Borrowed Funds

12 Months Ended

Dec. 31, 2020

BORROWED FUNDS (Note 10)

Short-Term Borrowings

Short-term borrowings at December 31, 2020 and 2019 consisted of the following:


	2020		2019
	(in thousands)
FHLB advances	$	1,000,000	$	940,000
Securities sold under agreements to repurchase	147,958		153,280

Total short-term borrowings	$	1,147,958	$	1,093,280

The weighted average interest rate for short-term borrowings was 0.38 percent and 1.68 percent at December 31, 2020 and 2019, respectively. Short-term FHLB advances totaling $200 million were hedged with cash flow interest rate swaps at December 31, 2020. See Note 15 for additional details.

Long-Term Borrowings

Long-term borrowings at December 31, 2020 and 2019 consisted of the following:


	2020		2019
	(in thousands)
FHLB advances, net (1)	$	1,592,252	$	1,480,012
Subordinated debt, net (2)	403,413		292,414
Securities sold under agreements to repurchase	300,000		350,000

Total long-term borrowings	$	2,295,665	$	2,122,426


(1)			FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $2.6 million and $2.8 million at December 31, 2020 and 2019, respectively.
(2)			Subordinated debt is presented net of unamortized debt issuance costs totaling $2.7 million and $1.2 million at December 31, 2020 and 2019, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 2.02 percent and 2.23 percent at December 31, 2020 and 2019, respectively. 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. Long-term FHLB advances totaling $900 million were hedged with cash flow interest rate swaps at December 31, 2020. See Note 15 for additional details.

Long-Term Borrowings

The long-term FHLB advances at December 31, 2020 are scheduled for contractual balance repayments as follows:


Year	Amount
	(in thousands)
2021	$	552,519
2022	29,377
2023	428,163
2024	300,000
2025	279,635

Total long-term FHLB advances	$	1,589,694

There are no FHLB advances with scheduled repayments in years 2021 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during 2021.

In December 2020, Valley prepaid $534.3 million of long-term FHLB advances scheduled to mature in 2021 and 2022 with a weighted average effective interest rate of 2.48 percent. The transaction was funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in a loss of $9.7 million reported within non-interest expense for the year ended December 31, 2020. In December 2019, Valley prepaid $635.0 million of long-term FHLB advances. These prepaid borrowings had contractual maturity dates in 2021 and 2022 and a weighted 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 also accounted for as an early debt extinguishment and resulted in a loss of $32.0 million for the year ended December 31, 2019.

Subordinated Debt. On June 5, 2020, Valley issued $115 million of 5.25 percent Fixed-to-Floating Rate subordinated notes issued in due June 15, 2030 and callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events. Interest on the subordinated notes during the initial five-year term through June 15, 2025 is payable semi-annually on June 15 and December 15. Thereafter, interest is expected to be set based on Three-Month Term SOFR plus 514 basis points and paid quarterly through maturity of the notes. The subordinated notes had a net carrying value of $113.3 million at December 31, 2020.

At December 31, 2020, Valley also had the following subordinated debt outstanding:

•$100 million of 4.55 percent subordinated debentures (notes) issued in June 2015 and due June 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 $99.5 million and $99.4 million at December 31, 2020 and 2019, respectively.

•$125 million of 5.125 percent subordinated notes issued in September 2013 and 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 $130.5 million and $132.4 million at December 31, 2020 and 2019, respectively.

•$60 million of 6.25 percent subordinated notes, assumed on January 1, 2018 in connection with the acquisition of USAB. The notes are due April 1, 2026 callable beginning April 1, 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 $60.1 million and $60.6 million at December 31, 2020 and 2019, respectively.

Long-term securities sold under agreements to repurchase (repos). The long-term repos had a weighted average interest rate of 3.37 percent and 1.94 percent at December 31, 2020 and 2019, respectively. Long-term repos outstanding as of December 31, 2020 all have maturities in 2021.

In September 2020, Valley prepaid $50 million of long-term institutional repo borrowings with an interest rate of 3.70 percent and an original contractual maturity date in January 2022. The debt prepayment was funded by excess cash liquidity.

The transaction was accounted for as an early debt extinguishment resulting in a loss of $2.4 million for the year ended December 31, 2020.

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 $2.1 billion and $2.3 billion for December 31, 2020 and 2019, respectively.