Business Segments

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Business Segments

BUSINESS SEGMENTS (Note 21)

Valley has four business segments that it monitors and reports on to manage Valley’s business operations. These segments are consumer lending, commercial lending, investment management, and corporate and other adjustments. Valley’s reportable segments have been determined based upon its 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 Valley’s 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. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

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 Valley’s income through investments in various types of securities. These securities are mainly comprised of fixed rate investments 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 immediate changes in market interest rates. However, a portion of the investment portfolio is invested in shorter-duration securities to maintain the overall asset sensitivity of Valley’s balance sheet. 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 and 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 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, 2013, 2012, and 2011:

	Year Ended December 31, 2013
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,915,395		$	7,272,573		$	3,054,234		$	—		$	14,242,202
Interest income		157,482			380,369			86,564			(8,318	)		616,097
Interest expense		41,556			77,187			32,416			17,218			168,377
Net interest income (loss)		115,926			303,182			54,148			(25,536	)		447,720
Provision for credit losses		2,094			14,001			—			—			16,095
Net interest income (loss) after provision for credit losses		113,832			289,181			54,148			(25,536	)		431,625
Non-interest income		75,028			(7,219	)		5,962			54,882			128,653
Non-interest expense		77,231			57,096			1,355			245,656			381,338
Internal expense transfer		64,142			118,546			50,011			(232,699	)		—
Income before income taxes	$	47,487		$	106,320		$	8,744		$	16,389		$	178,940
Return on average interest earning assets (pre-tax)		1.21	%		1.46	%		0.29	%		N/A			1.26	%

	Year Ended December 31, 2012
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,941,374		$	7,296,895		$	2,871,459		$	—		$	14,109,728
Interest income		174,978			407,288			96,582			(7,655	)		671,193
Interest expense		45,499			84,234			33,148			18,431			181,312
Net interest income (loss)		129,479			323,054			63,434			(26,086	)		489,881
Provision for credit losses		4,969			20,583			—			—			25,552
Net interest income (loss) after provision for credit losses		124,510			302,471			63,434			(26,086	)		464,329
Non-interest income		83,765			(1,701	)		6,817			32,065			120,946
Non-interest expense		69,281			54,963			1,219			249,437			374,900
Internal expense transfer		65,561			120,993			47,749			(234,303	)		—
Income (loss) before income taxes	$	73,433		$	124,814		$	21,283		$	(9,155	)	$	210,375
Return on average interest earning assets (pre-tax)		1.86	%		1.71	%		0.74	%		N/A			1.49	%

	Year Ended December 31, 2011
	Consumer Lending			Commercial Lending			Investment Management			Corporate and Other Adjustments			Total
	($ in thousands)
Average interest earning assets	$	3,394,161		$	6,214,319		$	3,205,756		$	—		$	12,814,436
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			231,827			338,556
Internal expense transfer		55,059			99,851			51,644			(206,554	)		—
Income (loss) before income taxes	$	51,188		$	110,055		$	42,075		$	(8,101	)	$	195,217
Return on average interest earning assets (pre-tax)		1.51	%		1.77	%		1.31	%		N/A			1.52	%