XML 48 R14.htm IDEA: XBRL DOCUMENT v3.19.3
Investment Securities
 9 Months Ended
Sep. 30, 2019
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, 2019 and December 31, 2018 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2019
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,393

 
$
6,479

 
$
—

 
$
144,872

U.S. government agency securities
7,462

 
93

 
(2
)
 
7,553

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

 
7,885

 
(585
)
 
312,429

Municipal bonds
212,301

 
5,777

 
(25
)
 
218,053

Total obligations of states and political subdivisions
517,430

 
13,662

 
(610
)
 
530,482

Residential mortgage-backed securities
1,360,903

 
17,687

 
(3,765
)
 
1,374,825

Trust preferred securities
37,319

 
53

 
(6,475
)
 
30,897

Corporate and other debt securities
32,250

 
430

 
(106
)
 
32,574

Total investment securities held to maturity
$
2,093,757

 
$
38,404

 
$
(10,958
)
 
$
2,121,203

December 31, 2018
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,517

 
$
3,532

 
$
—

 
$
142,049

U.S. government agency securities
8,721

 
55

 
(135
)
 
8,641

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
341,702

 
4,332

 
(5,735
)
 
340,299

Municipal bonds
243,954

 
3,141

 
(1,361
)
 
245,734

Total obligations of states and political subdivisions
585,656

 
7,473

 
(7,096
)
 
586,033

Residential mortgage-backed securities
1,266,770

 
3,203

 
(34,368
)
 
1,235,605

Trust preferred securities
37,332

 
77

 
(5,923
)
 
31,486

Corporate and other debt securities
31,250

 
96

 
(217
)
 
31,129

Total investment securities held to maturity
$
2,068,246

 
$
14,436

 
$
(47,739
)
 
$
2,034,943


The age of unrealized losses and fair value of related securities held to maturity at September 30, 2019 and December 31, 2018 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, 2019
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
2,093

 
$
(2
)
 
$
—

 
$
—

 
$
2,093

 
$
(2
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
11,459

 
(45
)
 
35,927

 
(540
)
 
47,386

 
(585
)
Municipal bonds
4,379

 
(9
)
 
784

 
(16
)
 
5,163

 
(25
)
Total obligations of states and political subdivisions
15,838

 
(54
)
 
36,711

 
(556
)
 
52,549

 
(610
)
Residential mortgage-backed securities
117,588

 
(171
)
 
319,039

 
(3,594
)
 
436,627

 
(3,765
)
Trust preferred securities
—

 
—

 
29,491

 
(6,475
)
 
29,491

 
(6,475
)
Corporate and other debt securities
6,696

 
(54
)
 
4,947

 
(52
)
 
11,643

 
(106
)
Total
$
142,215

 
$
(281
)
 
$
390,188

 
$
(10,677
)
 
$
532,403

 
$
(10,958
)
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
—

 
$
—

 
$
6,074

 
$
(135
)
 
$
6,074

 
$
(135
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
16,098

 
(266
)
 
138,437

 
(5,469
)
 
154,535

 
(5,735
)
Municipal bonds
3,335

 
(37
)
 
60,078

 
(1,324
)
 
63,413

 
(1,361
)
Total obligations of states and political subdivisions
19,433

 
(303
)
 
198,515

 
(6,793
)
 
217,948

 
(7,096
)
Residential mortgage-backed securities
72,240

 
(852
)
 
846,671

 
(33,516
)
 
918,911

 
(34,368
)
Trust preferred securities
—

 
—

 
30,055

 
(5,923
)
 
30,055

 
(5,923
)
Corporate and other debt securities
9,948

 
(52
)
 
4,835

 
(165
)
 
14,783

 
(217
)
Total
$
101,621

 
$
(1,207
)
 
$
1,086,150

 
$
(46,532
)
 
$
1,187,771

 
$
(47,739
)


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 82 at September 30, 2019 and 378 at December 31, 2018.

The unrealized losses within the residential mortgage-backed securities category of the held to maturity portfolio at September 30, 2019 mostly related to investment grade securities issued by Ginnie Mae.
The unrealized losses existing for more than twelve months for trust preferred securities at September 30, 2019 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, 2019.
As of September 30, 2019, 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 $1.4 billion.
The contractual maturities of investments in debt securities held to maturity at September 30, 2019 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, 2019
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
23,737

 
$
23,760

Due after one year through five years
247,505

 
254,040

Due after five years through ten years
220,403

 
230,852

Due after ten years
241,209

 
237,726

Residential mortgage-backed securities
1,360,903

 
1,374,825

Total investment securities held to maturity
$
2,093,757

 
$
2,121,203


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 5.1 years at September 30, 2019.

Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at September 30, 2019 and December 31, 2018 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2019
 
 
 
 
 
 
 
U.S. Treasury securities
$
70,947

 
$
27

 
$
(9
)
 
$
70,965

U.S. government agency securities
29,479

 
579

 
(21
)
 
30,037

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
83,794

 
510

 
(83
)
 
84,221

Municipal bonds
95,381

 
1,019

 
(154
)
 
96,246

Total obligations of states and political subdivisions
179,175

 
1,529

 
(237
)
 
180,467

Residential mortgage-backed securities
1,300,050

 
14,191

 
(3,654
)
 
1,310,587

Corporate and other debt securities
35,422

 
584

 
—

 
36,006

Total investment securities available for sale
$
1,615,073

 
$
16,910

 
$
(3,921
)
 
$
1,628,062

December 31, 2018
 
 
 
 
 
 
 
U.S. Treasury securities
$
50,975

 
$
—

 
$
(1,669
)
 
$
49,306

U.S. government agency securities
36,844

 
71

 
(638
)
 
36,277

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
100,777

 
18

 
(3,682
)
 
97,113

Municipal bonds
101,207

 
209

 
(1,437
)
 
99,979

Total obligations of states and political subdivisions
201,984

 
227

 
(5,119
)
 
197,092

Residential mortgage-backed securities
1,469,059

 
1,484

 
(40,761
)
 
1,429,782

Corporate and other debt securities
37,542

 
213

 
(668
)
 
37,087

Total investment securities available for sale
$
1,796,404

 
$
1,995

 
$
(48,855
)
 
$
1,749,544



The age of unrealized losses and fair value of related securities available for sale at September 30, 2019 and December 31, 2018 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, 2019
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
25,940

 
$
(9
)
 
$
—

 
$
—

 
$
25,940

 
$
(9
)
U.S. government agency securities
—

 
—

 
2,131

 
(21
)
 
2,131

 
(21
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
21,181

 
(11
)
 
10,270

 
(72
)
 
31,451

 
(83
)
Municipal bonds
2,226

 
(29
)
 
15,301

 
(125
)
 
17,527

 
(154
)
Total obligations of states and political subdivisions
23,407

 
(40
)
 
25,571

 
(197
)
 
48,978

 
(237
)
Residential mortgage-backed securities
96,615

 
(256
)
 
303,880

 
(3,398
)
 
400,495

 
(3,654
)
Total
$
145,962

 
$
(305
)
 
$
331,582

 
$
(3,616
)
 
$
477,544

 
$
(3,921
)
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
—

 
$
—

 
$
49,306

 
$
(1,669
)
 
$
49,306

 
$
(1,669
)
U.S. government agency securities
2,120

 
(20
)
 
26,775

 
(618
)
 
28,895

 
(638
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
17,560

 
(95
)
 
75,718

 
(3,587
)
 
93,278

 
(3,682
)
Municipal bonds
5,018

 
(106
)
 
70,286

 
(1,331
)
 
75,304

 
(1,437
)
Total obligations of states and political subdivisions
22,578

 
(201
)
 
146,004

 
(4,918
)
 
168,582

 
(5,119
)
Residential mortgage-backed securities
119,645

 
(668
)
 
1,221,942

 
(40,093
)
 
1,341,587

 
(40,761
)
Corporate and other debt securities
12,339

 
(161
)
 
12,397

 
(507
)
 
24,736

 
(668
)
Total
$
156,682

 
$
(1,050
)
 
$
1,456,424

 
$
(47,805
)
 
$
1,613,106

 
$
(48,855
)

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, 2019 was 177 as compared to 545 at December 31, 2018.
The unrealized losses for the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2019 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae and Fannie Mae.
As of September 30, 2019, 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, 2019 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, 2019
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
37,985

 
$
38,025

Due after one year through five years
114,646

 
115,107

Due after five years through ten years
65,745

 
66,839

Due after ten years
96,647

 
97,504

Residential mortgage-backed securities
1,300,050

 
1,310,587

Total investment securities available for sale
$
1,615,073

 
$
1,628,062


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 6.1 years at September 30, 2019.
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.

During the second quarter of 2019 and the nine months ended September 30, 2019, Valley recognized a $2.9 million other-than-temporary credit impairment charge on one special revenue bond classified as available for sale (within the obligations of states and state agencies in the tables above). The credit impairment was due to severe credit deterioration disclosed by the issuer in the second quarter of 2019, as well as the issuer's default on its contractual payment. At September 30, 2019, the impaired security had an adjusted amortized cost and fair value of $680 thousand. Comparatively, there were no other-than-temporary impairment losses on securities recognized in earnings for the three and nine months ended September 30, 2018.

The obligations of states and political subdivisions include special revenue bonds which had an aggregated amortized cost and fair value of $300.8 million and $304.5 million, respectively, at September 30, 2019. The gross unrealized losses associated with the special revenue bonds totaled $757 thousand as of September 30, 2019. The special revenue bonds were largely issued by the states of (or municipalities within) Utah, Idaho, Minnesota, Florida, other state housing authorities, as well the Port Authority of New York. As part of Valley’s pre-purchase analysis and on-going quarterly assessment of impairment of the obligations of states and political subdivisions, our Credit Risk Management Department conducts a financial analysis and risk rating assessment of each security issuer based on the issuer’s most recently issued financial statements and other publicly available information. Exclusive of the impaired security, these investments are a mix of bonds with investment grade ratings or not rated paying in accordance with their contractual terms. The vast majority of the bonds not rated by the rating agencies are state housing finance agency revenue bonds secured by Ginnie Mae securities that are commonly referred to as Tax Exempt Mortgage Securities (TEMS). Valley will continue to closely monitor the special revenue bond portfolio as part of its quarterly impairment analysis.

The impaired special revenue bond was not accruing interest as of September 30, 2019. Valley discontinues the recognition of interest on debt securities if the securities meet both of the following criteria: (i) regularly scheduled
interest payments have not been paid or have been deferred by the issuer, and (ii) full collection of all contractual principal and interest payments is not deemed to be the most likely outcome, resulting in the recognition of other-than-temporary impairment of the security.

Management does not believe that any individual unrealized loss as of September 30, 2019 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 any other securities, except for the impaired special revenue bond discussed above.