Operating Segments

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Operating Segments

Operating Segments

Valley manages 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 half of 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 interest 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 following tables represent the financial data for Valley’s operating segments for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended June 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,904,483		$	40,553,454		$	7,893,871		$	57,351,808
Interest income	$	90,602		$	624,569		$	72,288		$	787,459
Interest expense	55,198			250,871			61,625			367,694
Net interest income	35,404			373,698			10,663			419,765
Provision (credit) for credit losses	3,492			2,840			(282)			6,050
Net interest income after provision for credit losses	31,912			370,858			10,945			413,715
Non-interest income	25,529			14,361			20,185			60,075
Non-interest expense	23,223			35,365			224,383			282,971
Internal transfer expense (income)	22,018			102,395			(124,413)			—
Income (loss) before income taxes	$	12,200		$	247,459		$	(68,840)		$	190,819
Return on average interest earning assets (pre-tax)	0.55		%	2.44		%	(3.49)		%	1.33		%

	Three Months Ended June 30, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,967,305		$	34,549,982		$	6,373,943		$	48,891,230
Interest income	$	63,137		$	352,440		$	37,370		$	452,947
Interest expense	4,723			19,735			10,329			34,787
Net interest income	58,414			332,705			27,041			418,160
Provision for credit losses	5,402			38,310			286			43,998
Net interest income after provision for credit losses	53,012			294,395			26,755			374,162
Non-interest income	17,086			14,425			27,022			58,533
Non-interest expense	18,791			24,448			256,491			299,730
Internal transfer expense (income)	37,629			157,365			(194,994)			—
Income (loss) before income taxes	$	13,678		$	127,007		$	(7,720)		$	132,965
Return on average interest earning assets (pre-tax)	0.69		%	1.47		%	(0.48)		%	1.09		%

	Six Months Ended June 30, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	8,836,859		$	39,826,630		$	7,699,305		$	56,362,794
Interest income	$	175,918		$	1,194,479		$	137,292		$	1,507,689
Interest expense	98,204			442,594			111,106			651,904
Net interest income	77,714			751,885			26,186			855,785
Provision for credit losses	9,936			5,846			4,705			20,487
Net interest income after provision for credit losses	67,778			746,039			21,481			835,298
Non-interest income	39,819			30,108			44,447			114,374
Non-interest expense	41,472			71,088			442,577			555,137
Internal transfer expense (income)	52,901			233,990			(286,891)			—
Income (loss) before income taxes	$	13,224		$	471,069		$	(89,758)		$	394,535
Return on average interest earning assets (pre-tax)	0.30		%	2.37		%	(2.33)		%	1.40		%

	Six Months Ended June 30, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,848,764		$	30,743,387		$	6,017,817		$	44,609,968
Interest income	$	122,596		$	610,346		$	60,463		$	793,405
Interest expense	7,930			31,062			18,584			57,576
Net interest income	114,666			579,284			41,879			735,829
Provision for credit losses	7,275			39,937			343			47,555
Net interest income after provision for credit losses	107,391			539,347			41,536			688,274
Non-interest income	30,903			31,305			35,595			97,803
Non-interest expense	35,359			49,533			412,178			497,070
Internal transfer expense (income)	66,276			257,281			(323,557)			—
Income (loss) before income taxes	$	36,659		$	263,838		$	(11,490)		$	289,007
Return on average interest earning assets (pre-tax)	0.93		%	1.72		%	(0.38)		%	1.30		%