehensive income consist of a net loss of $91 thousand and $120 thousand in transition obligation at December 31, 2011 and $575 thousand net loss and $180 thousand in transition obligation at December 31, 2010. The post-retirement benefits paid in 2011 and 2010 of $288 thousand and $273 thousand, respectively, were fully funded by company and participant contributions.

The estimated transition obligation for the post-retirement benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $60 thousand.

Weighted average assumptions at December 31:

	December 31,
	2011		2010
Discount rate	4.40	%	5.54	%
Initial weighted health care cost trend rate	7.50		7.50
Ultimate health care cost trend rate	5.00		5.00
Year that the rate is assumed to stabilize and remain unchanged	2015		2014

Post-retirement health benefit expense included the following components:

	Years Ended December 31,
(Dollar amounts in thousands)	2011			2010			2009
Service cost	$	59		$	64		$	70
Interest cost	194			218			240
Amortization of transition obligation	60			60			60
Recognized actuarial loss	—			12			—
Net periodic benefit cost	$	313		$	354		$	370
Net loss (gain) during the period	$	(469	)	$	—		$	—
Amortization of prior service cost	(60		)	(60		)	(60		)
Amortization of unrecognized gain (loss)				(153		)	(110		)
Total recognized in other comprehensive income (loss)	$	(529	)	$	(213	)	$	(170	)
Total recognized net periodic benefit cost and other comprehensive income	$	(216	)	$	141		$	200

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

	1% Point		1% Point
(Dollar amounts in thousands)	Increase		Decrease
Effect on total of service and interest cost components	$	46	$	(42	)
Effect on post-retirement benefit obligation	2		(2		)

Contributions — The Corporation expects to contribute $255 thousand to its other post-retirement benefit plan in 2012.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

Post-Retirement Medical Benefits
(Dollar amounts in thousands)
2012	$	255
2013	250
2014	254
2015	263
2016	270
2017-2021	1,299