Business Segments

12 Months Ended

Dec. 31, 2011

Business Segments [Abstract]

Business Segments

BUSINESS SEGMENTS (Note 21)

We have four business segments that we monitor and report on to manage our business operations. These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments. Our reportable segments have been determined based upon Valley's internal structure of operations and lines of business. Each business 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). Expenses related to the branch network, all other components of retail banking, along with the back office departments of our subsidiary bank are allocated from the corporate and other adjustments segment to each of the other three business segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each business segment utilizing a "pool funding" methodology, which involves the allocation of uniform funding cost based on each segments' average earning assets outstanding for the period. The financial reporting for each segment contains allocations and reporting in line with our operations, which may not necessarily be comparable to any other financial institution. 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 consumer lending segment is mainly comprised of residential mortgages, home equity loans and automobile 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 lending segment also includes the Wealth Management Division, comprised of trust, asset management, insurance services, and asset-based lending support services.

The commercial lending segment is mainly comprised of floating rate and adjustable rate commercial and industrial loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio's interest rate characteristics, commercial lending is Valley's business segment that is most sensitive to movements in market interest rates.

The investment management segment generates a large portion of our income through investments in various types of securities. These securities are mainly comprised of fixed rate investments, trading securities, and depending on our liquid cash position, federal funds sold and interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York), as part of our asset/liability management strategies. The fixed rate investments are one of Valley's assets that are least sensitive assets to changes in market interest rates. However, as we continue to shift the composition of the investment portfolio to shorter-duration securities, the sensitivity to market interest rates will increase. Net gains and losses on the change in fair value of trading securities and net impairment losses on securities are reflected in the corporate and other adjustments segment.

The amounts disclosed as "corporate and other adjustments" represent income and expense items not directly attributable to a specific segment, including net trading and securities gains (losses), and net impairment losses on securities not reported in the investment management segment above, interest expense related to the junior subordinated debentures issued to capital trusts, the change in fair value of Valley's junior subordinated debentures carried at fair value, interest expense related to certain subordinated notes, as well as income and expense from derivative financial instruments.

The following tables represent the financial data for Valley's four business segments for the years ended December 31, 2011, 2010 and 2009

	Year Ended December 31, 2011
	Commercial Lending			Consumer Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,394,161		$	6,214,319		$	3,205,756		$	—		$	12,814,236
Interest income		171,939			375,873			132,530			(6,518	)		673,824
Interest expense		47,832			87,574			45,176			18,431			199,013
Net interest income (loss)		124,107			288,299			87,354			(24,949	)		474,811
Provision for credit losses		6,806			46,529			—			—			53,335
Net interest income (loss) after provision for credit losses		117,301			241,770			87,354			(24,949	)		421,476
Non-interest income		45,830			16,965			7,381			42,121			112,297
Non-interest expense		56,884			48,829			1,016			229,859			336,588
Internal expense transfer		55,059			99,851			51,644			(206,554	)		—
Income (loss) before income taxes	$	51,188		$	110,055		$	42,075		$	(6,133	)	$	197,185
Return on average interest earning assets (pre-tax)		1.51	%		1.77	%		1.31	%		N/A			1.54	%

	Year Ended December 31, 2010
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,321,124		$	6,153,870		$	3,204,762		$	—		$	12,679,756
Interest income		180,432			355,565			146,851			(6,036	)		676,812
Interest expense		51,240			94,944			49,445			18,431			214,060
Net interest income (loss)		129,192			260,621			97,406			(24,467	)		462,752
Provision for credit losses		14,598			34,858			—			—			49,456
Net interest income (loss) after provision for credit losses		114,594			225,763			97,406			(24,467	)		413,296
Non-interest income		52,545			7,927			6,166			24,689			91,327
Non-interest expense		49,758			42,131			992			224,801			317,682
Internal expense transfer		53,050			97,704			51,258			(202,012	)		—
Income (loss) before income taxes	$	64,331		$	93,855		$	51,322		$	(22,567	)	$	186,941
Return on average interest earning assets (pre-tax)		1.94	%		1.53	%		1.60	%		N/A			1.47	%

	Year Ended December 31, 2009
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,775,689		$	5,930,220		$	3,325,737		$	—		$	13,031,646
Interest income		213,310			340,358			162,834			(4,318	)		712,184
Interest expense		70,822			111,235			62,382			18,431			262,870
Net interest income (loss)		142,488			229,123			100,452			(22,749	)		449,314
Provision for credit losses		21,176			26,816			—			—			47,992
Net interest income (loss) after provision for credit losses		121,312			202,307			100,452			(22,749	)		401,322
Non-interest income		48,233			7,465			5,699			10,854			72,251
Non-interest expense		47,916			40,190			675			217,247			306,028
Internal expense transfer		56,575			88,043			50,102			(194,720	)		—
Income (loss) before income taxes	$	65,054		$	81,539		$	55,374		$	(34,422	)	$	167,545
Return on average interest earning assets (pre-tax)		1.72	%		1.37	%		1.67	%		N/A			1.29	%