Business Segments

6 Months Ended

Jun. 30, 2020

Valley has four business segments that it monitors and reports on to manage Valley’s business operations. These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments. Valley’s reportable segments have been determined based upon its internal structure of operations and lines of business. Each business segment is reviewed routinely for its asset growth, contribution to income before income taxes and return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Expenses related to the branch network, all other components of retail banking, along with the back office departments of our subsidiary bank are allocated from the corporate and other adjustments segment to each of the other three business segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average earning assets and/or liabilities outstanding for the period. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to any other financial institution. The accounting for each segment includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under U.S. GAAP. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables represent the financial data for Valley’s four business segments for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30, 2020
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	7,214,368		$	24,826,832		$	5,737,187		$	—		$	37,778,387

Interest income	$	66,807		$	255,152		$	27,623		$	(1,057	)	$	348,525
Interest expense	11,469			40,640			9,728			4,129			65,966
Net interest income (loss)	55,338			214,512			17,895			(5,186		)	282,559
Provision for credit losses	3,106			38,009			41			—			41,156
Net interest income (loss) after provision for credit losses	52,232			176,503			17,854			(5,186		)	241,403
Non-interest income	17,175			16,172			5,823			5,660			44,830
Non-interest expense	20,440			23,250			642			112,834			157,166
Internal expense transfer	19,406			66,858			15,505			(101,769		)	—
Income (loss) before income taxes	$	29,561		$	102,567		$	7,530		$	(10,591	)	$	129,067
Return on average interest earning assets (pre-tax)	1.64		%	1.65		%	0.52		%	N/A			1.37		%



	Three Months Ended June 30, 2019
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	6,756,322		$	18,796,093		$	4,324,969		$	—		$	29,877,384

Interest income	$	67,617		$	229,366		$	31,966		$	(1,207	)	$	327,742
Interest expense	23,428			65,141			14,994			3,945			107,508
Net interest income (loss)	44,189			164,225			16,972			(5,152		)	220,234
Provision for credit losses	885			1,215			—			—			2,100
Net interest income (loss) after provision for credit losses	43,304			163,010			16,972			(5,152		)	218,134
Non-interest income	13,037			7,688			2,560			4,318			27,603
Non-interest expense	18,392			26,324			216			96,805			141,737
Internal expense transfer	19,291			53,722			12,399			(85,412		)	—
Income (loss) before income taxes	$	18,658		$	90,652		$	6,917		$	(12,227	)	$	104,000
Return on average interest earning assets (pre-tax)	1.10		%	1.93		%	0.64		%	N/A			1.39		%



	Six Months Ended June 30, 2020
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	7,215,756		$	23,804,558		$	5,205,918		$	—		$	36,226,232

Interest income	$	135,062		$	520,027		$	59,392		$	(2,163	)	$	712,318
Interest expense	31,169			102,826			22,488			7,937			164,420
Net interest income (loss)	103,893			417,201			36,904			(10,100		)	547,898
Provision for credit losses	9,891			65,148			800			—			75,839
Net interest income (loss) after provision for credit losses	94,002			352,053			36,104			(10,100		)	472,059
Non-interest income	31,852			31,771			8,965			13,639			86,227
Non-interest expense	40,311			47,408			1,029			224,074			312,822
Internal expense transfer	39,741			131,054			28,680			(199,475		)	—
Income (loss) before income taxes	$	45,802		$	205,362		$	15,360		$	(21,060	)	$	245,464
Return on average interest earning assets (pre-tax)	1.27		%	1.73		%	0.59		%	N/A			1.36		%



	Six Months Ended June 30, 2019
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	6,788,511		$	18,615,885		$	4,316,619		$	—		$	29,721,015

Interest income	$	135,644		$	449,650		$	65,190		$	(2,518	)	$	647,966
Interest expense	45,952			126,012			29,220			7,900			209,084
Net interest income (loss)	89,692			323,638			35,970			(10,418		)	438,882
Provision for credit losses	2,983			7,117			—			—			10,100
Net interest income (loss) after provision for credit losses	86,709			316,521			35,970			(10,418		)	428,782
Non-interest income	26,819			14,470			4,678			89,309			135,276
Non-interest expense	37,097			51,568			303			200,564			289,532
Internal expense transfer	38,718			106,259			24,686			(169,663		)	—
Income (loss) before income taxes	$	37,713		$	173,164		$	15,659		$	47,990		$	274,526
Return on average interest earning assets (pre-tax)	1.11		%	1.86		%	0.73		%	N/A			1.85		%