XML 23 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Investment Securities
 9 Months Ended
Sep. 30, 2018
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, 2018 and December 31, 2017 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2018
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,557

 
$
1,853

 
$
(141
)
 
$
140,269

U.S. government agency securities
8,846

 
—

 
(305
)
 
8,541

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
347,775

 
3,717

 
(6,970
)
 
344,522

Municipal bonds
248,585

 
2,561

 
(2,245
)
 
248,901

Total obligations of states and political subdivisions
596,360

 
6,278

 
(9,215
)
 
593,423

Residential mortgage-backed securities
1,259,772

 
1,573

 
(49,589
)
 
1,211,756

Trust preferred securities
37,328

 
38

 
(6,213
)
 
31,153

Corporate and other debt securities
31,500

 
47

 
(335
)
 
31,212

Total investment securities held to maturity
$
2,072,363

 
$
9,789

 
$
(65,798
)
 
$
2,016,354

December 31, 2017
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,676

 
$
6,581

 
$
—

 
$
145,257

U.S. government agency securities
9,859

 
122

 
—

 
9,981

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
244,272

 
7,083

 
(1,653
)
 
249,702

Municipal bonds
221,606

 
6,199

 
(28
)
 
227,777

Total obligations of states and political subdivisions
465,878

 
13,282

 
(1,681
)
 
477,479

Residential mortgage-backed securities
1,131,945

 
4,842

 
(18,743
)
 
1,118,044

Trust preferred securities
49,824

 
60

 
(9,796
)
 
40,088

Corporate and other debt securities
46,509

 
532

 
(270
)
 
46,771

Total investment securities held to maturity
$
1,842,691

 
$
25,419

 
$
(30,490
)
 
$
1,837,620


The age of unrealized losses and fair value of related securities held to maturity at September 30, 2018 and December 31, 2017 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, 2018
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
34,660

 
$
(141
)
 
$
—

 
$
—

 
$
34,660

 
$
(141
)
U.S. government agency securities
8,541

 
(305
)
 
—

 
—

 
8,541

 
(305
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
129,321

 
(3,414
)
 
48,862

 
(3,556
)
 
178,183

 
(6,970
)
Municipal bonds
89,065

 
(2,208
)
 
528

 
(37
)
 
89,593

 
(2,245
)
Total obligations of states and political subdivisions
218,386

 
(5,622
)
 
49,390

 
(3,593
)
 
267,776

 
(9,215
)
Residential mortgage-backed securities
467,711

 
(9,928
)
 
662,345

 
(39,661
)
 
1,130,056

 
(49,589
)
Trust preferred securities
—

 
—

 
29,761

 
(6,213
)
 
29,761

 
(6,213
)
Corporate and other debt securities
15,386

 
(114
)
 
4,779

 
(221
)
 
20,165

 
(335
)
Total
$
744,684

 
$
(16,110
)
 
$
746,275

 
$
(49,688
)
 
$
1,490,959

 
$
(65,798
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
$
6,342

 
$
(50
)
 
$
53,034

 
$
(1,603
)
 
$
59,376

 
$
(1,653
)
Municipal bonds
4,644

 
(25
)
 
561

 
(3
)
 
5,205

 
(28
)
Total obligations of states and political subdivisions
10,986

 
(75
)
 
53,595

 
(1,606
)
 
64,581

 
(1,681
)
Residential mortgage-backed securities
344,216

 
(2,357
)
 
570,969

 
(16,386
)
 
915,185

 
(18,743
)
Trust preferred securities
—

 
—

 
38,674

 
(9,796
)
 
38,674

 
(9,796
)
Corporate and other debt securities
9,980

 
(270
)
 
—

 
—

 
9,980

 
(270
)
Total
$
365,182

 
$
(2,702
)
 
$
663,238

 
$
(27,788
)
 
$
1,028,420

 
$
(30,490
)


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 409 at September 30, 2018 and 152 at December 31, 2017.

The unrealized losses within the residential mortgage-backed securities category of the held to maturity portfolio at September 30, 2018 mostly related to investment grade securities issued by Ginnie Mae and Fannie Mae.
The unrealized losses existing for more than twelve months for trust preferred securities at September 30, 2018 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, 2018.
As of September 30, 2018, 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 $1.2 billion.
The contractual maturities of investments in debt securities held to maturity at September 30, 2018 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, 2018
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
21,825

 
$
21,850

Due after one year through five years
231,676

 
233,954

Due after five years through ten years
295,711

 
300,013

Due after ten years
263,379

 
248,781

Residential mortgage-backed securities
1,259,772

 
1,211,756

Total investment securities held to maturity
$
2,072,363

 
$
2,016,354


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 6.8 years at September 30, 2018.

Available for Sale
The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at September 30, 2018 and December 31, 2017 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2018
 
 
 
 
 
 
 
U.S. Treasury securities
$
50,980

 
$
—

 
$
(2,617
)
 
$
48,363

U.S. government agency securities
37,618

 
67

 
(1,172
)
 
36,513

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
106,881

 
41

 
(3,344
)
 
103,578

Municipal bonds
103,631

 
137

 
(2,109
)
 
101,659

Total obligations of states and political subdivisions
210,512

 
178

 
(5,453
)
 
205,237

Residential mortgage-backed securities
1,470,565

 
1,304

 
(59,020
)
 
1,412,849

Trust preferred securities
1,789

 
—

 
(199
)
 
1,590

Corporate and other debt securities
45,063

 
134

 
(748
)
 
44,449

Total investment securities available for sale
$
1,816,527

 
$
1,683

 
$
(69,209
)
 
$
1,749,001

December 31, 2017
 
 
 
 
 
 
 
U.S. Treasury securities
$
50,997

 
$
—

 
$
(1,355
)
 
$
49,642

U.S. government agency securities
42,384

 
158

 
(37
)
 
42,505

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
38,435

 
158

 
(374
)
 
38,219

Municipal bonds
74,752

 
477

 
(564
)
 
74,665

Total obligations of states and political subdivisions
113,187

 
635

 
(938
)
 
112,884

Residential mortgage-backed securities
1,239,534

 
2,423

 
(18,662
)
 
1,223,295

Trust preferred securities
3,726

 
—

 
(512
)
 
3,214

Corporate and other debt securities
50,701

 
623

 
(160
)
 
51,164

Equity securities
10,505

 
1,190

 
(494
)
 
11,201

Total investment securities available for sale
$
1,511,034

 
$
5,029

 
$
(22,158
)
 
$
1,493,905



The age of unrealized losses and fair value of related securities available for sale at September 30, 2018 and December 31, 2017 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, 2018
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
897

 
$
(16
)
 
$
47,467

 
$
(2,601
)
 
$
48,364

 
$
(2,617
)
U.S. government agency securities
5,502

 
(77
)
 
23,561

 
(1,095
)
 
29,063

 
(1,172
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
86,962

 
(2,850
)
 
12,297

 
(494
)
 
99,259

 
(3,344
)
Municipal bonds
58,259

 
(1,205
)
 
22,850

 
(904
)
 
81,109

 
(2,109
)
Total obligations of states and political subdivisions
145,221

 
(4,055
)
 
35,147

 
(1,398
)
 
180,368

 
(5,453
)
Residential mortgage-backed securities
667,551

 
(19,418
)
 
723,522

 
(39,602
)
 
1,391,073

 
(59,020
)
Trust preferred securities
—

 
—

 
1,590

 
(199
)
 
1,590

 
(199
)
Corporate and other debt securities
21,317

 
(319
)
 
10,473

 
(429
)
 
31,790

 
(748
)
Total
$
840,488

 
$
(23,885
)
 
$
841,760

 
$
(45,324
)
 
$
1,682,248

 
$
(69,209
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
916

 
$
(2
)
 
$
48,726

 
$
(1,353
)
 
$
49,642

 
$
(1,355
)
U.S. government agency securities
31,177

 
(37
)
 
—

 
—

 
31,177

 
(37
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
13,337

 
(131
)
 
7,792

 
(243
)
 
21,129

 
(374
)
Municipal bonds
31,669

 
(256
)
 
12,133

 
(308
)
 
43,802

 
(564
)
Total obligations of states and political subdivisions
45,006

 
(387
)
 
19,925

 
(551
)
 
64,931

 
(938
)
Residential mortgage-backed securities
406,940

 
(2,461
)
 
599,167

 
(16,201
)
 
1,006,107

 
(18,662
)
Trust preferred securities
—

 
—

 
3,214

 
(512
)
 
3,214

 
(512
)
Corporate and other debt securities
5,855

 
(45
)
 
15,115

 
(115
)
 
20,970

 
(160
)
Equity securities
—

 
—

 
5,150

 
(494
)
 
5,150

 
(494
)
Total
$
489,894

 
$
(2,932
)
 
$
691,297

 
$
(19,226
)
 
$
1,181,191

 
$
(22,158
)

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, 2018 was 572 as compared to 327 at December 31, 2017.
The unrealized losses for the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2018 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae, Fannie Mae, and Freddie Mac.
As of September 30, 2018, 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 $1.1 billion.
The contractual maturities of debt securities available for sale at September 30, 2018 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, 2018
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
9,831

 
$
9,893

Due after one year through five years
128,006

 
123,837

Due after five years through ten years
78,226

 
77,112

Due after ten years
129,899

 
125,310

Residential mortgage-backed securities
1,470,565

 
1,412,849

Total investment securities available for sale
$
1,816,527

 
$
1,749,001


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 was 7.1 years at September 30, 2018.
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; 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 (including one pooled security at September 30, 2018) and corporate bonds (some 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 three and nine months ended September 30, 2018 and 2017. Management does not believe that any individual unrealized loss as of September 30, 2018 included in the investment portfolio tables 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.

At September 30, 2018, four previously impaired private label mortgage-backed securities had a combined amortized cost and fair value of $6.8 million and $6.2 million, respectively.

Realized Gains and Losses

Net losses on securities transactions totaled $79 thousand and $880 thousand for the three and nine months ended September 30, 2018, respectively. The net losses on securities transactions for the nine months ended September 30, 2018 were mainly related to sales of equity securities classified as available for sale prior to the adoption of ASU No. 2016-01 on January 1, 2018 and certain municipal securities acquired from USAB. Net gains and losses on securities transactions were immaterial for the three and nine months ended September 30, 2017.