Operating Segments

9 Months Ended

Sep. 30, 2024

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 Valley's operating segments were determined necessary during the three and nine months ended September 30, 2024.

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, as well as Valley's international and domestic private banking businesses.

The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as adjustable and 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 HTM debt securities and AFS 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 FRB 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 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. Certain prior period amounts have been reclassified to conform to the current presentation for each operating segment and Treasury and Corporate Other.

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, 2024 and 2023:

	Three Months Ended September 30, 2024
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,929,693		$	40,197,270		$	7,524,687		$	57,651,650
Interest income	$	122,419		$	664,261		$	73,869		$	860,549
Interest expense	75,373			305,156			69,522			450,051
Net interest income	47,046			359,105			4,347			410,498
Provision (credit) for credit losses	6,007			69,031			(14)			75,024
Net interest income after provision for credit losses	41,039			290,074			4,361			335,474
Non-interest income	26,239			9,259			25,173			60,671
Non-interest expense	24,243			44,662			200,566			269,471
Internal transfer expense (income)	29,709			121,053			(150,762)			—
Income (loss) before income taxes	$	13,326		$	133,618		$	(20,270)		$	126,674
Return on average interest earning assets (pre-tax)	0.54		%	1.33		%	(1.08)		%	0.88		%

	Three Months Ended September 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,681,379		$	40,338,035		$	6,783,151		$	56,802,565
Interest income	$	106,384		$	647,258		$	59,376		$	813,018
Interest expense	65,987			274,377			60,236			400,600
Net interest income	40,397			372,881			(860)			412,418
(Credit) provision for credit losses	(4,568)			13,715			(30)			9,117
Net interest income after provision for credit losses	44,965			359,166			(830)			403,301
Non-interest income	21,035			13,015			24,614			58,664
Non-interest expense	20,796			40,248			206,089			267,133
Internal transfer expense (income)	30,104			121,878			(151,982)			—
Income before income taxes	$	15,100		$	210,055		$	(30,323)		$	194,832
Return on average interest earning assets (pre-tax)	0.62		%	2.08		%	(1.79)		%	1.37		%

	Nine Months Ended September 30, 2024
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,855,089		$	40,276,379		$	6,885,322		$	57,016,790
Interest income	$	354,718		$	1,974,478		$	193,475		$	2,522,671
Interest expense	221,246			904,202			191,492			1,316,940
Net interest income	133,472			1,070,276			1,983			1,205,731
Provision (credit) for credit losses	13,899			188,524			(129)			202,294
Net interest income after provision for credit losses	119,573			881,752			2,112			1,003,437
Non-interest income	77,780			38,051			57,468			173,299
Non-interest expense	68,260			136,653			622,365			827,278
Internal transfer expense (income)	91,782			374,903			(466,685)			—
Income (loss) before income taxes	$	37,311		$	408,247		$	(96,100)		$	349,458
Return on average interest earning assets (pre-tax)	0.50		%	1.35		%	(1.86)		%	0.82		%

	Nine Months Ended September 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,599,359		$	39,520,794		$	7,390,844		$	56,510,997
Interest income	$	305,025		$	1,819,015		$	196,667		$	2,320,707
Interest expense	172,202			708,961			171,341			1,052,504
Net interest income	132,823			1,110,054			25,326			1,268,203
Provision for credit losses	5,368			19,561			4,675			29,604
Net interest income after provision for credit losses	127,455			1,090,493			20,651			1,238,599
Non-interest income	59,858			43,105			70,075			173,038
Non-interest expense	65,595			127,810			628,865			822,270
Internal transfer expense (income)	90,460			372,426			(462,886)			—
Income (loss) before income taxes	$	31,258		$	633,362		$	(75,253)		$	589,367
Return on average interest earning assets (pre-tax)	0.43		%	2.14		%	(1.36)		%	1.39		%