Operating Segments

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Operating Segments

Operating SegmentsPrior to the second quarter 2022, Valley operated as four reportable segments: Consumer Lending, Commercial Lending, Investment Management, and Corporate and Other Adjustments. Valley re-evaluated its segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022 along with other factors, including changes in the internal structure of operations, discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel. As a result, Valley determined it operated reportable segments consisting of Consumer Lending, Commercial Lending and Treasury and Corporate Other at June 30, 2022. Treasury and Corporate Other was reorganized to consolidate Treasury and other corporate-wide functions, including the Treasury managed investment securities portfolios and overnight interest earning cash balances formerly reported under Investment Management. The discrete financial information related to the

activities previously reported in the Investment Management segment is no longer provided to Valley's CEO, who is the chief operating decision maker. Each operating 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). Valley regularly assesses its strategic plans, operations, and reporting structures to identify its reportable segments. There were no additional changes to Valley's reportable segments at September 30, 2022.

Consumer Lending 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. Consumer Lending also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Commercial Lending is 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 operating segment that is most sensitive to movements in market interest rates.

Treasury and Corporate Other largely consists of the Treasury managed held to maturity debt securities and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer Lending and Commercial Lending segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each operating 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 prior period balances presented in the tables below reflect reclassifications to conform the presentation in those periods to the current operating segment structure. Valley's consolidated results were not impacted by the changes discussed above and remain unchanged for all periods presented.

The following tables represent the financial data for Valley’s operating segments for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30, 2022
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,307,993		$	36,033,901		$	6,189,348		$	50,531,242
Interest income	$	70,590		$	425,930		$	40,208		$	536,728
Interest expense	12,288			53,294			17,154			82,736
Net interest income	58,302			372,636			23,054			453,992
Provision (credit) for credit losses	7,182			(5,347)			188			2,023
Net interest income after provision for credit losses	51,120			377,983			22,866			451,969
Non-interest income	19,637			23,510			13,047			56,194
Non-interest expense	24,352			31,759			205,528			261,639
Internal transfer expense (income)	26,268			113,932			(140,200)			—
Income before income taxes	$	20,137		$	255,802		$	(29,415)		$	246,524
Return on average interest earning assets (pre-tax)	0.97		%	2.84		%	(1.90)		%	1.95		%

	Three Months Ended September 30, 2021
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,373,897		$	25,324,485		$	5,634,492		$	38,332,874
Interest income	$	58,887		$	250,866		$	19,048		$	328,801
Interest expense	4,032			13,795			9,948			27,775
Net interest income	54,855			237,071			9,100			301,026
(Credit) provision for credit losses	(4,614)			8,110			35			3,531
Net interest income after provision for credit losses	59,469			228,961			9,065			297,495
Non-interest income	11,845			11,611			18,975			42,431
Non-interest expense	13,520			27,504			133,898			174,922
Internal transfer expense (income)	20,662			71,141			(91,803)			—
Income (loss) before income taxes	$	37,132		$	141,927		$	(14,055)		$	165,004
Return on average interest earning assets (pre-tax)	2.01		%	2.24		%	(1.00)		%	1.72		%

	Nine Months Ended September 30, 2022
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,978,732		$	32,551,062		$	6,075,623		$	46,605,417
Interest income	$	193,186		$	1,036,276		$	100,671		$	1,330,133
Interest expense	20,218			84,356			35,738			140,312
Net interest income	172,968			951,920			64,933			1,189,821
Provision for credit losses	14,457			34,590			531			49,578
Net interest income after provision for credit losses	158,511			917,330			64,402			1,140,243
Non-interest income	50,540			54,815			48,642			153,997
Non-interest expense	59,711			81,292			617,706			758,709
Internal transfer expense (income)	92,544			371,213			(463,757)			—
Income before income taxes	$	56,796		$	519,640		$	(40,905)		$	535,531
Return on average interest earning assets (pre-tax)	0.95		%	2.13		%	(0.90)		%	1.53		%

	Nine Months Ended September 30, 2021
	Consumer Lending			Commercial Lending			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,176,086		$	25,465,276		$	5,261,185		$	37,902,547
Interest income	$	179,151		$	759,097		$	55,999		$	994,247
Interest expense	15,639			55,497			28,511			99,647
Net interest income	163,512			703,600			27,488			894,600
(Credit) provision for credit losses	(6,538)			27,825			(353)			20,934
Net interest income after provision for credit losses	170,050			675,775			27,841			873,666
Non-interest income	47,445			29,144			40,201			116,790
Non-interest expense	53,161			80,276			373,591			507,028
Internal transfer expense (income)	60,026			212,931			(272,957)			—
Income (loss) before income taxes	$	104,308		$	411,712		$	(32,592)		$	483,428
Return on average interest earning assets (pre-tax)	1.94		%	2.16		%	(0.83)		%	1.70		%