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Investment Securities

12 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES (Note 4)

Equity Securities

Equity securities totaled $64.5 million and $48.7 million at December 31, 2023 and 2022, respectively. See Note 3 for further details on equity securities.

Trading Debt Securities

The fair value of trading debt securities totaled $4.0 million and $13.4 million at December 31, 2023 and 2022, respectively. Net trading gains are included in net gains and losses on securities transactions within non-interest income. See the “Realized Gains and Losses” section below.

Available for Sale Debt Securities

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
December 31, 2023
U.S. Treasury securities	$	313,772	$	—	$	(25,615)	$	288,157
U.S. government agency securities	25,967		19		(2,284)		23,702
Obligations of states and political subdivisions:
Obligations of states and state agencies	48,283		—		(588)		47,695
Municipal bonds	170,260		—		(26,265)		143,995
Total obligations of states and political subdivisions	218,543		—		(26,853)		191,690
Residential mortgage-backed securities	703,875		728		(78,031)		626,572
Corporate and other debt securities	192,282		—		(25,827)		166,455
Total	$	1,454,439	$	747	$	(158,610)	$	1,296,576
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

Accrued interest on investments, which is excluded from the amortized cost of AFS debt securities, totaled $5.9 million and $5.6 million at December 31, 2023 and 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

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


	Less than Twelve Months				More than Twelve Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
December 31, 2023
U.S. Treasury securities	$	—	$	—	$	288,156	$	(25,615)	$	288,156	$	(25,615)
U.S. government agency securities	—		—		22,364		(2,284)		22,364		(2,284)
Obligations of states and political subdivisions:
Obligations of states and state agencies	—		—		8,276		(588)		8,276		(588)
Municipal bonds	1,019		(4)		142,976		(26,261)		143,995		(26,265)
Total obligations of states and political subdivisions	1,019		(4)		151,252		(26,849)		152,271		(26,853)
Residential mortgage-backed securities	9,010		(3)		569,629		(78,028)		578,639		(78,031)

Corporate and other debt securities	4,977		(23)		161,478		(25,804)		166,455		(25,827)
Total	$	15,006	$	(30)	$	1,192,879	$	(158,580)	$	1,207,885	$	(158,610)
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 AFS debt securities portfolio, the total number of security positions in an unrealized loss position was 687 and 730 at December 31, 2023 and 2022, respectively.

As of December 31, 2023, the fair value of securities AFS that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $840.3 million.

The contractual maturities of AFS debt securities at December 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.


	December 31, 2023
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	1,927	$	1,915
Due after one year through five years	289,471		278,092
Due after five years through ten years	172,871		147,051
Due after ten years	286,295		242,946
Residential mortgage-backed securities	703,875		626,572

Total	$	1,454,439	$	1,296,576

Actual maturities of AFS 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 AFS was 8.41 years at December 31, 2023.

Impairment Analysis of Available for Sale Debt Securities

Valley’s AFS 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 unpredictable nature of the U.S. economy, and their potential negative effect on the future performance of the security issuers.

AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. See Note 1 for further information regarding Valley's accounting policy. 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 first quarter 2023. Valley also evaluated AFS debt securities that were in an unrealized loss position as of December 31, 2023 included in the tables 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 years ended December 31, 2022 and 2021.

The following table details the activity in the allowance for credit losses for the year ended December 31, 2023.


	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 AFS debt securities in an unrealized loss position at December 31, 2023 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 AFS debt securities were past due as of December 31, 2023. As a result, there was no allowance for credit losses for AFS debt securities at December 31, 2023 and 2022.

Held to Maturity Debt Securities

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Net Carrying Value
	(in thousands)
December 31, 2023
U.S. Treasury securities	$	26,232	$	—	$	(254)	$	25,978	$	—	$	26,232
U.S. government agency securities	305,996		—		(44,441)		261,555		—		305,996
Obligations of states and political subdivisions:
Obligations of states and state agencies	88,556		552		(4,155)		84,953		395		88,161
Municipal bonds	316,914		40		(14,380)		302,574		49		316,865
Total obligations of states and political subdivisions	405,470		592		(18,535)		387,527		444		405,026
Residential mortgage-backed securities	2,885,303		6,059		(369,436)		2,521,926		—		2,885,303
Trust preferred securities	37,062		—		(6,412)		30,650		506		36,556
Corporate and other debt securities	80,350		—		(5,674)		74,676		255		80,095
Total	$	3,740,413	$	6,651	$	(444,752)	$	3,302,312	$	1,205	$	3,739,208
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

Accrued interest on investments, which is excluded from the amortized cost of HTM debt securities, totaled $13.9 million and $13.5 million at December 31, 2023 and 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. HTM debt securities are carried net of an allowance for credit losses.

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


	Less than Twelve Months				More than Twelve Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
December 31, 2023
U.S. Treasury securities	$	—	$	—	$	25,978	$	(254)	$	25,978	$	(254)
U.S. government agency securities	43,664		(151)		216,759		(44,290)		260,423		(44,441)
Obligations of states and political subdivisions:
Obligations of states and state agencies	10,700		(102)		48,149		(4,053)		58,849		(4,155)
Municipal bonds	11,958		(121)		207,520		(14,259)		219,478		(14,380)
Total obligations of states and political subdivisions	22,658		(223)		255,669		(18,312)		278,327		(18,535)
Residential mortgage-backed securities	57,085		(505)		2,164,704		(368,931)		2,221,789		(369,436)
Trust preferred securities	938		(63)		29,712		(6,349)		30,650		(6,412)
Corporate and other debt securities	12,575		(426)		59,102		(5,248)		71,677		(5,674)
Total	$	136,920	$	(1,368)	$	2,751,924	$	(443,384)	$	2,888,844	$	(444,752)
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 HTM securities portfolio, the total number of security positions in an unrealized loss position was 762 and 802 at December 31, 2023 and 2022, respectively.

As of December 31, 2023, the fair value of debt securities HTM that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $2.6 billion.

The contractual maturities of investments in debt securities HTM at December 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.


	December 31, 2023
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	26,756	$	26,730
Due after one year through five years	111,161		108,553
Due after five years through ten years	156,190		149,634
Due after ten years	561,003		495,469
Residential mortgage-backed securities	2,885,303		2,521,926
Total	$	3,740,413	$	3,302,312

Actual maturities of HTM 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 HTM was 10.79 years at December 31, 2023.

Credit Quality Indicators

Valley monitors the credit quality of the HTM debt securities utilizing 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 December 31, 2023 and 2022.


	AAA/AA/A Rated		BBB rated		Non-investment grade rated		Non-rated		Total
	(in thousands)
December 31, 2023
U.S. Treasury securities	$	26,232	$	—	$	—	$	—	$	26,232
U.S. government agency securities	305,996		—		—		—		305,996
Obligations of states and political subdivisions:
Obligations of states and state agencies	66,502		—		5,330		16,724		88,556
Municipal bonds	283,441		—		—		33,473		316,914
Total obligations of states and political subdivisions	349,943		—		5,330		50,197		405,470
Residential mortgage-backed securities	2,885,303		—		—		—		2,885,303
Trust preferred securities			—		—		37,062		37,062
Corporate and other debt securities	—		6,000		—		74,350		80,350
Total	$	3,567,474	$	6,000	$	5,330	$	161,609	$	3,740,413
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 December 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 TEMS 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.

Allowance for Credit Losses for Held to Maturity Debt Securities

Valley has a zero loss expectation for certain securities within the HTM 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 security 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. To measure the expected credit losses on HTM debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party. See Note 1 for further details.

HTM 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 years ended December 31, 2023, 2022 and 2021:


	2023		2022		2021
	(in thousands)
Beginning balance	$	1,646	$	1,165	$	1,428

(Credit) provision for credit losses	(441)		481		(263)
Ending balance	$	1,205	$	1,646	$	1,165

There were no net charge-offs of HTM debt securities in the respective periods presented in the table above.

Realized Gains and Losses

Gross gains and losses realized on sales, maturities and other securities transactions related to AFS securities and net gains on trading debt securities included in earnings for the years ended December 31, 2023, 2022 and 2021 were as follows:


	2023		2022		2021
	(in thousands)
Sales transactions:
Gross gains	$	869	$	—	$	1,370
Gross losses	—		—		(550)
Total	$	869	$	—	$	820
Maturities and other securities transactions:
Gross gains	$	21	$	171	$	10
Gross losses	(488)		(76)		(285)
Total	(467)		95		(275)
Net gains (losses) on trading debt securities	702		(1,325)		1,213
Gains (losses) on securities transactions, net	$	1,104	$	(1,230)	$	1,758

The gross gains on sales transactions for the year ended December 31, 2023 represent a gain on sale of a previously impaired and fully charged-off corporate bond issued by Signature Bank that was classified as AFS.