Operating Segments

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Operating Segments

Operating Segments

At March 31, 2023 and December 31, 2022, Valley managed its business operations under reportable segments consisting of Consumer Banking, Commercial Banking and Treasury and Corporate Other. 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 and no changes to the reportable segments were determined necessary during the first quarter 2023.

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

Commercial Banking 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 Banking 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 and Commercial Banking 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 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. 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. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The balances presented for the three months ended March 31, 2022 in the tables below reflect reclassifications to conform with the presentation of the current operating segment structure, which was implemented in the second quarter 2022. These reclassifications did not impact Valley's consolidated results. See Valley's Form 10-K for the year ended December 31, 2022 for additional information.

The following tables represent the financial data for Valley’s operating segments for the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,768,482		$	39,090,889		$	7,503,419		$	55,362,790
Interest income	$	85,316		$	569,910		$	65,004		$	720,230
Interest expense	43,006			191,723			49,481			284,210
Net interest income	42,310			378,187			15,523			436,020
Provision for credit losses	6,444			3,006			4,987			14,437
Net interest income after provision for credit losses	35,866			375,181			10,536			421,583
Non-interest income	14,290			15,747			24,262			54,299
Non-interest expense	18,249			35,723			218,194			272,166
Internal transfer expense (income)	30,883			131,595			(162,478)			—
Income (loss) before income taxes	$	1,024		$	223,610		$	(20,918)		$	203,716
Return on average interest earning assets (pre-tax)	0.05		%	2.29		%	(1.12)		%	1.47		%

	Three Months Ended March 31, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,638,942		$	26,984,460		$	5,659,646		$	40,283,048
Interest income	$	59,459		$	257,906		$	23,093		$	340,458
Interest expense	3,207			11,327			8,255			22,789
Net interest income	56,252			246,579			14,838			317,669
Provision for credit losses	1,873			1,627			57			3,557
Net interest income after provision for credit losses	54,379			244,952			14,781			314,112
Non-interest income	13,817			16,880			8,573			39,270
Non-interest expense	16,568			25,085			155,687			197,340
Internal transfer expense (income)	28,647			99,916			(128,563)			—
Income (loss) before income taxes	$	22,981		$	136,831		$	(3,770)		$	156,042
Return on average interest earning assets (pre-tax)	1.20		%	2.03		%	(0.27)		%	1.55		%