Hudson Valley Holding Corp. Grows Earnings, Lending and Core Deposits in the Third Quarter of 2011

- Bank Increases EPS to $0.48 in the Third Quarter of 2011, from $0.42 in the Second Quarter and $0.23 in the Third Quarter of 2010 -

- Core Deposits Grow to 93.8 percent of Deposits while Funding Costs Decline -

- Grows Net Loan Balances for Fourth Consecutive Quarter as the Bank Deploys Excess Liquidity in Market-Rate Multi-family Lending Program -

- Nonperforming Assets Fall to Lowest Level in Nine Quarters -

Oct 26, 2011, 07:17 ET from Hudson Valley Holding Corp.

YONKERS, N.Y., Oct. 26, 2011 /PRNewswire/ -- Hudson Valley Holding Corp. (NYSE: HVB) today reported improved third quarter 2011 profits, as the bank continued to secure low-cost core deposits, deploy excess liquidity in its successful multi-family lending program, increase core revenues and maintain its operating efficiency.

The parent company of Hudson Valley Bank increased net income to $8.5 million, or $0.48 per diluted share, for the quarter ended September 30, 2011, compared to $7.4 million or $0.42 per diluted share during the second quarter of 2011 and $4.1 million or $0.23 per diluted share during the third quarter of 2010.  

All earnings per share data reported today, including 2011 and 2010 quarterly EPS, reflect additional shares outstanding as a result of Hudson Valley's 10 percent stock dividend issued in December 2010.

The bank, which serves middle-market commercial customers and their principals in Westchester County, metropolitan New York City, and lower Connecticut, also increased its pre-tax, pre-provision income during the third quarter of 2011 by 22.4 percent and 23.6 percent over the second quarter of 2011 and last year's third quarter, respectively.

"By staying focused on business banking in the Metro New York communities we've served for so long and so well, we were able to deliver both top- and bottom-line improvement in the third quarter in a time of remarkable economic uncertainty," President and Chief Executive Officer James J. Landy said.  "In this prolonged and historic low interest rate environment, we increased loan and deposit balances, lowered funding costs and invested in our franchise by attracting seasoned bankers.  At the same time, our patient pricing and aggressive credit quality improvement measures over the last 18 months cultivated a healthy balance sheet and strong capital position, which will be critical as we move into 2012."

Core customer deposits grew $121.3 million during the quarter, contributing to a decline in the bank's cost of deposits to 0.36 percent from 0.38 percent in the second quarter of 2011 and from 0.51 percent in the third quarter of 2010.  

While not immune to the unprecedented rate environment compressing net interest margins (NIM) across the industry, Hudson Valley's business-focused and low-funding-cost banking model delivered net interest income of $30.0 million in the third quarter of 2011, up from $29.6 million in the second quarter of 2011 and $27.3 million in the third quarter of 2010.  Excess liquidity derived from substantial deposit growth contributed to compression of Hudson Valley's net interest margin to 4.47 percent in the third quarter of 2011, compared to 4.55 percent in the second quarter of 2011.  However, the net interest margin increased compared to the third quarter of 2010 net interest margin of 4.09 percent.  

The continued deployment of excess cash in the bank's robust multi-family lending program provided a significant offset to the margin decline, with $141.6 million in new loan volume originated during the third quarter.  Management believes that Hudson Valley continues to maintain favorable net interest margin relative to other banks while reflecting the current low-rate environment.  

Core deposits were 93.8 percent of Hudson Valley's $2.5 billion in total deposits at September 30, 2011.  Deposits totaled $2.4 billion at June 30, 2011 and $2.4 billion at September 30, 2010.

Indicative of the bank's continued focus on efficiency and streamlined operations, Hudson Valley achieved positive operating leverage as compared to the linked and prior year quarters, while maintaining a strong efficiency ratio of 56.7 percent in the third quarter of 2011, compared to 58.8 percent in the second quarter of 2011 and 56.9 percent in the third quarter of 2010.  

Lending Activity

Hudson Valley reported a sequential increase in net loans for the fourth consecutive quarter, while loan balances continue to reflect industry wide softness in demand.  Net loans totaled $2.0 billion at September 30, 2011, representing increases of 5.6 percent from June 30, 2011 and 19.3 percent from September 30, 2010.  

Hudson Valley's primary source of loan growth in the quarter was again its multi-family lending program, which continued to serve the bank well as a near-term use of excess liquidity.  During the third quarter the bank originated $141.6 million in multi-family loans, successfully reaching its board-approved authorization of $525 million in total commitments while continuing to exercise conservative underwriting discipline.  Balances for these market-priced loans, which are designed for existing buildings with longstanding cash-flow histories from rental units, grew to $418.6 million at September 30, 2011, representing increases of 51.1 percent from June 30, 2011 and 235.8 percent from September 30, 2010.  The remainder of the multi-family loan pipeline is expected to close in this year's fourth quarter.

In addition, the company reported commercial real estate (CRE) loans of $818.0 million at September 30, 2011, representing a decrease of 3.2 percent from June 30, 2011 and an increase of 3.8 percent from September 30, 2010.  As a business-focused community bank, CRE has historically been Hudson Valley's single largest lending category, representing 40.1 percent of total loans at the end of the third quarter of 2011.

Portfolio Credit Quality

"The comprehensive approach we adopted to resolve the bank's credit quality in 2010 continues to benefit the health of our balance sheet today," Landy said.  "We're very pleased with the significant progress of problem asset resolutions in the third quarter, as loan and property sales reduced nonperforming assets to their lowest level in nine quarters.  The fragile economy and protracted period of high unemployment continue to exert downward pressure on our overall asset quality, however, giving us reason to continue expecting an uneven, but generally improving, credit quality trend."  

Hudson Valley recorded a loan loss provision of $2.5 million in this year's third quarter, compared to $1.5 million in the second quarter of 2011 and $6.6 million in the third quarter of 2010.  

Net charge-offs were $2.3 million in the third quarter of 2011, including $2.0 million in losses related to a single loan.  This compares to net recoveries of $0.1 million in the prior quarter and net charge-offs of $16.8 million in the third quarter of 2010.  This quarter's net charge-offs, while higher than the linked quarter, also demonstrate meaningful improvement from the levels just one year ago.  

As a percentage of average loans, annualized net charge-offs were 0.47 percent in the third quarter of 2011, compared to annualized net recoveries of 0.01 percent in the second quarter of 2011 and net charge offs of 3.97 percent in the third quarter of 2010.  

Hudson Valley's total nonperforming assets (NPAs), including nonaccrual loans, loans held for sale, accruing loans delinquent over 90 days and other real estate owned (OREO), were $61.7 million at September 30, 2011, compared to $64.5 million at June 30, 2011 and $73.4 million  at September 30, 2010.  Nonperforming assets totaled 2.11 percent of total assets at September 30, 2011, compared to 2.29 percent at June 30, 2011 and 2.59 percent at September 30, 2010.  Hudson Valley's nonperforming assets at the end of 2011's third quarter fell to their lowest level since the end of 2009's second quarter.  

Reflecting increased lending in the third quarter, as well as nonperforming assets at period end, the Bank's allowance for loan losses was $42.1 million, or 2.07 percent of total loans, at September 30, 2011.  Allowances were $41.9 million, or 2.17 percent of total loans, at June 30, 2011, and $36.9 million, or 2.15 percent of total loans, at September 30, 2010.

Capital Strength

Hudson Valley's capital ratios remain in excess of "well capitalized" levels generally applicable to banks under current regulations. At September 30, 2011, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 14.0 percent, a Tier 1 risk-based capital ratio of 12.7 percent, and a Tier 1 leverage ratio of 9.7 percent.  

$0.20 Cash Dividend Declared

The Hudson Valley Board of Directors declared a cash dividend of $0.20 per share payable to all common stock shareholders of record as of the close of business on November 7, 2011. The dividend will be distributed to shareholders on or about November 18, 2011.

Common Stock Transferred to NYSE

On July 21, 2011 the Company announced the pending transfer of the listing of its common stock from the NASDAQ Global Select Market to the New York Stock Exchange.  As of August 2, 2011, Hudson Valley common stock now trades on the NYSE under the ticker symbol "HVB".  

Third Quarter and Nine Month Review

Net income for the three month period ended September 30, 2011 was $8.5 million or $0.48 per diluted share, an increase of $4.4 million compared to net income of $4.1 million or $0.23 per diluted share for the same period in the prior year.  Net income for the nine month period ended September 30, 2011 was $20.8 million or $1.17 per diluted share, an increase of $22.8 million compared to a net loss of $2.0 million or $(0.12) per diluted share for the same period in the prior year.   Per share amounts for the 2010 periods have been adjusted to reflect the effects of the 10 percent stock dividend issued in December 2010.

The increases in earnings resulted primarily from significant decreases in the provision for loan losses which totaled $2.5 million and $9.5 million, respectively, for the three and nine month periods ended September 30, 2011, compared to $6.6 million and $40.7 million, respectively, for the same periods in the prior year.  The 2011 provisions are significantly lower than those in 2010, however, the provisions in both 2011 and 2010 are reflective of continued weakness in the overall economy, and the related effects of this weakness on the Company's overall asset quality.

Total loans increased $105.1 million and $307.6 million, respectively, during the three and nine month periods ended September 30, 2011 compared to the prior year end.  These increases resulted primarily from strong demand for local market multi-family loans and increases in commercial real estate loans, partially offset by decreased loan demand in other sectors of the market, charge-offs and pay downs of existing loans.  The Company continues to provide lending availability to both new and existing customers.

Nonperforming assets decreased to $61.7 million at September 30, 2011, compared to $64.1 million at December 31, 2010. The Company recognized $6.3 million of net charge-offs during the nine month period ended September 30, 2011. The Company had significant resolutions of problem assets during the third quarter of 2011. Overall asset quality, however, continued to be adversely affected by the current state of the economy and the real estate market, which has resulted in the continuation of elevated levels of delinquent and nonperforming loans, slowdowns in repayments and declines in the loan-to-value ratios on existing loans. The Company continues to reevaluate each problem loan and make a determination of net realizable value based on management's estimation of the most probable 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 including consideration of loan sales.  

Total deposits increased $295.2 million during the nine month period ended September 30, 2011, compared to the prior year end.  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 fund loan growth, reduce maturing term borrowings, increase the securities portfolio or were retained in liquid investments, principally interest earning bank deposits.

The Company's short-term liquidity remains at elevated levels, resulting from continuing strong deposit growth and soft loan demand. With interest rates remaining at historical low levels, this excess liquidity contributed to margin compression. This compression has been significantly offset by reinvestment of available liquidity in new loans, primarily local market multi-family loans, and an $86.3 million reduction of term borrowings since September 30, 2010, of which $71.3 million occurred in the first nine months of 2011. The resulting net interest margin of 4.47 percent for the three month period ended September 30, 2011, decreased compared to 4.55 percent for the three month period ended June 30, 2011, but increased from 4.09 percent for three month period ended September 30, 2010. The decrease in the net interest margin for the three months ended September 30, 2011, compared to prior quarter resulted from lower overall yields on investments and the impact of interest reversals on nonaccrual loans, partially offset by increases in interest income resulting from the redeployment of short-term liquidity into loans and a lower cost of funds.  

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 increased by $2.6 million or 9.3 percent to $30.6 million for the three month period ended September 30, 2011, compared to $28.0 million for the same period in the prior year.  Tax equivalent basis net interest income increased by $3.3 million or 3.8 percent to $88.9 million for the nine month period ended September 30, 2011, compared to $85.6 million for the same period in the prior year.  The effect of the adjustment to a tax equivalent basis was $0.5 million and $1.8 million, respectively, for the three and nine month periods ended September 30, 2011, compared to $0.7 million and $2.5 million, respectively, for the same periods in the prior year.

The Company's non interest income was $5.7 million and $14.8 million, respectively, for the three and nine month periods ended September 30, 2011.  This represented increases of $1.9 million or 50.0 percent and $5.5 million or 59.1 percent, respectively, compared to $3.8 million and $9.3 million, respectively, for the same periods in the prior year.  These increases partially resulted from an increase in investment advisory fees.  Fee income from this source increased primarily as a result of the effects of continued improvement in both domestic and international equity markets. Assets under management were approximately $1.3 billion at both September 30, 2011 and September 30, 2010. Non interest income also included recognized pre-tax impairment charges on securities available for sale of $0.1 million and $0.3 million, respectively, for the three and nine month periods ended September 30, 2011 and $0.1 million and $2.4 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 continued 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 also included other gains of $1.0 million and $0.1 million, respectively, for the three and nine month periods ended September 30, 2011 and other losses of $0.6 million and $2.0 million, respectively, for the same periods in the prior year.  These gains and losses are related to sales and revaluations of other real estate owned and loans held for sale.

Non interest expense was $20.1 million and $61.2 million, respectively, for the three and nine month periods ended September 30, 2011.  This represented increases of $1.7 million or 9.2 percent and $6.2 million or 11.3 percent, respectively, compared to $18.4 million and $55.0 million, respectively, for the same periods in the prior year.  Increases in non interest expense resulted primarily from the Company's reinstatement of an incentive compensation plan previously terminated in 2009, increase in costs associated with problem loan resolution and other real estate owned, and investment in technology and personnel to accommodate growth and the expansion of services and products available to new and existing customers.

Conference Call

As previously announced, Hudson Valley will hold a third quarter earnings conference call Wednesday, October 26, 2011 at 10:00 AM ET:

Domestic (toll free): 1-877-317-6789

International (toll): +1-412-317-6789.

All participants should dial in at least ten minutes prior to the call and request the "HVB Third Quarter Earnings call."

A replay of the call will be available one hour from the close of the conference through November 8, 2011 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 - Conference # 10005115

International Toll: +1-412-317-0088 - Conference # 10005115

Participants will be required to state their name and company upon entering call

The Company webcast will be available live at 10:00 AM ET, and archived after the call, through our website at www.hudsonvalleybank.com.

About Hudson Valley Holding Corp.  Hudson Valley Holding Corp. headquartered in Yonkers, NY, is the parent company of Hudson Valley Bank ("Hudson Valley"). Hudson Valley Bank is a Westchester based Bank with more than $2.9 billion in assets, serving the metropolitan area with 35 branches located in Westchester, Rockland, the Bronx, Manhattan and Brooklyn in New York and Fairfield County and New Haven County, in Connecticut. Hudson Valley 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 NYSE under the ticker symbol "HVB" 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.

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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, 2011. 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, 2010 include, but are not limited to, statements regarding:

  • further increases in our non-performing loans and allowance for loan losses;
  • ineffectiveness in managing our commercial real estate portfolio;
  • lower than expected future performance of our investment portfolio;
  • a lack of opportunities for growth, plans for expansion (including opening new branches) and increased or unexpected competition in attracting and retaining customers;
  • continued poor economic conditions generally and in our market area in particular, which may adversely affect the ability of borrowers to repay their loans and the value of real property or other property held as collateral for such loans;
  • lower than expected demand for our products and services;
  • possible impairment of our goodwill and other intangible assets;
  • other-than-temporary impairment charges on our investment securities;
  • our inability to manage interest rate risk;
  • increased expense and burdens resulting from the regulatory environment in which we operate and our ability to comply with existing and future regulatory requirements;
  • our inability 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 may adversely affect 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) may subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;
  • future increased Federal Deposit Insurance Corporation, or FDIC, special assessments or changes to regular assessments;
  • our inability 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, 2011 and 2010

Dollars in thousands, except per share amounts

Three Months Ended

Sep 30

2011

2010

Interest Income:

 Loans, including fees

$28,641

$26,557

 Securities:

   Taxable

2,778

3,354

   Exempt from Federal income taxes

989

1,321

 Federal funds sold

24

45

 Deposits in banks

154

260

Total interest income

32,586

31,537

Interest Expense:

   Deposits

2,226

3,025

   Securities sold under repurchase agreements and other short-term borrowings

68

69

   Other borrowings

254

1,190

Total interest expense

2,548

4,284

Net Interest Income

30,038

27,253

Provision for loan losses

2,536

6,572

Net interest income after provision for loan losses

27,502

20,681

Non Interest Income:

   Service charges

1,671

1,604

   Investment advisory fees

2,639

2,162

   Recognized impairment charge on securities available for sale (includes $361 of total losses and      $172 of total gains in 2011 and 2010, respectively, less $242 of losses and $247 of gains on      securities available for sale, recognized in other comprehensive income in 2011 and 2010,      respectively)

(119)

(75)

   Realized gains on securities available for sale, net

8

75

   Gains (losses) on sales and revaluation of loans held for sale and other real estate owned, net

946

(550)

   Other income

569

627

Total non interest income

5,714

3,843

Non Interest Expense:

   Salaries and employee benefits

11,296

9,483

   Occupancy

2,217

2,108

   Professional services

1,700

1,239

   Equipment

1,101

1,005

   Business development

452

480

   FDIC assessment

553

1,246

   Other operating expenses

2,771

2,861

Total non interest expense

20,090

18,422

Income Before Income Taxes

13,126

6,102

Income Taxes

4,618

2,031

Net Income

$8,508

$4,071

Basic Earnings Per Common Share (1)

$0.48

$0.23

Diluted Earnings Per Common Share (1)

$0.48

$0.23

(1) September 2010 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2010.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the nine months ended September 30, 2011 and 2010

Dollars in thousands, except per share amounts

Nine Months Ended

Sep 30

2011

2010

Interest Income:

 Loans, including fees

$82,914

$81,248

 Securities:

   Taxable

8,875

10,601

   Exempt from Federal income taxes

3,300

4,652

 Federal funds sold

73

123

 Deposits in banks

519

519

Total interest income

95,681

97,143

Interest Expense:

   Deposits

6,790

9,679

   Securities sold under repurchase agreements and other short-term borrowings

172

217

   Other borrowings

1,599

4,128

Total interest expense

8,561

14,024

Net Interest Income

87,120

83,119

Provision for loan losses

9,533

40,702

Net interest income after provision for loan losses

77,587

42,417

Non Interest Income:

   Service charges

5,263

5,019

   Investment advisory fees

7,998

6,676

   Recognized impairment charge on securities available for sale (includes $1,318 and      $2,841 of total losses in 2011 and 2010, respectively, less $995 and $483 of losses      on securities available for sale, recognized in other comprehensive income in 2011      and 2010, respectively)

(323)

(2,358)

   Realized gains on securities available for sale, net

8

150

   Gains (losses) on sales and revaluation of loans held for sale and other real estate owned, net

73

(1,974)

   Other income

1,745

1,807

Total non interest income

14,764

9,320

Non Interest Expense:

   Salaries and employee benefits

33,377

28,863

   Occupancy

6,764

6,204

   Professional services

4,902

4,103

   Equipment

3,218

2,940

   Business development

1,548

1,590

   FDIC assessment

2,350

3,521

   Other operating expenses

9,029

7,793

Total non interest expense

61,188

55,014

Income (Loss) Before Income Taxes

31,163

(3,277)

Income Taxes (Benefit)

10,399

(1,248)

Net Income (Loss)

$20,764

($2,029)

Basic Earnings Per Common Share (1)

$1.17

($0.12)

Diluted Earnings Per Common Share (1)

$1.17

($0.12)

(1) September 2010 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2010.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2011 and December 31, 2010

Dollars in thousands, except per share and share amounts

Sep 30

Dec 31

2011

2010

ASSETS

Cash and non interest earning due from banks

$51,704

$25,876

Interest earning deposits in banks

202,472

258,280

Federal funds sold

36,400

72,071

Securities available for sale, at estimated fair value (amortized cost of $481,731 in

    2011 and $440,792 in 2010)

486,138

443,667

Securities held to maturity, at amortized cost (estimated fair value of $14,627 in

    2011 and $17,272 in 2010)

13,673

16,267

Federal Home Loan Bank of New York (FHLB) stock

3,832

7,010

Loans (net of allowance for loan losses of $42,150 in 2011 and $38,949 in 2010)

1,993,658

1,689,187

Loans held for sale

2,244

7,811

Accrued interest and other receivables

13,287

16,396

Premises and equipment, net

26,510

28,611

Other real estate owned

924

11,028

Deferred income tax, net

25,826

25,043

Bank owned life insurance

27,169

25,976

Goodwill

23,842

23,842

Other intangible assets

1,838

2,454

Other assets

12,740

15,514

TOTAL ASSETS

$2,922,257

$2,669,033

LIABILITIES

Deposits:

Non interest bearing

$884,306

$756,917

Interest bearing

1,645,362

1,477,495

Total deposits

2,529,668

2,234,412

Securities sold under repurchase agreements and other short-term borrowings

46,611

36,594

Other borrowings

16,475

87,751

Accrued interest and other liabilities

25,992

20,359

TOTAL LIABILITIES

2,618,746

2,379,116

STOCKHOLDERS’ EQUITY

Preferred Stock, $0.01 par value; authorized 15,000,000 shares; no shares

   outstanding in 2011 and 2010, respectively

0

0

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

   17,694,297 and 17,665,908 shares in 2011 and 2010, respectively

3,799

3,793

Additional paid-in capital

347,337

346,750

Retained earnings (deficit)

7,931

(3,989)

Accumulated other comprehensive income (loss)

2,008

927

Treasury stock, at cost; 1,299,414 shares in 2011 and 2010

(57,564)

(57,564)

Total stockholders’ equity

303,511

289,917

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$2,922,257

$2,669,033

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the three months ended September 30, 2011 and 2010

      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,

2011

2010

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest (3)

Rate

Balance

Interest (3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$234,589

$154

0.26%

$373,553

$260

0.28%

Federal funds sold

39,971

24

0.24%

84,112

45

0.21%

Securities: (1)

   Taxable

378,157

2,778

2.94%

365,119

3,354

3.67%

   Exempt from federal income taxes

103,638

1,522

5.87%

142,292

2,032

5.71%

Loans, net (2)

1,928,888

28,641

5.94%

1,693,859

26,557

6.27%

Total interest earning assets

2,685,243

33,119

4.93%

2,658,935

32,248

4.85%

Non interest earning assets:

Cash & due from banks

48,290

46,877

Other assets

135,965

135,884

Total non interest earning assets

184,255

182,761

Total assets

$2,869,498

$2,841,696

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

   Money market

$999,130

$1,557

0.62%

$955,296

$2,050

0.86%

   Savings

111,358

116

0.42%

118,399

143

0.48%

   Time

163,830

357

0.87%

202,934

609

1.20%

   Checking with interest

309,694

196

0.25%

337,006

223

0.26%

Securities sold under repo & other s/t borrowings

53,100

68

0.51%

56,109

69

0.49%

Other borrowings

23,652

254

4.30%

102,760

1,190

4.63%

Total interest bearing liabilities

1,660,764

2,548

0.61%

1,772,504

4,284

0.97%

Non interest bearing liabilities:

Demand deposits

884,347

772,954

Other liabilities

25,770

13,148

Total non interest bearing liabilities

910,117

786,102

Stockholders' equity (1)

298,617

283,090

Total liabilities and stockholders' equity

$2,869,498

$2,841,696

Net interest earnings

$30,571

$27,964

Net yield on interest earning assets

4.55%

4.21%

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

(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, 2011 and 2010

      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,

2011

2010

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest (3)

Rate

Balance

Interest (3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$253,829

$519

0.27%

$291,067

$519

0.24%

Federal funds sold

42,190

73

0.23%

78,095

123

0.21%

Securities: (1)

   Taxable

359,008

8,875

3.30%

371,305

10,601

3.81%

   Exempt from federal income taxes

109,837

5,077

6.16%

159,258

7,157

5.99%

Loans, net (2)

1,832,866

82,914

6.03%

1,727,807

81,248

6.27%

Total interest earning assets

2,597,730

97,458

5.00%

2,627,532

99,648

5.06%

Non interest earning assets:

Cash & due from banks

46,501

45,898

Other assets

143,107

138,609

Total non interest earning assets

189,608

184,507

Total assets

$2,787,338

$2,812,039

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

   Money market

$946,616

$4,699

0.66%

$935,851

$6,397

0.91%

   Savings

112,907

358

0.42%

114,520

404

0.47%

   Time

172,634

1,176

0.91%

206,351

1,948

1.26%

   Checking with interest

293,660

557

0.25%

342,335

930

0.36%

Securities sold under repo & other s/t borrowings

46,102

172

0.50%

60,995

217

0.47%

Other borrowings

48,176

1,599

4.43%

114,924

4,128

4.79%

Total interest bearing liabilities

1,620,095

8,561

0.70%

1,774,976

14,024

1.05%

Non interest bearing liabilities:

Demand deposits

848,834

728,005

Other liabilities

24,106

18,442

Total non interest bearing liabilities

872,940

746,447

Stockholders' equity (1)

294,303

290,616

Total liabilities and stockholders' equity

$2,787,338

$2,812,039

Net interest earnings

$88,897

$85,624

Net yield on interest earning assets

4.56%

4.34%

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

(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

2011

2010

2011

2010

Total interest earning assets:

 As reported

$2,687,904

$2,664,979

$2,598,798

$2,632,076

 Unrealized gain on securities

   available-for-sale (1)

2,661

6,044

1,068

4,544

Adjusted total interest earning assets

$2,685,243

$2,658,935

$2,597,730

$2,627,532

Net interest earnings:

 As reported

$30,038

$27,253

$87,120

$83,119

 Adjustment to tax equivalency basis (2)

533

711

1,777

2,505

Adjusted net interest earnings

$30,571

$27,964

$88,897

$85,624

Net yield on interest earning assets:

 As reported

4.47%

4.09%

4.47%

4.21%

 Effects of (1) and (2) above

0.08%

0.12%

0.09%

0.13%

Adjusted net yield on interest earning assets

4.55%

4.21%

4.56%

4.34%

Average stockholders' equity:

 As reported

$300,338

$286,849

$295,084

$293,454

 Effects of (1) and (2) above

1,721

3,759

781

2,838

Adjusted average stockholders' equity

$298,617

$283,090

$294,303

$290,616

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Financial Highlights

Third Quarter 2011

(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

2011

2010

2011

2010

Earnings:

 Net Interest Income

$30,038

$27,253

$87,120

$83,119

 Non Interest Income

$5,714

$3,843

$14,764

$9,320

 Non Interest Expense

$20,090

$18,422

$61,188

$55,014

 Net Income (Loss)

$8,508

$4,071

$20,764

($2,029)

 Net Interest Margin

4.47%

4.09%

4.47%

4.21%

 Net Interest Margin (FTE)

4.55%

4.21%

4.56%

4.34%

 Diluted Earnings (Loss) Per Share (1)

$0.48

$0.23

$1.17

($0.12)

 Dividends Per Share (1)

$0.20

$0.09

$0.50

$0.51

 Return on Average Equity

11.33%

5.68%

9.38%

-0.92%

 Return on Average Assets

1.18%

0.57%

0.99%

-0.10%

Average Balances:

 Average Assets

$2,872,159

$2,847,740

$2,788,406

$2,816,583

 Average Net Loans

$1,928,888

$1,693,859

$1,832,866

$1,727,807

 Average Investments

$481,795

$507,411

$468,845

$530,563

 Average Interest Earning Assets

$2,687,904

$2,664,979

$2,598,798

$2,632,076

 Average Deposits

$2,468,359

$2,386,589

$2,374,651

$2,327,062

 Average Borrowings

$76,752

$158,869

$94,278

$175,919

 Average Interest Bearing Liabilities

$1,660,764

$1,772,504

$1,620,095

$1,774,976

 Average Stockholders' Equity

$300,338

$286,849

$295,084

$293,454

Asset Quality - During Period:

 Provision for loan losses

$2,536

$6,572

$9,533

$40,702

 Net Chargeoffs

$2,276

$16,813

$6,332

$42,460

 Annualized Net Chargeoffs/Avg Net Loans

0.47%

3.97%

0.46%

3.28%

(1) 2010 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2010.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Balance Sheet Data

Third Quarter 2011

(Dollars in thousands except per share amounts)

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2011

2011

2011

2010

2010

Period End Balances:

 Total Assets

$2,922,257

$2,817,815

$2,655,273

$2,669,033

$2,830,059

 Total Investments

$499,811

$476,309

$448,973

$459,934

$491,908

 Net Loans

$1,993,658

$1,888,761

$1,774,679

$1,689,187

$1,671,730

 Goodwill and Other Intangible Assets

$25,680

$25,885

$26,090

$26,296

$26,501

 Total Deposits

$2,529,668

$2,418,391

$2,243,613

$2,234,412

$2,374,079

 Total Stockholders' Equity

$303,511

$295,686

$290,654

$289,917

$287,652

 Tangible Common Equity

$277,831

$269,801

$264,564

$263,621

$261,151

 Common Shares Outstanding (1)

17,694,297

17,689,049

17,686,063

17,665,908

17,632,080

 Book Value Per Share (1)

$17.15

$16.72

$16.43

$16.41

$16.31

 Tangible Book Value Per Share (1)

$15.70

$15.25

$14.96

$14.92

$14.81

 Tangible Common Equity Ratio - HVHC

9.6%

9.7%

10.1%

10.0%

9.3%

 Tier 1 Leverage Ratio - HVHC

9.7%

9.8%

9.9%

9.6%

9.1%

 Tier 1 Risk Based Capital Ratio - HVHC

12.7%

13.2%

13.5%

13.9%

13.7%

 Total Risk Based Capital Ratio - HVHC

14.0%

14.4%

14.8%

15.2%

15.0%

 Tier 1 Leverage Ratio - HVB

9.2%

9.1%

9.1%

8.8%

8.3%

 Tier 1 Risk Based Capital Ratio - HVB

12.1%

12.3%

12.4%

12.8%

12.5%

 Total Risk Based Capital Ratio - HVB

13.4%

13.5%

13.7%

14.0%

13.7%

Loan Categories:

 Commercial Real Estate

$817,998

$844,741

$821,959

$796,253

$788,016

 Construction

145,682

148,439

168,567

174,369

176,223

 Residential

812,203

671,638

548,346

467,326

451,344

 Commercial and Industrial

221,208

227,008

234,742

245,263

254,506

 Individuals

29,714

29,620

30,616

33,257

25,705

 Lease Financing

13,036

13,329

14,923

15,783

16,856

 Total Loans

$2,039,841

$1,934,775

$1,819,153

$1,732,251

$1,712,650

Asset Quality - Period End:

 Allowance for Loan Losses

$42,150

$41,889

$40,287

$38,949

$36,886

 Loans 31-89 Days Past Due Accruing

$8,737

$12,361

$12,745

$21,004

$9,732

 Loans 90 Days or More Past Due Accruing (90 PD)

$0

$0

$0

$1,625

$197

 Nonaccrual Loans (NAL)

$58,537

$57,617

$54,433

$43,684

$41,918

 Other Real Estate Owned (OREO)

$924

$2,370

$4,810

$11,028

$9,393

 Nonperforming Loans Held For Sale (HFS)

$2,244

$4,506

$5,506

$7,811

$21,864

 Nonperforming Assets (90 PD+NAL+OREO+HFS)

$61,705

$64,493

$64,749

$64,148

$73,372

 Allowance / Total Loans

2.07%

2.17%

2.21%

2.25%

2.15%

 NAL / Total Loans

2.87%

2.98%

2.99%

2.52%

2.45%

 NAL + 90 PD / Total Loans

2.87%

2.98%

2.99%

2.62%

2.46%

 NAL + 90 PD + OREO / Total Assets

2.03%

2.13%

2.23%

2.11%

1.82%

 Nonperforming Assets / Total Assets

2.11%

2.29%

2.44%

2.40%

2.59%

(1) Share and per share amounts for September 2010 have been restated to reflect the effects of the 10% stock dividend issued in December 2010.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Income Statement Data

Third Quarter 2011

(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

2011

2011

2011

2010

2010

Interest Income

$32,586

$32,462

$30,633

$31,196

$31,537

Interest Expense

2,548

2,848

3,165

3,659

4,284

Net Interest Income

30,038

29,614

27,468

27,537

27,253

Provision for Loan Losses

2,536

1,546

5,451

5,825

6,572

Non Interest Income

5,714

3,831

5,219

4,405

3,843

Non Interest Expense

20,090

20,648

20,450

19,132

18,422

Income Before Income Taxes

13,126

11,251

6,786

6,985

6,102

Income Taxes (Benefit)

4,618

3,819

1,962

(157)

2,031

Net Income

$8,508

$7,432

$4,824

$7,142

$4,071

Diluted Earnings per share (1)

$0.48

$0.42

$0.27

$0.41

$0.23

Net Interest Margin

4.47%

4.55%

4.39%

4.29%

4.09%

Average Cost of Deposits (2)

0.36%

0.38%

0.40%

0.44%

0.51%

(1) Share and per share amounts for September 2010 have been restated to reflect the effects of the 10% stock dividend issued in December 2010.

(2) Includes noninterest bearing deposits

SOURCE Hudson Valley Holding Corp.



RELATED LINKS

http://www.hudsonvalleybank.com