Borrowed Funds

12 Months Ended

Dec. 31, 2019

BORROWED FUNDS (Note 11)

Short-Term Borrowings

Short-term borrowings at December 31, 2019 and 2018 consisted of the following:



	2019		2018
	(in thousands)
FHLB advances	$	940,000	$	1,732,000
Securities sold under agreements to repurchase	153,280		261,914
Federal funds purchased	—		125,000
Total short-term borrowings	$	1,093,280	$	2,118,914

The weighted average interest rate for short-term borrowings was 1.68 percent and 2.45 percent at December 31, 2019 and 2018, respectively.

Long-Term Borrowings

Long-term borrowings at December 31, 2019 and 2018 consisted of the following:



	2019		2018
	(in thousands)
FHLB advances, net ⁽¹⁾	$	1,480,012	$	1,309,666
Securities sold under agreements to repurchase	350,000		50,000
Subordinated debt, net ⁽²⁾	292,414		294,602
Total long-term borrowings	$	2,122,426	$	1,654,268



(1)	FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $2.8 million and $10.3 million at December 31, 2019 and 2018, respectively.
(2)	Subordinated debt is presented net of unamortized debt issuance costs totaling $1.2 million and $1.4 million at December 31, 2019 and 2018, respectively.

In 2019, Valley prepaid $635.0 million of the long-term FHLB advances. These prepaid borrowings had contractual maturity dates in 2021 and 2022 and a total average interest rate of 3.93 percent. The debt prepayment was funded by cash proceeds from the sale of commercial real estate loans and overnight borrowings. The transaction was accounted for as an early debt extinguishment resulting in a loss of $32.0 million, reported within non-interest expense, for the year ended December 31, 2019.

FHLB Advances. The long-term FHLB advances had a weighted average interest rate of 2.23 percent and 3.13 percent at December 31, 2019 and 2018, 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.

Valley assumed $430.1 million of FHLB advances in connection with the Oritani acquisition on December 1, 2019.

The long-term FHLB advances at December 31, 2019 are scheduled for contractual balance repayments as follows:



Year	Amount
	(in thousands)
2020	$	83,418
2021	994,768
2022	121,419
2023	78,164
2024	200,000
Thereafter	5,000
Total long-term FHLB advances	$	1,482,769

There are no FHLB advances with scheduled repayments in years 2020 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during 2020.

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 $99.4 million and $99.3 million at December 31, 2019 and 2018, 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 $132.4 million and $134.2 million at December 31, 2019 and 2018, 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 $60.6 million and $61.1 million at December 31, 2019 and 2018, respectively.

Long-term securities sold under agreements to repurchase (repos). The long-term repos had a weighted average interest rate of 1.94 percent and 3.70 percent at December 31, 2019 and 2018, respectively.

The long-term repos at December 31, 2019 are scheduled for contractual balance repayments as follows:



Year	Amount
	(in thousands)
2021	$	300,000
2022	50,000
Total long-term securities sold under agreements to repurchase	$	350,000

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 $2.3 billion and $2.4 billion for December 31, 2019 and 2018, respectively.