Market Overview

Hudson Valley Holding Corp. Announces Financial Results For The Third Quarter Of 2012

Share:

- C&I Loan Balances Grow 15 percent -

- Bank Continues to Grow Core Deposits and Lower Funding Costs -

- Operational Efficiency Drives 5 percent Reduction in Expenses, Even While Strategic Hiring and Investments in Technology Continue -

- Board Declares Dividend of $0.18 for the Fourth Quarter of 2012 -

YONKERS, N.Y., Oct. 24, 2012 /PRNewswire/ -- Hudson Valley Holding Corp. (NYSE: HVB) today reported sustained profitability in the third quarter ended September 30, 2012, as the bank continued to grow commercial loan balances, reduce funding costs and contain operational expenses.

The parent company of Hudson Valley Bank earned net income of $3.1 million, or $0.16 per diluted share, for the third quarter of 2012, compared to $5.0 million, or $0.25 per diluted share during the second quarter of 2012 and $8.5 million, or $0.43 per share, during the third quarter of 2011.  All earnings per share data reported today reflect additional shares outstanding as a result of Hudson Valley's 10 percent stock dividend issued in December 2011. 

"Knowing that Hudson Valley Bank's proven focus on small- and middle-market commercial customers is capable of delivering so much more, we're certainly not satisfied with the bottom line, even as we're pleased to report a profitable third quarter," President and Chief Executive Officer Stephen R. Brown said.  "We continue to acquire low-cost core deposits, profitable new lending relationships and experienced banking talent.  All the while, we continue to position the company to take full advantage of opportunities to fully deploy our excess liquidity in the quarters ahead, as we work to diversify our loan portfolio and product offering for businesses and their principals in metro New York."

Third quarter profitability was dampened by a credit impairment charge on one loan relationship in addition to the continued impact of the bank's excess cash position.  Cash totaled $843.9 million at September 30, 2012, up 27.2 percent from June 30, 2012 and nearly tripled from $290.6 million at September 30, 2011.  The position has accumulated as a result of the company's successful first quarter 2012 loan sales, along with continued cash flows generated by the bank's loan and securities portfolios.

Excess cash lowered the yield on interest-earning assets to 3.90 percent in the third quarter of 2012 from 4.26 percent in the linked quarter and 4.93 percent in the third quarter of 2011.  As a result, Hudson Valley's net interest margin was 3.60 percent in the third quarter of 2012, compared to 3.93 percent in the second quarter of 2012 and 4.47 percent in the third quarter of 2011.

Lower yield and margin were partially offset by continued improvement in deposit funding costs.  During the third quarter of 2012, the company's historically low average cost of deposits fell still further to 0.22 percent, one basis point lower than the linked quarter and 14 basis points below the third quarter of 2011. 

During the third quarter of 2012 the bank earned $4.4 million in non-interest income, compared to $4.8 million in the second quarter of 2012 and $5.7 million in the third quarter of 2011.  Fee income declined from both the linked and year-ago quarters due to a lower level of activities which generate service charges as well as fluctuating equity markets levels, which reduced investment advisory fees.  Compared to last year's third quarter, third quarter 2012 non-interest income was also lower due to about $0.9 million in gains on certain assets held for sale in 2011. 

The company again demonstrated its commitment to operational efficiency during the third quarter, even while continuing to invest in corporate initiatives to attract senior-level talent, introduce best practices and expand products and services.  Non-interest expense totaled $20.0 million for the three months ended September 30, 2012, a reduction of $1.0 million, or 4.8 percent, from the second quarter of 2012 and virtually unchanged compared to the third quarter of 2011.  Hudson Valley's efficiency ratio was 69.3 percent in the third quarter, compared to 68.1 percent and 56.7 percent in the linked and year-ago quarters, respectively.

Hudson Valley's unique core deposit base continued to expand in the third quarter of 2012.  Core deposits, which exclude time deposits greater than $100,000, increased $111.3 million from the linked quarter to $2.5 billion, comprising 96 percent of total deposits.  Stable and low-cost deposit funding remains the foundation of Hudson Valley's commercial banking franchise.

Commercial Loan Portfolio

Growth in commercial and industrial (C&I) loans during the third quarter of 2012 demonstrates the company's success in executing on its strategic plan to diversify its commercial loan base among new and existing customers in its metro New York markets.  C&I balances grew to $266.1 million at September 30, 2012, a 15.1 percent increase from $231.1 million at June 30, 2012.  C&I loans totaled $218.5 million at December 31, 2011 and $221.2 million at September 30, 2011.

The bank continues to reduce its overall concentration in commercial real estate (CRE) lending. At September 30, 2012, CRE represented 313.5 percent of risk-based capital, a level below the bank's previously disclosed commitment to maintain its concentration of commercial real estate loans below 400 percent.  CRE loans including construction and multi-family loans totaled $884.1 million on September 30, 2012, decreasing from $944.1 million at June 30, 2012, $1.2 billion at December 31, 2011 and $1.5 billion at September 30, 2011. 

Portfolio Credit Quality

Overall portfolio trends continue to reflect a generally improving credit environment across Hudson Valley's niche commercial franchise, while credit events specific to one customer relationship drove the linked quarter decline in asset quality.

Hudson Valley's total nonperforming assets (NPAs), including nonaccrual loans, nonaccrual loans held for sale, accruing loans delinquent over 90 days and other real estate owned (OREO), were $42.6 million at September 30, 2012, compared to $39.6  million at June 30, 2012, $58.9 million at December 31, 2011 and $61.7 million at September 30, 2011.  NPAs totaled 1.45 percent of total assets at September 30, 2012, compared to 1.40 percent at June 30, 2012, 2.11 percent at December 31, 2011 and 2.11 percent at September 30, 2011. 

The linked quarter increase in nonperforming assets reflected the addition of classified credits totaling $6.5 million.  The relationship associated with these credits has unique aspects and, therefore, we do not believe it is indicative of a general trend. The sale of $474 million in held-for-sale loans, including $27.8 million in nonperforming loans held-for-sale, significantly improved the bank's key asset quality measures compared to December 31, 2011 and September 30, 2011.

Net charge-offs during the third quarter of 2012 were $4.3 million, $0.7 million lower than in the second quarter of 2012 and $2.1 million higher than in the third quarter of 2011.  Net charge-offs for the third quarter of 2012 were primarily attributable to a single relationship, with impairment charges of $4.1 million.  As a percentage of average loans, annualized net charge-offs were 1.16 percent in the third quarter of 2012, compared to 1.27 percent in the second quarter of 2012 and 0.47 percent in the third quarter of 2011.

The provision for loan losses was $3.7 million for the third quarter of 2012. Provision for loan losses was $1.9 million and $2.5 million in the linked and year-ago quarters, respectively.

The bank's allowance for loan losses was $28.1 million at September 30, 2012, compared to $28.7 million at June 30, 2012, $30.7 million at December 31, 2011 and $42.2 million at September 30, 2011.  Allowances measured 1.86 percent, 1.85 percent, 1.95 and 2.07 percent of total loans at each of those dates, respectively. 

At September 30, 2012, classified assets represented 31.9 percent of risk-based capital.  The company continues to target concentration levels for classified assets relative to risk-based capital below 25 percent. 

$0.18 Cash Dividend Declared

Hudson Valley's board of directors declared a cash dividend of $0.18 per share, payable to all common stock shareholders of record as of the close of business on November 13, 2012.  The dividend will be payable on November 23, 2012.

Capital Strength

At September 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.4 percent, a Tier 1 risk-based capital ratio of 16.1 percent, and a Tier 1 leverage ratio of 9.4 percent. 

Its Hudson Valley Bank subsidiary at September 30, 2012 recorded a total risk-based capital ratio of 17.2 percent, a Tier 1 risk-based capital ratio of 15.9 percent, and a Tier 1 leverage ratio of 9.2 percent. 

Hudson Valley's capital ratios remain in excess of "well capitalized" levels applicable to banks under current regulations.  Further, Hudson Valley Bank's capital ratios at September 30, 2012 were in excess of the following internal minimum capital ratios established under the Bank's capital plan submitted to the Office of the Comptroller of the Currency ("OCC"): total risk-based capital ratio of at least 13.0 percent, a Tier 1 risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 8.5 percent. 

Third Quarter and Nine Month Review

The company recorded net income for the three month period ended September 30, 2012 of $3.1 million or $0.16 per diluted share, a decrease of $5.4 million compared to net income of $8.5 million or $0.43 per diluted share for the same period in the prior year.  Net income for the nine month period ended September 30, 2012 was $26.1 million or $1.33 per diluted share, an increase of $5.3 million compared to net income of $20.8 million or $1.06 per diluted share for the same period in the prior year. Per share amounts for the 2011 periods have been adjusted to reflect the effects of the 10 percent stock dividend issued in December 2011.

The decrease in earnings for the three month period ended September 30, 2012, compared to the same period in the prior year, was primarily due to a $5.9 million decrease in net interest income, the anticipated result of excess liquidity remaining from the proceeds of the loan sales conducted in the first and second quarters of 2012. The loan sales were conducted as part of the company's efforts to reduce the levels of nonperforming and other classified loans, and also to reduce the overall concentration in commercial real estate loans. In addition to the decrease in net interest income, net income for the third quarter of 2012 was lower, compared to the same period in the prior year, as a result of a higher provision for loan losses and lower fee income, partially offset by lower losses on sales and revaluations of loans and other real estate owned and slightly lower non interest expenses. The increase in earnings for the nine month period ended September 30, 2012, compared to the same period in the prior year, resulted primarily from pretax gain of $15.9 million resulting from the successful completion of $474 million of loan sales announced in the fourth quarter of 2011 and completed at the end of the first quarter of 2012. In addition to the gains on the loan sales, income for the nine month period ended September 30, 2012 was higher, compared to the same period in the prior year, due to a lower provision for loan losses, partially offset by lower net interest income, higher impairment charges on securities available for sale and slightly higher non interest expenses.

Total loans, excluding loans held for sale, decreased $47.9 million and $68.3 million during the three and nine month periods ended September 30, 2012 compared to the prior year end.  The overall decrease was primarily the result of pay downs and payoffs of existing loans exceeding new production and additional loan sales conducted in the second quarter of 2012, partially offset by the purchase of adjustable rate residential loans in the first quarter of 2012, which were purchased as partial redeployment of proceeds from sales of loans held for sale.  The company continues to provide lending availability to both new and existing customers.

Nonperforming assets decreased to $42.6 million at September 30, 2012, compared to $58.9 million at December 31, 2011. Overall asset quality continued to be adversely affected by the current state of the economy and the real estate market. Although there is evidence that the current economic downturn may have begun to slowly turn around, higher than normal levels of 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 2012. Despite overall reductions in classified and nonperforming loans, the company's loan portfolio continued to be adversely impacted by the effects of 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 some continuing weakness in the overall asset quality of the company's loan portfolio. As a result of these factors, the company has continued to follow aggressive strategies for resolving problem assets and has maintained the allowance for loan loss at a higher than normal level. The provision for loan losses totaled $3.7 million and $7.0 million, respectively, for the three and nine month periods ended September 30, 2012, compared to $2.5 million and $9.5 million, respectively, for the same periods in the prior year.  The 2012 provision is lower than in 2011 reflecting improvements achieved in the resolutions of classified and nonperforming loans, however, the provisions in both 2012 and 2011 are reflective of continued weakness in the overall economy, and the related effects of this weakness on the company's overall asset quality.

Total deposits increased by $123.3 million during the nine month period ended September 30, 2012, compared to the prior year end. The company continued to emphasize its core deposit growth, while placing less emphasis on non core deposits including deposits which are obtained on a bid basis.

Liquidity from deposit growth and excess loan and investment repayments over new production 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 significant margin compression. The net interest margin was 3.60 percent and 4.09 percent, respectively, for the three and nine month periods ended September 30, 2012, compared to 4.47 percent and 4.47 percent, respectively, for the same periods in the prior year. The company expects some additional net interest margin compression in future quarters due to maturing loans and investments being reinvested at lower interest rates and until redeployment of the excess proceeds from the recent loan sales and other maturing assets can be completed in a manner consistent with both the company's risk management policies and the requirements of the OCC.  Regardless of the timing of the aforementioned redeployment, if interest rates continue at current levels, we expect that additional downward pressure on net interest margin will continue.   

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 decreased by $6.1 million or 19.9 percent to $24.5 million for the three month period ended September 30, 2012, compared to $30.6 million for the same period in the prior year. Tax equivalent basis net interest income decreased by $6.5 million or 7.3 percent to $82.4 million for the nine month period ended September 30, 2012, compared to $88.9 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.4 million and $1.5 million, respectively, for the three and nine month periods ended September 30, 2012, compared to $0.6 million and $1.8 million, respectively, for the same periods in the prior year.

The company's non interest income was $4.4 million and $29.5 million, respectively, for the three and nine month periods ended September 30, 2012. This represented a decrease of $1.3 million and an increase of $14.7 million, respectively, compared to $5.7 million and $14.8 million, respectively, for the same periods in the prior year. The decrease in the three month period ended September 30, 2012, compared to the same period in the prior year, resulted from lower service fees, lower investment advisory fees and lower net gains on sales and revaluations of assets. The increase in the nine month period ended September 30, 2012, compared to the same period in the prior year, resulted from a $15.9 million pretax gain on sales of loans completed in the first quarter of 2012 and higher other income, partially offset by lower service fees, lower investment advisory fees and higher impairment charges on securities available-for-sale. Investment advisory fee income was lower in 2012 primarily as a result of the effects of continued fluctuation in both domestic and international equity markets. Service charges decreased due to decreased activity. Pre-tax impairment charges on securities available for sale were $0.5 million for the nine month period ended September 30, 2012 and $0.3 million for the same period in the prior year.  The impairment charges were related to the company's investments in pooled trust preferred securities. Non interest income also included other gains of $0.9 million and $0.1 million, respectively, for the three and nine month periods ended September 30, 2011. These gains related to sales and revaluations of other real estate owned and loans held for sale.

Non interest expense was $20.0 million and $61.9 million, respectively, for the three and nine month periods ended September 30, 2012. This represented a decrease of $0.1 million or 0.5 percent and an increase of $0.7 million or 1.1 percent, respectively, compared to $20.1 million and $61.2 million, respectively, for the same periods in the prior year. The overall increase in non interest expense resulted primarily from an additional provision of $1.3 million related to the previously announced ongoing investigations by the Securities and Exchange Commission (SEC) and the Department of Labor (DOL) relating to issues surrounding the brokerage practices and policies and disclosures about such practices of the company's investment advisory subsidiary, A.R. Schmeidler & Co., Inc. Based on ongoing discussions with the SEC and the DOL, the company believes it has substantially accrued for any penalties and related costs anticipated in the final resolution of this matter although, until final agreement is reached, the exact result cannot be determined. Other changes in non interest expense included decreases in costs associated with problem loan resolution and decreases in FDIC insurance, partially offset by increases in investments in technology and personnel to accommodate expanding risk management requirements and growth and the expansion of services and products available to new and existing customers.

Hudson Valley's capital ratios remain significantly in excess of "well capitalized" levels generally applicable to banks under current regulations. At September 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.4 percent, a Tier 1 risk-based capital ratio of 16.1 percent, and a Tier 1 leverage ratio of 9.4 percent.

Non-GAAP Financial Disclosures and Reconciliation to GAAP

In addition to evaluating Hudson Valley Holding Corp's results of operations in accordance with U.S. generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as the tangible equity ratio and tangible book value per share.  Management believes these non-GAAP financial measures provide information useful to investors in understanding Hudson Valley Holding Corp's underlying operating performance and trends, and facilitates comparisons with the performance of other banks.  Further, the tangible equity ratio and tangible book value per share are used by management to analyze the relative strength of Hudson Valley Holding Corp's capital position. 

In light of diversity in presentation among financial institutions, the methodologies used by Hudson Valley Holding Corp. for determining the non-GAAP financial measures discussed above may differ from those used by other financial institutions.

Conference Call

As previously announced, Hudson Valley will hold its quarterly conference call to review the company's financial results on Wednesday, October 24, 2012 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 9, 2012 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 - Conference # 10019414;
International Toll: +1-412-317-0088 - Conference # 10019414.

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 its 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 Bank is a Westchester based Bank with more than $2.9 billion in assets, serving the metropolitan area with 36 branches located in Westchester, Rockland, the Bronx, Manhattan and Brooklyn in New York and Fairfield County and New Haven County, in Connecticut.  Hudson Valley Bank  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.

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 December 31, 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, 2011 include, but are not limited to:

  • our ability to comply with the formal agreement entered into with the Office of the Comptroller of the Currency (the "OCC") and any additional restrictions placed on us as a result of future regulatory exams or changes in regulatory policy implemented by the OCC or other bank regulators;
  • the  OCC and other bank regulators may require us to further modify or change our mix of assets, including our concentration in certain types of loans, or require us to take further remedial actions;
  • the results of the investigation of A.R. Schmeidler & Co., Inc. by the Securities and Exchange Commission (the "SEC") and the Department of Labor (the "DOL") and the possibility that our management's attention will be diverted to the SEC and DOL  investigations and settlement discussions and we will incur further costs and legal expenses;
  • the adverse effects on the business of A.R. Schmeidler & Co., Inc. and our trust department arising from a settlement with the SEC and DOL investigations;
  • our inability to pay quarterly cash dividends to shareholders in light of our earnings, the current and future economic environment,  Federal Reserve Board guidance, our Bank's capital plan and other regulatory requirements applicable to Hudson Valley or Hudson Valley Bank ;
  • the possibility that we may need to raise additional capital in the future and our ability to raise such capital on terms that are favorable to us;
  • 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;
  • our inability to manage interest rate risk;
  • increased expense and burdens resulting from the regulatory environment in which we operate and our inability to comply with existing and future  regulatory requirements;
  • our inability to maintain regulatory capital above the minimum levels Hudson Valley Bank has set as its minimum capital levels in its capital plan provided to the OCC, or such higher capital levels as may be required;
  • proposed legislative and regulatory action may adversely affect us and the financial services industry;
  • future increased Federal Deposit Insurance Corporation, or FDIC, special assessments or changes to regular assessments;
  • potential liabilities under federal and state environmental laws;
  • regulatory 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, 2012 and 2011

Dollars in thousands, except per share amounts





Three Months Ended


September 30


2012

2011

Interest Income:



Loans, including fees

$21,619

$28,641

Securities:



Taxable

2,902

2,778

Exempt from Federal income taxes

796

989

Federal funds sold

11

24

Deposits in banks

381

154

Total interest income

25,709

32,586

Interest Expense:



Deposits

1,393

2,226

Securities sold under repurchase agreements and other short-term borrowings

18

68

Other borrowings

183

254

Total interest expense

1,594

2,548

Net Interest Income

24,115

30,038

Provision for loan losses

3,723

2,536

Net interest income after provision for loan losses

20,392

27,502

Non Interest Income:



Service charges

1,454

1,671

Investment advisory fees

2,303

2,639

Recognized impairment charge on securities available for sale (includes $699 of total gains and

$361 of total losses in 2012 and 2011, respectively, less $699 of gains and $242 of losses on 

securities available for sale, recognized in other comprehensive income in 2012 and 2011,

respectively)

-

(119)

Realized gains on securities available for sale, net

-

8

Gains on sales and revaluations of loans and other real estate owned, net

-

946

Other income

596

569

Total non interest income

4,353

5,714

Non Interest Expense:



Salaries and employee benefits

11,366

11,296

Occupancy

2,121

2,217

Professional services

1,739

1,700

Equipment

1,071

1,101

Business development

545

452

FDIC assessment

811

553

Other operating expenses

2,382

2,771

Total non interest expense

20,035

20,090

Income Before Income Taxes

4,710

13,126

Income Taxes

1,576

4,618

Net Income

$3,134

$8,508

Basic Earnings Per Common Share (1)

$0.16

$0.44

Diluted Earnings Per Common Share (1)

$0.16

$0.43




(1) September 2011 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2011.

 

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the nine months ended September 30, 2012 and 2011

Dollars in thousands, except per share amounts





Nine Months Ended


September 30


2012

2011

Interest Income:



    Loans, including fees

$73,197

$82,914

    Securities:



        Taxable

9,355

8,875

        Exempt from Federal income taxes

2,792

3,300

    Federal funds sold

28

73

    Deposits in banks

735

519

Total interest income

86,107

95,681

Interest Expense:



    Deposits

4,557

6,790

    Securities sold under repurchase agreements and other short-term borrowings

85

172

    Other borrowings

546

1,599

Total interest expense

5,188

8,561

Net Interest Income

80,919

87,120

Provision for loan losses

6,976

9,533

Net interest income after provision for loan losses

73,943

77,587

Non Interest Income:



    Service charges

4,850

5,263

    Investment advisory fees

7,213

7,998

    Recognized impairment charge on securities available for sale (includes $594 of total gains and

    $1,318 of total losses in 2012 and 2011, respectively, less $1,122 of gains and $995 of losses on

    securities available for sale, recognized in other comprehensive income in 2012 and 2011,

    respectively)

(528)

(323)

    Realized gains on securities available for sale, net

-

8

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

15,920

73

    Other income

2,041

1,745

Total non interest income

29,496

14,764

Non Interest Expense:



    Salaries and employee benefits

33,544

33,377

    Occupancy

6,563

6,764

    Professional services

5,646

4,902

    Equipment

3,300

3,218

    Business development

1,899

1,548

    FDIC assessment

2,165

2,350

    Other operating expenses

8,828

9,029

Total non interest expense

61,945

61,188

Income Before Income Taxes

41,494

31,163

Income Taxes

15,386

10,399

Net Income

$26,108

$20,764

Basic Earnings Per Common Share (1)

$1.33

$1.07

Diluted Earnings Per Common Share (1)

$1.33

$1.06




(1) September 2011 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2011.

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2012 and December 31, 2011

Dollars in thousands, except per share and share amounts





Sept 30

Dec 31


2012

2011

ASSETS



Cash and non interest earning due from banks

$53,349

$43,743

Interest earning deposits in banks

778,025

34,361

Federal funds sold

12,517

16,425

Securities available for sale, at estimated fair value (amortized cost of

    $444,337 in 2012 and $503,584 in 2011)

447,453

507,897

Securities held to maturity, at amortized cost (estimated fair value of $11,627



in 2012 and $13,819 in 2011)

10,902

12,905

Federal Home Loan Bank of New York (FHLB) stock

4,827

3,831

Loans (net of allowance for loan losses of $28,107 in 2012 and $30,685 in 2011)

1,476,814

1,541,405

Loans held for sale

2,354

473,814

Accrued interest and other receivables

25,099

40,405

Premises and equipment, net

24,424

25,936

Other real estate owned

250

1,174

Deferred income tax, net

18,585

19,822

Bank owned life insurance

38,937

37,563

Goodwill

23,842

23,842

Other intangible assets

1,090

1,651

Other assets

10,574

12,896

TOTAL ASSETS

$2,929,042

$2,797,670




LIABILITIES



Deposits:



    Non interest bearing

$997,251

$910,329

    Interest bearing

1,551,359

1,514,953

Total deposits

2,548,610

2,425,282

Securities sold under repurchase agreements and other short-term borrowings

42,693

53,056

Other borrowings

16,438

16,466

Accrued interest and other liabilities

28,401

25,304

TOTAL LIABILITIES

2,636,142

2,520,108




STOCKHOLDERS' EQUITY



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



outstanding in 2012 and 2011, respectively

-

-

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



19,638,090 and 19,516,490 shares in 2012 and 2011, respectively

4,188

4,163

Additional paid-in capital

348,159

347,764

Retained earnings (deficit)

(2,968)

(18,527)

Accumulated other comprehensive income

1,085

1,726

Treasury stock, at cost; 1,299,414 shares in 2012 and 2011

(57,564)

(57,564)

TOTAL STOCKHOLDERS' EQUITY

292,900

277,562

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$2,929,042

$2,797,670




 

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the three months ended September 30, 2012 and 2011









       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,



2012




2011


(Unaudited)

Average

Interest 

Yield/


Average

Interest

Yield/


Balance

(3)

Rate


Balance

(3)

Rate

ASSETS








Interest earning assets:








 Deposits in Banks

$696,798

$381

0.22%


$234,589

$154

0.26%

 Federal funds sold

22,782

11

0.19%


39,971

24

0.24%

 Securities: (1)








    Taxable

367,206

2,902

3.16%


378,157

2,778

2.94%

    Exempt from federal income taxes

86,429

1,224

5.66%


103,638

1,522

5.87%

 Loans, net (2)

1,505,942

21,619

5.74%


1,928,888

28,641

5.94%

Total interest earning assets

2,679,157

26,137

3.90%


2,685,243

33,119

4.93%









Non interest earning assets:








 Cash & due from banks

50,526




48,290



 Other assets

146,062




135,965



Total non interest earning assets

196,588




184,255



Total assets

$2,875,745




$2,869,498



LIABILITIES AND STOCKHOLDERS'

EQUITY








Interest bearing liabilities:








 Deposits:








    Money market

$874,877

$841

0.38%


$999,130

$1,557

0.62%

    Savings

125,759

146

0.46%


111,358

116

0.42%

    Time

136,459

194

0.57%


163,830

357

0.87%

    Checking with interest

383,258

212

0.22%


309,694

196

0.25%

 Securities sold under repo & other s/t borrowings

48,082

18

0.15%


53,100

68

0.51%

 Other borrowings

16,441

183

4.45%


23,652

254

4.30%

Total interest bearing liabilities

1,584,876

1,594

0.40%


1,660,764

2,548

0.61%

Non interest bearing liabilities:








 Demand deposits

969,025




884,347



 Other liabilities

31,204




25,770



Total non interest bearing liabilities

1,000,229




910,117



Stockholders' equity (1)

290,640




298,617



Total liabilities and stockholders' equity

$2,875,745




$2,869,498



Net interest earnings


$24,543




$30,571


Net yield on interest earning assets



3.66%




4.55%

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








(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 and loans held-for-sale.

(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, 2012 and 2011









       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,



2012




2011


(Unaudited)

Average

Interest

Yield/


Average

Interest

Yield/


Balance

(3)

Rate


Balance

(3)

Rate

ASSETS








Interest earning assets:








 Deposits in Banks

$451,380

$735

0.22%


$253,829

$519

0.27%

 Federal funds sold

18,707

28

0.20%


42,190

73

0.23%

 Securities: (1)








    Taxable

378,363

9,355

3.30%


359,008

8,875

3.30%

    Exempt from federal income taxes

94,650

4,295

6.05%


109,837

5,077

6.16%

 Loans, net (2)

1,692,823

73,197

5.77%


1,832,866

82,914

6.03%

Total interest earning assets

2,635,923

87,610

4.43%


2,597,730

97,458

5.00%









Non interest earning assets:








 Cash & due from banks

48,748




46,501



 Other assets

151,766




143,107



Total non interest earning assets

200,514




189,608



Total assets

$2,836,437




$2,787,338



LIABILITIES AND STOCKHOLDERS'

EQUITY








Interest bearing liabilities:








 Deposits:








    Money market

$904,794

$2,997

0.44%


$946,616

$4,699

0.66%

    Savings

122,711

407

0.44%


112,907

358

0.42%

    Time

140,774

659

0.62%


172,634

1,176

0.91%

    Checking with interest

347,664

494

0.19%


293,660

557

0.25%

 Securities sold under repo & other s/t borrowings

48,791

85

0.23%


46,102

172

0.50%

 Other borrowings

16,450

546

4.43%


48,176

1,599

4.43%

Total interest bearing liabilities

1,581,184

5,188

0.44%


1,620,095

8,561

0.70%

Non interest bearing liabilities:








 Demand deposits

938,938




848,834



 Other liabilities

28,421




24,106



Total non interest bearing liabilities

967,359




872,940



Stockholders' equity (1)

287,894




294,303



Total liabilities and stockholders' equity

$2,836,437




$2,787,338



Net interest earnings


$82,422




$88,897


Net yield on interest earning assets



4.17%




4.56%

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








(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 and loans held-for-sale.

(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

Financial Highlights

Third Quarter 2012

(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


2012

2011

2012

2011






Earnings:





Net Interest Income

$24,115

$30,038

$80,919

$87,120

Non Interest Income

$4,353

$5,714

$29,496

$14,764

Non Interest Expense

$20,035

$20,090

$61,945

$61,188

Net Income

$3,134

$8,508

$26,108

$20,764

Net Interest Margin

3.60%

4.47%

4.09%

4.47%

Net Interest Margin (FTE) (2)

3.66%

4.55%

4.17%

4.56%






Diluted Earnings Per Share (1)

$0.16

$0.43

$1.33

$1.06

Dividends Per Share (1)

$0.18

$0.18

$0.54

$0.46

Return on Average Equity

4.32%

11.33%

12.03%

9.38%

Return on Average Assets

0.44%

1.18%

1.23%

0.99%






Average Balances:





Average Assets

$2,874,634

$2,872,159

$2,838,448

$2,788,406

Average Net Loans

$1,505,942

$1,928,888

$1,692,823

$1,832,866

Average Investments

$453,635

$481,795

$473,013

$468,845

Average Interest Earning Assets

$2,678,046

$2,687,904

$2,637,934

$2,598,798

Average Deposits

$2,489,378

$2,468,359

$2,454,881

$2,374,651

Average Borrowings

$64,523

$76,752

$65,241

$94,278

Average Interest Bearing Liabilities

$1,584,876

$1,660,764

$1,581,184

$1,620,095

Average Stockholders' Equity

$290,189

$300,338

$289,345

$295,084






Asset Quality - During Period:





Provision for loan losses

$3,723

$2,536

$6,976

$9,533

Net Charge-offs

$4,349

$2,276

$9,554

$6,332

Annualized Net Charge-offs/Avg Net Loans

1.16%

0.47%

0.75%

0.46%






(1) 2011 per share amounts have been restated to reflect the effects of the 10% stock dividend issued in December 2011.

(2) See Non-GAAP financial measures and reconciliation to GAAP below.

 

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Balance Sheet Data

Third Quarter 2012

(Dollars in thousands except per share amounts)








Sep 30

Jun 30

Mar 31

Dec 31

Sep 30


2012

2012

2012

2011

2011







Period End Balances:






Total Assets

$2,929,042

$2,816,244

$2,805,276

$2,797,670

$2,922,257

Total Investments

$458,355

$467,623

$460,188

$520,802

$499,811

Net Loans

$1,476,814

$1,523,833

$1,609,199

$1,541,405

$1,993,658

Goodwill and Other Intangible Assets

$24,932

$25,119

$25,306

$25,493

$25,680

Total Deposits

$2,548,610

$2,439,848

$2,423,901

$2,425,282

$2,529,668

Total Stockholders' Equity

$292,900

$292,599

$290,884

$277,562

$303,511

Tangible Common Equity (2)

$267,968

$267,480

$265,578

$252,069

$277,831

Common Shares Outstanding (1)

19,638,090

19,633,977

19,629,981

19,516,490

19,463,727

Book Value Per Share (1)

$14.91

$14.90

$14.82

$14.22

$15.59

Tangible Book Value Per Share (1) (2)

$13.65

$13.62

$13.53

$12.92

$14.27

Tangible Common Equity Ratio - HVHC (2)

9.2%

9.6%

9.6%

9.1%

9.6%







Tier 1 Leverage Ratio - HVHC

9.4%

9.6%

9.4%

8.8%

9.7%

Tier 1 Risk Based Capital Ratio - HVHC

16.1%

15.8%

15.0%

11.3%

12.7%

Total Risk Based Capital Ratio - HVHC

17.4%

17.0%

16.3%

12.6%

14.0%

Tier 1 Leverage Ratio - HVB

9.2%

9.5%

9.1%

8.4%

9.2%

Tier 1 Risk Based Capital Ratio - HVB

15.9%

15.6%

14.6%

10.8%

12.1%

Total Risk Based Capital Ratio - HVB

17.2%

16.8%

15.8%

12.1%

13.4%







Loan Categories (excluding Loans Held-For-Sale):






Commercial Real Estate

$583,653

$633,581

$705,603

$690,837

$817,998

Construction

91,241

96,211

106,698

110,027

145,682

Residential Multi-Family

209,192

212,655

225,428

227,595

507,145

Residential Other

322,841

346,489

343,044

287,233

305,058

Commercial and Industrial

266,118

231,140

222,485

218,500

221,208

Individuals

22,270

21,495

28,316

29,222

29,714

Lease Financing

12,373

14,015

13,187

12,538

13,036

Total Loans

$1,507,688

$1,555,586

$1,644,761

$1,575,952

$2,039,841







Asset Quality - Period End:






Allowance for Loan Losses

$28,107

$28,733

$31,856

$30,685

$42,150

Loans 31-89 Days Past Due Accruing

$7,557

$5,436

$10,250

$4,974

$8,737

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

$0

$0

$0

$0

$0

Nonaccrual Loans (NAL)

$42,305

$39,304

$27,859

$29,892

$58,537

Other Real Estate Owned (OREO)

$250

$250

$1,174

$1,174

$924

Nonperforming Loans Held For Sale (HFS)

$0

$0

$0

$27,848

$2,244

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

$42,555

$39,554

$29,033

$58,914

$61,705

Allowance / Total Loans

1.86%

1.85%

1.94%

1.95%

2.07%

NAL / Total Loans

2.81%

2.53%

1.69%

1.90%

2.87%

NAL + 90 PD / Total Loans

2.81%

2.53%

1.69%

1.90%

2.87%

NAL + 90 PD + OREO / Total Assets

1.45%

1.40%

1.03%

1.11%

2.03%

Nonperforming Assets / Total Assets

1.45%

1.40%

1.03%

2.11%

2.11%







(1) Share and per share amounts for September 2011 have been restated to reflect the effects of the 10% stock dividend issued in December 2011.

(2) See Non-GAAP financial disclosures and reconciliation to GAAP  below.

 

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Income Statement Data

Third Quarter 2012

(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


2012

2012

2012

2011

2011







Interest Income

$25,709

$27,120

$33,278

$32,936

$32,586

Interest Expense

1,594

1,612

1,982

2,197

2,548

Net Interest Income

24,115

25,508

31,296

30,739

30,038

Provision for Loan Losses

3,723

1,894

1,359

54,621

2,536

Non Interest Income

4,353

4,789

20,354

4,136

5,714

Non Interest Expense

20,035

21,034

20,876

18,967

20,090

Income (Loss) Before Income Taxes

4,710

7,369

29,415

(38,713)

13,126

Income Taxes (Benefit)

1,576

2,408

11,402

(15,812)

4,618

Net Income (Loss)

$3,134

$4,961

$18,013

($22,901)

$8,508

Diluted Earnings (Loss) per share (1)

$0.16

$0.25

$0.92

($1.17)

$0.43

Net Interest Margin

3.60%

3.93%

4.75%

4.60%

4.47%

Average Cost of Deposits (2)

0.22%

0.23%

0.28%

0.32%

0.36%







(1) Share and per share amounts for September 2011 have been restated to reflect the effects of the 10% stock dividend issued in December 2011.

(2) Includes noninterest bearing deposits

 

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Non-GAAP Financial Measures and Reconciliation to GAAP

(Dollars in thousands except per share amounts)







Three Months Ended

Nine Months Ended


September 30

September 30


2012

2011

2012

2011

Total interest earning assets:





  As reported

$2,678,046

$2,687,904

$2,637,934

$2,598,798

  Unrealized gain on securities





    available-for-sale (a)

(1,111)

2,661

2,011

1,068

Adjusted total interest earning assets (1)

$2,679,157

$2,685,243

$2,635,923

$2,597,730

Net interest earnings:





  As reported

$24,115

$30,038

$80,919

$87,120

  Adjustment to tax equivalency basis (b)

428

533

1,503

1,777

Adjusted net interest earnings (1)

$24,543

$30,571

$82,422

$88,897

Net yield on interest earning assets:





  As reported

3.60%

4.47%

4.09%

4.47%

  Effects of (a) and (b) above

0.06%

0.08%

0.08%

0.09%

Adjusted net yield on interest earning assets (1)

3.66%

4.55%

4.17%

4.56%

Average stockholders' equity:





  As reported

$290,189

$300,338

$289,345

$295,084

  Effects of (a) and (b) above

(451)

1,721

1,451

781

Adjusted average stockholders' equity (1)

$290,640

$298,617

$287,894

$294,303

 


Sep 30

Jun 30

Mar 31

Dec 31

Sep 30


2012

2012

2012

2011

2011

Tangible Equity Ratio:






Total Stockholders' Equity:






As reported

$292,900

$292,599

$290,884

$277,562

$303,511

Less: Goodwill and other intangible assets

24,932

25,119

25,306

25,493

25,680

                      Tangible stockholders' equity

$267,968

$267,480

$265,578

$252,069

$277,831

Total Assets:






As reported

$2,929,042

$2,816,244

$2,805,276

$2,797,670

$2,922,257

Less: Goodwill and other intangible assets

24,932

25,119

25,306

25,493

25,680

Tangible assets

$2,904,110

$2,791,125

$2,779,970

$2,772,177

$2,896,577

                      Tangible equity ratio (2)

9.2%

9.6%

9.6%

9.1%

9.6%

Tangible Book Value Per Share:






Tangible stockholders' equity

$267,968

$267,480

$265,578

$252,069

$277,831

Common shares outstanding

19,638,090

19,633,977

19,629,981

19,516,490

19,463,727

                       Tangible book value per share (2)

$13.65

$13.62

$13.53

$12.92

$14.27







(1) Adjusted total interest earning assets, net interest earnings, net yield on interest earning assets and average stockholders equity exclude the effects of unrealized net gains and losses on securities available for sale. These are non-GAAP financial measures. Management believes that this alternate 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. As noted in the company's 2012 Proxy Statement, net income as a percentage of adjusted average stockholders' equity is one of several factors utilized by management to determine total compensation.   

(2) Tangible equity ratio and tangible book value for share are non-GAAP financial measurements. Management believes these non-GAAP financial measures provide information useful to investors in understanding the company's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and are used by management to analyze the relative strength of the company's capital position.     

 

SOURCE Hudson Valley Holding Corp.

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