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Investment Securities
 12 Months Ended
Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
INVESTMENT SECURITIES (Note 4)

Held to Maturity
The amortized cost, gross unrealized gains and losses and fair value of investment securities held to maturity at December 31, 2015 and 2014 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(in thousands)
December 31, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
138,978

 
$
10,505

 
$
—

 
$
149,483

U.S. government agency securities
12,859

 
271

 
—

 
13,130

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
194,547

 
10,538

 
(10
)
 
205,075

Municipal bonds
310,318

 
11,955

 
(85
)
 
322,188

Total obligations of states and political subdivisions
504,865

 
22,493

 
(95
)
 
527,263

Residential mortgage-backed securities
852,289

 
11,018

 
(8,035
)
 
855,272

Trust preferred securities
59,785

 
36

 
(13,384
)
 
46,437

Corporate and other debt securities
27,609

 
1,894

 
(49
)
 
29,454

Total investment securities held to maturity
$
1,596,385

 
$
46,217

 
$
(21,563
)
 
$
1,621,039

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 December 31, 2015 and 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)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
$
6,837

 
$
(5
)
 
$
1,965

 
$
(5
)
 
$
8,802

 
$
(10
)
Municipal bonds
8,814

 
(72
)
 
10,198

 
(13
)
 
19,012

 
(85
)
Total obligations of states and political subdivisions
15,651

 
(77
)
 
12,163

 
(18
)
 
27,814

 
(95
)
Residential mortgage-backed securities
244,440

 
(2,916
)
 
162,756

 
(5,119
)
 
407,196

 
(8,035
)
Trust preferred securities
—

 
—

 
45,047

 
(13,384
)
 
45,047

 
(13,384
)
Corporate and other debt securities
2,951

 
(49
)
 
—

 
—

 
2,951

 
(49
)
Total
$
263,042

 
$
(3,042
)
 
$
219,966

 
$
(18,521
)
 
$
483,008

 
$
(21,563
)
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 December 31, 2015 was 74 as compared to 57 at December 31, 2014.
The unrealized losses for the residential mortgage-backed securities category of the held to maturity portfolio at December 31, 2015 mostly related to investment grade securities issued by Fannie Mae.
The unrealized losses for trust preferred securities at December 31, 2015 are all more than twelve months and primarily relate to four non-rated single-issuer 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 December 31, 2015.

Management does not believe that any individual unrealized loss as of December 31, 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, widening credit spreads, and lack of liquidity in the market place, 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 an amortized cost of $9.8 million. See "Realized Gains and Losses" section below for further details regarding this transaction.
As of December 31, 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 $943.5 million.
The contractual maturities of investments in debt securities held to maturity at December 31, 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. 
 
December 31, 2015
 
Amortized Cost
 
Fair Value
 
(in thousands)
Due in one year
$
77,803

 
$
77,803

Due after one year through five years
145,649

 
154,897

Due after five years through ten years
314,175

 
332,505

Due after ten years
206,469

 
200,562

Residential mortgage-backed securities
852,289

 
855,272

Total investment securities held to maturity
$
1,596,385

 
$
1,621,039


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 6.6 years at December 31, 2015.
Available for Sale
The amortized cost, gross unrealized gains and losses and fair value of investment securities available for sale at December 31, 2015 and 2014 were as follows: 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in thousands)
December 31, 2015
 
 
 
 
 
 
 
U.S. Treasury securities
$
551,173

 
$
4

 
$
(1,704
)
 
$
549,473

U.S. government agency securities
29,316

 
665

 
(18
)
 
29,963

Obligations of states and political subdivisions:
 
 
 
 
 
 
 
Obligations of states and state agencies
44,285

 
196

 
(67
)
 
44,414

Municipal bonds
80,717

 
209

 
(374
)
 
80,552

Total obligations of states and political subdivisions
125,002

 
405

 
(441
)
 
124,966

Residential mortgage-backed securities
701,764

 
3,348

 
(8,684
)
 
696,428

Trust preferred securities*
10,458

 
—

 
(2,054
)
 
8,404

Corporate and other debt securities
78,202

 
1,239

 
(1,889
)
 
77,552

Equity securities
21,022

 
575

 
(1,522
)
 
20,075

Total investment securities available for sale
$
1,516,937

 
$
6,236

 
$
(16,312
)
 
$
1,506,861

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 December 31, 2015 and 2014, respectively.


The age of unrealized losses and fair value of related securities available for sale at December 31, 2015 and 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)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
548,538

 
$
(1,704
)
 
$
—

 
$
—

 
$
548,538

 
$
(1,704
)
U.S. government agency securities
3,489

 
(5
)
 
4,736

 
(13
)
 
8,225

 
(18
)
Obligations of states and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and state agencies
24,359

 
(67
)
 
—

 
—

 
24,359

 
(67
)
Municipal bonds
38,207

 
(128
)
 
13,551

 
(246
)
 
51,758

 
(374
)
Total obligations of states and political subdivisions
62,566

 
(195
)
 
13,551

 
(246
)
 
76,117

 
(441
)
Residential mortgage-backed securities
293,615

 
(4,147
)
 
164,010

 
(4,537
)
 
457,625

 
(8,684
)
Trust preferred securities
—

 
—

 
8,404

 
(2,054
)
 
8,404

 
(2,054
)
Corporate and other debt securities
21,203

 
(471
)
 
36,137

 
(1,418
)
 
57,340

 
(1,889
)
Equity securities
—

 
—

 
14,273

 
(1,522
)
 
14,273

 
(1,522
)
Total
$
929,411

 
$
(6,522
)
 
$
241,111

 
$
(9,790
)
 
$
1,170,522

 
$
(16,312
)
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 December 31, 2015 was 291 as compared to 96 at December 31, 2014. At December 31, 2015 the unrealized losses less than twelve months included larger number of small loss positions as compared to 2014.
The unrealized losses within the residential mortgage-backed securities category of the available for sale portfolio at December 31, 2015 largely related to several investment grade residential mortgage-backed securities mainly issued by Ginnie Mae and Fannie Mae.
The unrealized losses for trust preferred securities at December 31, 2015 in the more than twelve months category in the table above entirely relate to 2 pooled trust preferred securities with a combined amortized cost of $10.5 million and a fair value of $8.4 million. One of the two pooled trust preferred securities had a unrealized loss of $1.4 million and an investment grade rating at December 31, 2015. The second pooled trust preferred security had a unrealized loss of $610 thousand, a non-investment grade rating and was initially other-than-temporarily impaired in 2008 with additional estimated credit losses recognized in 2009 and 2011.
As of December 31, 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 $489.8 million.
The contractual maturities of investments securities available for sale at December 31, 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. 
 
December 31, 2015
 
Amortized Cost
 
Fair Value
 
(in thousands)
Due in one year
$
501,717

 
$
501,565

Due after one year through five years
89,821

 
89,834

Due after five years through ten years
120,691

 
118,331

Due after ten years
81,922

 
80,628

Residential mortgage-backed securities
701,764

 
696,428

Equity securities
21,022

 
20,075

Total investment securities available for sale
$
1,516,937

 
$
1,506,861


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 December 31, 2015 was 8.5 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.
For residential mortgage-backed securities, Valley estimates loss projections for each security by stressing the cash flows from the individual loans collateralizing the security using expected default rates, loss severities, and prepayment speeds, in conjunction with the underlying credit enhancement (if applicable) for each security. Based on collateral and origination vintage specific assumptions, a range of possible cash flows is identified to determine whether other-than-temporary impairment exists.
For the single-issuer trust preferred securities and corporate and other debt securities, Valley reviews each portfolio to determine if all the securities are paying in accordance with their terms and have no deferrals of interest or defaults. A deferral event by a bank holding company for which Valley holds trust preferred securities may require the recognition of an other-than-temporary impairment charge if Valley determines that it is more likely than not that all contractual interest and principal cash flows may not be collected. Among other factors, the probability of the collection of all interest and principal determined by Valley in its impairment analysis declines if there is an increase in the estimated deferral period of the issuer. Additionally, a FDIC receivership for any single-issuer would result in an impairment and significant loss. Including the other factors outlined above, Valley analyzes the performance of the issuers on a quarterly basis, including a review of performance data from the issuers’ most recent bank regulatory report, if applicable, to assess their credit risk and the probability of impairment of the contractual cash flows of the applicable security. All of the issuers had capital ratios at December 31, 2015 that were at or above the minimum amounts to be considered a “well-capitalized” financial institution, if applicable, and/or have maintained performance levels adequate to support the contractual cash flows of the trust preferred securities.
Management does not believe that any individual unrealized loss as of December 31, 2015 represents an other-than-temporary impairment, as management mainly attributes the declines in value to changes in interest rates and recent 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.
At December 31, 2015, approximately 50 percent of the $629.8 million carrying value of obligations of states and political subdivisions were issued by the states of (or municipalities within) New Jersey, New York and Maryland. The obligations of states and political subdivisions mainly consist of general obligation bonds and, to much lesser extent, special revenue bonds which had an aggregated amortized cost and fair value of $17.6 million and $18.5 million, respectively, at December 31, 2015. The special revenue bonds were mainly issued by the Port Authorities of New York and New Jersey, as well as various school districts. As part of Valley’s pre-purchase analysis and on-going quarterly assessment of impairment of the obligations of states and political subdivisions, our Credit Risk Management Department conducts a financial analysis and risk rating assessment of each security issuer based on the issuer’s most recently issued financial statements and other publicly available information. Substantially all of these investments are investment grade. As of December 31, 2015, these securities are expected to perform in accordance with their contractual terms and, as a result, Valley expects to recover the entire amortized cost basis of these securities.

For the two pooled trust preferred securities, Valley evaluates the projected cash flows from each of its tranches in the two securities to determine if they are adequate to support their future contractual principal and interest payments. Valley assesses the credit risk and probability of impairment of the contractual cash flows by projecting the default rates over the life of the security. Higher projected default rates will decrease the expected future cash flows from each security. If the projected decrease in cash flows affects the cash flows projected for the tranche held by Valley, the security would be considered to be other-than-temporarily impaired.
The perpetual preferred securities, reported in equity securities, are hybrid investments that are assessed for impairment by Valley as if they were debt securities. Therefore, Valley assessed the creditworthiness of each security issuer, as well as any potential change in the anticipated cash flows of the securities as of December 31, 2015. Based on this analysis, management believes the declines in fair value of these securities are attributable to a lack of liquidity in the marketplace and are not reflective of any deterioration in the creditworthiness of the issuers.
Other-Than-Temporarily Impaired Securities
There was no other-than-temporary impairment recognized in earnings as a result of Valley's impairment analysis of its securities during 2015 , 2014 and 2013. At December 31, 2015, four previously impaired private label mortgage-backed securities had a combined amortized cost of $11.9 million and fair value of $11.7 million, respectively, while one previously impaired pooled trust preferred security had an amortized cost of $2.8 million and fair value of $2.1 million, respectively. During the first quarter of 2015, one previously impaired pooled trust preferred security was sold for an immaterial gain. See the "Realized Gains and Losses" section below for additional information.
The previously impaired trust preferred securities discussed above were not accruing interest during the years ended December 31, 2015, 2014, and 2013. See Note 1 for details regarding Valley's policy for the recognition of interest on impaired debt securities.
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 recognized in earnings, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income or loss for the years ended December 31, 2015, 2014 and 2013: 
 
2015
 
2014
 
2013
 
(in thousands)
Balance, beginning of period
$
8,947

 
$
9,990

 
$
33,290

Accretion of credit loss impairment due to an increase in expected cash flows
(728
)
 
(661
)
 
(461
)
Sales
(2,382
)
 
(382
)
 
(22,839
)
Balance, end of period
$
5,837

 
$
8,947

 
$
9,990



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 included in earnings for the years ended December 31, 2015, 2014 and 2013 were as follows: 
 
2015
 
2014
 
2013
 
(in thousands)
Sales transactions:
 
 
 
 
 
Gross gains
$
3,274

 
$
746

 
$
14,098

Gross losses
(947
)
 
(2
)
 
(44
)
 
$
2,327

 
$
744

 
$
14,054

Maturities and other securities transactions:
 
 
 
 
 
Gross gains
$
293

 
$
10

 
$
662

Gross losses
(133
)
 
(9
)
 
(38
)
 
$
160

 
$
1

 
$
624

Gains on securities transactions, net
$
2,487

 
$
745

 
$
14,678


Valley recognized gross gains from sales transactions of investment securities totaling $3.3 million for the year ended December 31, 2015 mostly 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, during 2015 Valley recognized $947 thousand of gross losses primarily 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 an investment portfolio re-balancing during the first quarter of 2015 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.
The gross gains totaling $14.1 million for the year ended December 31, 2013 included a $10.7 million gain on sale of the previously impaired trust preferred securities issued by one deferring bank holding company.
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. Total net trading gains and losses (included in the other non-interest income category of the consolidated statements of income) were immaterial for the years ended December 31, 2015, 2014 and 2013.
Interest income on trading securities totaled $213 thousand, $1.2 million, and $1.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.