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Investment Securities
 9 Months Ended
Sep. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
Investment Securities

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at September 30, 2015 and December 31, 2014 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
139,014

 
$
13,499

 
$
—

 
$
152,513

U.S. government agency securities
12,973

 
427

 
—

 
13,400

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
195,143

 
9,471

 
(12
)
 
204,602

Municipal bonds
316,645

 
10,678

 
(309
)
 
327,014

Total obligations of states and political subdivisions
511,788

 
20,149

 
(321
)
 
531,616

Residential mortgage-backed securities
889,146

 
15,530

 
(4,900
)
 
899,776

Trust preferred securities
59,780

 
48

 
(13,017
)
 
46,811

Corporate and other debt securities
24,609

 
2,226

 
—

 
26,835

Total investment securities held to maturity
$
1,637,310

 
$
51,879

 
$
(18,238
)
 
$
1,670,951

December 31, 2014
 
 
 
 
 
 
 
U.S. Treasury securities
$
139,121

 
$
12,179

 
$
—

 
$
151,300

U.S. government agency securities
14,081

 
304

 
—

 
14,385

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
197,440

 
9,410

 
(412
)
 
206,438

Municipal bonds
302,578

 
10,955

 
(278
)
 
313,255

Total obligations of states and political subdivisions
500,018

 
20,365

 
(690
)
 
519,693

Residential mortgage-backed securities
986,992

 
18,233

 
(6,244
)
 
998,981

Trust preferred securities
98,456

 
167

 
(12,380
)
 
86,243

Corporate and other debt securities
39,648

 
5,726

 
—

 
45,374

Total investment securities held to maturity
$
1,778,316

 
$
56,974

 
$
(19,314
)
 
$
1,815,976


The age of unrealized losses and fair value of related securities held to maturity at September 30, 2015 and December 31, 2014 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)
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
$
—

 
$
—

 
$
1,957

 
$
(12
)
 
$
1,957

 
$
(12
)
Municipal bonds
19,027

 
(241
)
 
10,159

 
(68
)
 
29,186

 
(309
)
Total obligations of states and political subdivisions
19,027

 
(241
)
 
12,116

 
(80
)
 
31,143

 
(321
)
Residential mortgage-backed securities
223,653

 
(1,665
)
 
160,149

 
(3,235
)
 
383,802

 
(4,900
)
Trust preferred securities
—

 
—

 
45,409

 
(13,017
)
 
45,409

 
(13,017
)
Total
$
242,680

 
$
(1,906
)
 
$
217,674

 
$
(16,332
)
 
$
460,354

 
$
(18,238
)
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
$
4,927

 
$
(50
)
 
$
19,050

 
$
(362
)
 
$
23,977

 
$
(412
)
Municipal bonds
—

 
—

 
28,815

 
(278
)
 
28,815

 
(278
)
Total obligations of states and political subdivisions
4,927

 
(50
)
 
47,865

 
(640
)
 
52,792

 
(690
)
Residential mortgage-backed securities
107,357

 
(563
)
 
276,580

 
(5,681
)
 
383,937

 
(6,244
)
Trust preferred securities
—

 
—

 
66,194

 
(12,380
)
 
66,194

 
(12,380
)
Total
$
112,284

 
$
(613
)
 
$
390,639

 
$
(18,701
)
 
$
502,923

 
$
(19,314
)


The unrealized losses on investment securities held to maturity are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. The total number of security positions in the securities held to maturity portfolio in an unrealized loss position at September 30, 2015 was 79 as compared to 57 at December 31, 2014.

The unrealized losses within the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2015 largely related to several investment grade securities mainly issued by Fannie Mae.
The unrealized losses existing for more than twelve months for trust preferred securities at September 30, 2015 primarily related to four non-rated single-issuer trust preferred securities issued by bank holding companies. All single-issuer trust preferred securities classified as held to maturity are paying in accordance with their terms, have no deferrals of interest or defaults and, if applicable, the issuers meet the regulatory capital requirements to be considered “well-capitalized institutions” at September 30, 2015.
Management does not believe that any individual unrealized loss as of September 30, 2015 included in the table above represents other-than-temporary impairment as management mainly attributes the declines in fair value to changes in interest rates and 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 believes there are no credit losses on these securities. Valley does not have the intent to sell, nor is it more likely than not that Valley will be required to sell, the securities contained in the table above before the recovery of their amortized cost basis or maturity.
During the first quarter of 2015, Valley sold one corporate debt security classified as held to maturity with amortized costs of $9.8 million. See "Realized Gains and Losses" section below for further details regarding this transaction.
As of September 30, 2015, the fair value of investments held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $1.0 billion.
The contractual maturities of investments in debt securities held to maturity at September 30, 2015 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.  
 
September 30, 2015
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
81,860

 
$
81,866

Due after one year through five years
71,354

 
75,970

Due after five years through ten years
374,915

 
400,050

Due after ten years
220,035

 
213,289

Residential mortgage-backed securities
889,146

 
899,776

Total investment securities held to maturity
$
1,637,310

 
$
1,670,951


Actual maturities of 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 5.9 years at September 30, 2015.

Available for Sale
The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at September 30, 2015 and December 31, 2014 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
September 30, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
51,047

 
$
20

 
$
(599
)
 
$
50,468

U.S. government agency securities
24,738

 
779

 
(4
)
 
25,513

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
10,980

 
22

 
—

 
11,002

Municipal bonds
33,215

 
60

 
(808
)
 
32,467

Total obligations of states and political subdivisions
44,195

 
82

 
(808
)
 
43,469

Residential mortgage-backed securities
569,182

 
5,865

 
(5,397
)
 
569,650

Trust preferred securities*
10,530

 
—

 
(1,937
)
 
8,593

Corporate and other debt securities
78,550

 
1,413

 
(946
)
 
79,017

Equity securities
21,022

 
815

 
(1,158
)
 
20,679

Total investment securities available for sale
$
799,264

 
$
8,974

 
$
(10,849
)
 
$
797,389

December 31, 2014
 
 
 
 
 
 
 
U.S. Treasury securities
$
51,063

 
$
2

 
$
(1,622
)
 
$
49,443

U.S. government agency securities
33,163

 
748

 
(86
)
 
33,825

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
11,160

 
—

 
(24
)
 
11,136

Municipal bonds
33,340

 
127

 
(552
)
 
32,915

Total obligations of states and political subdivisions
44,500

 
127

 
(576
)
 
44,051

Residential mortgage-backed securities
643,382

 
5,854

 
(4,960
)
 
644,276

Trust preferred securities*
23,194

 
296

 
(2,953
)
 
20,537

Corporate and other debt securities
73,585

 
1,645

 
(1,218
)
 
74,012

Equity securities
21,071

 
671

 
(916
)
 
20,826

Total investment securities available for sale
$
889,958

 
$
9,343

 
$
(12,331
)
 
$
886,970

 
*
Includes two and three pooled trust preferred securities, principally collateralized by securities issued by banks and insurance companies, at September 30, 2015 and December 31, 2014, respectively.


The age of unrealized losses and fair value of related securities available for sale at September 30, 2015 and December 31, 2014 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)
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
49,516

 
$
(599
)
 
$
—

 
$
—

 
$
49,516

 
$
(599
)
U.S. government agency securities
—

 
—

 
4,857

 
(4
)
 
4,857

 
(4
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
19,764

 
(232
)
 
10,721

 
(576
)
 
30,485

 
(808
)
Total obligations of states and political subdivisions
19,764

 
(232
)
 
10,721

 
(576
)
 
30,485

 
(808
)
Residential mortgage-backed securities
107,912

 
(1,601
)
 
168,049

 
(3,796
)
 
275,961

 
(5,397
)
Trust preferred securities
—

 
—

 
8,593

 
(1,937
)
 
8,593

 
(1,937
)
Corporate and other debt securities
15,190

 
(131
)
 
36,908

 
(815
)
 
52,098

 
(946
)
Equity securities
—

 
—

 
14,486

 
(1,158
)
 
14,486

 
(1,158
)
Total
$
192,382

 
$
(2,563
)
 
$
243,614

 
$
(8,286
)
 
$
435,996

 
$
(10,849
)
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
—

 
$
—

 
$
48,504

 
$
(1,622
)
 
$
48,504

 
$
(1,622
)
U.S. government agency securities
—

 
—

 
5,442

 
(86
)
 
5,442

 
(86
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
—

 
—

 
11,136

 
(24
)
 
11,136

 
(24
)
Municipal bonds
13,337

 
(426
)
 
14,637

 
(126
)
 
27,974

 
(552
)
Total obligations of states and political subdivisions
13,337

 
(426
)
 
25,773

 
(150
)
 
39,110

 
(576
)
Residential mortgage-backed securities
57,543

 
(121
)
 
244,910

 
(4,839
)
 
302,453

 
(4,960
)
Trust preferred securities
2,210

 
(117
)
 
12,085

 
(2,836
)
 
14,295

 
(2,953
)
Corporate and other debt securities
27,500

 
(294
)
 
28,269

 
(924
)
 
55,769

 
(1,218
)
Equity securities
158

 
(41
)
 
14,769

 
(875
)
 
14,927

 
(916
)
Total
$
100,748

 
$
(999
)
 
$
379,752

 
$
(11,332
)
 
$
480,500

 
$
(12,331
)

The unrealized losses on investment securities available for sale are primarily due to changes in interest rates (including, in certain cases, changes in credit spreads) and, in some cases, lack of liquidity in the marketplace. The total number of security positions in the securities available for sale portfolio in an unrealized loss position at September 30, 2015 was 94 as compared to 96 at December 31, 2014.
The unrealized losses within the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2015 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae.
The unrealized losses for trust preferred securities at September 30, 2015 for more than twelve months in the table above largely relate to 2 pooled trust preferred securities with an amortized cost of $10.5 million and a fair value of $8.6 million. One of the two pooled trust preferred securities had a unrealized loss of $1.4 million and an investment grade rating at September 30, 2015. The second pooled trust preferred security had a non-investment grade rating and was initially other-than-temporarily impaired in 2008 with additional estimated credit losses recognized in 2009 and 2011, and is not accruing interest.
Management does not believe that any individual unrealized loss as of September 30, 2015 represents an other-than-temporary impairment, as management mainly attributes the declines in value to changes in interest rates and 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 believes there are no credit losses on these securities. Valley has no intent to sell, nor is it more likely than not that Valley will be required to sell, the securities contained in the table above before the recovery of their amortized cost basis or, if necessary, maturity.
As of September 30, 2015, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $242.5 million.
The contractual maturities of investment securities available for sale at September 30, 2015 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.
 
September 30, 2015
 
Amortized
Cost
 
Fair
Value
 
(in thousands)
Due in one year
$
600

 
$
602

Due after one year through five years
70,286

 
71,237

Due after five years through ten years
71,953

 
70,566

Due after ten years
66,221

 
64,655

Residential mortgage-backed securities
569,182

 
569,650

Equity securities
21,022

 
20,679

Total investment securities available for sale
$
799,264

 
$
797,389


Actual maturities of 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 at September 30, 2015 was 4.8 years.
Other-Than-Temporary Impairment Analysis

Valley records impairment charges on its investment securities when the decline in fair value is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities; decline in the creditworthiness of the issuer; absence of reliable pricing information for investment securities; adverse changes in business climate; adverse actions by regulators; prolonged decline in value of equity investments; or unanticipated changes in the competitive environment could have a negative effect on Valley’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods. Valley’s investment portfolios include private label mortgage-backed securities, trust preferred securities principally issued by bank holding companies (including two pooled trust preferred securities), corporate bonds, and perpetual preferred and common equity securities issued by banks. These investments 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 and, if applicable, the underlying mortgage loan collateral of the security.

There were no other-than-temporary impairment losses on securities recognized in earnings for the three and nine months ended September 30, 2015 and 2014. At September 30, 2015, four previously impaired private label mortgage-backed securities (prior to December 31, 2012) had a combined amortized cost and fair value of $12.3 million and $12.2 million, respectively, while one previously impaired pooled trust preferred security had an amortized cost and fair value of $2.8 million and $2.2 million, respectively. The previously impaired pooled trust preferred security was not accruing interest during the three and nine months ended September 30, 2015 and 2014. Additionally, one previously impaired pooled trust preferred security was sold during the first quarter of 2015 for an immaterial gain. See the table and discussion below for additional information.

The following table presents the changes in the credit loss component of cumulative other-than-temporary impairment losses on debt securities classified as either held to maturity or available for sale that Valley has previously recognized in earnings, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income for the three and nine months ended September 30, 2015 and 2014: 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Balance, beginning of period
$
6,387

 
$
9,682

 
$
8,947

 
$
9,990

Accretion of credit loss impairment due to an increase in expected cash flows
(458
)
 
(198
)
 
(636
)
 
(506
)
Sales
—

 
—

 
(2,382
)
 
—

Balance, end of period
$
5,929

 
$
9,484

 
$
5,929

 
$
9,484



The credit loss component of the impairment loss represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. The beginning balance represents the credit loss component for debt securities for which other-than-temporary impairment occurred prior to each period presented. Other-than-temporary impairments recognized in earnings for credit impaired debt securities are presented as additions in two components based upon whether the current period is the first time the debt security was credit impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairment). The credit loss component is reduced if Valley sells, intends to sell or believes it will be required to sell previously credit impaired debt securities. Additionally, the credit loss component is reduced if (i) Valley receives cash flows in excess of what it expected to receive over the remaining life of the credit impaired debt security, (ii) the security matures, or (iii) the security is fully written down.
Realized Gains and Losses

Gross gains (losses) realized on sales, maturities and other securities transactions related to investment securities included in earnings for the three and nine months ended September 30, 2015 and 2014 were as follows: 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Sales transactions:
 
 
 
 
 
 
 
Gross gains
$
—

 
$
103

 
$
3,274

 
$
103

Gross losses
—

 
—

 
(947
)
 
—

 
$
—

 
$
103

 
$
2,327

 
$
103

Maturities and other securities transactions:
 
 
 
 
 
 
 
Gross gains
$
158

 
$
—

 
$
287

 
$
8

Gross losses
(1
)
 
—

 
(133
)
 
(9
)
 
$
157

 
$
—

 
$
154

 
$
(1
)
Total gains on securities transactions, net
$
157

 
$
103

 
$
2,481

 
$
102



Valley recognized gross gains from sales transactions of investment securities totaling $3.3 million for the nine months ended September 30, 2015 due to the sale of corporate debt securities and trust preferred securities with amortized cost totaling $25.9 million. These transactions included a corporate debt security classified as held to maturity and a previously impaired pooled trust preferred security with amortized costs of $9.8 million and $2.6 million, respectively. Additionally, Valley recognized $947 thousand of gross losses during the nine months ended September 30, 2015 due to the sale of mostly trust preferred securities with a total amortized cost of $8.3 million. The vast majority of the sales of investment securities were due to a investment portfolio re-balancing during the first quarter due to changes in our regulatory capital calculation under the new Basel III regulatory capital reform (effective for Valley on January 1, 2015). Under ASC Topic 320, “Investments - Debt and Equity Securities,” the sale of held to maturity securities based upon the change in capital requirements is permitted without tainting the remaining held to maturity investment portfolio.

Trading Securities

The fair value of trading securities (consisting of 2 single-issuer bank trust preferred securities) was $14.2 million at December 31, 2014. During the first quarter of 2015, one of the two securities was redeemed by the issuer and the other security was sold prior to its issuer's call date in April 2015. Both of the securities transactions resulted in an immaterial aggregate net trading loss for the nine months ended September 30, 2015 which was included in the other non-interest income category of our consolidated statements of income. Net trading losses were also immaterial for the three and nine months ended September 30, 2014. Interest income on trading securities totaled $213 thousand for the nine months ended September 30, 2015 and $290 thousand and $871 thousand for the three and nine months ended September 30, 2014, respectively.