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Investment Securities
 9 Months Ended
Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
Investment Securities

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at September 30, 2016 and December 31, 2015 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2016
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,866

 
$
15,176

 
$
—

 
$
154,042

U.S. government agency securities
11,549

 
557

 
—

 
12,106

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
192,735

 
13,353

 
—

 
206,088

Municipal bonds
375,477

 
13,960

 
—

 
389,437

Total obligations of states and political subdivisions
568,212

 
27,313

 
—

 
595,525

Residential mortgage-backed securities
1,030,165

 
17,642

 
(1,420
)
 
1,046,387

Trust preferred securities
59,800

 
28

 
(14,102
)
 
45,726

Corporate and other debt securities
36,559

 
1,637

 
—

 
38,196

Total investment securities held to maturity
$
1,845,151

 
$
62,353

 
$
(15,522
)
 
$
1,891,982

December 31, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,978

 
$
10,505

 
$
—

 
$
149,483

U.S. government agency securities
12,859

 
271

 
—

 
13,130

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
194,547

 
10,538

 
(10
)
 
205,075

Municipal bonds
310,318

 
11,955

 
(85
)
 
322,188

Total obligations of states and political subdivisions
504,865

 
22,493

 
(95
)
 
527,263

Residential mortgage-backed securities
852,289

 
11,018

 
(8,035
)
 
855,272

Trust preferred securities
59,785

 
36

 
(13,384
)
 
46,437

Corporate and other debt securities
27,609

 
1,894

 
(49
)
 
29,454

Total investment securities held to maturity
$
1,596,385

 
$
46,217

 
$
(21,563
)
 
$
1,621,039


The age of unrealized losses and fair value of related securities held to maturity at September 30, 2016 and December 31, 2015 were as follows: 
 
Less than
Twelve Months
 
More than
Twelve Months
 
Total
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
(in thousands)
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities
$
185,774

 
$
(867
)
 
$
128,211

 
$
(553
)
 
$
313,985

 
$
(1,420
)
Trust preferred securities
—

 
—

 
44,344

 
(14,102
)
 
44,344

 
(14,102
)
Total
$
185,774

 
$
(867
)
 
$
172,555

 
$
(14,655
)
 
$
358,329

 
$
(15,522
)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
$
6,837

 
$
(5
)
 
$
1,965

 
$
(5
)
 
$
8,802

 
$
(10
)
Municipal bonds
8,814

 
(72
)
 
10,198

 
(13
)
 
19,012

 
(85
)
Total obligations of states and political subdivisions
15,651

 
(77
)
 
12,163

 
(18
)
 
27,814

 
(95
)
Residential mortgage-backed securities
244,440

 
(2,916
)
 
162,756

 
(5,119
)
 
407,196

 
(8,035
)
Trust preferred securities
—

 
—

 
45,047

 
(13,384
)
 
45,047

 
(13,384
)
Corporate and other debt securities
2,951

 
(49
)
 
—

 
—

 
2,951

 
(49
)
Total
$
263,042

 
$
(3,042
)
 
$
219,966

 
$
(18,521
)
 
$
483,008

 
$
(21,563
)


The unrealized losses on investment securities held to maturity are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 52 at September 30, 2016 and 74 at December 31, 2015.

The unrealized losses within the residential mortgage-backed securities category of the held to maturity portfolio at September 30, 2016 mainly related to certain investment grade securities issued by Ginnie Mae.
The unrealized losses existing for more than twelve months for trust preferred securities at September 30, 2016 primarily related to four non-rated single-issuer trust preferred securities issued by bank holding companies. All single-issuer trust preferred securities classified as held to maturity are paying in accordance with their terms, have no deferrals of interest or defaults and, if applicable, the issuers meet the regulatory capital requirements to be considered “well-capitalized institutions” at September 30, 2016.
Management does not believe that any individual unrealized loss as of September 30, 2016 included in the table above represents other-than-temporary impairment as management mainly attributes the declines in fair value to changes in interest rates and market volatility, not credit quality or other factors. Based on a comparison of the present value of expected cash flows to the amortized cost, management believes there are no credit losses on these securities. Valley does not have the intent to sell, nor is it more likely than not that Valley will be required to sell, the securities contained in the table above before the recovery of their amortized cost basis or maturity.
As of September 30, 2016, the fair value of investments held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $860.6 million.
The contractual maturities of investments in debt securities held to maturity at September 30, 2016 are set forth in the table below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.  
 
September 30, 2016
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
85,384

 
$
85,388

Due after one year through five years
181,107

 
192,968

Due after five years through ten years
369,454

 
398,494

Due after ten years
179,041

 
168,745

Residential mortgage-backed securities
1,030,165

 
1,046,387

Total investment securities held to maturity
$
1,845,151

 
$
1,891,982


Actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.
The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 6.5 years at September 30, 2016.

Available for Sale
The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at September 30, 2016 and December 31, 2015 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2016
 
 
 
 
 
 
 
U.S. Treasury securities
$
51,025

 
$
766

 
$
—

 
$
51,791

U.S. government agency securities
23,764

 
339

 
(6
)
 
24,097

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
42,466

 
1,091

 
(40
)
 
43,517

Municipal bonds
80,155

 
1,939

 
(321
)
 
81,773

Total obligations of states and political subdivisions
122,621

 
3,030

 
(361
)
 
125,290

Residential mortgage-backed securities
958,531

 
11,021

 
(2,914
)
 
966,638

Trust preferred securities*
10,231

 
—

 
(2,075
)
 
8,156

Corporate and other debt securities
79,148

 
1,623

 
(204
)
 
80,567

Equity securities
20,522

 
445

 
(797
)
 
20,170

Total investment securities available for sale
$
1,265,842

 
$
17,224

 
$
(6,357
)
 
$
1,276,709

December 31, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
551,173

 
$
4

 
$
(1,704
)
 
$
549,473

U.S. government agency securities
29,316

 
665

 
(18
)
 
29,963

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
44,285

 
196

 
(67
)
 
44,414

Municipal bonds
80,717

 
209

 
(374
)
 
80,552

Total obligations of states and political subdivisions
125,002

 
405

 
(441
)
 
124,966

Residential mortgage-backed securities
701,764

 
3,348

 
(8,684
)
 
696,428

Trust preferred securities*
10,458

 
—

 
(2,054
)
 
8,404

Corporate and other debt securities
78,202

 
1,239

 
(1,889
)
 
77,552

Equity securities
21,022

 
575

 
(1,522
)
 
20,075

Total investment securities available for sale
$
1,516,937

 
$
6,236

 
$
(16,312
)
 
$
1,506,861

 
*
Includes two pooled trust preferred securities, principally collateralized by securities issued by banks and insurance companies, at September 30, 2016 and December 31, 2015.


The age of unrealized losses and fair value of related securities available for sale at September 30, 2016 and December 31, 2015 were as follows: 
 
Less than
Twelve Months
 
More than
Twelve Months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(in thousands)
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
—

 
$
—

 
$
4,197

 
$
(6
)
 
$
4,197

 
$
(6
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
2,607

 
(40
)
 
—

 
—

 
2,607

 
(40
)
Municipal bonds
—

 
—

 
11,012

 
(321
)
 
11,012

 
(321
)
Total obligations of states and political subdivisions
2,607

 
(40
)
 
11,012

 
(321
)
 
13,619

 
(361
)
Residential mortgage-backed securities
145,631

 
(566
)
 
138,425

 
(2,348
)
 
284,056

 
(2,914
)
Trust preferred securities
—

 
—

 
8,155

 
(2,075
)
 
8,155

 
(2,075
)
Corporate and other debt securities
20,814

 
(7
)
 
15,329

 
(197
)
 
36,143

 
(204
)
Equity securities
—

 
—

 
14,998

 
(797
)
 
14,998

 
(797
)
Total
$
169,052

 
$
(613
)
 
$
192,116

 
$
(5,744
)
 
$
361,168

 
$
(6,357
)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
548,538

 
$
(1,704
)
 
$
—

 
$
—

 
$
548,538

 
$
(1,704
)
U.S. government agency securities
3,489

 
(5
)
 
4,736

 
(13
)
 
8,225

 
(18
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
24,359

 
(67
)
 
—

 
—

 
24,359

 
(67
)
Municipal bonds
38,207

 
(128
)
 
13,551

 
(246
)
 
51,758

 
(374
)
Total obligations of states and political subdivisions
62,566

 
(195
)
 
13,551

 
(246
)
 
76,117

 
(441
)
Residential mortgage-backed securities
293,615

 
(4,147
)
 
164,010

 
(4,537
)
 
457,625

 
(8,684
)
Trust preferred securities
—

 
—

 
8,404

 
(2,054
)
 
8,404

 
(2,054
)
Corporate and other debt securities
21,203

 
(471
)
 
36,137

 
(1,418
)
 
57,340

 
(1,889
)
Equity securities
—

 
—

 
14,273

 
(1,522
)
 
14,273

 
(1,522
)
Total
$
929,411

 
$
(6,522
)
 
$
241,111

 
$
(9,790
)
 
$
1,170,522

 
$
(16,312
)

The unrealized losses on investment securities available for sale are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. The total number of security positions in the securities available for sale portfolio in an unrealized loss position at September 30, 2016 was 102 as compared to 291 at December 31, 2015.
The unrealized losses more than twelve months for the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2016 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae and three non-investment grade private label mortgage-backed securities that were previously impaired.
The unrealized losses more than twelve months for trust preferred securities at September 30, 2016 in the table above largely relate to 2 pooled trust preferred securities with an amortized cost of $10.2 million and a fair value of $8.2 million. One of the two pooled trust preferred securities had unrealized loss of $1.3 million and an investment grade rating at September 30, 2016.

As of September 30, 2016, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $461.5 million.
The contractual maturities of investment securities available for sale at September 30, 2016 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.
 
September 30, 2016
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
10,549

 
$
10,578

Due after one year through five years
93,945

 
95,479

Due after five years through ten years
122,929

 
125,488

Due after ten years
59,366

 
58,356

Residential mortgage-backed securities
958,531

 
966,638

Equity securities
20,522

 
20,170

Total investment securities available for sale
$
1,265,842

 
$
1,276,709


Actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.
The weighted average remaining expected life for residential mortgage-backed securities available for sale at September 30, 2016 was 9.3 years.
Other-Than-Temporary Impairment Analysis

Valley records impairment charges on its investment securities when the decline in fair value is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities; decline in the creditworthiness of the issuer; absence of reliable pricing information for investment securities; adverse changes in business climate; adverse actions by regulators; prolonged decline in value of equity investments; or unanticipated changes in the competitive environment could have a negative effect on Valley’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods. Valley’s investment portfolios include private label mortgage-backed securities, trust preferred securities principally issued by bank holding companies (including two pooled trust preferred securities), corporate bonds, and perpetual preferred and common equity securities issued by banks. These investments may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S. economy and its potential negative effect on the future performance of the security issuers and, if applicable, the underlying mortgage loan collateral of the security.

There were no other-than-temporary impairment losses on securities recognized in earnings for the nine months ended September 30, 2016 and 2015. At September 30, 2016, four previously impaired private label mortgage-backed securities (prior to December 31, 2012) had a combined amortized cost and fair value of $10.8 million and $10.4 million, respectively, while one previously impaired pooled trust preferred security had an amortized cost and fair value of $2.8 million and $2.0 million, respectively. The previously impaired pooled trust preferred security was not accruing interest during the three and nine months ended September 30, 2016 and 2015. Additionally, one previously impaired pooled trust preferred security was sold during the first quarter of 2015 for an immaterial gain. See the table and discussion below for additional information.

The following table presents the changes in the credit loss component of cumulative other-than-temporary impairment losses on debt securities classified as either held to maturity or available for sale that Valley has previously recognized in earnings, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income for the three and nine months ended September 30, 2016 and 2015: 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Balance, beginning of period
$
5,348

 
$
6,387

 
$
5,837

 
$
8,947

Accretion of credit loss impairment due to an increase in expected cash flows
(87
)
 
(458
)
 
(576
)
 
(636
)
Sales
—

 
—

 
—

 
(2,382
)
Balance, end of period
$
5,261

 
$
5,929

 
$
5,261

 
$
5,929



The credit loss component of the impairment loss represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. The beginning balance represents the credit loss component for debt securities for which other-than-temporary impairment occurred prior to each period presented. The credit loss component increases if other-than-temporary impairments (initial and subsequent) are recognized in earnings for credit impaired debt securities. The credit loss component is reduced if (i) Valley receives cash flows in excess of what it expected to receive over the remaining life of the credit impaired debt security, (ii) the security matures, (iii) the security is fully written down, or (iv) Valley sells, intends to sell or believes it will be required to sell previously credit impaired debt securities.
Realized Gains and Losses

Gross gains (losses) realized on sales, maturities and other securities transactions related to investment securities included in earnings for the three and nine months ended September 30, 2016 and 2015 were as follows: 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Sales transactions:
 
 
 
 
 
 
 
Gross gains
$
—

 
$
—

 
$
271

 
$
3,274

Gross losses
—

 
—

 
—

 
(947
)
 
—

 
—

 
271

 
2,327

Maturities and other securities transactions:
 
 
 
 
 
 
 
Gross gains
2

 
158

 
2

 
287

Gross losses
(12
)
 
(1
)
 
(15
)
 
(133
)
 
(10
)
 
157

 
(13
)
 
154

Total (losses) gains on securities transactions, net
$
(10
)
 
$
157

 
$
258

 
$
2,481



Valley recognized gross gains from sales transactions of investment securities totaling $3.3 million for the nine months ended September 30, 2015 due to the sale of corporate debt securities and trust preferred securities with amortized cost totaling $25.9 million. These transactions included a corporate debt security classified as held to maturity and a previously impaired pooled trust preferred security with amortized costs of $9.8 million and $2.6 million, respectively. Additionally, Valley recognized $947 thousand of gross losses during the nine months ended September 30, 2015 primarily due to the sale of mostly trust preferred securities with a total amortized cost of $8.3 million. The vast majority of the sales of investment securities were due to an investment portfolio re-balancing during the third quarter of 2015 due to changes in our regulatory capital calculation under the new Basel III regulatory capital reform (effective for Valley on January 1, 2015). Under ASC Topic 320, “Investments - Debt and Equity Securities,” the sale of held to maturity securities based upon the change in capital requirements is permitted without tainting the remaining held to maturity investment portfolio.