Categories

A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Hudson Valley Holding Corp. Reports Second Quarter 2013 Results Including Loan And Securities Portfolio Growth

YONKERS, N.Y., July 23, 2013 /PRNewswire/ — Hudson Valley Holding Corp. (HVB) reported second quarter 2013 financial results, including solid earnings, continued expansion of core deposits, and growth in the bank’s loan and securities portfolios.

The parent company of Hudson Valley Bank earned $3.5 million, or $0.18 per diluted share, in the second quarter of 2013, compared to $3.7 million, or $0.18 per share, in the first three months of 2013 and $5.0 million, or $0.25 per share, in the second quarter of 2012.

“We made good progress on our efforts to deploy our cash into earning assets in the second quarter and first half of the year,” President and Chief Executive Officer Stephen R. Brown said. “As our results show, we’re executing our strategy for growing the breadth and diversity of loan products we can offer our niche customers in metro New York, while continuing our longstanding success in attracting and retaining the low-cost deposits that are the foundation of our franchise value.”

Liquidity Deployment

As previously announced, the bank is targeting total loan growth of about 10 percent in 2013, compared to the year prior, with total loan originations or purchases projected to exceed $200 million, in addition to expansion of its investment securities portfolio by $100 million this year.

Summary of Earning Asset Balances

(Excludes Loans-Held-For-Sale)

(dollars in thousands)

First

Half

Second

Quarter

First

Quarter

2013

2013

2013

Starting loans, gross

$1,469,783

$1,414,986

$1,469,783

Loan originations

100,663

75,933

24,730

Loan purchases

36,323

36,323

0

Payoffs, pay-downs and other changes

(126,396)

(46,869)

(79,527)

Increase (decrease) in gross loans

10,590

65,387

(54,797)

Ending loans, gross

$1,480,373

$1,480,373

$1,414,986

Starting securities

$455,295

$483,792

$455,295

Securities purchases

210,376

110,137

100,239

Pay-downs, maturities and other changes

(134,967)

(63,225)

(71,742)

Increase (decrease) in securities

75,409

46,912

28,497

Ending securities

$530,704

$530,704

$483,792

Hudson Valley continues to focus capital and investment on developing new middle market, small business and other business lending products to successfully grow and diversify its loan portfolio beyond its traditional strength in commercial real estate (CRE). The company remains committed to a prudent timeline for deployment of excess liquidity, without compromising credit quality, risk management or market strength.

Newly originated loans in the first half of 2013 totaled $100.7 million and included $50.6 million of commercial real estate loans, $30.2 million of business loans and $19.9 million of residential 1-4 family loans.

Loans purchased in the second quarter of 2013 totaled $36.3 million and are largely jumbo adjustable rate mortgages collateralized by single-family residences in and around metropolitan New York. Prior to their acquisition from an in-market financial institution late in the second quarter, Hudson Valley carried out a thorough on-site credit and compliance review of each of these loans, which exhibit high-quality credit risk characteristics, and carry an average yield of 3.09 percent.

Year-to-date, the bank has originated or purchased nearly $137 million in loans toward our $200 million target for 2013 – that’s more than 68 percent through June 30.

In addition, during the second quarter of 2013, the company experienced $8.6 million in payoffs and paydowns on problem credits as the company continues to actively facilitate resolutions.

The company believes its investment securities purchases continue to exhibit conservative interest rate and credit risk characteristics. Including recently acquired securities, Hudson Valley’s total portfolio yield averaged 2.53 percent in the second quarter of 2013, with an average duration of just 3.2 years.

Core Deposits

Even as the bank executed its liquidity deployment and loan growth strategy, Hudson Valley continued to drive the ongoing expansion of its core deposit franchise in the second quarter of 2013. These low-cost core deposits, which exclude time deposits greater than $100,000, grew to $2.5 billion, or 96.6 percent of total deposits, at June 30, 2013, compared to $2.4 billion and $2.3 billion at March 31, 2013 and June 30, 2012, respectively.

Contributing to core deposit growth in the second quarter were high levels of customer retention following previously announced branch consolidations that were completed in the first half of the year. At June 30, 2013, as a result of branch consolidations, Hudson Valley retained 88 percent of deposits which was higher than anticipated.

Continued improvement in the company’s historically low average cost of deposits to 20 basis points in the first and second quarters of 2013 from 23 basis points in the second quarter of 2012 continues to help to mitigate the impact of remaining excess liquidity on net interest margin.

Profitability

Hudson Valley’s net interest margin was 3.06 percent in the second quarter of 2013, compared to 3.18 percent in the first quarter of 2013 and 3.93 percent in the second quarter of 2012. As previously disclosed, the company continues to expect the pace of margin compression to moderate in 2013, as compared to the prior year. Looking ahead, Hudson Valley now expects stabilizing net interest margin as mid- and long-term interest rates begin to rise and the bank continues to make progress on deploying cash into earning assets.

Average loans totaled $1.41 billion in the second quarter of 2013 compared to $1.42 billion in the first quarter of 2013 and $1.58 billion in the second quarter of 2012. The yield on the loan portfolio declined by 8 basis points to 5.34 percent for the second quarter of 2013, compared to 5.42 percent for the first quarter of 2013 and declined by 41 basis points compared to 5.75 percent for the second quarter of 2012.

Net interest income totaled $21.1 million for the second quarter of 2013, compared to $21.2 million for the first quarter of 2013 and $25.5 million in the second quarter of 2012.

Hudson Valley’s total non-interest income was $3.9 million in the second quarter of 2013, compared to $4.5 million in the first quarter of 2013 and $4.8 million in the second quarter of 2012, primarily reflecting lower deposit service and investment management fees. Investment management fees were $2.0 million in the second quarter of 2013, compared to $1.9 million in the first three months of the year and $2.5 million in the year-ago quarter on lower balances.

Hudson Valley remained on pace to achieve its previously disclosed target of non-interest expense reductions of approximately 5.0 percent for the 12 months of 2013, compared to 2012, trimming these costs by 5.7 percent for the second quarter, and 6.0 percent for the six months ended June 30, 2013, compared to the same periods in the prior year. Non-interest expense fell to $19.8 million and $39.4 million for the three and six months ended June 30, 2013, respectively, compared to $21.0 million and $41.9 million for the three and six months ended June 30, 2012, respectively.

As of June 30, the bank completed all steps believed to be necessary for full implementation of expense reductions that were announced earlier this year in order to achieve Hudson Valley’s target for non-interest expense in 2013 and improve operating leverage and efficiency in the quarters ahead. However, we can provide no assurances that other factors may arise which will prevent us from reaching our target.

The bank’s efficiency ratio, which since the first half of 2012 has reflected the impact of excess liquidity on net interest income, was 78.1 percent in the second quarter of 2013, compared to 75.0 percent in the first quarter of 2013 and 68.1 percent in the second quarter of 2012.

Rising Rate Environment

Hudson Valley’s second quarter originations and asset purchases have further enhanced its asset sensitive balance sheet. The company believes that this positions it to profit from a rising interest rate environment. For example, the company estimates that net interest income from June 30, 2013 would increase 7.1 percent with a gradual 200 basis point increase in interest rates, given the bank’s balance sheet at the end of the second quarter and considering the continuation of the current shape and steepness of the yield curve.

Credit Quality

Overall portfolio trends continue to reflect an uneven but generally improving credit environment across Hudson Valley’s niche commercial franchise in metropolitan New York. 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 $30.3 million at June 30, 2013, compared to $32.1 million at March 31, 2013 and $39.6 million at June 30, 2012. NPAs totaled 1.01 percent of total assets at June 30, 2013, compared to 1.14 percent at March 31, 2013 and 1.40 percent at June 30, 2012.

Reflecting generally improving credit trends, net charge-offs were $0.5 million for the second quarter of 2013, compared to $1.3 million and $5.0 million in the linked and year-ago quarters, respectively. As a percentage of average loans, annualized net charge-offs were 0.13 percent in the second quarter of 2013, compared to 0.36 percent in the first quarter of 2013 and 1.27 percent in the second quarter of 2012.

The bank’s provision for loan losses in the second quarter of 2013 was $0.3 million, compared to $0.8 million in the linked quarter and $1.9 million in the year-ago quarter. The decline in the provision reflected meaningful recoveries during the second quarter from prior charge-offs.

The bank’s allowance for loan losses was $25.9 million at June 30, 2013, compared to $26.1 million at March 31, 2013 and $28.7 million at June 30, 2012. The allowance measured 1.75 percent, 1.84 percent and 1.85 percent of total loans at each of those dates, respectively. At June 30, 2013, classified assets represented 31.0 percent of risk-based capital, down from 36.2 percent at March 31, 2013.

Quarterly Cash Dividend

Hudson Valley’s board of directors declared a cash dividend of $0.06 per share, payable on August 16, 2013 to all common stockholders of record as of the close of business on August 5, 2013.

Capital Strength

At June 30, 2013, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.7 percent, a Tier 1 risk-based capital ratio of 16.5 percent, and a Tier 1 leverage ratio of 9.3 percent. Its Hudson Valley Bank subsidiary at June 30, 2013 posted a total risk-based capital ratio of 17.4 percent, a Tier 1 risk-based capital ratio of 16.2 percent, and a Tier 1 leverage ratio of 9.1 percent.

Hudson Valley believes that it already meets the Basel III risk-based capital standards for financial institutions of its size when such standards are fully phased in. The Basel III standards were adopted by U.S. regulators earlier this month and go into effect on January 1, 2015.

Non-GAAP Financial Disclosures and Reconciliation to GAAP

In addition to disclosing Hudson Valley Holding Corp’s results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), management routinely supplements this disclosure 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, July 24, 2013 at 10:00 AM ET:

Domestic (toll free): 1-888-317-6016; International (toll): +1-412-317-6016.

All participants should dial in at least ten minutes prior to the call and request the “Hudson Valley – Second Quarter Earnings Call.”

A replay of the call will be available one hour from the close of the conference through August 9, 2013 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 – Conference # 10030640; International Toll: +1-412-317-0088- Conference # 10030640.

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.
Through its Hudson Valley Bank subsidiary, Hudson Valley Holding Corp. (HVB) serves small- and mid-sized businesses, professional services firms, not-for-profit organizations and select individuals in metropolitan New York. Headquartered in Yonkers, N.Y., the company provides a full range of banking, trust and investment management services to niche commercial customers and their principals throughout Westchester and Rockland counties, the Bronx, Brooklyn and Manhattan. Hudson Valley is the largest bank headquartered in Westchester County, with $3.0 billion in assets, $2.6 billion in deposits and 28 branches. Its common stock is traded on the New York Stock Exchange and is a Russell 3000® Index component. More information is available 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 June 30, 2013. 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, 2012 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; our ability to deploy our excess cash, reduce our expenses and improve our operating leverage and efficiency; 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 June 30, 2013 and 2012

Dollars in thousands, except per share amounts

Three Months Ended

June 30

2013

2012

Interest Income:

Loans, including fees

$18,826

$22,663

Securities:

Taxable

2,390

3,140

Exempt from Federal income taxes

780

1,010

Federal funds sold

11

9

Deposits in banks

540

298

Total interest income

22,547

27,120

Interest Expense:

Deposits

1,292

1,414

Securities sold under repurchase agreements and other short-term borrowings

7

16

Other borrowings

180

182

Total interest expense

1,479

1,612

Net Interest Income

21,068

25,508

Provision for loan losses

289

1,894

Net interest income after provision for loan losses

20,779

23,614

Non Interest Income:

Service charges

1,394

1,529

Investment advisory fees

1,959

2,512

Other-than-temporary impairment loss:

Total impairment loss

(50)

Loss recognized in comprehensive income

Net impairment loss recognized in earnings

(50)

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

(15)

Other income

528

813

Total non interest income

3,881

4,789

Non Interest Expense:

Salaries and employee benefits

11,120

11,360

Occupancy

2,101

2,210

Professional services

1,731

2,040

Equipment

1,001

1,161

Business development

591

837

FDIC assessment

949

726

Other operating expenses

2,325

2,700

Total non interest expense

19,818

21,034

Income Before Income Taxes

4,842

7,369

Income Taxes

1,355

2,408

Net Income

$3,487

$4,961

Basic Earnings Per Common Share

$0.18

$0.25

Diluted Earnings Per Common Share

$0.18

$0.25

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the six months ended June 30, 2013 and 2012

Dollars in thousands, except per share amounts

Six Months Ended

June 30

2013

2012

Interest Income:

Loans, including fees

$38,085

$51,578

Securities:

Taxable

4,585

6,453

Exempt from Federal income taxes

1,548

1,996

Federal funds sold

22

17

Deposits in banks

988

354

Total interest income

45,228

60,398

Interest Expense:

Deposits

2,539

3,164

Securities sold under repurchase agreements and other short-term borrowings

16

67

Other borrowings

359

363

Total interest expense

2,914

3,594

Net Interest Income

42,314

56,804

Provision for loan losses

1,061

3,253

Net interest income after provision for loan losses

41,253

53,551

Non Interest Income:

Service charges

3,133

3,396

Investment advisory fees

3,892

4,910

Other-than-temporary impairment loss:

Total impairment loss

(528)

Loss recognized in comprehensive income

Net impairment loss recognized in earnings

(528)

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

17

15,920

Other income

1,356

1,445

Total non interest income

8,398

25,143

Non Interest Expense:

Salaries and employee benefits

22,402

22,178

Occupancy

4,210

4,442

Professional services

3,236

3,907

Equipment

2,057

2,229

Business development

1,043

1,354

FDIC assessment

1,893

1,354

Other operating expenses

4,588

6,446

Total non interest expense

39,429

41,910

Income Before Income Taxes

10,222

36,784

Income Taxes

3,084

13,810

Net Income

$7,138

$22,974

Basic Earnings Per Common Share

$0.36

$1.17

Diluted Earnings Per Common Share

$0.36

$1.17

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, 2013 and December 31, 2012

Dollars in thousands, except per share and share amounts

Jun 30

Dec 31

2013

2012

ASSETS

Cash and non interest earning due from banks

$61,892

$57,836

Interest earning deposits in banks

773,754

769,687

Total cash and cash equivalents

835,646

827,523

Federal funds sold

24,360

19,251

Securities available for sale, at estimated fair value (amortized cost of $534,263 in

2013 and $444,243 in 2012)

523,364

445,070

Securities held to maturity, at amortized cost (estimated fair value of $7,755 in

2013 and $10,825 in 2012)

7,340

10,225

Federal Home Loan Bank of New York (FHLB) stock

3,479

4,826

Loans (net of allowance for loan losses of $25,926 in 2013 and $26,612 in 2012)

1,454,191

1,440,760

Loans held for sale

2,317

Accrued interest and other receivables

16,580

24,826

Premises and equipment, net

21,171

23,996

Other real estate owned

250

Deferred income tax, net

23,603

19,263

Bank owned life insurance

40,417

39,257

Goodwill

23,842

23,842

Other intangible assets

808

903

Other assets

7,174

8,937

TOTAL ASSETS

$2,981,975

$2,891,246

LIABILITIES

Deposits:

Non interest bearing

$1,003,682

$1,035,847

Interest bearing

1,621,433

1,484,114

Total deposits

2,625,115

2,519,961

Securities sold under repurchase agreements and other short-term borrowings

23,902

34,624

Other borrowings

16,409

16,428

Accrued interest and other liabilities

27,083

29,262

TOTAL LIABILITIES

2,692,509

2,600,275

STOCKHOLDERS’ EQUITY

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

outstanding in 2013 and 2012, respectively

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

19,898,145 and 19,761,426 shares in 2013 and 2012, respectively

4,240

4,212

Additional paid-in capital

349,388

348,643

Retained earnings (deficit)

1,288

(3,471)

Accumulated other comprehensive loss

(7,886)

(849)

Treasury stock, at cost; 1,299,414 shares in 2013 and 2012

(57,564)

(57,564)

TOTAL STOCKHOLDERS’ EQUITY

289,466

290,971

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$2,981,975

$2,891,246

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the three months ended June 30, 2013 and 2012

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 June 30,

2013

2012

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest

(3)

Rate

Balance

Interest

(3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$822,288

$540

0.26%

$532,009

$298

0.22%

Federal funds sold

23,279

11

0.19%

16,658

9

0.22%

Securities: (1)

Taxable

421,394

2,390

2.27%

373,009

3,140

3.37%

Exempt from federal income taxes

82,236

1,200

5.84%

96,953

1,554

6.41%

Loans, net (2)

1,409,875

18,826

5.34%

1,577,190

22,663

5.75%

Total interest earning assets

2,759,072

22,967

3.33%

2,595,819

27,664

4.26%

Non interest earning assets:

Cash & due from banks

60,270

46,279

Other assets

132,272

150,049

Total non interest earning assets

192,542

196,328

Total assets

$2,951,614

$2,792,147

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:

Deposits:

Money market

$894,878

$784

0.35%

$856,977

$917

0.43%

Savings

123,925

95

0.31%

126,547

148

0.47%

Time

124,058

155

0.50%

140,963

211

0.60%

Checking with interest

442,048

258

0.23%

358,670

138

0.15%

Securities sold under repo & other s/t borrowings

26,115

7

0.11%

44,715

16

0.14%

Other borrowings

16,412

180

4.39%

16,450

182

4.43%

Total interest bearing liabilities

1,627,436

1,479

0.36%

1,544,322

1,612

0.42%

Non interest bearing liabilities:

Demand deposits

1,001,674

925,569

Other liabilities

27,658

28,830

Total non interest bearing liabilities

1,029,332

954,399

Stockholders’ equity (1)

294,846

293,426

Total liabilities and stockholders’ equity

$2,951,614

$2,792,147

Net interest earnings

$21,488

$26,052

Net yield on interest earning assets

3.12%

4.01%

—————————————————–

(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 six months ended June 30, 2013 and 2012

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.

Six Months Ended June 30,

2013

2012

(Unaudited)

Average

Yield/

Average

Yield/

Balance

Interest

(3)

Rate

Balance

Interest

(3)

Rate

ASSETS

Interest earning assets:

Deposits in Banks

$787,982

$988

0.25%

$327,322

$354

0.22%

Federal funds sold

24,415

22

0.18%

16,647

17

0.20%

Securities: (1)

Taxable

403,689

4,585

2.27%

384,002

6,453

3.36%

Exempt from federal income taxes

83,058

2,382

5.74%

98,806

3,071

6.22%

Loans, net (2)

1,415,970

38,085

5.38%

1,787,290

51,578

5.77%

Total interest earning assets

2,715,114

46,062

3.39%

2,614,067

61,473

4.70%

Non interest earning assets:

Cash & due from banks

56,284

47,850

Other assets

134,438

154,651

Total non interest earning assets

190,722

202,501

Total assets

$2,905,836

$2,816,568

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:

Deposits:

Money market

$878,399

$1,625

0.37%

$919,917

$2,156

0.47%

Savings

127,108

187

0.29%

121,171

261

0.43%

Time

126,521

318

0.50%

142,953

465

0.65%

Checking with interest

405,065

409

0.20%

329,671

282

0.17%

Securities sold under repo & other s/t borrowings

28,019

16

0.11%

49,150

67

0.27%

Other borrowings

16,417

359

4.37%

16,455

363

4.41%

Total interest bearing liabilities

1,581,529

2,914

0.37%

1,579,317

3,594

0.46%

Non interest bearing liabilities:

Demand deposits

1,002,967

923,730

Other liabilities

28,458

27,016

Total non interest bearing liabilities

1,031,425

950,746

Stockholders’ equity (1)

292,882

286,505

Total liabilities and stockholders’ equity

$2,905,836

$2,816,568

Net interest earnings

$43,148

$57,879

Net yield on interest earning assets

3.18%

4.43%

—————————————————–

(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

Second Quarter 2013

(Dollars in thousands, except per share amounts)

3 mos end

3 mos end

6 mos end

6 mos end

Jun 30

Jun 30

Jun 30

Jun 30

2013

2012

2013

2012

Earnings:

Net Interest Income

$21,068

$25,508

$42,314

$56,804

Non Interest Income

$3,881

$4,789

$8,398

$25,143

Non Interest Expense

$19,818

$21,034

$39,429

$41,910

Net Income

$3,487

$4,961

$7,138

$22,974

Net Interest Margin

3.06%

3.93%

3.12%

4.34%

Net Interest Margin (FTE) (1)

3.12%

4.01%

3.18%

4.43%

Diluted Earnings Per Share

$0.18

$0.25

$0.36

$1.17

Dividends Per Share

$0.06

$0.18

$0.12

$0.36

Return on Average Equity

4.75%

6.72%

4.88%

15.90%

Return on Average Assets

0.47%

0.71%

0.49%

1.63%

Average Balances:

Average Assets

$2,949,423

$2,795,090

$2,904,681

$2,820,157

Average Net Loans

$1,409,875

$1,577,190

$1,415,970

$1,787,290

Average Investments

$503,630

$469,962

$486,747

$482,808

Average Interest Earning Assets

$2,756,881

$2,598,762

$2,713,959

$2,617,656

Average Deposits

$2,586,583

$2,408,726

$2,540,060

$2,437,442

Average Borrowings

$42,527

$61,165

$44,436

$65,605

Average Interest Bearing Liabilities

$1,627,436

$1,544,322

$1,581,529

$1,579,317

Average Stockholders’ Equity

$293,616

$295,378

$292,290

$288,918

Asset Quality – During Period:

Provision for Loan Losses

$289

$1,894

$1,061

$3,253

Net Charge-offs

$452

$5,018

$1,748

$5,205

Annualized Net Charge-offs/Avg Net Loans

0.13%

1.27%

0.25%

0.58%

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

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Balance Sheet Data

Second Quarter 2013

(Dollars in thousands except per share amounts)

Jun 30

Mar 31

Dec 31

Sep 30

Jun 30

2013

2013

2012

2012

2012

Period End Balances:

Total Assets

$2,981,975

$2,828,809

$2,891,246

$2,929,042

$2,816,244

Total Investments

$530,704

$483,792

$455,295

$458,355

$467,623

Net Loans

$1,454,191

$1,386,694

$1,440,760

$1,476,814

$1,523,833

Goodwill and Other Intangible Assets

$24,650

$24,697

$24,745

$24,932

$25,119

Total Deposits

$2,625,115

$2,464,197

$2,519,961

$2,548,610

$2,439,848

Total Stockholders’ Equity

$289,466

$292,895

$290,971

$292,900

$292,599

Tangible Common Equity (1)

$264,816

$268,198

$266,226

$267,968

$267,480

Common Shares Outstanding

19,898,145

19,880,657

19,761,426

19,638,090

19,633,977

Book Value Per Share

$14.55

$14.73

$14.72

$14.91

$14.90

Tangible Book Value Per Share (1)

$13.31

$13.49

$13.47

$13.65

$13.62

Tangible Common Equity Ratio – HVHC (1)

9.0%

9.6%

9.3%

9.2%

9.6%

Tier 1 Leverage Ratio – HVHC

9.3%

9.5%

9.3%

9.4%

9.6%

Tier 1 Risk Based Capital Ratio – HVHC

16.5%

17.1%

16.5%

16.1%

15.8%

Total Risk Based Capital Ratio – HVHC

17.7%

18.3%

17.7%

17.4%

17.0%

Tier 1 Leverage Ratio – HVB

9.1%

9.3%

9.2%

9.2%

9.5%

Tier 1 Risk Based Capital Ratio – HVB

16.2%

16.8%

16.2%

15.9%

15.6%

Total Risk Based Capital Ratio – HVB

17.4%

18.0%

17.4%

17.2%

16.8%

Gross Loans (excluding Loans Held-For-Sale):

Commercial Real Estate

$594,301

$576,409

$550,786

$583,653

$633,581

Construction

72,337

70,212

74,727

91,241

96,211

Residential Multi-Family

196,438

195,016

196,199

209,192

212,655

Residential Other

328,922

294,798

325,774

322,841

346,489

Commercial and Industrial

261,469

249,794

288,809

266,118

231,140

Individuals

16,752

17,696

21,725

22,270

21,495

Lease Financing

10,154

11,043

11,763

12,373

14,015

Total Loans

$1,480,373

$1,414,968

$1,469,783

$1,507,688

$1,555,586

Asset Quality – Period End:

Allowance for Loan Losses

$25,926

$26,088

$26,612

$28,107

$28,733

Loans 31-89 Days Past Due Accruing

$8,824

$19,323

$12,630

$7,557

$5,436

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

Nonaccrual Loans (NAL)

$30,267

$32,140

$34,808

$42,305

$39,304

Other Real Estate Owned (OREO)

$250

$250

$250

Nonperforming Loans Held For Sale (HFS)

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

$30,267

$32,140

$35,058

$42,555

$39,554

Allowance / Total Loans

1.75%

1.84%

1.81%

1.86%

1.85%

NAL / Total Loans

2.04%

2.27%

2.37%

2.81%

2.53%

NAL + 90 PD / Total Loans

2.04%

2.27%

2.37%

2.81%

2.53%

NAL + 90 PD + OREO / Total Assets

1.01%

1.14%

1.21%

1.45%

1.40%

Nonperforming Assets / Total Assets

1.01%

1.14%

1.21%

1.45%

1.40%

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

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Selected Income Statement Data

Second Quarter 2013

(Dollars in thousands except per share amounts)

3 mos end

3 mos end

3 mos end

3 mos end

3 mos end

Jun 30

Mar 31

Dec 31

Sep 30

Jun 30

2013

2013

2012

2012

2012

Interest Income

$22,547

$22,681

$23,945

$25,709

$27,120

Interest Expense

1,479

1,435

1,535

1,594

1,612

Net Interest Income

21,068

21,246

22,410

24,115

25,508

Provision for Loan Losses

289

772

1,531

3,723

1,894

Non Interest Income

3,881

4,517

4,346

4,353

4,789

Non Interest Expense

19,818

19,611

20,593

20,035

21,034

Income Before Income Taxes

4,842

5,380

4,632

4,710

7,369

Income Taxes

1,355

1,729

1,559

1,576

2,408

Net Income

$3,487

$3,651

$3,073

$3,134

$4,961

Diluted Earnings per share

$0.18

$0.18

$0.16

$0.16

$0.25

Net Interest Margin

3.06%

3.18%

3.28%

3.60%

3.93%

Average Cost of Deposits (1)

0.20%

0.20%

0.21%

0.22%

0.23%

(1) 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

Six Months Ended

June 30

June 30

2013

2012

2013

2012

Total interest earning assets:

As reported

$2,756,881

$2,598,762

$2,713,959

$2,617,656

Unrealized (loss) gain on securities

available-for-sale (a)

(2,191)

2,943

(1,155)

3,589

Adjusted total interest earning assets (1)

$2,759,072

$2,595,819

$2,715,114

$2,614,067

Net interest earnings:

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

Thumbnail


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

My news for Investors

— Bank Continues to Lower Funding Costs as Core Deposits Grow to 96 percent of Total Deposits —

— Generates 3.93 Percent Net Interest Margin, Even with Excess Cash from First Quarter Loan Sales —

— Capital Ratios Increase to Highest Level in Eight Years —

— C&I Loan Balances Continue to Increase —

— Board Declares Dividend of $0.18 for the Third Quarter of 2012 —

YONKERS, N.Y., Aug. 1, 2012 /PRNewswire/ — ;Hudson Valley Holding Corp. (NYSE: HVB) today reported solid profitability in the second quarter ended June 30, 2012, as the bank continued to lower funding costs and increase capital ratios while operating with a significant excess cash position following its successful loan sales in the first quarter of the year.

“Robust business loan and deposit balances in the second quarter reflect the stability of Hudson Valley’s niche commercial customer base and the strength of our bankers’ relationships throughout Metro New York,” President and Chief Executive Officer Stephen R. Brown said. ; “We also maintained competitive funding costs and core deposit growth, positioning us to profitably deploy the proceeds of last quarter’s loan sales. ; As we patiently evaluate new lending opportunities that will leverage Hudson Valley’s ; business banking approach in the communities we serve, our core franchise continues to prosper, building capital to the highest levels in eight years.”

The parent company of Hudson Valley Bank earned net income of $5.0 million, or $0.25 per diluted share, for the second quarter of 2012, compared to $7.4 million, or $0.38 per share, during the second quarter of 2011. ;

First quarter 2012 net income of $18.0 million, or $0.92 per share, included $9.4 million or $0.48 per share in after-tax net gains on the sale of $474 million in loans. ; The loan sales were pursuant to the bank’s previously announced understanding with the Office of the Comptroller of the Currency (OCC) to reduce concentrations of commercial real estate (CRE) and classified assets below 400 percent and 25 percent of risk-based capital, respectively. ; At June 30, 2012, the bank’s ratios of CRE and classified assets to risk-based capital were 365.4 percent and 24.6 percent.

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.

Hudson Valley’s net interest margin was 3.93 percent in the second quarter of 2012, compared to 4.75 percent in the first quarter of 2012 and 4.55 percent in the second quarter of 2011. The significant cash position derived from last quarter’s loan sales drove margin compression, lowering the yield on interest-earning assets to 4.26 percent from 5.14 percent in the linked quarter and 5.09 percent in the second quarter of 2011. ; Continued improvement in deposit funding costs partially offset this decline.

During the second quarter, the company’s average cost of deposits fell to 0.23 percent, five basis points lower than the linked quarter and 15 basis points below the second quarter of 2011. ; The company continues to seek prudent and profitable opportunities to deploy loan-sale proceeds beyond its first quarter 2012 purchase of $65.8 million in adjustable rate mortgages.

Hudson Valley continues to derive meaningful fee income from its deep commercial relationships. ; The bank earned $4.8 million in non-interest income during the second quarter of 2012, compared to $20.4 million (including the $15.9 million loan-sale gain) in the first quarter of 2012 and $3.8 million in the second quarter of 2011. ; Fee income saw modest growth on a linked quarter basis due to lower securities impairment charges and higher investment advisory fees, while deposit service charges were lower. Compared to last year’s second quarter, second quarter 2012 core banking fees were stable while overall fees grew $1.0 million due to losses on certain assets held for sale in 2011.

The company’s core relationship banking operations retained their characteristic efficiency during the second quarter, while corporate initiatives to attract executive-level talent and introduce best practices modestly increased the company’s expense run-rate. ; Non-interest expense was $21.0 million for the three months ended June 30, 2012, representing increases of $0.2 million, or 0.8 percent, from the first quarter of 2012 and $0.4 million, or 1.9 percent, from the second quarter of 2011. ; Hudson Valley’s efficiency ratio was 68.1 percent in the second quarter, compared to 56.8 percent and 58.8 percent in the linked and year-ago quarters, respectively.

Hudson Valley continued to maintain an enviable core deposit base in the second quarter of 2012. ; Core deposits, which exclude time deposits greater than $100,000, increased $18.9 million from the linked quarter to $2.3 billion, comprising 96 percent of total deposits. ; Stable and low-cost deposit funding remains the foundation of Hudson Valley’s commercial banking franchise.

Portfolio Credit 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 $39.6 million at June 30, 2012, compared to $29.0 million at March 31, 2012, $58.9 million at December 31, 2011 and $64.5 million at June 30, 2011. ; NPAs totaled 1.40 percent of total assets at June 30, 2012, compared to 1.03 percent at March 31, 2012, 2.11 percent at December 31, 2011 and 2.29 percent at June 30, 2011. ;

The linked quarter increase in nonperforming assets reflected the progression of certain delinquent loans to nonaccrual status, in particular, a $13.1 million relationship with whom a workout plan was developed which included a $6.5 million payment received in early July. ; 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 June 30, 2011.

Net charge-offs during the second quarter of 2012 were $5.0 million, and included $2.0 million which was included as a specific reserve component of the allowance for loan loss at March 31, 2012 and December 31, 2011. ; As a percentage of average loans, annualized net charge-offs were 1.27 percent in the second quarter of 2012, compared to 0.04 percent in the first quarter of 2012 and a net recovery position of 0.01 percent in the second quarter of 2011. ;

The provision for loan losses was $1.9 million for the second quarter. Provision for loan losses was $1.5 million and $1.4 million in the linked and year-ago quarters, respectively.

The bank’s allowance for loan losses was $28.7 million at June 30, 2012, compared to $31.9 million at March 31, 2012, $30.7 million at December 31, 2011 and $41.9 million at June 30, 2011. ; Allowances measured 1.85 percent, 1.94 percent, 1.95 and 2.17 percent of total loans at each of those dates, respectively. ;

Commercial Loan Portfolio

Hudson Valley Bank continues to actively fund existing loans and originate new loans to meet the needs of middle-market commercial customers and their principals in Westchester and Rockland counties, lower Connecticut and metropolitan New York City.

Commercial and industrial (C&I) loans totaled $231.1 million at June 30, 2012, a 3.9 percent increase from March 31, 2012. ; C&I loans totaled $218.5 million at December 31, 2011 and $227.0 million at June 30, 2011. ; The second quarter 2012 increase in C&I loans reflects increased emphasis on this type of lending as the bank works to reduce its overall concentration in CRE.

Reflecting the bank’s previously announced plans to reduce its commercial real estate concentration relative to risk-based capital, CRE loans totaled $633.6 million on June 30, 2012, decreasing from $705.6 million at March 31, 2012, $690.8 million at December 31, 2011 and $844.7 at June 30, 2011. ;

Progress on Commitments to Primary Banking Regulator

During the second quarter, Hudson Valley Bank submitted a capital plan to the OCC, as required under its written agreement with the regulator. ; The bank is operating in accordance with its capital plan without supervisory objection from the OCC.

“The board of directors is pleased with the progress toward addressing all of the commitments under our written agreement with the OCC,” Chairman James J. Landy said. ; “We believe we are on track toward meeting the obligations set forth in the agreement, while continuing to serve our commercial customers’ every need in the dedicated manner they’ve come to expect from Hudson Valley Bank.” Landy added, “Based upon our capital plan now in place, which includes provisions regarding payment of dividends, ; we anticipate the continuation of our current quarterly dividend.”

$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 August 13, 2012. ; The dividend will be payable on August 24, 2012.

Capital Strength

At June 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.0 percent, a Tier 1 risk-based capital ratio of 15.8 percent, and a Tier 1 leverage ratio of 9.6 percent.

Its Hudson Valley Bank subsidiary at June 30, 2012 recorded a total risk-based capital ratio of 16.8 percent, a Tier 1 risk-based capital ratio of 15.6 percent, and a Tier 1 leverage ratio of 9.5 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 June 30, 2012 were in excess of the following internal minimum capital ratios established under the Bank’s capital plan submitted to the 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. ;

Second Quarter and Six Month Review

The Company recorded net income for the three month period ended June 30, 2012 of $5.0 million or $0.25 per diluted share, a decrease of $2.4 ;million compared to net income of $7.4 ;million or $0.38 per diluted share for the same period in the prior year. ; Net income for the six month period ended June 30, 2012 was $23.0 million or $1.17 per diluted share, an increase of $10.7 ;million compared to net income of $12.3 million or $0.63 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 June 30, 2012, compared to the same period in the prior year, was primarily due to a $4.1 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 second 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 higher non interest expenses. The increase in earnings for the six month period ended June 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 six month period ended June 30, 2012 was higher, compared to the same period in the prior year, as a result of higher non interest income and 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 $89.2 million and $20.4 million during the three and six month periods ended June 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 $39.6 million at June 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 half of 2012. Despite recent 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 $1.9 million and $3.3 million, respectively, for the three and six month periods ended June 30, 2012, compared to $1.5 million and $7.0 million, respectively, for the same periods in the prior year. ; The 2012 provision is significantly 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 slightly by $14.6 million during the six month period ended June 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 3.93 percent and 4.34 percent, respectively, for the three and six month periods ended June 30, 2012, compared to 4.55 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 the company’s risk management policies. ; 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 activities, tax equivalent basis net interest income decreased by $4.1 million or 13.6 percent to $26.1 million for the three month period ended June 30, 2012, compared to $30.2 million for the same period in the prior year. Tax equivalent basis net interest income decreased by $0.4 million or 0.7 percent to $57.9 million for the six month period ended June 30, 2012, compared to $58.3 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.6 million and $1.1 million, respectively, for the three and six month periods ended June 30, 2012, compared to $0.6 million and $1.2 million, respectively, for the same periods in the prior year.

The Company’s non interest income was $4.8 million and $25.1 million, respectively, for the three and six month periods ended June 30, 2012. This represented increases of $1.0 million and $16.6 million, respectively, compared to $3.8 million and $9.1 million, respectively, for the same periods in the prior year. The increase in the three month period ended June 30, 2012, compared to the same period in the prior year, resulted from higher other income and lower other losses, partially offset by lower service fees and lower investment advisory fees. The increase in the six month period ended June 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 slightly due to decreased activity. Pre-tax impairment charges on securities available for sale were $0.5 million for the six month period ended June 30, 2012 and $0.2 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 losses of $1.0 million and $0.9 million, respectively, for the three and six month periods ended June 30, 2011. These losses related to sales and revaluations of other real estate owned and loans held for sale. ;

Non interest expense was $21.0 million and $41.9 million, respectively, for the three and six month periods ended June 30, 2012. This represented increases of $0.4 million or 1.9 percent and $0.8 million or 1.9 percent, respectively, compared to $20.6 million and $41.1 million, respectively, for the same periods in the prior year. The increase in non interest expense resulted primarily from an additional provision of $1.3 million related to the previously announced investigations and settlement discussions with 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 settlement 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 complete accrual 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 June 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.0 percent, a Tier 1 risk-based capital ratio of 15.8 percent, and a Tier 1 leverage ratio of 9.6 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. ; ; A reconciliation of the non-GAAP to GAAP measures accompanies this press release.

Conference Call

As previously announced, Hudson Valley will hold its quarterly conference call to review the company’s financial results on Wednesday, August 1, 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 Second Quarter Earnings Call.”

A replay of the call will be available one hour from the close of the conference through August 16, 2012 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 – Conference # 10015751; International Toll: +1-412-317-0088 – Conference # 10015751.

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.

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 $2.8 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 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 affects 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 June 30, 2012 and 2011

Dollars in thousands, except per share amounts

Three Months Ended

Jun 30

2012

2011

Interest Income:

Loans, including fees

$22,663

$27,941

Securities:

Taxable

3,140

3,147

Exempt from Federal income taxes

1,010

1,150

Federal funds sold

9

23

Deposits in banks

298

201

Total interest income

27,120

32,462

Interest Expense:

Deposits

1,414

2,290

Securities sold under repurchase agreements and other short-term borrowings

16

57

Other borrowings

182

501

Total interest expense

1,612

2,848

Net Interest Income

25,508

29,614

Provision for loan losses

1,894

1,546

Net interest income after provision for loan losses

23,614

28,068

Non Interest Income:

Service charges

1,529

1,552

Investment advisory fees

2,512

2,753

Recognized impairment charge on securities available for sale (includes $395 of total gains and $184 of
total losses in 2012 and 2011, respectively, less $445 of gains and $141 of losses on securities available for
sale, recognized in other comprehensive income in 2012 and 2011, respectively)

(50)

(43)

Realized gains on securities available for sale, net

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

(15)

(1,000)

Other income

813

569

Total non interest income

4,789

3,831

Non Interest Expense:

Salaries and employee benefits

11,360

11,263

Occupancy

2,210

2,202

Professional services

2,040

1,749

Equipment

1,161

1,107

Business development

837

590

FDIC assessment

726

686

Other operating expenses

2,700

3,051

Total non interest expense

21,034

20,648

Income Before Income Taxes

7,369

11,251

Income Taxes

2,408

3,819

Net Income

$4,961

$7,432

Basic Earnings Per Common Share (1)

$0.25

$0.38

Diluted Earnings Per Common Share (1)

$0.25

$0.38

(1) June 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 six months ended June 30, 2012 and 2011

Dollars in thousands, except per share amounts

Six Months Ended

Jun 30

2012

2011

Interest Income:

Loans, including fees

$51,578

$54,273

Securities:

Taxable

6,453

6,097

Exempt from Federal income taxes

1,996

2,311

Federal funds sold

17

49

Deposits in banks

354

365

Total interest income

60,398

63,095

Interest Expense:

Deposits

3,164

4,564

Securities sold under repurchase agreements and other short-term borrowings

67

104

Other borrowings

363

1,345

Total interest expense

3,594

6,013

Net Interest Income

56,804

57,082

Provision for loan losses

3,253

6,997

Net interest income after provision for loan losses

53,551

50,085

Non Interest Income:

Service charges

3,396

3,592

Investment advisory fees

4,910

5,359

Recognized impairment charge on securities available for sale (includes $105 and $957 of total losses in
2012 and 2011, respectively, less $423 of gains and $753 of losses on securities available for sale, recognized
in other comprehensive income in 2012 and 2011, respectively)

(528)

(204)

Realized gains on securities available for sale, net

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

15,920

(873)

Other income

1,445

1,176

Total non interest income

25,143

9,050

Non Interest Expense:

Salaries and employee benefits

22,178

22,081

Occupancy

4,442

4,547

Professional services

3,907

3,202

Equipment

2,229

2,117

Business development

1,354

1,096

FDIC assessment

1,354

1,797

Other operating expenses

6,446

6,258

Total non interest expense

41,910

41,098

Income Before Income Taxes

36,784

18,037

Income Taxes

13,810

5,781

Net Income

$22,974

$12,256

Basic Earnings Per Common Share (1)

$1.17

$0.63

Diluted Earnings Per Common Share (1)

$1.17

$0.63

(1) June 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)

June 30, 2012 and December 31, 2011

Dollars in thousands, except per share and share amounts

Jun 30

Dec 31

2012

2011

ASSETS

Cash and non interest earning due from banks

$46,047

$43,743

Interest earning deposits in banks

595,263

34,361

Federal funds sold

22,250

16,425

Securities available for sale, at estimated fair value (amortized cost of $453,993 in

2012 and $503,584 in 2011)

456,165

507,897

Securities held to maturity, at amortized cost (estimated fair value of $12,217 in

2012 and $13,819 in 2011)

11,458

12,905

Federal Home Loan Bank of New York (FHLB) stock

4,827

3,831

Loans (net of allowance for loan losses of $28,733 in 2012 and $30,685 in 2011)

1,523,833

1,541,405

Loans held for sale

2,387

473,814

Accrued interest and other receivables

35,460

40,405

Premises and equipment, net

25,130

25,936

Other real estate owned

250

1,174

Deferred income tax, net

19,279

19,822

Bank owned life insurance

38,458

37,563

Goodwill

23,842

23,842

Other intangible assets

1,277

1,651

Other assets

10,318

12,896

TOTAL ASSETS

$2,816,244

$2,797,670

LIABILITIES

Deposits:

Non interest bearing

$964,372

$910,329

Interest bearing

1,475,476

1,514,953

Total deposits

2,439,848

2,425,282

Securities sold under repurchase agreements and other short-term borrowings

42,173

53,056

Other borrowings

16,447

16,466

Accrued interest and other liabilities

25,177

25,304

TOTAL LIABILITIES

2,523,645

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

19,633,977 and 19,516,490 shares in 2012 and 2011, respectively

4,186

4,163

Additional paid-in capital

348,114

347,764

Retained earnings (deficit)

(2,585)

(18,527)

Accumulated other comprehensive income

448

1,726

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

(57,564)

(57,564)

TOTAL STOCKHOLDERS’ EQUITY

292,599

277,562

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$2,816,244

$2,797,670

;

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

Average Balances and Interest Rates

For the three months ended June 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 June 30,

2012

2011

(Unaudited)

Average

Interest

Yield/

Average

Interest

Yield/

Balance

(3)

Rate

Balance

(3)

Rate

ASSETS

Interest earning assets:

;Deposits in Banks

$532,009

$298

0.22%

$250,408

$201

0.32%

;Federal funds sold

16,658

9

0.22%

41,988

23

0.22%

;Securities: (1)

; ; ; Taxable

373,009

3,140

3.37%

358,474

3,147

3.51%

; ; ; Exempt from federal income taxes

96,953

1,554

6.41%

110,642

1,769

6.40%

;Loans, net (2)

1,577,190

22,663

5.75%

1,840,076

27,941

6.07%

Total interest earning assets

2,595,819

27,664

4.26%

2,601,588

33,081

5.09%

Non interest earning assets:

;Cash & due from banks

46,279

50,110

;Other assets

150,049

140,332

Total non interest earning assets

196,328

190,442

Total assets

$2,792,147

$2,792,030

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:

;Deposits:

; ; ; Money market

$856,977

$917

0.43%

$969,145

$1,603

0.66%

; ; ; Savings

126,547

148

0.47%

112,632

115

0.41%

; ; ; Time

140,963

211

0.60%

169,824

384

0.90%

; ; ; Checking with interest

358,670

138

0.15%

290,163

188

0.26%

;Securities sold under repo & other s/t borrowings

44,715

16

0.14%

45,350

57

0.50%

;Other borrowings

16,450

182

4.43%

46,379

501

4.32%

Total interest bearing liabilities

1,544,322

1,612

0.42%

1,633,493

2,848

0.70%

Non interest bearing liabilities:

;Demand deposits

925,569

841,503

;Other liabilities

28,830

23,804

Total non interest bearing liabilities

954,399

865,307

Stockholders’ equity (1)

293,426

293,230

Total liabilities and stockholders’ equity

$2,792,147

$2,792,030

Net interest earnings

$26,052

$30,233

Net yield on interest earning assets

4.01%

4.65%

—————————————————–

(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 six months ended June 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.

;

Six Months Ended June 30,

2012

2011

(Unaudited)

Average

Interest

Yield/

Average

Interest

Yield/

Balance

(3)

Rate

Balance

(3)

Rate

ASSETS

Interest earning assets:

;Deposits in Banks

$327,322

$354

[…]

Housing Crisis Quicksand: 'Payday Loans' on Rise

suggests that the number of people using these so-called “pay day loans” is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.

“We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).

A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.

The Center also estimates pay day lenders issued more than $28 billion in loans in 2005, the latest available figures.

In the Union Miles district of Cleveland, which has been hit hard by the housing crisis, all the conventional banks have been replaced by pay day lenders with brightly painted signs offering instant cash for a week or two to poor families.

“When distressed home owners come to us it usually takes a while before we find out if they have pay day loans because they don’t mention it at first,” said Lindsey Sacher, community relations coordinator at nonprofit East Side Organizing Project on a recent tour of the district. “But by the time they come to us for help, they have nothing left.”

The loans on offer have an Annual Percentage Rate (APR) of up to 391 percent — excluding fees and penalties. All you need for a loan like this is proof of regular income, even government benefits will do.

On top of the exorbitant cost, pay day loans have an even darker side, Sacher notes. “We also have to contend with the fact that pay day lenders are very aggressive when it comes to getting paid.”

Ohio is on the front line of the U.S. housing crisis.

According to the Mortgage Bankers Association, at the end of the fourth quarter Ohio had 3.88 percent of home loans in the process of foreclosure, the highest of all the 50 U.S. states. The “Rust Belt” state’s woes have been further compounded by the loss of 235,900 manufacturing jobs between 2000 and 2007.

But while the state as a whole has not done well in recent years, pay day lenders have proliferated.

Bill Faith, executive director of COHHIO, an umbrella group representing some 600 nonprofit agencies in Ohio, said the state is home to some 1,650 pay day loan lenders — more than all of Ohio’s McDonald’s, Burger Kings and Wendy’s fast food franchises put together.

“That’s saying something, as the people of Ohio really like their fast food,” Faith said. “But pay day loans are insidious because people get trapped in a cycle of debt.”

It takes the average borrower two years to get out of a pay day loan, he said.

Robert Frank, an economics professor at Cornell University, equates pay day loans with “handing a suicidal person a noose” because many people can’t control their finances and end up mired in debt.

“These loans lead to more bankruptcies and wipe out people’s savings, which is bad for the economy,” he said. “This is a problem that has been caused by deregulation” of the U.S. financial sector in the 1990s.

Because of the astronomical interest rates there is a movement among more states to implement a cap of 36 percent APR that is currently in place in 13 states and the District of Columbia.

“Thirty-six percent is still very high,” said Ozell Brooklin, director of Acorn Housing in Atlanta, Georgia where there is a cap in place. “But it’s better than 400 percent.”

SPRINGING THE TRAP

But even in states like New York where pay day loan caps or bans exist, loopholes allow out-of-state lenders to provide loans over the Internet.

Janet Hudson, 40, ran into pay day loans when she and her fiance broke up, leaving her with a young son and a $1,000 monthly mortgage payment. Short on cash, she took out three small pay day loans online totaling $900 but fell behind with her payments. Soon her monthly interest and fees totaled $800.

“It almost equaled my mortgage and I wasn’t even touching the principal of the loans,” said Hudson, who works as an administrative assistant.

After falling behind on her mortgage, Hudson asked Rochester, New York-based nonprofit Empire Justice Center for help. A lawyer at Empire, Rebecca Case-Grammatico, advised her to stop paying off the pay day loans because the loans were unsecured debt.

“For months after that the pay day lenders left me voice mails threatening to have me thrown in jail, take everything I owned and destroy my credit rating,” Hudson said. After several months, the pay day lenders offered to reach a settlement.

But Hudson was already so far behind on her mortgage that she had to sell her home April 2007 to avoid foreclosure.

“Thanks to the (New York state) ban on pay day loans we’ve been spared large scale problems, but Internet loans have still cost people their homes,” Case-Grammatico said.

A national 36 percent cap on pay day loans to members of the military came into effect last October. The cap was proposed by Republican Senator Jim Talent and Democratic Senator Bill Nelson — citing APR of up to 800 percent as harmful to the battle readiness and morale of the U.S. Armed Forces.

There are now proposals in other states — including Ohio, Virginia, Arizona and Colorado — to bring in a 36 percent cap. And, in Arkansas, attorney general Dustin McDaniel sent a letter to payday lenders on March 18 asking them to shut down or face a lawsuit, saying they have made a “lot of money on the backs of Arkansas consumers, mostly the working poor.”

[…]