BORROWED FUNDS (Note 10)

Short-Term Borrowings

Short-term borrowings at December 31, 2018 and 2017 consisted of the following:



	2018		2017
	(in thousands)
FHLB advances	$	1,732,000	$	427,000
Securities sold under agreements to repurchase	261,914		321,628
Federal funds purchased	125,000		—
Total short-term borrowings	$	2,118,914	$	748,628

The weighted average interest rate for short-term borrowings was 2.45 percent and 1.05 percent at December 31, 2018 and 2017, respectively.

Long-Term Borrowings

Long-term borrowings at December 31, 2018 and 2017 consisted of the following:



	2018		2017
	(in thousands)
FHLB advances, net ⁽¹⁾	$	1,309,666	$	1,980,666
Subordinated debt, net ⁽²⁾	294,602		235,153
Securities sold under agreements to repurchase	50,000		100,000
Total long-term borrowings	$	1,654,268	$	2,315,819



(1)	FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $10.3 million and $14.3 million at December 31, 2018 and 2017, respectively.
(2)	Subordinated debt is presented net of unamortized debt issuance costs totaling $1.4 million and $1.7 million at December 31, 2018 and 2017, respectively.

In 2016, Valley prepaid $355 million and $50 million of the long-term FHLB advances and securities sold under agreements to repurchase, respectively. These prepaid borrowings, which had contractual maturity dates in 2018 and a total average interest rate of 3.69 percent, were funded with a new fixed-rate FHLB advance totaling $405.0 million (maturing in August 2021). The transaction was accounted for as a debt modification under U.S. GAAP. As a result, the new advance has an adjusted annual interest rate of 2.51 percent, after amortization of prepayment penalties totaling $20.0 million paid to the FHLB.

In 2016, Valley also prepaid $87 million of FHLB advances assumed in the acquisition of CNL. The prepayment was entirely funded by cash balances that were held as collateral at the FHLB of Atlanta and resulted in the recognition of a $315 thousand loss on extinguishment of debt reported within other non-interest expense for the year ended December 31, 2016.

FHLB Advances. The long-term FHLB advances had a weighted average interest rate of 3.13 percent and 2.52 percent at December 31, 2018 and 2017, respectively. These FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

The long-term FHLB advances at December 31, 2018 are scheduled for contractual balance repayments as follows:



Year	Amount
	(in thousands)
2019	$	255,000
2020	25,000
2021	840,000
2022	200,000
Total long-term FHLB advances	$	1,320,000

There are no FHLB advances which are callable for early redemption by the FHLB in the table above.

Subordinated Debt. In June 2015, Valley issued $100 million of 4.55 percent subordinated debentures (notes) due July 30, 2025 with no call dates or prepayments allowed unless certain conditions exist. Interest on the subordinated notes is payable semi-annually in arrears on June 30 and December 30 of each year. The subordinated notes had a net carrying value of $99.3 million and $99.2 million at December 31, 2018 and 2017, respectively.

In September 2013, Valley issued $125 million of its 5.125 percent subordinated notes due September 27, 2023 with no call dates or prepayments allowed, unless certain conditions exist. Interest on the subordinated debentures is payable semi-annually in arrears on March 27 and September 27 of each year. In conjunction with the issuance, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the subordinated notes. In August 2016, the fair value interest rate swap with a notional amount of $125 million was terminated resulting in an adjusted fixed annual interest rate of 3.32 percent on the subordinated notes, after amortization of the derivative valuation adjustment recorded at the termination date. The subordinated notes had a net carrying value of $134.2 million and $135.2 million at December 31, 2018 and 2017, respectively.

On January 1, 2018, Valley assumed $60 million of 6.25 percent subordinated notes, in connection with the acquisition of USAB. The notes are due April 1, 2026 callable beginning April 2021. Interest on the subordinated debentures is payable semi-annually in arrears on April 1 and October 1 of each year. After purchase accounting adjustments, the subordinated notes had a net carrying value of $61.1 million at December 31, 2018.

Long-term securities sold under agreements. The long-term securities sold under agreements had a weighted average interest rate of 3.70 percent and 3.37 percent at December 31, 2018 and 2017, respectively.

The long-term repos at December 31, 2018 are scheduled for contractual balance repayments as follows:



Year	Amount
	(in thousands)
2022	$	50,000
Total long-term securities sold under agreements to repurchase	$	50,000

Pledged Securities. The fair value of securities pledged to secure public deposits, repurchase agreements, lines of credit, FHLB advances and for other purposes required by law approximated $2.4 billion and $1.9 billion for December 31, 2018 and 2017, respectively.