Borrowed Funds

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Borrowed Funds

Borrowed Funds

Short-Term Borrowings

Short-term borrowings at June 30, 2021 and December 31, 2020 consisted of the following:

	June 30, 2021		December 31, 2020
	(in thousands)
FHLB advances	$	700,000	$	1,000,000
Securities sold under agreements to repurchase	154,378		147,958
Total short-term borrowings	$	854,378	$	1,147,958

The weighted average interest rate for short-term borrowings was 0.35 percent and 0.38 percent at June 30, 2021 and December 31, 2020, respectively. The interest payments on the FHLB advances totaling $700 million were hedged with interest rate swaps at June 30, 2021. See Note 11 for additional details.

Long-Term Borrowings

Long-term borrowings at June 30, 2021 and December 31, 2020 consisted of the following:

	June 30, 2021		December 31, 2020
	(in thousands)
FHLB advances, net (1)	$	947,206	$	1,592,252
Subordinated debt, net (2)	638,484		403,413
Securities sold under agreements to repurchase	300,000		300,000
Total long-term borrowings	$	1,885,690	$	2,295,665

(1)	FHLB advances are presented net of unamortized prepayment penalties and other purchase accounting adjustments totaling $2.6 million at December 31, 2020.
(2)	Subordinated debt is presented net of unamortized debt issuance costs totaling $6.4 billion and $2.7 million at June 30, 2021 and December 31, 2020, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 1.91 percent and 2.02 percent at June 30, 2021 and December 31, 2020, 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.

In June 2021, Valley prepaid approximately $248 million of long-term FHLB advances with maturities scheduled through 2025 and a weighted average effective interest rate of 1.82 percent. The transaction was funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in a loss of $8.4 million reported within non-interest expense for the three and six months ended June 30, 2021.

The long-term FHLB advances at June 30, 2021 are scheduled for contractual balance repayments as follows:

Year	Amount
	(in thousands)
2021	$	157,870
2023	350,000
2024	165,000
2025	273,000
Total long-term FHLB advances	$	945,870

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 the next 12 months.

Subordinated debt. On April 1, 2021, Valley redeemed, at par value, $60 million of its callable 6.25 percent subordinated notes originally due April 1, 2026. No gain or loss was incurred on this transaction.

On May 25, 2021, Valley issued $300 million of 3.00 percent Fixed-to-Floating Rate subordinated notes due June 15, 2031. The subordinated notes are callable in whole or in part on or after June 15, 2026 or upon the occurrence of certain events. Interest on the subordinated notes during the initial five year term through June 15, 2026 is payable semi-annually on June 15 and December 15. Thereafter, interest is expected to be set based on three-month Secured Overnight Financing Rate (SOFR) plus 236 basis points and paid quarterly through maturity of the notes. At June 30, 2021, the subordinated notes had a carrying value of $296.0 million, net of debt issuance costs. During June 2021, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the $300 million in subordinated notes. See Note 11 for additional details.

Valley also had the following subordinated debt outstanding at June 30, 2021:

•$125 million aggregate principal amount of 5.125 percent subordinated notes due September 27, 2023 with no call dates or prepayments allowed except upon the occurrence of certain events;

•$100 million aggregate principal amount of 4.55 percent subordinated notes due June 30, 2025 with no call dates or prepayments allowed except upon the occurrence of certain events;

•$115 million aggregate principal amount of 5.25 percent subordinated notes due June 15, 2030 and callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events.

Long-term securities sold under agreements to repurchase (repos). The long-term repos had a weighted average interest rate of 3.41 percent and 3.37 percent at June 30, 2021 and December 31, 2020, respectively. All long-term repos outstanding as of June 30, 2021 have maturities in the second half of 2021.