Equity securities carried at fair value totaled $54.4 million and $41.4 million at June 30, 2020 and December 31, 2019, respectively. Valley's equity securities consist mainly of one publicly traded money market mutual fund totaling $41.8 million and $41.4 million at June 30, 2020 and December 31, 2019, respectively. The remainder of the balance at June 30, 2020 represents investments made for CRA purposes.



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2020
U.S. Treasury securities	$	50,940	$	1,681	$	—		$	52,621
U.S. government agency securities	26,778		1,174		(28		)	27,924
Obligations of states and political subdivisions:
Obligations of states and state agencies	65,620		1,477		(54		)	67,043
Municipal bonds	79,100		1,363		(1		)	80,462
Total obligations of states and political subdivisions	144,720		2,840		(55		)	147,505
Residential mortgage-backed securities	1,340,614		43,039		(927		)	1,382,726
Corporate and other debt securities	78,225		1,251		(864		)	78,612
Total investment securities available for sale	$	1,641,277	$	49,985	$	(1,874	)	$	1,689,388
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



	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2020
U.S. government agency securities	$	—	$	—		$	1,627	$	(28	)	$	1,627	$	(28	)
Obligations of states and political subdivisions:
Obligations of states and state agencies	24,913		(37		)	1,036		(17		)	25,949		(54		)
Municipal bonds	210		(1		)	—		—			210		(1		)
Total obligations of states and political subdivisions	25,123		(38		)	1,036		(17		)	26,159		(55		)
Residential mortgage-backed securities	101,162		(458		)	49,368		(469		)	150,530		(927		)
Corporate and other debt securities	27,194		(864		)	—		—			27,194		(864		)
Total	$	153,479	$	(1,360	)	$	52,031	$	(514	)	$	205,510	$	(1,874	)
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	)

The contractual maturities of available for sale debt securities at June 30, 2020 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.



	June 30, 2020
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	26,643	$	26,742
Due after one year through five years	97,248		99,501
Due after five years through ten years	104,076		106,154
Due after ten years	72,696		74,265
Residential mortgage-backed securities	1,340,614		1,382,726
Total investment securities available for sale	$	1,641,277	$	1,689,388

Valley's available for sale debt securities portfolio includes corporate bonds and special revenue bonds, among other securities, which 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, including due to the economic effects of COVID-19.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. In performing an assessment of whether any decline in fair value is due to a credit loss, Valley considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level such as credit deterioration of the issuer or collateral underlying the security. In assessing the impairment, Valley compares the present value of cash flows expected to be collected with the amortized cost basis of the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income, net of tax. Valley also assesses the intent to sell the securities (as well as the likelihood of a near-term recovery). If Valley intends to sell an available for sale debt security or it is more likely than not that Valley will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

The obligations of states and political subdivisions classified as available for sale include special revenue bonds which had an aggregate amortized cost and fair value of $80.2 million and $81.8 million, respectively, at June 30, 2020. There were $56 thousand in gross unrealized losses associated with the special revenue bonds as of June 30, 2020. Approximately 54 percent of the special revenue bonds were issued by the states of (or municipalities within) Utah, Illinois, North Carolina and Florida. 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. These investments are a mix of municipal bonds with investment grade ratings or non-rated revenue bonds 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

Valley has evaluated available for sale debt securities that are in an unrealized loss position as of June 30, 2020 included in the table above and has determined that the declines in fair value are mainly attributable to 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 recognized no impairment during the three and six months ended June 30, 2020 and, as a result, there is no allowance for credit losses for available for sale debt securities at June 30, 2020.

During the three months ended June 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 June 30, 2020, the impaired security had an adjusted amortized cost and fair value of $680 thousand and $1.4 million, respectively.

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.



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2020
U.S. Treasury securities	$	138,268	$	9,147	$	—		$	147,415
U.S. government agency securities	6,657		264		—			6,921
Obligations of states and political subdivisions:
Obligations of states and state agencies	280,187		8,569		(545		)	288,211
Municipal bonds	186,649		6,876		—			193,525
Total obligations of states and political subdivisions	466,836		15,445		(545		)	481,736
Residential mortgage-backed securities	1,451,581		44,327		(309		)	1,495,599
Trust preferred securities	37,335		48		(7,483		)	29,900
Corporate and other debt securities	32,750		556		(1		)	33,305
Total investment securities held to maturity	$	2,133,427	$	69,787	$	(8,338	)	$	2,194,876
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



	Less than Twelve Months					More than Twelve Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
June 30, 2020
Obligations of states and political subdivisions:
Obligations of states and state agencies	$	10,544	$	(266	)	$	20,022	$	(279	)	$	30,566	$	(545	)
Total obligations of states and political subdivisions	10,544		(266		)	20,022		(279		)	30,566		(545		)
Residential mortgage-backed securities	37,394		(305		)	2,710		(4		)	40,104		(309		)
Trust preferred securities	—		—			28,499		(7,483		)	28,499		(7,483		)
Corporate and other debt securities	17,749		(1		)	—		—			17,749		(1		)
Total	$	65,687	$	(572	)	$	51,231	$	(7,766	)	$	116,918	$	(8,338	)
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	)

The contractual maturities of investments in debt securities held to maturity at June 30, 2020 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.



	June 30, 2020
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	92,432	$	93,313
Due after one year through five years	171,778		179,833
Due after five years through ten years	203,555		215,200
Due after ten years	214,081		210,931
Residential mortgage-backed securities	1,451,581		1,495,599
Total investment securities held to maturity	$	2,133,427	$	2,194,876

Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies. The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at June 30, 2020 and December 31, 2019.



	AAA/AA/A Rated		BBB rated		Non-investment grade rated		Non-rated		Total
	(in thousands)
June 30, 2020
U.S. Treasury securities	$	138,268	$	—	$	—	$	—	$	138,268
U.S. government agency securities	6,657		—		—		—		6,657
Obligations of states and political subdivisions:
Obligations of states and state agencies	239,811		—		5,686		34,690		280,187
Municipal bonds	182,140		—		—		4,509		186,649
Total obligations of states and political subdivisions	421,951		—		5,686		39,199		466,836
Residential mortgage-backed securities	1,451,581		—		—		—		1,451,581
Trust preferred securities	—		—		—		37,335		37,335
Corporate and other debt securities	—		5,000		—		27,750		32,750
Total investment securities held to maturity	$	2,018,457	$	5,000	$	5,686	$	104,284	$	2,133,427
December 31, 2019
U.S. Treasury securities	$	138,352	$	—	$	—	$	—	$	138,352
U.S. government agency securities	7,345		—		—		—		7,345
Obligations of states and political subdivisions:
Obligations of states and state agencies	248,533		5,722		—		43,199		297,454
Municipal bonds	202,642		—		—		609		203,251
Total obligations of states and political subdivisions	451,175		5,722		—		43,808		500,705
Residential mortgage-backed securities	1,620,119		—		—		—		1,620,119
Trust preferred securities	—		—		—		37,324		37,324
Corporate and other debt securities	—		5,000		—		27,250		32,250
Total investment securities held to maturity	$	2,216,991	$	10,722	$	—	$	108,382	$	2,336,095

Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At June 30, 2020, most of the obligations of states and political subdivisions were rated investment grade and the "non-rated" category included mostly TEMS securities secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies. Corporate bonds consist of debt primarily issued by banks.

Valley has a zero loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard. After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion: U.S. Treasury securities, U.S. agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds called TEMS.

To measure the expected credit losses on held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party. Assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. The model is adjusted for a probability

weighted multi-scenario economic forecast to estimate future credit losses. Valley uses a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience for the remaining life of the investment security. The economic forecast methodology and governance for debt securities is aligned with Valley's economic forecast used for the loan portfolio discussed in more detail in Note 8. Accrued interest receivable is excluded from the estimate of credit losses.