BORROWED FUNDS (Note 10)

Short-term borrowings consisted of securities sold under repurchase agreements totaling $154.3 million and $212.8 million at December 31, 2012 and 2011, respectively. The weighted average interest rate for short-term borrowings was 0.26 percent and 0.25 percent at December 31, 2012 and 2011, respectively.

Long-term borrowings at December 31, 2012 and 2011 consisted of the following:


	2012		2011
	(in thousands)
FHLB advances	$	2,008,370	$	2,036,690
Securities sold under agreements to repurchase		587,500		587,500
Subordinated debt		100,000		100,000
Other		1,429		1,909

Total long-term borrowings	$	2,697,299	$	2,726,099

The long-term FHLB advances had a weighted average interest rate of 3.86 percent and 3.91 percent at December 31, 2012 and 2011, respectively. These FHLB advances are secured by pledges of certain eligible collateral, including but not limited to U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans. Interest expense recorded on FHLB advances totaled $79.5 million, $86.6 million, and $91.5 million for the years ended December 31, 2012, 2011, and 2010, respectively.

The long-term FHLB advances at December 31, 2012 are scheduled for repayment as follows:


Year	Amount
	(in thousands)
2013	$	26,102
2014		102
2015		175,102
2016		182,101
2017		584,969
Thereafter		1,039,994

Total long-term FHLB advances	$	2,008,370

The long-term advances with scheduled repayments for years 2014 and over, reported in the table above, include $408.0 million in advances which are callable by the FHLB for redemption during 2013 with interest rates ranging from 2.27 percent to 4.09 percent.

During the first half of 2012, Valley modified the terms of $200.0 million in FHLB advances within its long-term borrowings. The modifications resulted in a reduction of the interest rates on these funds, an extension of their maturity dates to 10 years from the date of modification, and a conversion of the advances to non-callable for 4 years. After the modifications, the weighted average interest rate on these borrowings declined by 0.59 percent to 3.86 percent. There were no gains, losses, penalties or fees incurred in the modification transactions.

The long-term borrowings for securities sold under repurchase agreements to the FHLB and other counterparties totaled $587.5 million at December 31, 2012 and 2011. The weighted average interest rate of these long-term borrowings was 4.07 percent and 4.18 percent at December 31, 2012 and 2011, respectively. Interest expense on long-term securities sold under repurchase agreements amounted to $24.6 million, $25.0 million, and $28.3 million during the years ended December 31, 2012, 2011 and 2010, respectively.

The long-term borrowings for securities sold under agreements to repurchase at December 31, 2012 are scheduled for repayment as follows:


Year	Amount
	(in thousands)
2015	$	125,000
2016		92,500
2017		220,000
Thereafter		150,000

Total long-term borrowings for securities sold under agreements to repurchase	$	587,500

In January 2012, Valley modified the terms of $50.0 million in securities sold under repurchase agreement with one counterparty. The modifications resulted in a reduction of the interest rates on these funds, an extension of their maturity dates to 10 years from the date of modification, and a conversion to non-callable for 4 years. After the modifications, the interest rate on these borrowings declined by 0.94 percent to 3.7 percent. There were no gains, losses, penalties or fees incurred in the modification transaction.

In 2005, the Bank issued $100 million of 5.0 percent subordinated notes due July 15, 2015 with no call dates or prepayments allowed. Interest on the subordinated notes is payable semi-annually in arrears at an annual rate of 5.0 percent on January 15 and July 15 of each year.

The fair value of securities pledged to secure public deposits, repurchase agreements, lines of credit, FHLB advances and for other purposes required by law approximated $1.2 billion and $1.5 billion at December 31, 2012 and 2011, respectively.