HUVL Hudson Valley Holding Corp. (MM)

YONKERS, N.Y., April 28 /PRNewswire-FirstCall/ -- Hudson Valley Holding Corp. (Nasdaq: HUVL), parent of Hudson Valley Bank, has announced earnings of $4.9 million for the first quarter of 2010, compared to $6.6 million for the same period in 2009, and $5.2 million for the fourth quarter of 2009.  Diluted earnings per share totaled $0.30 for the first quarter of 2010, compared to $0.55 for the same period in 2009 and $0.34 for the fourth quarter of 2009.  The first quarter 2010 results reflected consistent core business performance as well as continued challenges related to the growth in and resolution of problem assets.

James J. Landy, President and Chief Executive Officer stated, "The challenges of 2009 continued into the first quarter of 2010."  Mr. Landy added, "Our core business continues to perform well.  We had solid deposit growth during the first quarter with an increase of $112 million, or 5.2%.  We believe that our liquidity is robust, our capital is strong and our balance sheet is well positioned for any increase in interest rates.  Loan demand has moderated somewhat, however, we remain focused on originating quality loans within our primary market and niches.  We are also adding a competitive multi-family product, an area of the lending market where we see continued strong credits."

Mr. Landy said, "Attention to asset quality is a primary mission.  While we have experienced an increase in non-accrual loans during the first quarter of 2010, we are seeing indications of economic improvement within our market area. We believe that asset quality improvement typically lags general economic improvement."

Net income for the three month period ended March 31, 2010 was $4.9 million or $0.30 per diluted share, a decrease of $1.7 million or 25.8 percent compared to $6.6 million or $0.55 per diluted share for the three month period ended March 31, 2009. Per share amounts for the 2009 periods have been adjusted to reflect the effects of the 10% stock dividend issued in December 2009. The decline in net income for the three month period ended March 31, 2010, compared to the same period in the prior year, resulted primarily from sharply higher provisions for loan losses and higher charges for impairment of certain investments, partially offset by significant increases in investment advisory fee income and deposit service charges. The increases in the provision for loan losses and impairment charges reflect a continuing negative impact on the Company's asset quality resulting from the effects of the current economic downturn.  

Total deposits increased $112.3 million during the three month period ended March 31, 2010. The Company experienced growth in both new and existing customers, including growth from new branches added during 2008 and 2009 and from seasonal increases in municipal demand deposits. Proceeds from deposit growth were retained in liquid assets, primarily interest earning bank deposits.

Total loans decreased $16.5 million during the three month period ended March 31, 2010. This decline resulted from a number of factors including decreased loan demand, charge offs and pay downs of existing loans. The Company has continued to experience a slowdown in payments of certain loans, such as construction loans, whose repayment is often dependent on sales of completed properties, as well as additional increases in delinquent and nonperforming loans in other sectors of the loan portfolio, all of which have been adversely impacted by the economic downturn and decline in the real estate market. The Company, however, continues to provide lending availability to both new and existing customers.

The Company's noninterest income increased slightly for the three month period ended March 31, 2010, compared to the same period in the prior year, primarily as a result of an increase in investment advisory fees. Fee income from this source increased primarily as a result of the effects of recent significant improvement in both domestic and international equity markets. Assets under management were approximately $1.3 billion at March 31, 2010 and $1.0 billion at March 31, 2009. The overall increase in noninterest income also included growth in deposit service charges, partially offset by an increase in recognized impairment charges related to the Company's investments in certain pooled trust preferred securities which continue to be adversely affected by the effects of the current economic downturn on the financial services industry.

Nonperforming assets, which include nonaccrual loans, accruing loans delinquent over 90 days and other real estate owned, increased to $85.1 million at March 31, 2010, compared to $66.7 million at December 31, 2009, as overall asset quality continued to be adversely affected by the current state of the economy and the real estate market. Although there is growing evidence that the current economic downturn may have begun to turn around, increases in delinquent and nonperforming loans, slowdowns in repayments and declines in the loan-to-value ratios on existing loans continued during the first quarter of 2010. Despite recent improvement in most economic indicators, the Company's loan portfolio continues to be adversely impacted by the effects of severe declines in the demand for and values of virtually all commercial and residential real estate properties. These declines, together with the limited availability of residential mortgage financing, resulted in continued downward pressure on the overall asset quality of the Company's loan portfolio during the first quarter of 2010. Continuation or worsening of such conditions would have additional adverse effects on asset quality in the future.

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

As a result of the aforementioned activity in the Company's core businesses of loans and deposits and other asset/liability management activities, tax equivalent basis net interest income declined slightly by $0.4 million or 1.4 percent to $29.1 million for the three month period ended March 31, 2010, compared to $29.5 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.9 million for the three month period ended March 31, 2010, compared to $1.1 million for the same period in the prior year.

Non interest income, excluding net realized gains and losses on securities transactions and recognized impairment charges on securities available for sale, was $4.5 million for the three month period ended March 31, 2010, an increase of $0.4 million or 9.8 percent compared to $4.1 million for the same period in the prior year. The increase was primarily due to an increase in investment advisory fees. Investment advisory fee income has increased as a result of recent general improvement in performance in the global financial markets as well as new business development efforts. Non interest income also included recognized pre-tax impairment charges on securities available for sale of $1.8 million and $1.4 million, respectively, for the three month periods ended March 31, 2010 and 2009. The impairment charges were related to the Company's investments in pooled trust preferred securities. The Company has decided to hold its investments in pooled trust preferred securities as it does not believe that the current market quotes for these investments are indicative of their underlying value. The pooled trust preferred securities are primarily backed by various U.S. financial institutions many of which are experiencing severe financial difficulties as a result of the current economic downturn. Continuation of these conditions may result in additional impairment charges on these securities in the future.

Non interest expense was $18.5 million for the three month period ended March 31, 2010, an increase of $0.1 million or 0.5 percent compared to $18.4 million for the same period in the prior year. Increases in non interest expense resulting from the Company's continued investment in its branch offices, technology and personnel to accommodate growth in loans and deposits, the expansion of services and products available to new and existing customers and the upgrading of certain internal processes were significantly offset by cost saving measures implemented by the Company during 2009 and continued into 2010. Increases in non interest expense for the three month period ended March 31, 2010, compared to the same period in the prior year, were also partially offset by lower FDIC deposit insurance premiums. Additional premiums imposed by the FDIC in 2009 to replenish shortfalls in the FDIC Insurance Fund have not as yet been imposed to the same degree in 2010. However, additional premium increases and special assessments may continue to be imposed by the FDIC in the future.

The Office of the Comptroller of the Currency (OCC), which is the primary federal regulator of the Bank, has directed greater scrutiny to banks with higher levels of commercial real estate loans.  During the fourth quarter of 2009, the OCC required Hudson Valley Bank (HVB) to maintain, by December 31, 2009, a total risk-based capital ratio of at least 12.0%, a Tier 1 risk-based capital ratio of at least 10.0%, and a Tier 1 leverage ratio of at least 8.0%. These capital levels are in excess of "well capitalized" levels generally applicable to banks under current regulations. The Company and HVB have continuously exceeded these required regulatory capital ratios since December 31, 2009.  

As previously announced we will be holding a first quarter  earnings conference call Wednesday, April 28, 2010 at 10:00 AM EDT - Conference ID 439517:  Domestic (toll free):  1-800-860-2442 or  International  (toll) +1-412-858-4600.

A replay of the call will be available 1 hour from the close of the conference through May 10, 2010 at 9:00 AM EDT - Conference Number:  439517:  US Toll Free: 1-877-344-7529; International Toll: 1-412-317-0088. Participants will be required to state their name and company upon entering call.

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

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

About Hudson Valley Holding Corp.

Hudson Valley Holding Corp. (HUVL), headquartered in Yonkers, NY, is the parent company of Hudson Valley Bank (HVB). Hudson Valley Bank is a Westchester based bank with more than $2.8 billion in assets, serving the metropolitan area with 36 branches located in Westchester, Rockland, the Bronx, Manhattan, Queens and Brooklyn in New York and Fairfield County and New Haven County, in Connecticut. HVB specializes in providing a full range of financial services to businesses, professional services firms, not-for-profit organizations and individuals; and provides investment management services through a subsidiary, A. R. Schmeidler & Co., Inc. Hudson Valley Holding Corp.'s common stock is traded on the NASDAQ Global Select Market under the ticker symbol "HUVL". Additional information on Hudson Valley Bank can be obtained on their web-site at www.hudsonvalleybank.com.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are statements that are not historical facts. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "expects," "intends," "may," "plans," "potential," "predicts," "should" or "will" or the negative of these terms or other comparable terminology. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievements to be materially different from our future results, level of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

• a continued or unexpected decline in the economy in the New York Metropolitan area;
• increases in loan losses or in the level of nonperforming loans;
• unexpected increases in our allowance for loan losses;
• our failure to maintain required regulatory capital levels;
• further declines in value in our investment portfolio;
• a continued or unexpected decline in real estate values within our market areas;
• higher than expected FDIC insurance premiums;
• unexpected changes in interest rates;
• additional regulatory oversight which may require us to change our business model;
• the imposition on us of liabilities under federal or state environmental laws;
• those risk factors identified in our SEC filings, including our Form 10-K for the year ended December 31, 2009.

Forward looking statements speak only as of the date such statements are made. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

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

(2)  Includes loans classified as non-accrual.

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

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

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

SOURCE Hudson Valley Holding Corp.