Pension Plan

9 Months Ended

Sep. 30, 2012

Pension Plan

Note 10. Pension Plan

The Bank has a non-contributory defined benefit plan (“qualified plan”) covering most of its employees. Effective July 1, 2011, the Bank closed the qualified plan to new employees hired on or after such date. The Plan continues to operate and accrue normal benefits for existing participants. In conjunction with the eligibility change for the qualified plan, the Bank amended its 401(k) plan to increase the Bank’s matching percentage of employee contributions for non-pension participants, within certain statutory limits.

The qualified plan benefits are based upon years of credited service and the employee’s highest average compensation as defined. It is the Bank’s funding policy to contribute annually an amount that can be deducted for federal income tax purposes. Additionally, the Bank has a supplemental non-qualified, non-funded retirement plan (“non-qualified plan”) which is designed to supplement the pension plan for key officers.

The following table sets forth the components of net periodic pension expense related to the qualified and non-qualified plans for the three and nine months ended September 30, 2012 and 2011:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
				(in thousands)
Service cost	$	1,964		$	1,483		$	5,892		$	4,609
Interest cost		1,599			1,518			4,795			4,567
Expected return on plan assets		(2,234	)		(1,674	)		(6,700	)		(5,004	)
Amortization of prior service cost		177			160			531			480
Amortization of actuarial loss		582			345			1,745			1,030
Total net periodic pension expense		2,088			1,832			6,263			5,682
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Amortization of prior service cost		(177	)		(160	)		(531	)		(480	)
Amortization of actuarial loss		(582	)		(345	)		(1,745	)		(1,030	)
		(759	)		(505	)		(2,276	)		(1,510	)
Total amount recognized in net periodic benefit cost and other comprehensive income (before tax)	$	1,329		$	1,327		$	3,987		$	4,172

The fair value of qualified plan assets increased approximately $32.9 million, or 34.3 percent to $128.6 million at September 30, 2012 from $95.7 million at December 31, 2011. Valley contributed $25.0 million to the qualified plan in January 2012. Valley does not expect to make any additional contributions to the qualified plan during the fourth quarter of 2012.