Hudson Valley Holding Corp Announces Financial Results for the Third Quarter and First Nine Months of 2010 and Declares Increased Cash Dividend

Oct 27, 2010, 06:45 ET from Hudson Valley Holding Corp.

YONKERS, N.Y., Oct. 27 /PRNewswire-FirstCall/ -- Hudson Valley Holding Corp. (Nasdaq: HUVL) reported net income of $4.1 million, or $0.25 per diluted share, for the third quarter ending September 30, 2010, compared to a net loss of $10.9 million or $(0.68) per diluted share during the prior quarter and net income of $6.9 million or $0.58 per diluted share during the same period last year.

Net interest income for the parent company of Hudson Valley Bank was $27.3 million in the third quarter 2010, compared to $28.6 million the same period the year prior.  Non-interest income was $3.8 million in the third quarter of 2010, compared to $3.3 million the same period the year prior.

Hudson Valley, which serves middle-market commercial customers and their principals in metropolitan New York City and lower Connecticut, significantly improved profitability over the prior quarter, maintained its strong capital position and increased its quarterly dividend by 50 percent to $0.15 per share.

"Third quarter results reflect industry-wide softness in loan demand, partially offset by the early success of our push into the market for high-quality multi-family lending, as well as Hudson Valley's ability to continue growing core deposits, maintaining a low cost of funds, generating superior net interest margin and running a very efficient operation," President and Chief Executive Officer James J. Landy said.  "We're also pleased to report excellent progress in executing our strategy for improving the credit quality of our loan portfolio."

Loans totaled $1.7 billion at September 30, 2010, decreasing 1.8 percent and 5.7 percent from June 30, 2010 and December 31, 2009, respectively.  The decrease reflects generally soft loan demand and Hudson Valley's strategy for improving the credit quality of its portfolio.  The decline has been partially offset by Hudson Valley's efforts to leverage its strong capital position and ample liquidity to make credit available to new and existing customers. For example, the multi-family loan program launched by the bank earlier this year has a very active pipeline, with more than $39 million in new multi-family loans booked and another $28 million in commitments.

Hudson Valley continued to grow core deposits to $2.2 billion at the end of the third quarter of 2010, an increase of 10.0 percent over core deposits of $2.0 billion at the end of the prior year.

Hudson Valley again demonstrated its low cost of deposits, which averaged 51 basis points in the third quarter of 2010, compared to an average of 56 basis points in the second quarter of 2010 and 66 basis points in the third quarter of 2009.  

Hudson Valley's net interest margin was 4.09 percent in the third quarter of 2010, compared to 4.15 percent in the second quarter of 2010 and 4.76 percent in the third quarter of 2009.  While remaining superior to most peers, the company's net interest margin nonetheless reflects the protracted low-interest-rate environment faced by the entire industry.

Portfolio Credit Quality

As previously disclosed, earlier in 2010, Hudson Valley adopted a more aggressive approach to resolving problem loans, accruing $28.5 million in loan loss provisions and recognizing $21.1 million in charge-offs in the second quarter.  

For the third quarter of 2010, Hudson Valley booked a $6.6 million provision and recognized charge-offs of $17.4 million.  

Hudson Valley reduced total nonperforming loans from $70.0 million at the beginning of the third quarter of 2010 to $42.1 million at September 30.  The reduction includes the transfer of $21.9 million in nonperforming loans to loans held-for-sale.

Charge-offs for the third quarter of 2010 were $17.4 million, about $14 million of which was related to the aforementioned loan sale.  

"Our sale of nonperforming loans, which we believe had limited potential for productive workouts, is well underway," Landy said.  "This loan sale reduces exposure to future losses.  Economically, we expect to be better off by taking the hit today, moving on with these problem loans off our books, and setting ourselves up for much improved portfolio credit quality.  We're comfortable with what we believe is conservative provisioning and our $36.9 million allowance for loan losses, based on our view of the portfolio at the close of the third quarter."

50 Percent Dividend Increase

The Hudson Valley Board of Directors declared a cash dividend of $0.15 per share payable to all common stock shareholders of record as of the close of business November 8, 2010.  The dividend will be distributed to shareholders on or about November 19, 2010.  

Third Quarter and Nine Month Review

The company recorded net income for the three month period ended September 30, 2010 of $4.1 million or $0.25 per diluted share, a decrease of $2.8 million compared to net income of $6.9 million or $0.58 per diluted share for the same period in the prior year. The company recorded a net loss for the nine month period ended September 30, 2010 of $2.0 million or $0.13 per diluted share, a decrease of $15.8 million compared to earnings of $13.8 million or $1.16 per diluted share for the same period in the prior year. Per share amounts for the 2009 periods have been adjusted to reflect the effects of the 10 percent stock dividend issued in December 2009.

The declines in earnings resulted primarily from significant increases in the provision for loan losses which totaled $6.6 million and $40.7 million, respectively, for the three and nine month periods ended September 30, 2010, compared to $2.7 million and $17.2 million, respectively, for the same periods in the prior year. Earnings were also adversely affected by real estate owned valuation provisions of $1.4 million and $0.6 million, respectively, in the second and third quarters of 2010. These provisions are reflective of continued weakness in the overall economy which has resulted in the company's decision to follow a more aggressive strategy for problem asset resolution. The severity of the decline in real estate values has provided new market opportunities for the disposition of distressed assets as investors search for yield in the current low interest rate environment and our more aggressive policy has begun to take advantage of those opportunities. As part of the revised resolution strategy, the company has reevaluated each problem loan and has made a determination of net realizable value based on management's estimation of the best possible outcome considering the individual characteristics of each asset against the likelihood of resolution with the current borrower, expectations for resolution through the court system, or other available market opportunities.

Total loans decreased $103.8 million during the nine month period ended September 30, 2010. This decline resulted from a number of factors including decreased loan demand, charge-offs, pay downs of existing loans and the transfer of $21.9 million of nonperforming loans to the loans held for sale category in anticipation of the results of loan sales expected to be completed in the fourth quarter of 2010. The company recognized $42.5 million of net charge-offs during the nine month period. The company has continued to experience a slowdown in payments of certain loans, such as construction loans, whose repayment is often dependent on sales of completed properties, as well as additional increases in delinquent and nonperforming loans in other sectors of the loan portfolio, all of which have been adversely impacted by the economic downturn and decline in the real estate market. The company, however, continues to provide lending availability to both new and existing customers.

Nonperforming assets, which include nonaccrual loans, accruing loans delinquent over 90 days and other real estate owned, decreased to $51.5 million at September 30, 2010, compared to $66.7 million at December 31, 2009. The decrease includes the transfer of $21.9 of nonperforming loans to the held for sale category discussed above. Overall asset quality continued to be adversely affected by the current state of the economy and the real estate market. Although there is growing evidence that the current economic downturn may have begun to slowly turn around, increases in delinquent and nonperforming loans, slowdowns in repayments and declines in the loan-to-value ratios on existing loans continued during the first three quarters of 2010. Despite recent improvement in most economic indicators, the company's loan portfolio continued to be adversely impacted by the effects of severe declines in the demand for and values of virtually all commercial and residential real estate properties. These declines, together with the limited availability of residential mortgage financing, resulted in continued downward pressure on the overall asset quality of the company's loan portfolio during the first nine months of 2010. In addition, recent significant increases in filings of bankruptcy and foreclosure proceedings have overloaded the court systems and have resulted in what the company believes to be unacceptable delays in attempts to obtain title to real estate and other collateral through conventional foreclosure. As a result of these factors, since the second quarter of 2010, the company has followed the more aggressive strategy for resolving problem assets discussed above including the anticipated sale of certain nonperforming loans discussed above.

Total deposits increased $201.5 million during the nine month period ended September 30, 2010 as the company continued to experience significant growth in new customers both in existing branches and new branches added during the last two years. Proceeds from deposit growth were used to reduce maturing term borrowings or were retained in liquid investments, principally interest earning bank deposits.

During 2009 and 2010, the company was able to repay maturing long-term borrowings, all of its brokered certificates of deposit and non-customer related short-term borrowings with liquidity provided primarily by core deposit growth and planned utilization of run-off from our investment securities. Additional liquidity from deposit growth was retained in the company's short-term liquidity portfolios, available to fund future loan growth. With interest rates remaining at historical low levels, this increase in liquidity contributed to margin compression. The net interest margin declined from 4.15 percent in the second quarter of 2010 to 4.09 percent in the third quarter of 2010.

As a result of the aforementioned activity in the company's core businesses of loans and deposits and other asset/liability management activities, tax equivalent basis net interest income declined by $1.6 million or 5.4 percent to $28.0 million for the three month period ended September 30, 2010, compared to $29.6 million for the same period in the prior year. Tax equivalent basis net interest income declined by $2.8 million or 3.2 percent to $85.6 million for the nine month period ended September 30, 2010, compared to $88.4 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.7 million and $2.5 million, respectively, for the three and nine month periods ended September 30, 2010, compared to $1.0 million and $3.2 million, respectively, for the same periods in the prior year.

The company's non interest income was $3.8 million and $9.3 million, respectively, for the three and nine month periods ended September 30, 2010. This represented increases of $0.5 million or 15.2 percent and $1.5 million or 19.2 percent, respectively, compared to $3.3 million and $7.8 million, respectively, for the same periods in the prior year. These increases were primarily as a result of an increase in investment advisory fees. Fee income from this source increased primarily as a result of the effects of recent improvement in both domestic and international equity markets. Assets under management were approximately $1.3 billion at September 30, 2010 and $1.2 billion at September 30, 2009. The overall increases in non interest income also included growth in deposit service charges. Non interest income also included recognized pre-tax impairment charges on securities available for sale of $0.1 million and $2.4 million, respectively, for the three and nine month periods ended September 30, 2010 and $0.6 million and $4.1 million, respectively, for the same periods in the prior year. The impairment charges were related to the company's investments in pooled trust preferred securities. The company has decided to hold its investments in pooled trust preferred securities as it does not believe that the current market value estimates for these investments are indicative of their underlying value. The pooled trust preferred securities are primarily backed by various U.S. financial institutions many of which are experiencing severe financial difficulties as a result of the current economic downturn. Continuation of these conditions may result in additional impairment charges on these securities in the future. Non interest income for the three and nine month periods ended September 30, 2010 also included $0.6 million and $2.0 million, respectively, of valuation losses on other real estate owned.

Non interest expense was $18.4 million and $55.0 million, respectively, for the three and nine month periods ended September 30, 2010. This represented decreases of $0.5 million or 2.6 percent and $2.0 million or 3.5 percent, respectively, compared to $18.9 million and $57.0 million, respectively, for the same periods in the prior year. Increases in non interest expense resulting from the company's continued investment in its branch offices, technology and personnel to accommodate growth, the expansion of services and products available to new and existing customers and the upgrading of certain internal processes, were more than offset by cost saving measures implemented by the company during 2009 and 2010. Overall decreases in non interest expense for the nine month period ended September 30, 2010, compared to the same period in the prior year, partially resulted from significantly lower FDIC deposit insurance premiums. Additional premiums imposed by the FDIC in 2009 to replenish shortfalls in the FDIC Insurance Fund have not as yet been imposed to the same degree in 2010. However, additional premium increases and special assessments may continue to be imposed by the FDIC in the future.

Hudson Valley's capital ratios remain significantly in excess of "well capitalized" levels generally applicable to banks under current regulations. At September 30, 2010, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 15.0 percent, a Tier 1 risk-based capital ratio of 13.7 percent, and a Tier 1 leverage ratio of 9.1 percent.

Conference Call

As previously announced we will be holding a third quarter earnings conference call Wednesday, October 27, 2010 at 10:00 AM EDT - Participant Pass code: 8920297:  Domestic (toll free): 1-866-843-0890 or International (toll) +1-412-317-9250.

A replay of the call will be available 1 hour from the close of the conference through November 10, 2010 at 9:00 AM EST - Replay Pass code: 445065:  US Toll Free: 1-877-344-7529; International Toll: +1-412-317-0088. Participants will be required to state their name and company upon entering call.

The Company webcast will be available live at 10:00 AM EDT, and archived after the

call, through our website at www.hudsonvalleybank.com.

About Hudson Valley Holding Corp.

Hudson Valley Holding Corp. (HUVL), headquartered in Yonkers, NY, is the parent company of Hudson Valley Bank (HVB). Hudson Valley Bank is a Westchester based bank with more than $2.8 billion in assets, serving the metropolitan area with 37 branches located in Westchester, Rockland, the Bronx, Manhattan, Queens and Brooklyn in New York and Fairfield County and New Haven County, in Connecticut. HVB specializes in providing a full range of financial services to businesses, professional services firms, not-for-profit organizations and individuals; and provides investment management services through a subsidiary, A. R. Schmeidler & Co., Inc. Hudson Valley Holding Corp.'s common stock is traded on the NASDAQ Global Select Market under the ticker symbol "HUVL" and is included in the Russell 3000® Index. Additional information on Hudson Valley Bank can be obtained on their web-site at www.hudsonvalleybank.com.

Hudson Valley Holding Corp. ("Hudson Valley")  has made in this press release various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to earnings, credit quality and other financial and business matters for periods subsequent to September 30, 2010. These statements may be identified by such forward-looking terminology as "expect", "may", "will", "anticipate", "continue", "believe" or similar statements or variations of such terms. Hudson Valley cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, and that statements relating to subsequent periods increasingly are subject to greater uncertainty because of the increased likelihood of changes in underlying factors and assumptions. Actual results could differ materially from forward-looking statements.

Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, in addition to those risk factors disclosed in the Hudson Valley's Annual Report on Form 10-K for the year ended December 31, 2009 and our subsequent Quarterly Reports of Form 10-Q include, but are not limited to, statements regarding:

  • further increases in our non-performing loans and allowance for loan losses;
  • our ability to manage our commercial real estate portfolio;
  • the future performance of our investment portfolio;
  • our opportunities for growth, our plans for expansion (including opening new branches) and the competition we face in attracting and retaining customers;
  • economic conditions generally and in our market area in particular, which may affect the ability of borrowers to repay their loans and the value of real property or other property held as collateral for such loans;
  • demand for our products and services;
  • possible impairment of our goodwill and other intangible assets;
  • our ability to manage interest rate risk;
  • the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements;
  • our intention and ability to maintain regulatory capital above the levels required by the Office of the Comptroller of the Currency, or the OCC, for Hudson Valley Bank and the levels required for us to be "well-capitalized", or such higher capital levels as may be required;
  • proposed legislative and regulatory action affecting us and the financial services industry;
  • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;
  • future Federal Deposit Insurance Corporation, or FDIC, special assessments or changes to regular assessments;
  • our ability to raise additional capital in the future;
  • potential liabilities under federal and state environmental laws; and
  • limitations on dividends payable by Hudson Valley or Hudson Valley Bank.

We assume no obligation for updating any such forward-looking statements at any given time.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the three months ended September 30, 2010 and 2009

Dollars in thousands, except per share amounts

Three Months Ended

Sep 30

2010

2009

Interest Income:

Loans, including fees

$26,557

$27,822

Securities:

Taxable

3,354

4,203

Exempt from Federal income taxes

1,321

1,756

Federal funds sold

45

38

Deposits in banks

260

20

Total interest income

31,537

33,839

Interest Expense:

Deposits

3,025

3,541

Securities sold under repurchase agreements and other short-term borrowings

69

73

Other borrowings

1,190

1,579

Total interest expense

4,284

5,193

Net Interest Income

27,253

28,646

Provision for loan losses

6,572

2,732

Net interest income after provision for loan losses

20,681

25,914

Non Interest Income:

Service charges

1,604

1,368

Investment advisory fees

2,162

1,934

Recognized impairment charge on securities available for sale (includes $172 of total gains and $8,450 of total losses in 2010 and 2009, respectively, less $745 of gains and $6,335 of losses on securities available for sale, recognized in other comprehensive income in 2010 and 2009, respectively)

(75)

(597)

Realized gains on securities available for sale, net

75

-

Losses on sales of other real estate owned

(550)

-

Other income

627

636

Total non interest income

3,843

3,341

Non Interest Expense:

Salaries and employee benefits

9,483

9,551

Occupancy

2,108

2,143

Professional services

1,239

1,220

Equipment

1,005

1,233

Business development

480

495

FDIC assessment

1,246

915

Other operating expenses

2,861

3,374

Total non interest expense

18,422

18,931

Income (Loss) Before Income Taxes

6,102

10,324

Income Taxes (Benefit)

2,031

3,426

Net Income (Loss)

$4,071

$6,898

Basic Earnings Per Common Share (1)

$0.25

$0.59

Diluted Earnings Per Common Share (1)

$0.25

$0.58

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the nine months ended September 30, 2010 and 2009

Dollars in thousands, except per share amounts

Nine Months Ended

Sep 30

2010

2009

Interest Income:

 Loans, including fees

$81,248

$82,213

 Securities:

   Taxable

10,601

14,133

   Exempt from Federal income taxes

4,652

5,945

 Federal funds sold

123

62

 Deposits in banks

519

32

Total interest income

97,143

102,385

Interest Expense:

   Deposits

9,679

11,096

   Securities sold under repurchase agreements and other short-term borrowings

217

474

   Other borrowings

4,128

5,605

Total interest expense

14,024

17,175

Net Interest Income

83,119

85,210

Provision for loan losses

40,702

17,224

Net interest income after provision for loan losses

42,417

67,986

Non Interest Income:

   Service charges

5,019

4,373

   Investment advisory fees

6,676

5,576

   Recognized impairment charge on securities available for sale (includes $2,841 and     $11,857 of total losses in 2010 and 2009, respectively, less $483 and $7,708 of losses on     securities available for sale, recognized in other comprehensive income in 2010 and 2009,     respectively)

(2,358)

(4,149)

   Realized gains on securities available for sale, net

150

52

   Losses on sales of other real estate owned

(1,974)

-

   Other income

1,807

1,976

Total non interest income

9,320

7,828

Non Interest Expense:

   Salaries and employee benefits

28,863

29,769

   Occupancy

6,204

6,148

   Professional services

4,103

3,280

   Equipment

2,940

3,273

   Business development

1,590

1,535

   FDIC assessment

3,521

4,554

   Other operating expenses

7,793

8,460

Total non interest expense

55,014

57,019

Income (Loss) Before Income Taxes

(3,277)

18,795

Income Taxes (Benefit)

(1,248)

4,995

Net Income (Loss)

($2,029)

$13,800

Basic Earnings Per Common Share (1)

($0.13)

$1.18

Diluted Earnings Per Common Share (1)

($0.13)

$1.16

(1) 2009 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2009.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2010 and December 31, 2009

Dollars in thousands, except per share and share amounts

Sep 30

Dec 31

2010

2009

ASSETS

Cash and non interest earning due from banks

$38,123

$39,321

Interest earning deposits in banks

379,879

127,659

Federal funds sold

70,908

51,891

Securities available for sale, at estimated fair value (amortized cost of $466,901 in

    2010 and $500,340 in 2009)

474,434

500,635

Securities held to maturity, at amortized cost (estimated fair value of $18,683 in

    2010 and $22,728 in 2009)

17,474

21,650

Federal Home Loan Bank of New York (FHLB) stock

7,685

8,470

Loans held for sale

21,864

-

Loans (net of allowance for loan losses of $36,886 in 2010 and $38,645 in 2009)

1,671,730

1,772,645

Accrued interest and other receivables

17,425

15,200

Premises and equipment, net

29,208

30,383

Other real estate owned

9,393

9,211

Deferred income tax, net

23,620

20,957

Bank owned life insurance

25,651

24,458

Goodwill

23,842

23,842

Other intangible assets

2,659

3,276

Other assets

16,164

15,958

TOTAL ASSETS

$2,830,059

$2,665,556

LIABILITIES

Deposits:

Non interest bearing

$768,109

$686,856

Interest bearing

1,605,970

1,485,759

Total deposits

2,374,079

2,172,615

Securities sold under repurchase agreements and other short-term borrowings

43,336

53,121

Other borrowings

102,759

123,782

Accrued interest and other liabilities

22,233

22,360

TOTAL LIABILITIES

2,542,407

2,371,878

STOCKHOLDERS' EQUITY

Common stock, $0.20 par value; authorized 25,000,000 shares: outstanding

   16,029,124 and 16,016,738 shares in 2010 and 2009, respectively

3,465

3,463

Additional paid-in capital

346,614

346,297

Retained earnings (deficit)

(8,711)

2,294

Accumulated other comprehensive income (loss)

3,848

(812)

Treasury stock, at cost; 1,299,414 shares in 2010 and 2009

(57,564)

(57,564)

Total stockholders' equity

287,652

293,678

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$2,830,059

$2,665,556

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the three months ended September 30, 2010 and 2009

      The following table sets forth the average balances of interest earning assets and interest bearing liabilities for the periods indicated, as well as total interest and corresponding yields and rates.

Three Months Ended September 30,

2010

2009

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest (3)

Rate

Balance

Interest (3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$373,553

$260

0.28%

$40,573

$20

0.20%

Federal funds sold

84,112

45

0.21%

75,506

38

0.20%

Securities: (1)

   Taxable

365,119

3,354

3.67%

378,847

4,203

4.44%

   Exempt from federal income taxes

142,292

2,032

5.71%

170,326

2,701

6.34%

Loans, net (2)

1,693,859

26,557

6.27%

1,739,165

27,822

6.40%

Total interest earning assets

2,658,935

32,248

4.85%

2,404,417

34,784

5.79%

Non interest earning assets:

Cash & due from banks

46,877

41,675

Other assets

136,910

115,189

Total non interest earning assets

183,787

156,864

Total assets

$2,842,722

$2,561,281

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

   Money market

$955,296

$2,050

0.86%

$826,877

$2,284

1.10%

   Savings

118,399

143

0.48%

103,308

133

0.51%

   Time

202,934

609

1.20%

248,905

855

1.37%

   Checking with interest

337,006

223

0.26%

270,984

269

0.40%

Securities sold under repo & other s\t borrowings

56,109

69

0.49%

72,275

73

0.40%

Other borrowings

102,760

1,190

4.63%

126,793

1,579

4.98%

Total interest bearing liabilities

1,772,504

4,284

0.97%

1,649,142

5,193

1.26%

Non interest bearing liabilities:

Demand deposits

772,954

691,156

Other liabilities

14,174

25,175

Total non interest bearing liabilities

787,128

716,331

Stockholders' equity (1)

283,090

195,808

Total liabilities and stockholders' equity

$2,842,722

$2,561,281

Net interest earnings

$27,964

$29,591

Net yield on interest earning assets

4.21%

4.92%

-----------------------------------------------------

(1) Excludes unrealized gains (losses) on securities available for sale. Management believes that this presentation more closely reflects actual performance, as it is more consistent with the Company's stated asset/liability management strategies, which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates. Effects of these adjustments are presented in the table below.

(2)  Includes loans classified as non-accrual.

(3) The data contained in the table has been adjusted to a tax equivalent basis, based on the Company's federal statutory rate of 35 percent. Management believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. Effects of these adjustments are presented in the table below.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the nine months ended September 30, 2010 and 2009

      The following table sets forth the average balances of interest earning assets and interest bearing liabilities for the periods indicated, as well as total interest and corresponding yields and rates.

Nine Months Ended September 30,

2010

2009

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest (3)

Rate

Balance

Interest (3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$291,067

$519

0.24%

$16,705

$32

0.26%

Federal funds sold

78,095

123

0.21%

33,861

62

0.24%

Securities: (1)

   Taxable

371,305

10,601

3.81%

428,116

14,133

4.40%

   Exempt from federal income taxes

159,258

7,157

5.99%

190,456

9,146

6.40%

Loans, net (2)

1,727,807

81,248

6.27%

1,725,069

82,213

6.35%

Total interest earning assets

2,627,532

99,648

5.06%

2,394,207

105,586

5.88%

Non interest earning assets:

Cash & due from banks

45,898

43,144

Other assets

138,609

117,423

Total non interest earning assets

184,507

160,567

Total assets

$2,812,039

$2,554,774

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

   Money market

$935,851

$6,397

0.91%

$761,283

$6,831

1.20%

   Savings

114,520

404

0.47%

99,508

361

0.48%

   Time

206,351

1,948

1.26%

276,674

3,136

1.51%

   Checking with interest

342,335

930

0.36%

240,378

768

0.43%

Securities sold under repo & other s\t borrowings

60,995

217

0.47%

118,241

474

0.53%

Other borrowings

114,924

4,128

4.79%

164,492

5,605

4.54%

Total interest bearing liabilities

1,774,976

14,024

1.05%

1,660,576

17,175

1.38%

Non interest bearing liabilities:

Demand deposits

728,005

664,914

Other liabilities

18,442

28,997

Total non interest bearing liabilities

746,447

693,911

Stockholders' equity (1)

290,616

200,287

Total liabilities and stockholders' equity

$2,812,039

$2,554,774

Net interest earnings

$85,624

$88,411

Net yield on interest earning assets

4.34%

4.92%

-----------------------------------------------------

(1) Excludes unrealized gains (losses) on securities available for sale. Management believes that this presentation more closely reflects actual performance, as it is more consistent with the Company's stated asset/liability management strategies, which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates. Effects of these adjustments are presented in the table below.

(2)  Includes loans classified as non-accrual.

(3) The data contained in the table has been adjusted to a tax equivalent basis, based on the Company's federal statutory rate of 35 percent. Management believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. Effects of these adjustments are presented in the table below.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

Non-GAAP disclosures

Three Months Ended

Nine Months Ended

Sep 30

Sep 30

2010

2009

2010

2009

Total interest earning assets:

 As reported

$2,663,953

$2,407,514

$2,632,076

$2,394,900

 Unrealized gain (loss) on securities

   available-for-sale (1)

          5,018

          3,097

          4,544

             693

Adjusted total interest earning assets

$2,658,935

$2,404,417

$2,627,532

$2,394,207

Net interest earnings:

 As reported

$27,253

$28,645

$83,119

$85,210

 Adjustment to tax equivalency basis (2)

             711

             946

          2,505

          3,201

Adjusted net interest earnings

$27,964

$29,591

$85,624

$88,411

Net yield on interest earning assets:

 As reported

4.09%

4.76%

4.21%

4.74%

 Effects of (1) and (2) above

0.12%

0.16%

0.13%

0.18%

Adjusted net interest earnings

4.21%

4.92%

4.34%

4.92%

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Financial Highlights

Third Quarter 2010

(Dollars in thousands, except per share amounts)

3 mos end

3 mos end

9 mos end

9 mos end

Sep 30

Sep 30

Sep 30

Sep 30

2010

2009

2010

2009

Earnings:

Net Interest Income

$27,253

$28,646

$83,119

$85,210

Non Interest Income

$3,843

$3,341

$9,320

$7,828

Non Interest Expense

$18,422

$18,931

$55,014

$57,019

Net Income (Loss)

$4,071

$6,898

($2,029)

$13,800

Net Interest Margin

4.09%

4.76%

4.21%

4.74%

Net Interest Margin (FTE)

4.21%

4.92%

4.34%

4.92%

Diluted Earnings (Loss) Per Share (1)

$0.25

$0.58

($0.13)

$1.16

Dividends Per Share (1)

$0.10

$0.27

$0.56

$1.06

Return on Average Equity

5.68%

13.95%

-0.92%

9.16%

Return on Average Assets

0.57%

1.08%

-0.10%

0.72%

Average Balances:

Average Assets

$2,847,740

$2,564,378

$2,816,583

$2,555,467

Average Net Loans

$1,693,859

$1,739,165

$1,727,807

$1,725,069

Average Investments

$507,411

$549,173

$530,563

$618,572

Average Interest Earning Assets

$2,663,953

$2,407,514

$2,632,076

$2,394,900

Average Deposits

$2,386,589

$2,141,230

$2,327,062

$2,042,757

Average Borrowings

$158,869

$199,068

$175,919

$282,733

Average Interest Bearing Liabilities

$1,772,504

$1,649,142

$1,774,976

$1,660,576

Average Stockholders' Equity

$286,849

$197,780

$293,454

$200,807

Asset Quality - During Period:

Provision for loan losses

$6,572

$2,732

$40,702

$17,224

Net Chargeoffs

$16,813

$2,064

$42,460

$4,916

Annualized Net Chargeoffs/Avg Net Loans

3.97%

0.47%

3.28%

0.38%

(1) 2009 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2009.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Balance Sheet Data

Third Quarter 2010

(Dollars in thousands except per share amounts)

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2010

2010

2010

2009

2009

Period End Balances:

Total Assets

$2,830,059

$2,883,239

$2,804,199

$2,665,556

$2,578,790

Total Investments

$491,908

$505,196

$534,846

$522,285

$548,123

Net Loans

$1,671,730

$1,693,083

$1,755,981

$1,772,645

$1,750,917

Goodwill and Other Intangible Assets

$26,501

$26,707

$26,912

$27,118

$24,414

Total Deposits

$2,374,079

$2,411,063

$2,284,938

$2,172,615

$2,169,811

Total Stockholders' Equity

$287,652

$282,502

$297,002

$293,678

$200,718

Common Shares Outstanding (1)

16,029,164

16,029,164

16,025,792

16,016,738

11,612,209

Book Value Per Share (1)

$17.95

$17.62

$18.53

$18.34

$17.29

Tier 1 Leverage Ratio - HVHC

9.1%

9.0%

9.9%

10.2%

6.9%

Tier 1 Risk Based Capital Ratio - HVHC

13.7%

14.0%

14.2%

13.9%

9.2%

Total Risk Based Capital Ratio - HVHC

15.0%

15.2%

15.4%

15.2%

10.5%

Tier 1 Leverage Ratio - HVB

8.3%

8.1%

8.3%

8.4%

6.9%

Tier 1 Risk Based Capital Ratio - HVB

12.5%

12.6%

11.9%

11.4%

9.2%

Total Risk Based Capital Ratio - HVB

13.7%

13.9%

13.1%

12.7%

10.4%

Loan Categories:

Commercial Real Estate

$788,016

$784,012

$792,447

$783,597

$745,406

Construction

176,223

203,124

247,679

255,660

261,827

Residential

451,344

454,529

445,107

454,532

454,326

Commercial and Industrial

254,506

254,840

265,761

274,860

282,513

Individuals

25,705

29,992

29,361

26,970

26,824

Lease Financing

16,856

17,822

19,569

20,810

19,800

Total Loans

$1,712,650

$1,744,319

$1,799,924

$1,816,429

$1,790,696

Asset Quality - Period End:

Allowance for Loan Losses

$36,886

$47,127

$39,363

$38,645

$34,845

Loans 31-89 Days Past Due Accruing

$9,732

$6,380

$30,934

$32,022

$35,489

Loans 90 Days or More Past Due Accruing

$197

$448

$8,504

$6,941

$20,878

Nonaccrual Loans

$41,918

$69,562

$69,686

$50,590

$39,872

Other Real Estate Owned

$9,393

$5,578

$6,937

$9,211

$5,063

Nonperforming Loans Held For Sale (HFS)

$21,864

$0

$0

$0

$0

Allowance / Total Loans

2.15%

2.70%

2.19%

2.13%

1.95%

Nonaccrual / Total Loans

2.45%

3.99%

3.87%

2.79%

2.23%

Nonaccrual + 90 Day Past Due / Total Loans

2.46%

4.01%

4.34%

3.17%

3.39%

Nonaccrual + OREO / Total Assets

1.81%

2.61%

2.73%

2.24%

1.74%

Nonaccrual + OREO + HFS / Total Assets

2.59%

2.61%

2.73%

2.24%

1.74%

(1) Share and per share amounts for September 2009 have been restated to reflect the effects of the 10% stock dividend issued in December 2009.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Income Statement Data

Third Quarter 2010

(Dollars in thousands except per share amounts)

3 mos end

3 mos end

3 mos end

3 mos end

3 mos end

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2010

2010

2010

2009

2009

Interest Income

$31,537

$32,510

$33,096

$34,194

$33,839

Interest Expense

4,284

4,830

4,910

5,129

5,193

Net Interest Income

27,253

27,680

28,186

29,065

28,646

Provision for Loan Losses

6,572

28,548

5,582

7,082

2,732

Non Interest Income

3,843

2,684

2,793

2,666

3,341

Non Interest Expense

18,422

18,138

18,454

17,122

18,931

Income (Loss) Before Income Taxes

6,102

(16,322)

6,943

7,527

10,324

Income Taxes (Benefit)

2,031

(5,367)

2,088

2,315

3,426

Net Income (Loss)

$4,071

($10,955)

$4,855

$5,212

$6,898

Diluted Earnings (Loss) per share (1)

$0.25

($0.68)

$0.30

$0.34

$0.58

Net Interest Margin

4.09%

4.15%

4.40%

4.67%

4.76%

Average Cost of Deposits (2)

0.51%

0.56%

0.60%

0.64%

0.66%

(1) Share and per share amounts for September 2009 have been restated to reflect the effects of the 10% stock dividend issued in December 2009.

(2) Includes noninterest bearing deposits

SOURCE Hudson Valley Holding Corp.



RELATED LINKS

http://www.hudsonvalleybank.com