Business Segments

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Business Segments

BUSINESS SEGMENTS (Note 21)

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 the 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 consumer lending segment is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans. The duration of the residential mortgage loan portfolio is subject to movements in the market level of interest rates and forecasted prepayment speeds. The average weighted life of the automobile loans within the portfolio is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. The consumer lending segment also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, and insurance services.

The commercial lending segment is mainly comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, commercial lending is Valley’s business segment that is most sensitive to movements in market interest rates.

The investment management segment generates a large portion of Valley’s income through investments in various types of securities and interest-bearing deposits with other banks. These investments are mainly comprised of fixed rate securities and depending on Valley's liquid cash position, federal funds sold and interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York), as part of its asset/liability management strategies. The fixed rate investments are among Valley’s assets that are least sensitive to changes in market interest rates. However, a portion of the investment portfolio is invested in shorter-duration securities to maintain the overall asset sensitivity of Valley’s balance sheet.

The amounts disclosed as “corporate and other adjustments” represent income and expense items not directly attributable to a specific segment, including net securities gains and losses not reported in the investment management segment above, interest expense related to subordinated notes, amortization and impairment of tax credit investments, as well as non-core items, including the loss on extinguishment of debt and merger expenses.

The following tables represent the financial data for Valley’s four business segments for the years ended December 31, 2020, 2019 and 2018:

	Year Ended December 31, 2020
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
	($ in thousands)
Average interest earning assets (unaudited)	$	7,160,793		$	24,625,066		$	5,225,074		$	—	$	37,010,933
Interest income	$	257,196		$	1,027,796		$	102,883		$	(4,156)	$	1,383,719
Interest expense	47,712			164,075			34,814			18,214		264,815
Net interest income (loss)	209,484			863,721			68,069			(22,370)		1,118,904
Provision for credit losses	11,502			113,585			635			—		125,722
Net interest income (loss) after provision for credit losses	197,982			750,136			67,434			(22,370)		993,182
Non-interest income	81,499			64,783			10,083			26,667		183,032
Non-interest expense	77,582			98,710			1,136			468,720		646,148
Internal transfer expense (income)	77,835			267,588			56,788			(402,211)		—
Income (loss) before income taxes	$	124,064		$	448,621		$	19,593		$	(62,212)	$	530,066
Return on average interest earning assets (pre-tax) (unaudited)	1.73		%	1.82		%	0.37		%	N/A		1.43		%

	Year Ended December 31, 2019
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
	($ in thousands)
Average interest earning assets (unaudited)	$	6,891,462		$	19,343,791		$	4,340,277		$	—	$	30,575,530
Interest income	$	272,773		$	926,328		$	126,723		$	(4,824)	$	1,321,000
Interest expense	91,798			257,670			57,815			15,669		422,952
Net interest income (loss)	180,975			668,658			68,908			(20,493)		898,048
Provision for credit losses	6,688			17,530			—			—		24,218
Net interest income (loss) after provision for credit losses	174,287			651,128			68,908			(20,493)		873,830
Non-interest income	57,981			41,157			8,818			106,564		214,520
Non-interest expense	76,046			101,924			1,034			452,551		631,555
Internal transfer expense (income)	78,743			221,113			49,670			(349,526)		—
Income (loss) before income taxes	$	77,479		$	369,248		$	27,022		$	(16,954)	$	456,795
Return on average interest earning assets (pre-tax) (unaudited)	1.12		%	1.91		%	0.62		%	N/A		1.49		%

	Year Ended December 31, 2018
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments		Total
	($ in thousands)
Average interest earning assets (unaudited)	$	6,197,161		$	17,143,169		$	4,362,581		$	—	$	27,702,911
Interest income	$	235,264		$	798,974		$	130,971		$	(5,961)	$	1,159,248
Interest expense	64,083			177,273			45,112			15,577		302,045
Net interest income (loss)	171,181			621,701			85,859			(21,538)		857,203
Provision for credit losses	5,550			26,951			—			—		32,501
Net interest income (loss) after provision for credit losses	165,631			594,750			85,859			(21,538)		824,702
Non-interest income	61,280			22,275			8,691			41,806		134,052
Non-interest expense	92,462			95,171			1,251			440,177		629,061
Internal transfer expense (income)	77,164			213,399			54,353			(344,916)		—
Income (loss) before income taxes	$	57,285		$	308,455		$	38,946		$	(74,993)	$	329,693
Return on average interest earning assets (pre-tax) (unaudited)	0.92		%	1.80		%	0.89		%	N/A		1.19		%