Operating Segments

9 Months Ended

Sep. 30, 2023

Segment Reporting [Abstract]

Operating Segments

Operating Segments

Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in 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 operating segments and no changes to the operating segments were determined necessary during the three and nine months ended September 30, 2023.

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

The Commercial Banking segment 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 interest earning assets and or liabilities outstanding for the period.

The accounting for each operating segment and Treasury and Corporate Other 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 following tables represent the financial data for Valley’s operating segments and Treasury and Corporate Other for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,941,112		$	41,078,302		$	6,783,151		$	56,802,565
Interest income	$	94,280		$	659,360		$	59,378		$	813,018
Interest expense	60,950			279,415			60,235			400,600
Net interest income	33,330			379,945			(857)			412,418
(Credit) provision for credit losses	(4,568)			13,715			(30)			9,117
Net interest income after provision for credit losses	37,898			366,230			(827)			403,301
Non-interest income	22,591			11,208			24,865			58,664
Non-interest expense	19,944			33,141			214,048			267,133
Internal transfer expense (income)	28,273			127,249			(155,522)			—
Income (loss) before income taxes	$	12,272		$	217,048		$	(34,488)		$	194,832
Return on average interest earning assets (pre-tax)	0.55		%	2.11		%	(2.03)		%	1.37		%

	Three Months Ended September 30, 2022
	Consumer Banking			Commercial Banking			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 (loss) 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		%

	Nine Months Ended September 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,871,992		$	40,248,161		$	7,390,844		$	56,510,997
Interest income	$	270,198		$	1,853,839		$	196,670		$	2,320,707
Interest expense	159,154			722,009			171,341			1,052,504
Net interest income	111,044			1,131,830			25,329			1,268,203
Provision for credit losses	5,368			19,561			4,675			29,604
Net interest income after provision for credit losses	105,676			1,112,269			20,654			1,238,599
Non-interest income	62,410			41,316			69,312			173,038
Non-interest expense	61,416			104,229			656,625			822,270
Internal transfer expense (income)	81,174			361,239			(442,413)			—
Income (loss) before income taxes	$	25,496		$	688,117		$	(124,246)		$	589,367
Return on average interest earning assets (pre-tax)	0.38		%	2.28		%	(2.24)		%	1.39		%

	Nine Months Ended September 30, 2022
	Consumer Banking			Commercial Banking			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 (loss) 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		%