INVESTMENT SECURITIES (Note 4)

As of December 31, 2011, Valley had approximately $2.0 billion, $566.5 million, and $21.9 million in held to maturity, available for sale, and trading investment securities, respectively. 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 three pooled trust preferred securities), corporate bonds primarily issued by banks, 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.

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at December 31, 2011 and 2010 were as follows:


			Gross Unrealized Gains		Gross Unrealized Losses
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2011
U.S. Treasury securities	$	100,018	$	13,841	$	—		$	113,859
Obligations of states and political subdivisions		433,284		19,931		(14	)		453,201
Residential mortgage-backed securities		1,180,104		51,041		(152	)		1,230,993
Trust preferred securities		193,312		4,308		(22,867	)		174,753
Corporate and other debt securities		52,198		3,799		(1,606	)		54,391

Total investment securities held to maturity	$	1,958,916	$	92,920	$	(24,639	)	$	2,027,197

December 31, 2010
U.S. Treasury securities	$	100,161	$	251	$	(909	)	$	99,503
Obligations of states and political subdivisions		387,280		2,146		(3,467	)		385,959
Residential mortgage-backed securities		1,114,469		30,728		(3,081	)		1,142,116
Trust preferred securities		269,368		5,891		(59,365	)		215,894
Corporate and other debt securities		52,715		2,911		(226	)		55,400

Total investment securities held to maturity	$	1,923,993	$	41,927	$	(67,048	)	$	1,898,872

The age of unrealized losses and fair value of related securities held to maturity at December 31, 2011 and 2010 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, 2011
Obligations of states and political subdivisions	$	1,854	$	(13	)	$	50	$	(1	)	$	1,904	$	(14	)
Residential mortgage-backed securities		33,520		(152	)		—		—			33,520		(152	)
Trust preferred securities		35,527		(730	)		55,612		(22,137	)		91,139		(22,867	)
Corporate and other debt securities		14,756		(192	)		7,560		(1,414	)		22,316		(1,606	)

Total	$	85,657	$	(1,087	)	$	63,222	$	(23,552	)	$	148,879	$	(24,639	)

December 31, 2010
U.S. Treasury securities	$	57,027	$	(909	)	$	—	$	—		$	57,027	$	(909	)
Obligations of states and political subdivisions		123,399		(3,467	)		50		—			123,449		(3,467	)
Residential mortgage-backed securities		226,135		(3,081	)		—		—			226,135		(3,081	)
Trust preferred securities		14,152		(250	)		75,477		(59,115	)		89,629		(59,365	)
Corporate and other debt securities		7,971		(13	)		8,761		(213	)		16,732		(226	)

Total	$	428,684	$	(7,720	)	$	84,288	$	(59,328	)	$	512,972	$	(67,048	)

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 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, 2011 was 28 as compared to 153 at December 31, 2010.

At December 31, 2011, the unrealized losses reported for trust preferred securities mostly related to 12 single-issuer securities, issued by bank holding companies. Of the 12 trust preferred securities, 5 were investment grade, 2 were non-investment grade, and 5 were not rated.

At December 31, 2011, Valley recorded $18.3 million of other-than-temporary impairment charges attributable to credit factors on trust preferred securities issued by one bank holding company. After the credit impairment charges, the trust preferred securities had a combined adjusted amortized cost of $46.4 million and a fair value of $23.5 million at December 31, 2011. In connection with its impairment analysis at year end 2011, Valley determined that it no longer had a positive intent to hold these securities to their maturity due to the significant decline in the securities' fair value caused by the deterioration in creditworthiness of the issuer. As a result, and in accordance with ASC 320, management transferred the securities from the held to maturity portfolio to the available for sale portfolio at December 31, 2011. See "Other-Than-Temporarily Impaired Securities" section below for further details.

All single-issuer bank 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, 2011.

Management does not believe that any individual unrealized loss as of December 31, 2011 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.

As of December 31, 2011, 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 $1.1 billion.

The contractual maturities of investments in debt securities held to maturity at December 31, 2011 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, 2011
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	129,523	$	129,775
Due after one year through five years		44,746		45,839
Due after five years through ten years		189,250		210,535
Due after ten years		415,293		410,055
Residential mortgage-backed securities		1,180,104		1,230,993

Total investment securities held to maturity	$	1,958,916	$	2,027,197

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 3.6 years at December 31, 2011.

Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at December 31, 2011 and 2010 were as follows:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
December 31, 2011
U.S. government agency securities	$	89,787	$	1,204	$	(243	)	$	90,748
Obligations of states and political subdivisions		18,893		1,322		(1	)		20,214
Residential mortgage-backed securities		304,631		10,950		(5,444	)		310,137
Trust preferred securities*		96,956		78		(33,176	)		63,858
Corporate and other debt securities		40,638		2,554		(3,582	)		39,610
Equity securities		47,932		1,320		(7,299	)		41,953

Total investment securities available for sale	$	598,837	$	17,428	$	(49,745	)	$	566,520

December 31, 2010
U.S. Treasury securities	$	162,404	$	1,406	$	—		$	163,810
U.S. government agency securities		88,926		26		(152	)		88,800
Obligations of states and political subdivisions		28,231		1,234		(3	)		29,462
Residential mortgage-backed securities		578,282		35,016		(2,940	)		610,358
Trust preferred securities*		54,060		1,142		(14,119	)		41,083
Corporate and other debt securities		53,379		2,612		(2,030	)		53,961
Equity securities		48,724		812		(1,728	)		47,808

Total investment securities available for sale	$	1,014,006	$	42,248	$	(20,972	)	$	1,035,282

*	Includes three pooled trust preferred securities, principally collateralized by securities issued by banks and insurance companies.

The age of unrealized losses and fair value of related securities available for sale at December 31, 2011 and 2010 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, 2011
U.S. government agency securities	$	7,980	$	(243	)	$	—	$	—		$	7,980	$	(243	)
Obligations of states and political subdivisions		141		(1	)		—		—			141		(1	)
Residential mortgage-backed securities		41,673		(1,655	)		22,639		(3,789	)		64,312		(5,444	)
Trust preferred securities		23,962		(1,061	)		38,191		(32,115	)		62,153		(33,176	)
Corporate and other debt securities		3,243		(173	)		6,567		(3,409	)		9,810		(3,582	)
Equity securities		20,570		(4,430	)		12,551		(2,869	)		33,121		(7,299	)

Total	$	97,569	$	(7,563	)	$	79,948	$	(42,182	)	$	177,517	$	(49,745	)

December 31, 2010
U.S. government agency securities	$	66,157	$	(152	)	$	—	$	—		$	66,157	$	(152	)
Obligations of states and political subdivisions		1,146		(3	)		—		—			1,146		(3	)
Residential mortgage-backed securities		11,439		(350	)		46,206		(2,590	)		57,645		(2,940	)
Trust preferred securities		1,262		(153	)		33,831		(13,966	)		35,093		(14,119	)
Corporate and other debt securities		—		—			7,944		(2,030	)		7,944		(2,030	)
Equity securities		1,538		(243	)		13,736		(1,485	)		15,274		(1,728	)

Total	$	81,542	$	(901	)	$	101,717	$	(20,071	)	$	183,259	$	(20,972	)

The total number of security positions in the securities available for sale portfolio in an unrealized loss position at both December 31, 2011 and 2010 was 43.

Within the residential mortgage-backed securities category of the available for sale portfolio at December 31, 2011, of the total $5.4 million unrealized losses, $2.3 million relate to five private label mortgage-backed securities that were other-than-temporarily impaired prior to 2011, with the exception of one, which was found to be other-than-temporarily impaired during the fourth quarter of 2011. See the "Other-Than-Temporarily Impaired Securities" section below for further details. The remaining $3.1 million of unrealized losses relate mainly to one investment grade private label mortgage-backed security.

The unrealized losses for trust preferred securities at December 31, 2011, in the table above relate to 3 pooled trust preferred and 15 single-issuer bank issued trust preferred securities. The unrealized losses include $22.9 million attributable to trust preferred securities issued by one bank holding company with an amortized cost of $46.4 million and a fair value of $23.5 million, and $8.2 million attributable to 3 pooled trust preferred securities with an amortized cost of $20.0 million and a fair value of $11.8 million. The two trust preferred issuances by one bank holding company, previously classified as a held to maturity, were found be other-than-temporarily impaired during the fourth quarter of 2011 and subsequently transferred to the available for sale portfolio. The three pooled trust preferred securities included one security with an unrealized loss of $6.6 million and an investment grade rating at December 31, 2011. The other two pooled trust preferred securities had non-investment grade ratings and were initially other-than-temporarily impaired in 2008 with additional estimated credit losses recognized during the period 2009 through 2011. See "Other-Than-Temporarily Impaired Securities" section below for more details. All of the remaining single-issuer trust preferred securities are all paying in accordance with their terms and have no deferrals of interest or defaults.

Unrealized losses existing for more than twelve months reported for corporate and other debt securities at December 31, 2011 relate almost entirely to one investment grade bank-issued corporate bond with a $10.0 million amortized cost and a $3.4 million unrealized loss that is paying in accordance with its contractual terms.

The unrealized losses on equity securities, including those existing for more than twelve months, are related primarily to three perpetual preferred security positions with a combined $35.0 million amortized cost and a $7.2 million unrealized loss. At December 31, 2011, these perpetual preferred securities had investment grade ratings and are currently performing and paying quarterly dividends.

Management does not believe that any individual unrealized loss as of December 31, 2011 represents an other-than-temporary impairment, except for the previously impaired securities discussed above, 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.

As of December 31, 2011, 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 $385 million.

The contractual maturities of investments securities available for sale at December 31, 2011, 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, 2011
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	452	$	455
Due after one year through five years		2,599		2,550
Due after five years through ten years		94,440		97,261
Due after ten years		148,783		114,164
Residential mortgage-backed securities		304,631		310,137
Equity securities		47,932		41,953

Total investment securities available for sale	$	598,837	$	566,520

The weighted-average remaining expected life for residential mortgage-backed securities available for sale at December 31, 2011 was 3.6 years.

Other-Than-Temporary Impairment Analysis

To determine whether a security's impairment is other-than-temporary, Valley considers several factors that include, but are not limited to the following:

•

The severity and duration of the decline, including the causes of the decline in fair value, such as an issuer's credit problems, interest rate fluctuations, or market volatility;

•

Adverse conditions specifically related to the issuer of the security, an industry, or geographic area;

•

Failure of the issuer of the security to make scheduled interest or principal payments;

•

Any changes to the rating of the security by a rating agency or, if applicable, any regulatory actions impacting the security issuer;

•

Recoveries or additional declines in fair value after the balance sheet date;

•

Our ability and intent to hold equity security investments until they recover in value, as well as the likelihood of such a recovery in the near term; and

•

Our intent to sell debt security investments, or if it is more likely than not that we will be required to sell such securities before recovery of their individual amortized cost basis.

For debt securities, the primary consideration in determining whether impairment is other-than-temporary is whether or not we expect to collect all contractual cash flows.

In assessing the level of other-than-temporary impairment attributable to credit loss for debt securities, Valley compares the present value of cash flows expected to be collected with the amortized cost basis of the security. The portion of the total other-than-temporary impairment related to credit loss is recognized in earnings, while the amount related to other factors is recognized in other comprehensive income or loss. The total other-than-temporary impairment loss is presented in the consolidated statements of income, less the portion recognized in other comprehensive income or loss. Subsequent assessments may result in additional estimated credit losses on previously impaired securities. These additional estimated credit losses are recorded as reclassifications from the portion of other-than-temporary impairment previously recognized in other comprehensive income or loss to earnings in the period of such assessments. The amortized cost basis of an impaired debt security is reduced by the portion of the total impairment related to credit loss.

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. Over the past several years, an increasing number of banking institutions have been required to defer trust preferred payments and various banking institutions have been put in receivership by the FDIC. 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. Based upon management's quarterly review, all of the issuers' had capital ratios at December 31, 2011 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. However, Valley lengthened the estimate of the timeframe over which it could reasonably anticipate receiving the expected cash flows from one deferring bank holding company issuer at December 31, 2011 resulting in the $18.3 million credit impairment charge noted in the "Held to Maturity" section above. See "Other-Than-Temporarily Impaired Securities" section below for further details.

For the three pooled trust preferred securities, Valley evaluates the projected cash flows from each of its tranches in the three 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. Two of the pooled trust preferred securities were initially impaired in 2008 with additional estimated credit losses recognized during 2009 and 2010. One of the two pooled trust preferred securities had additional estimated credit losses recognized during the first quarter of 2011. See "Other-Than-Temporarily Impaired Securities" section below for further details.

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, 2011. 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

The following table provides information regarding our other-than-temporary impairment losses on securities recognized in earnings for the years ended December 31, 2011, 2010 and 2009.


	2011		2010		2009
	(in thousands)
Held to maturity:
Trust preferred securities	$	18,314	$	—	$	—
Available for sale:
Residential mortgage-backed securities		829		2,265		5,735
Trust preferred securities		825		2,377		183
Equity securities		—		—		434

Net impairment losses on securities recognized in earnings	$	19,968	$	4,642	$	6,352

Impaired Trust Preferred Securities. During the fourth quarter of 2011, Valley recognized credit impairment charges totaling $18.3 million related to the trust preferred securities of two issuances by one bank holding company, which were classified as held to maturity. In August and October of 2009, the issuer was required to defer its scheduled interest payments on each respective security issuance based upon an operating agreement with its bank regulators. From the dates of deferral up to and including the bank holding company's most recent regulatory filing, the bank issuer continued to accrue and capitalize the interest owed, but not remitted to its trust preferred security holders, and at the holding company level it reported cash and cash equivalents in excess of the cumulative amount of accrued but unpaid interest owed on all of its junior subordinated debentures related to trust preferred securities. Additionally, the issuer reported that it raised new common capital and increased all its bank regulatory risk ratios, and that it has consistently met the minimum well-capitalized requirements (each quarter) since the date of the interest deferral on both issuances. However, in assessing whether a credit loss exists for the securities of the deferring issuer, Valley considers numerous other factors, including but not limited to, such factors highlighted in the "Other-Than-Temporary Impairment Analysis" section above. While the issuer has reported reasonably consistent financial performance in its recent regulatory filings, Valley lengthened its estimate of the timeframe over which it could reasonably anticipate receiving the expected cash flows and, as a result, concluded that the securities were other-than-temporarily impaired at December 31, 2011. The total impairment loss of $41.2 million on these securities consisted of the aforementioned $18.3 million attributable to credit and $22.9 million attributable to factors other than credit. After recognition of the credit impairment charges, the trust preferred securities had a combined amortized cost of $46.4 million and a fair value of $23.5 million at December 31, 2011. In connection with its impairment analysis at year end 2011, Valley determined that it no longer had a positive intent to hold these securities to their maturity due to the significant decline in the securities' fair value caused by the deterioration in the creditworthiness of the issuer. As a result, these securities were transferred from the held to maturity portfolio to the available for sale portfolio at December 31, 2011. However, 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.

The other-than-temporary impairment charges on trust preferred securities classified as available for sale reported in the table above all relate to two pooled trust preferred securities with a combined amortized cost and fair value of $5.4 million and $3.7 million, respectively, at December 31, 2011, after recognition of all credit impairments. These securities were initially found to be other-than-temporarily impaired in 2008, as each of Valley's tranches in the securities had projected cash flows below their future contractual principal and interest payments. Additional estimated credit losses were recognized on one or both of these securities during 2009 through 2011, as higher default rates decreased the expected cash flows from the securities.

All of the impaired trust preferred securities discussed above are not accruing interest as of December 31, 2011. As disclosed in Note 1, Valley discontinues the recognition of interest on debt securities if the securities meet both of the following criteria: (i) regularly scheduled interest payments have not been paid or have been deferred by the issuer, and (ii) full collection of all contractual principal and interest payments is not deemed to be the most likely outcome, resulting in the recognition of other-than-temporary impairment of the security.

Impaired Residential Mortgage-Backed Securities. During 2011, Valley recognized an initial impairment charge of $829 thousand on one of the 17 individual private label mortgage-backed securities classified as available for sale at December 31, 2011. Five other private label mortgage-backed securities were impaired during 2010. Of the five securities impaired during 2010, four were also impaired during 2009 and responsible for the total other-than-temporary impairment losses on residential mortgage-backed securities for 2009 in the table above. At December 31, 2011, the six impaired private label mortgage-backed securities had a combined amortized cost of $52.3 million and fair value of $50.2 million, respectively. Although Valley recognized other-than-temporary impairment charges on the securities, each security is currently performing in accordance with its contractual obligations. See the "Other-Than-Temporary Impairment Analysis" section above for further details regarding the impairment analysis of residential mortgage-backed securities.

Impaired Equity Securities. During the year ended December 31, 2009, Valley recognized other-than-temporary impairment charges of $434 thousand on equity securities classified as available for sale, which relates to one common equity security issued by a bank. The impairment was recognized based on the length of time and the severity of the difference between the security's book value and its observable market price and the security's near term prospects for recovery. At December 31, 2011, the security had a carrying value of $940 thousand and an unrealized gain of $217 thousand.

Realized Gains and Losses

Gross gains (losses) realized on sales, maturities and other securities transactions included in earnings for the years ended December 31, 2011, 2010 and 2009 were as follows:


	2011			2010			2009
	(in thousands)
Sales transactions:
Gross gains	$	31,456		$	8,615		$	8,006
Gross losses		—			(96	)		(36	)

	$	31,456		$	8,519		$	7,970

Maturities and other securities transactions:
Gross gains	$	623		$	3,158		$	79
Gross losses		(11	)		(79	)		(44	)

	$	612		$	3,079		$	35

Gains on securities transactions, net	$	32,068		$	11,598		$	8,005

During year ended December 31, 2011, Valley recognized $31.5 million of gross gains on sales transactions mainly due to the sales of certain residential mortgage-backed securities classified as available for sale issued by Ginnie Mae and government sponsored enterprises totaling $651.7 million. Valley recorded trade date receivables of approximately $141.1 million for unsettled sales of securities classified as available for sale, which are included in other assets at December 31, 2011.

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, 2011, 2010, and 2009:


	2011			2010			2009
	(in thousands)
Balance, beginning of period	$	10,500		$	6,119		$	549
Additions:
Initial credit impairments		19,143			124			2,171
Subsequent credit impairments		825			4,518			3,747
Reductions:
Accretion of credit loss impairment due to anincrease in expected cash flows		(1,398	)		(261	)		(348	)

Balance, end of period	$	29,070		$	10,500		$	6,119

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.

Trading Securities

The fair value of trading securities (consisting of 3 and 4 single-issuer bank trust preferred securities at December 31, 2011 and 2010, respectively) was $21.9 million and $31.9 million at December 31, 2011 and 2010, respectively. Interest income on trading securities totaled $2.1 million, $2.6 million, and $3.8 million for the years ended December 31, 2011, 2010 and 2009, respectively.