Operating Segments

3 Months Ended

Mar. 31, 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 months ended March 31, 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.

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 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.

The following tables represent the financial data for Valley’s operating segments and Treasury and Corporate Other for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31, 2024
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,795,462		$	40,451,129		$	6,372,206		$	56,618,797
Interest income	$	113,631		$	657,922		$	57,103		$	828,656
Interest expense	73,173			302,174			59,761			435,108
Net interest income	40,458			355,748			(2,658)			393,548
Provision (credit) for credit losses	3,072			42,202			(74)			45,200
Net interest income after provision for credit losses	37,386			313,546			(2,584)			348,348
Non-interest income	26,546			17,994			16,875			61,415
Non-interest expense	18,651			36,288			225,371			280,310
Internal transfer expense (income)	33,111			136,631			(169,742)			—
Income (loss) before income taxes	$	12,170		$	158,621		$	(41,338)		$	129,453
Return on average interest earning assets (pre-tax)	0.50		%	1.57		%	(2.59)		%	0.91		%

	Three Months Ended March 31, 2023
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	9,476,112		$	38,383,259		$	7,503,419		$	55,362,790
Interest income	$	95,963		$	559,263		$	65,004		$	720,230
Interest expense	46,476			188,253			49,481			284,210
Net interest income	49,487			371,010			15,523			436,020
Provision for credit losses	6,444			3,006			4,987			14,437
Net interest income after provision for credit losses	43,043			368,004			10,536			421,583
Non-interest income	17,882			15,747			20,670			54,299
Non-interest expense	19,633			35,723			216,810			272,166
Internal transfer expense (income)	28,968			117,461			(146,429)			—
Income (loss) before income taxes	$	12,324		$	230,567		$	(39,175)		$	203,716
Return on average interest earning assets (pre-tax)	0.52		%	2.40		%	(2.09)		%	1.47		%