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Investment Securities
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
INVESTMENT SECURITIES (Note 4)
Equity Securities
Equity securities carried at fair value totaled $41.4 million at December 31, 2019. Valley's equity securities consist of one publicly traded money market mutual fund held in trust to secure Valley's assumed obligations under certain former Oritani non-qualified director and employee benefit plans. See Note 13 for further details.
Available for Sale Debt Securities
The amortized cost, gross unrealized gains and losses and fair value of investment securities available for sale at December 31, 2019 and 2018 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in thousands)
December 31, 2019
 
 
 
 
 
 
 
U.S. Treasury securities
$
50,952

 
$
12

 
$
(21
)
 
$
50,943

U.S. government agency securities
28,982

 
280

 
(19
)
 
29,243

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
78,116

 
540

 
(83
)
 
78,573

Municipal bonds
90,662

 
902

 
(86
)
 
91,478

Total obligations of states and political subdivisions
168,778

 
1,442

 
(169
)
 
170,051

Residential mortgage-backed securities
1,248,814

 
11,234

 
(5,262
)
 
1,254,786

Corporate and other debt securities
61,261

 
628

 
(111
)
 
61,778

Total investment securities available for sale
$
1,558,787

 
$
13,596

 
$
(5,582
)
 
$
1,566,801

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 December 31, 2019 and 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)
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
25,019

 
$
(21
)
 
$
—

 
$
—

 
$
25,019

 
$
(21
)
U.S. government agency securities
—

 
—

 
1,783

 
(19
)
 
1,783

 
(19
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
18,540

 
(21
)
 
8,755

 
(62
)
 
27,295

 
(83
)
Municipal bonds
—

 
—

 
13,177

 
(86
)
 
13,177

 
(86
)
Total obligations of states and political subdivisions
18,540

 
(21
)
 
21,932

 
(148
)
 
40,472

 
(169
)
Residential mortgage-backed securities
240,412

 
(1,194
)
 
282,798

 
(4,068
)
 
523,210

 
(5,262
)
Corporate and other debt securities
5,139

 
(111
)
 
—

 
—

 
5,139

 
(111
)
Total
$
289,110

 
$
(1,347
)
 
$
306,513

 
$
(4,235
)
 
$
595,623

 
$
(5,582
)
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 debt 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 December 31, 2019 was 182 as compared to 545 at December 31, 2018.
The unrealized losses existing for more than twelve months for the residential mortgage-backed securities category of the available for sale portfolio at December 31, 2019 were largely related to several investment grade securities mainly issued by Ginnie Mae, Fannie Mae, and Freddie Mac.
As of December 31, 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 $1.0 billion.
The contractual maturities of investment debt securities available for sale at December 31, 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. 
 
December 31, 2019
 
Amortized Cost
 
Fair Value
 
(in thousands)
Due in one year
$
19,554

 
$
19,611

Due after one year through five years
110,337

 
110,801

Due after five years through ten years
90,297

 
91,232

Due after ten years
89,785

 
90,371

Residential mortgage-backed securities
1,248,814

 
1,254,786

Total investment securities available for sale
$
1,558,787

 
$
1,566,801


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 5.7 years at December 31, 2019.

Held to Maturity Debt Securities
The amortized cost, gross unrealized gains and losses and fair value of investment debt securities held to maturity at December 31, 2019 and 2018 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
December 31, 2019
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,352

 
$
5,761

 
$
—

 
$
144,113

U.S. government agency securities
7,345

 
58

 
(41
)
 
7,362

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
297,454

 
7,745

 
(529
)
 
304,670

Municipal bonds
203,251

 
5,696

 
(10
)
 
208,937

Total obligations of states and political subdivisions
500,705

 
13,441

 
(539
)
 
513,607

Residential mortgage-backed securities
1,620,119

 
14,803

 
(5,350
)
 
1,629,572

Trust preferred securities
37,324

 
39

 
(5,981
)
 
31,382

Corporate and other debt securities
32,250

 
454

 
(20
)
 
32,684

Total investment securities held to maturity
$
2,336,095

 
$
34,556

 
$
(11,931
)
 
$
2,358,720

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 December 31, 2019 and 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)
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
5,183

 
$
(41
)
 
$
—

 
$
—

 
$
5,183

 
$
(41
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
11,178

 
(55
)
 
32,397

 
(474
)
 
43,575

 
(529
)
Municipal bonds
—

 
—

 
798

 
(10
)
 
798

 
(10
)
Total obligations of states and political subdivisions
11,178

 
(55
)
 
33,195

 
(484
)
 
44,373

 
(539
)
Residential mortgage-backed securities
307,885

 
(1,387
)
 
254,915

 
(3,963
)
 
562,800

 
(5,350
)
Trust preferred securities
—

 
—

 
29,990

 
(5,981
)
 
29,990

 
(5,981
)
Corporate and other debt securities
—

 
—

 
4,980

 
(20
)
 
4,980

 
(20
)
Total
$
324,246

 
$
(1,483
)
 
$
323,080

 
$
(10,448
)
 
$
647,326

 
$
(11,931
)
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 debt 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 held to maturity portfolio in an unrealized loss position at December 31, 2019 was 82 as compared to 378 at December 31, 2018.
The unrealized losses existing for more than twelve months within the residential mortgage-backed securities category of the held to maturity portfolio at December 31, 2019 were largely 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 December 31, 2019 primarily related to four non-rated single-issuer 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 December 31, 2019.
As of December 31, 2019, the fair value of debt securities 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 December 31, 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. 
 
December 31, 2019
 
Amortized Cost
 
Fair Value
 
(in thousands)
Due in one year
$
96,230

 
$
97,223

Due after one year through five years
170,615

 
176,005

Due after five years through ten years
216,437

 
226,086

Due after ten years
232,694

 
229,834

Residential mortgage-backed securities
1,620,119

 
1,629,572

Total investment securities held to maturity
$
2,336,095

 
$
2,358,720


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 5.2 years at December 31, 2019.
Other-Than-Temporary Impairment Analysis
Valley records impairment charges on its investment debt 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. Among other securities, Valley's investments in trust preferred securities, bank issued corporate bonds and special revenue bonds may pose a higher risk of future impairment charges to Valley as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers.
For the single-issuer trust preferred, corporate, and other debt securities, Valley reviews each portfolio to determine if all the securities are paying in accordance with their terms and have no deferrals of interest or defaults. A deferral event by a bank holding company for which Valley holds trust preferred securities may require the recognition of an other-than-temporary impairment charge if Valley determines that it is more likely than not that all contractual interest and principal cash flows may not be collected. Among other factors, the probability of the collection of all interest and principal determined by Valley in its impairment analysis declines if there is an increase in the estimated deferral period of the issuer. Additionally, a FDIC receivership for any single-issuer would result in an impairment and significant loss. Including the other factors outlined above, Valley analyzes the performance of the issuers on a quarterly basis, including a review of performance data from the issuers’ most recent bank regulatory report, if applicable, to assess their credit risk and the probability of impairment of the contractual cash flows of the applicable security. All of the issuers had capital ratios at December 31, 2019 that were at or above the minimum amounts to be considered a “well-capitalized” financial institution, if applicable, and/or have maintained performance levels adequate to support the contractual cash flows of the trust preferred securities.
During 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 2019, as well as the issuer's default on its contractual payment. At December 31, 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 years ended December 31, 2018 and 2017. The impaired special revenue bond was not accruing interest as of December 31, 2019.
At December 31, 2019, approximately 41.5 percent of the $670.8 million carrying value of obligations of states and political subdivisions were issued by the states of (or municipalities within) New Jersey, Utah, Texas, and Idaho. The obligations of states and political subdivisions mainly consist of general obligation bonds and, to lesser extent, special revenue bonds with amortized cost and fair value totaling $294.9 million and $299.0 million, respectively, at December 31, 2019. Special revenue bonds were largely issued by the Utah, Idaho, Florida and other state housing authorities, as well Port Authority of New York and New Jersey. As part of Valley’s pre-purchase analysis and on-going quarterly assessment of impairment of the obligations of states and political subdivisions, Valley's 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.
Management does not believe that any individual unrealized loss as of December 31, 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 these securities, except for the impaired special revenue bond discussed above.
Realized Gains and Losses
Gross gains and losses realized on sales, maturities and other securities transactions included in earnings for the years ended December 31, 2019, 2018 and 2017 were as follows:
 
2019
 
2018
 
2017
 
(in thousands)
Sales transactions:
 
 
 
 
 
Gross gains
$
—

 
$
1,769

 
$
—

Gross losses
—

 
(3,881
)
 
(25
)
 
$
—

 
$
(2,112
)
 
$
(25
)
Maturities and other securities transactions:
 
 
 
 
 
Gross gains
$
67

 
$
42

 
$
43

Gross losses
(217
)
 
(272
)
 
(38
)
 
$
(150
)
 
$
(230
)
 
$
5

Net losses on securities transactions
$
(150
)
 
$
(2,342
)
 
$
(20
)

Net losses on sales transactions in 2018 (as presented in the table above) primarily related to the sales of equity securities previously classified as available for sale, certain municipal securities acquired from USAB and all of Valley's private label mortgage-backed securities classified as available for sale, including securities that were previously impaired.