XML 24 R15.htm IDEA: XBRL DOCUMENT

Investment Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Equity Securities

Equity securities totaled $50.2 million and $48.7 million at March 31, 2023 and December 31, 2022, respectively. See Note 6 for further details on equity securities.

Trading Debt Securities

The fair value of trading debt securities totaled $6.9 million and $13.4 million at March 31, 2023 and December 31, 2022, respectively. Net trading gains and losses were included in net gains and losses on securities transactions within non-interest income. We recorded net trading gains of $402 thousand and net trading losses of $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at March 31, 2023 and December 31, 2022 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
March 31, 2023
U.S. Treasury securities	$	309,524	$	—	$	(22,779)	$	286,745
U.S. government agency securities	28,394		46		(2,088)		26,352
Obligations of states and political subdivisions:
Obligations of states and state agencies	10,649		—		(652)		9,997
Municipal bonds	171,219		—		(28,441)		142,778
Total obligations of states and political subdivisions	181,868		—		(29,093)		152,775
Residential mortgage-backed securities	699,214		60		(79,498)		619,776

Corporate and other debt securities	193,007		—		(19,419)		173,588
Total	$	1,412,007	$	106	$	(152,877)	$	1,259,236
December 31, 2022
U.S. Treasury securities	$	308,137	$	—	$	(28,639)	$	279,498
U.S. government agency securities	29,494		47		(2,577)		26,964
Obligations of states and political subdivisions:
Obligations of states and state agencies	10,899		—		(493)		10,406
Municipal bonds	171,586		—		(35,181)		136,405
Total obligations of states and political subdivisions	182,485		—		(35,674)		146,811
Residential mortgage-backed securities	719,868		64		(90,114)		629,818

Corporate and other debt securities	197,927		—		(19,621)		178,306

Total	$	1,437,911	$	111	$	(176,625)	$	1,261,397

The age of unrealized losses and fair value of the related available for sale debt securities at March 31, 2023 and December 31, 2022 were as follows:


	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
March 31, 2023
U.S. Treasury securities	$	286,745	$	(22,779)	$	—	$	—	$	286,745	$	(22,779)
U.S. government agency securities	12,003		(1,238)		11,371		(850)		23,374		(2,088)
Obligations of states and political subdivisions:
Obligations of states and state agencies	2,231		(17)		7,766		(635)		9,997		(652)
Municipal bonds	114,299		(20,463)		28,229		(7,978)		142,528		(28,441)
Total obligations of states and political subdivisions	116,530		(20,480)		35,995		(8,613)		152,525		(29,093)
Residential mortgage-backed securities	34,170		(1,506)		582,739		(77,992)		616,909		(79,498)

Corporate and other debt securities	108,625		(9,446)		64,964		(9,973)		173,589		(19,419)
Total	$	558,073	$	(55,449)	$	695,069	$	(97,428)	$	1,253,142	$	(152,877)
December 31, 2022
U.S. Treasury securities	$	279,498	$	(28,639)	$	—	$	—	$	279,498	$	(28,639)
U.S. government agency securities	22,831		(2,538)		1,116		(39)		23,947		(2,577)
Obligations of states and political subdivisions:
Obligations of states and state agencies	2,943		(54)		7,462		(439)		10,405		(493)
Municipal bonds	112,029		(26,044)		24,127		(9,137)		136,156		(35,181)
Total obligations of states and political subdivisions	114,972		(26,098)		31,589		(9,576)		146,561		(35,674)
Residential mortgage-backed securities	311,836		(27,152)		314,834		(62,962)		626,670		(90,114)

Corporate and other debt securities	144,924		(12,581)		33,382		(7,040)		178,306		(19,621)

Total	$	874,061	$	(97,008)	$	380,921	$	(79,617)	$	1,254,982	$	(176,625)

Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 715 and 730 at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $870.4 million.

The contractual maturities of available for sale debt securities at March 31, 2023 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.


	March 31, 2023
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	3,852	$	3,834
Due after one year through five years	282,224		270,503
Due after five years through ten years	173,459		154,742
Due after ten years	253,258		210,381
Residential mortgage-backed securities	699,214		619,776
Total	$	1,412,007	$	1,259,236

Actual maturities of available for sale 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 8.91 years at March 31, 2023.

Impairment Analysis of Available For Sale Debt Securities

Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the changes in market interest rates, unpredictable nature of the U.S. economy and their potential negative effect on the future performance of the security issuers.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. Based on a comparison of the present value of expected cash flows to the amortized cost, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in a provision for credit losses and full charge-off of the bond totaling $5.0 million during the three months ended March 31, 2023. Valley also evaluated available for sale debt securities that are in an unrealized loss position as of March 31, 2023 included in the table above and has determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors. There was no impairment recognized during the three months ended March 31, 2022.

Accrued interest on investments, which is excluded from the amortized cost of available for sale debt securities, totaled $5.1 million and $5.6 million at March 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The following table details the activity in the allowance for credit losses for the three months ended March 31, 2023.


	Three Months Ended March 31, 2023

	(in thousands)
Beginning balance	$	—
Provision for credit losses	5,000
Charge-offs	(5,000)
Ending balance	$	—

Valley does not intend to sell any of its available for sale debt securities in an unrealized loss position prior to recovery of their amortized cost basis, and it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of their amortized cost basis. None of the available for sale debt securities were past due

as of March 31, 2023 and there was no allowance for credit losses for available for sale debt securities at March 31, 2023, December 31, 2022 and March 31, 2022.

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at March 31, 2023 and December 31, 2022 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Net Carrying Value
	(in thousands)
March 31, 2023
U.S. Treasury securities	$	66,747	$	—	$	(565)	$	66,182	$	—	$	66,747
U.S. government agency securities	300,614		25		(44,999)		255,640		—		300,614
Obligations of states and political subdivisions:
Obligations of states and state agencies	96,693		341		(4,149)		92,885		257		96,436
Municipal bonds	376,904		112		(16,982)		360,034		86		376,818
Total obligations of states and political subdivisions	473,597		453		(21,131)		452,919		343		473,254
Residential mortgage-backed securities	2,893,505		2,752		(370,689)		2,525,568		—		2,893,505
Trust preferred securities	37,048		1		(7,057)		29,992		775		36,273
Corporate and other debt securities	75,701		—		(5,518)		70,183		515		75,186
Total	$	3,847,212	$	3,231	$	(449,959)	$	3,400,484	$	1,633	$	3,845,579
December 31, 2022
U.S. Treasury securities	$	66,911	$	—	$	(1,022)	$	65,889	$	—	$	66,911
U.S. government agency securities	260,392		—		(47,680)		212,712		—		260,392
Obligations of states and political subdivisions:
Obligations of states and state agencies	99,238		305		(3,869)		95,674		252		98,986
Municipal bonds	381,060		76		(23,615)		357,521		41		381,019
Total obligations of states and political subdivisions	480,298		381		(27,484)		453,195		293		480,005
Residential mortgage-backed securities	2,909,106		1,723		(415,032)		2,495,797		—		2,909,106
Trust preferred securities	37,043		1		(5,938)		31,106		888		36,155
Corporate and other debt securities	75,234		—		(4,463)		70,771		465		74,769
Total	$	3,828,984	$	2,105	$	(501,619)	$	3,329,470	$	1,646	$	3,827,338

The age of unrealized losses and fair value of related debt securities held to maturity at March 31, 2023 and December 31, 2022 were as follows:


	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
March 31, 2023
U.S. Treasury securities	$	66,182	$	(565)	$	—	$	—	$	66,182	$	(565)
U.S. government agency securities	211,526		(44,773)		2,925		(226)		214,451		(44,999)
Obligations of states and political subdivisions:
Obligations of states and state agencies	20,457		(789)		39,627		(3,360)		60,084		(4,149)
Municipal bonds	226,278		(13,671)		26,411		(3,311)		252,689		(16,982)
Total obligations of states and political subdivisions	246,735		(14,460)		66,038		(6,671)		312,773		(21,131)
Residential mortgage-backed securities	381,802		(33,941)		1,944,360		(336,748)		2,326,162		(370,689)
Trust preferred securities	—		—		28,990		(7,057)		28,990		(7,057)
Corporate and other debt securities	37,579		(2,122)		24,604		(3,396)		62,183		(5,518)
Total	$	943,824	$	(95,861)	$	2,066,917	$	(354,098)	$	3,010,741	$	(449,959)
December 31, 2022
U.S. Treasury securities	$	65,889	$	(1,022)	$	—	$	—	$	65,889	$	(1,022)
U.S. government agency securities	209,863		(47,508)		1,673		(172)		211,536		(47,680)
Obligations of states and political subdivisions:
Obligations of states and state agencies	62,443		(2,020)		18,231		(1,849)		80,674		(3,869)
Municipal bonds	251,970		(20,457)		15,534		(3,158)		267,504		(23,615)
Total obligations of states and political subdivisions	314,413		(22,477)		33,765		(5,007)		348,178		(27,484)
Residential mortgage-backed securities	962,690		(109,532)		1,413,590		(305,500)		2,376,280		(415,032)
Trust preferred securities	—		—		30,105		(5,938)		30,105		(5,938)
Corporate and other debt securities	57,245		(2,989)		13,525		(1,474)		70,770		(4,463)
Total	$	1,610,100	$	(183,528)	$	1,492,658	$	(318,091)	$	3,102,758	$	(501,619)

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 766 and 802 at March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, 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 $2.5 billion.

The contractual maturities of investments in debt securities held to maturity at March 31, 2023 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.


	March 31, 2023
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	63,872	$	63,355
Due after one year through five years	169,205		165,906
Due after five years through ten years	96,385		92,034
Due after ten years	624,245		553,621
Residential mortgage-backed securities	2,893,505		2,525,568
Total	$	3,847,212	$	3,400,484

Actual maturities of held to maturity 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 11.67 years at March 31, 2023.

Credit Quality Indicators

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 March 31, 2023 and December 31, 2022.


	AAA/AA/A Rated		BBB rated		Non-investment grade rated		Non-rated		Total
	(in thousands)
March 31, 2023
U.S. Treasury securities	$	66,747	$	—	$	—	$	—	$	66,747
U.S. government agency securities	300,614		—		—		—		300,614
Obligations of states and political subdivisions:
Obligations of states and state agencies	73,278		—		5,437		17,978		96,693
Municipal bonds	328,202		—		—		48,702		376,904
Total obligations of states and political subdivisions	401,480		—		5,437		66,680		473,597
Residential mortgage-backed securities	2,893,505		—		—		—		2,893,505
Trust preferred securities	—		—		—		37,048		37,048
Corporate and other debt securities	—		6,000		—		69,701		75,701
Total	$	3,662,346	$	6,000	$	5,437	$	173,429	$	3,847,212
December 31, 2022
U.S. Treasury securities	$	66,911	$	—	$	—	$	—	$	66,911
U.S. government agency securities	260,392		—		—		—		260,392
Obligations of states and political subdivisions:
Obligations of states and state agencies	74,943		—		5,497		18,798		99,238
Municipal bonds	333,488		—		—		47,572		381,060
Total obligations of states and political subdivisions	408,431		—		5,497		66,370		480,298
Residential mortgage-backed securities	2,909,106		—		—		—		2,909,106
Trust preferred securities	—		—		—		37,043		37,043
Corporate and other debt securities	2,000		6,000		—		67,234		75,234
Total	$	3,646,840	$	6,000	$	5,497	$	170,647	$	3,828,984

Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At March 31, 2023, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included tax exempt mortgage securities (TEMS) secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies. Corporate and other debt securities in the non-rated category mostly consist of high quality foreign issued bonds.

Allowance for Credit Losses for Held to Maturity Debt Securities

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. government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and TEMS collateralized municipal bonds.

Accrued interest on investments, which is excluded from the amortized cost of held to maturity debt securities, totaled $12.7 million and $13.5 million at March 31, 2023 and December 31, 2022, respectively, and is presented

within total accrued interest receivable on the consolidated statements of financial condition. Held to maturity debt securities are carried net of an allowance for credit losses.

The following table details the activity in the allowance for credit losses for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Beginning balance	$	1,646	$	1,165
(Credit) provision for credit losses	(13)		57
Ending balance	$	1,633	$	1,222

There were no sales of available for sale and held to maturity debt securities debt securities during the three months ended March 31, 2023 and 2022, respectively.