Exhibit 99.1
Exhibit 99.1
March 2013 Ticker: HVB www.hudsonvalleybank.com
Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
meaning This presentation of the Private contains Securities various Litigation forward looking Reform statements Act of 1995. withThese respect forward to earnings, statements credit can quality be identified and other by financial words such and business as “expects,” matters “anticipates,” within the numerous “intends,” “believes,” assumptions, “estimates,” risks and uncertainties, “predicts” and and words that statements of similar import. relating The to future Company periods cautions are subject that to these uncertainty forward because looking of statements the increased are likelihood subject of to changes in underlying factors and assumptions. Actual results could differ materially from forward looking statements.
statements Factors that regarding: may cause (a) actual our ability results to comply to differ with materially the formal from agreement those contemplated entered into with by such the Office forward of the looking Comptroller statements, of the include, Currency but (the are “OCC”) not limited and any to, (b) additional the OCC restrictions and other placed bank regulators on us as a may result require of future us to regulatory further modify exams or or change changes our in mix regulatory of assets, policy including implemented our concentration by the OCC in certain or other types bank of regulators; loans, or require “SEC”) and us to the take Department further remedial of Labor actions; (the “DOL”) (c) the and results the of possibility the investigation that our management’s of A.R. Schmeidler attention & Co. will , Inc. be by diverted the Securities to the SEC and and Exchange DOL investigations Commission (the and department settlement discussions arising from and a settlement we will incur with further the SEC costs and and DOL legal investigations; expenses; (d) (e) the the adverse reduction affects or our on inability the business to pay of quarterly A.R. Schmeidler cash dividends & Co. ,to Inc. shareholders and our trust in light requirements of our earnings, applicable the to Hudson current Valley and future or Hudson economic Valley environment, Bank; (f) the Federal possibility Reserve that we may Board need guidance, to raise our additional Bank’s capital capital in the plan future and and other our regulatory ability to raise managing such our capital commercial on terms real that estate are favorable portfolio; to (i) us; lower (g) than further expected increases future in our performance non performing of our loans investment and allowance portfolio; for (j) a loan lack losses; of opportunities (h) ineffectiveness for growth, in plans economic for expansion conditions (including generally and opening in our new market branches) area in and particular, increased which or unexpected may adversely competition affect the in ability attracting of borrowers and retaining to repay customers; their loans (k) and continued the value poor of real goodwill property and or other other intangible property held assets; as collateral (n) our inability for such to loans; manage (l) lower interest than expected rate risk; demand (o) increased for our expense products and and services; burdens (m) resulting possible from impairment the regulatory of our environment above the minimum in which levels we operate Hudson and Valley our Bank inability has to set comply as its with minimum existing capital and levels future in regulatory its capital requirements; plan provided (p) to our the OCC, inability or to such maintain higher regulatory capital levels capital as Deposit may be required; Insurance (q) Corporation, proposed legislative or FDIC, and special regulatory assessments action may or changes adversely to affect regular us and assessments; the financial (s) services potential industry; liabilities (r) under future increased federal and Federal state environmental non interest expense; laws; (t) (v) regulatory our inability limitations to consolidate on dividends or divest payable our Connecticut by Hudson branches. Valley or Hudson Valley Bank; (u) our inability to realize targeted reductions in For Quarterly a more Reports detailed on discussion Form 10 of Q. these The factors, forward see looking the Risk statements Factors included discussion in in this the presentation Company’s most are made recent only Annual as Report of the date on Form hereof 10 K, and and the subsequent Company undertakes no obligation to update or revise any of its forward looking statements.
Unless otherwise noted, information presented is from Company sources.
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A Differentiated Business Model
NOT A TRADITIONAL RETAIL COMMUNITY BANK
A customers “Community and Business their principals Bank” founded to focus on small and middle market commercial
Focus deposit on transaction targeted niche volume businesses, throughout entrepreneurs the Metro New and York professional area service firms with high
Low cost, core deposits = foundation of customer relationships
We commercial sell service, customers with a strong commitment to acting as a “private bank” to our niche
WE LEND WHERE WE LIVE
Providing prudent, conservatively underwritten loans in our home market
Stable accessible and to deep customers management team has extensive in market experience and is highly
Unique significant Metro opportunities NYC market for allows growth for competitive positioning with high touch service and
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Metro New York Franchise
Branch Network County Level
Deposits
Branches US $000s
New York State
Westchester 18 $ 1,770,169
New York (Manhattan) 5 321,111
Bronx 4 194,924
Rockland 2 75,508
Kings (Brooklyn) 1 11,883
$2.9 billion commercial bank with 30 branches throughout Westchester, Rockland, the Bronx, Manhattan and Brooklyn in New York Largest bank headquartered in Westchester County Historic growth achieved by taking share from larger national bank competitors There are more than 34,000 small and middle market companies with revenues of $1 million or more in this market
Source: SNL Financial; deposit data as of 06/30/2012; branch count and map as of 12/31/2011
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Our Mission is Unchanged
OUR METRO NYC SMALL AND MID SIZED COMMERCIAL CUSTOMERS REMAIN OUR FOUNDATION AND OUR PRIORITY
What changes is the number and diversity of products offered to serve them
OBJECTIVE IS TO GAIN COMPETITIVE ADVANTAGE WHILE MAINTAINING COMPLIANCE
More nimble in adapting to new environments, products, and competitors
More effectively serve our niche markets with an even broader array of customized products that meet their needs
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Summary Financial Highlights
Twelve Months and Year Ended Dec 31
(Dollars in thousands, except per share amounts) 2011 2012 2012 (1)
Net Interest Income $117,859 $103,329 $103,329
Non Interest Income $18,900 $33,842 $17,907
Non Interest Expense $80,155 $82,538 $82,538
Net Income ($2,137) $29,181 $19,824
Diluted Earnings Per Share ($0.11) $1.49 $1.01
Dividends Per Share $0.64 $0.72 $0.72
Net Interest Margin 4.50% 3.88% 3.88% 3.76%
Return on Average Equity 0.72% 10.05% 6.82% VS. 9.48%
Return on Average Assets 0.08% 1.02% 0.70% PEERS: 0.89%
Efficiency Ratio 57.08% 66.71% 66.71% 65.30%
Tangible Common Equity Ratio 9.1% 9.3% 9.3% 8.4%
Average Assets $2,808,292 $2,849,669 $2,849,669
Average Net Loans $1,882,199 $1,636,097 $1,636,097
Average Deposits $2,396,934 $2,469,947 $2,469,947
Average Stockholders’ Equity $297,488 $290,486 $290,486
| (1) |
|
Excludes income from loan sales. |
Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
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Historical Profitability
RETURN ON AVERAGE ASSETS % RETURN ON AVERAGE EQUITY %
1.02
10.05
1.54 1.49 1.30 0.74 0.18 0.08 0.70 19.40 18.00 14.76 8.74 1.75 0.72 6.82
200620072008200920102011 2012 2006 2007 2008 2009 2010 2011 2012
Income from loan sale
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Historical Profitability
PRE TAX PRE PROVISION DILUTED EARNINGS DILUTED EARNINGS PER SHARE
PER SHARE*
$2.78 $1.49
$3.64 $3.64 $3.84 $3.31 $2.58 $2.91 $1.97 $2.29 $2.31 $2.06 $1.24 $0.26 ($0.11) $1.01
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012
Income from loan sale
Pre Tax Pre Provision Diluted Earnings per Share is a Non GAAP measure. See Appendix slide 48 for reconciliation
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Asset Quality Measures Strengthen Balance Sheet
NONACCRUAL LOANS / TOTAL ASSETS % LOAN LOSS RESERVE / GROSS LOANS %
0.24 0.46 0.44 1.90 1.64 1.07 1.20 1.37 1.33 1.33 2.13 2.25 1.95 1.81
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012
LOAN LOSS RESERVE / NONACCRUAL LOANS % NET CHARGEOFFS / AVERAGE NET LOANS %
301 162 200 76 89 103 76 0.04 0.07 0.39 0.47 2.70 3.85 0.77
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012
Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
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Strong Capital Position
TANGIBLE COMMON EQUITY / TANGIBLE ASSETS LEVERAGE RATIO %
%
7.4 7.9 7.3 10.1 10.0 9.1 9.3 7.7 8.3 7.5 10.2 9.6 8.8 9.3
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012
TIER 1 RISK BASED CAPITAL RATIO % TOTAL RISK BASED CAPITAL RATIO %
12.3 12.6 10.1 13.9 13.9 11.3 16.5 13.5 13.8 11.3 15.2 15.2 12.6 17.7
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012
Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
9
HUDSON VALLEY BANK’S PRIVATE BANKING MODEL
10
Hudson Valley’s Business Model
Commercial bank focused on small and middle market businesses, professional service firms and their principals they view us as their “private bankers”
Niche businesses synergistically compliment each other to form the core of HVB’s business model Relationship Focus high quality banking products and exceptional personal service
11
Efficiency is Key in High Touch Business Model
“PRIVATE BANK” BUSINESS MODEL SUCCEEDS BECAUSE OF:
Narrowly targeted niche business approach
Institutional focus fully directed to targeted segments no mass market efforts
High touch client RM relationships
Opportunity and incentive structure attracts talent from some of the best operators in the business
RMs are successful at attracting and retaining low cost, stable deposits and profitable loans
MAINTAINING EFFICIENT OPERATIONS IS KEY TO BALANCING COST OF A SERVICE ORIENTED MODEL
Small branch network
No centralized call center RMs & Branches are the first and only point of client contact
Non price sensitive core deposit base limits need for wholesale funding and expensive rate promotions
Referrals and Business Development Board provide low cost and effective marketing
12
Efficiency is Key in High Touch Business Model
OPTIMIZING BRANCH NETWORK AND EFFICIENCY
Consolidation or divestiture of six Connecticut locations, representing less than three percent of $2.5 billion in total deposits, with anticipated annual net savings in excess of $2 million by the middle of 2013
Targeted non interest expense reductions of approximately 5 percent year over year
13
How is HVB Different?
HUDSON VALLEY IS ABLE TO COMPETE IN A DENSE MARKET BECAUSE:
Will start small and work our way into lead bank position
Referral driven satisfied customers, Business Development Board Members & centers of influence
“Big Fish in Small Pond” treatment exceptional “above and beyond service” and easy access to decision makers
Decision makers who live and operate in the local market
Will customize products to meet specific customer needs
Provide networking opportunities to help customers grow their businesses
Relationship not transaction driven longer sales cycle
14
How HVB is Different
NICHE MARKET SEGMENTATION IS UNIQUE
We go to market in a very focused way
We add value by bringing specialized expertise to targeted customers and segments
“PRIVATE BANK” APPROACH
Service orientation and niche expertise is our focus
We are our clients’ private bankers, helping them meet all of their financial needs as a trusted partner
EXPERIENCE IN DENSE METRO NYC MARKET PRESENTS GROWTH OPPORTUNITIES
Opportunities are abundant
Small market share gains translate into large profitability gains
Our disciplined growth strategy will prioritize opportunities to deliver significant long term shareholder value
15
Branch Network Local Service & Execution
Low cost branch infrastructure supports core deposit franchise
Branch value grows with age deeper penetration into existing relationships and new referrals increase deposits per branch over time
December 2012 YTD Avg Deposit Balances per Branch
$140
12 Branches
$120
Millions $100 6 Branches $116.4
in
$80 $86.5
Deposits $60 7 Branches
$40 $52.2
| 5 |
|
Branches |
Average $20
$19.2
$0
< 5 Yrs 5 10 Yrs 10 20 Yrs > 20 Yrs
Age of Branch
16
HVB Funding Advantage
Cost of Deposits
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
8Y Y
2002Y 2003Y 2004Y 2005Y 2006Y 2007Y 200 2009Y 2010Y 2011 2012Y
HVB National Peers
Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec. 31, 2012.
17
Historical Success in Outperforming Peers
OPERATING EXPENSE CONTROL HAS SUPPORTED A MID 50% EFFICIENCY RATIO OVER THE PAST FIVE YEARS
Reflects an efficient approach to collecting deposits, with minimal branch network
Stable, non price sensitive deposits support highly competitive deposit funding costs
Declining net interest income due to excess cash is primary driver for rising efficiency ratio in 2012
Excess cash on
balance sheet
Mid 50% efficiency ratio =
favorable to peers
Efficiency Ratio as reported by SNL.
Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec. 31, 2012.
18
Composition of Client Segments
HVB’S CLIENT RELATIONSHIPS ARE DIVERSIFIED ACROSS OUR NICHE SEGMENTS
AS OF DECEMBER 31, 2012
AVERAGE
DEPOSITS PER % OF STRATEGIC
% OF STRATEGIC % OF STRATEGIC CLIENT CLIENT
CLIENT TOTAL BANK RELATIONSHIP RELATIONSHIPS
SEGMENT RELATIONSHIPS DEPOSITS (IN THOUSANDS) WITH LOANS
Attorney 28% 20% $809 29%
Not for Profit 18% 15% $898 37%
Property
Managers/Real Estate
Investors 18% 25% $1,553 57%
Municipalities 2% 7% $3,959 7%
General Business 34% 21% $701 49%
TOTAL / AVERAGE 100% 88% $984
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A Core Deposit Driven Franchise
Dec 31, 2011 Dec 31, 2012
DEPOSIT METRICS
HVB HVB PEERS(2)
Core Deposits / Total Deposits (1) 95% 96% 87%
Non Interest Bearing Deposits / 38% 41% 20%
Total Deposits
Deposits / Total Funding 97% 98% 92%
Loan / Deposit Ratio 64% 57% 77%
Cost of Total Deposits 36 bps 24 bps 79 bps
| (1) |
|
Core Deposits defined as total deposits less time deposits >$100,000. |
(2) Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
20
A Core Deposit Driven Franchise
DEPOSIT COMPOSITION Dec 31, 2012 CORE FUNDING
100% 96%
88%
Demand, 90%
41%
80%
Savings, 5%
Money Time > $100m, 70% 74%
Market, 4%
60% 57%
34% Time < 1% $100m,
Checking with 50%
Interest, 15% 2006 2007 2008 2009 2010 2011 2012
Loan/Dep Ratio (1)
Core/Total Deposits(2)
TOTAL DEPOSITS $2,520 MILLION
| (1) |
|
Net loans excluding loans held for sale. |
| (2) |
|
Core Deposits defined as total deposits less time deposits >$100,000. |
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Deposit Growth Drives Long Term Profitability
$2,500
OS ITS .5%
$2,000 CORE D 2 E C PAGR :12
2000 201 96.0%
$1,500 CORE
DEPOSITS (1)
VS.
$1,000 87.3% FOR
PEERS (2)
67.2% $500
CORE
DEPOSITS (1)
$0
$880 $888 $1,027 $1,125 $1,235 $1,408 $1,626 $1,813 $1,839 $2,173 $2,234 $2,425 $2,520
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Demand Deposits Checking with Interest Money Market Accounts Savings Accounts
Time Deposits < $100m Time Deposits > $100m Brokered Deposits
(1) Core deposits defined as total deposits less time deposits > $100,000 and brokered deposits. December 2006 Includes approximately $127 million of deposits as part of New York National Bank acquisition
(2) Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
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Strong Net Interest Margin
10% 9.46%
9%
8%
7%
6% 5.70%
5% 4.36%
3.96%
4%
VS.
3% 3.82%
2% 3.00% PEERS(1,2)
1%
0.24%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net Interest Margin (FTE) Yield on Loans Cost of Deposits Federal Funds Rate
| (1) |
|
Fully tax equivalent basis. |
(2) Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
23
Revenue and Margin Compression
EXCESS CASH POSITION FROM 1Q12 LOAN SALES COMPRESSING NET INTEREST INCOME
Disciplined redeployment is underway and will take time
$ 33 6%
$ 31
5%
$ 29
millions) $ 27 3.66% 4%
3.34%
(in $ 25 $24.1
3%
Income $ 23 $22.4
Interest $ 21 2%
$ 19
Net 1%
$ 17
$ 15 0%
Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
Net Interest Income NIM (FTE)
24
POSITIONED FOR
DEPLOYMENT AND DIVERSIFICATION
25
Balance Sheet Positioned for Diversification
December 31,
($ in Millions) 2009 2010 2011 2012
Cash and Cash Equivalents 219 356 78 828
Securities 522 460 521 455
Real Estate
Commercial 784 796 691 551
Construction 256 174 110 75
Residential 455 467 515 522
Commercial & Industrial 275 245 219 289
Other 27 33 29 22
Lease Financing 21 16 12 11
Total Loans (excl.HFS) 1,816 1,732 1,576 1,470
Deferred Loan Fees (4) (4) (4) (3)
Allowance for Loan Losses (39) (39) (31) (27)
Loans, Net (excl. HFS) 1,773 1,689 1,541 1,440
Total Assets 2,666 2,669 2,798 2,891
Deposits 2,173 2,234 2,425 2,520
Borrowings 177 124 70 51
Stockholders’ Equity 294 290 278 291
26
Redeployment Aimed at Balance Sheet Efficiency
Diversifying by simultaneously implementing three approaches
1.Asset purchases CURRENT
$65 Million in Residential ARMs purchased in 1Q12
Evaluating others
2.Loan participations with other institutions NEAR TERM
Building on HVB’s longstanding CRE participation experience by leveraging other institutions’ expertise and infrastructure for C&I and residential lending
Includes new relationships initiated in mid 2012 with
Large regional bank (for upper middle market and large corporate C&I)
Metro NYC peer bank (for A/R financing, mortgage warehouse financing, other non CRE)
3.Building internal ability to originate, underwrite and service non CRE credits NEAR & LONG TERM
Focus is new products for longstanding niche business and industry targets in metro NYC
New commercial lending including equipment leases, lines of credit, term loans, ABL, etc.
Complementary jumbo mortgage and HELOC products for RMs to offer commercial account principals
All while continuing to leverage historic strength in CRE underwriting to capitalize on solid demand from quality CRE credits
27
Growth Strategy
ORGANIC GROWTH IS OUR STRENGTH
We have been successful in going to market in a very focused way in the highly competitive Metro NYC commercial banking market
Larger bank M&A in the market provides opportunities to acquire new customers and new talent with intact books of business
Referrals and reputation for service have historically generated profitable, controlled growth in customers
Always seeking to grow sources of fee revenue
A.R. Schmeidler acquisition in 2004 is a good example of investing in a niche business with strong fee generating capabilities
Breadth and depth of niche business markets in Metro NYC provide unusually high growth opportunities compared to other areas of the U.S.
Opportunistic and targeted M&A could supplement organic growth in the future, particularly in fee income
28
Market Potential Example
AS OF DECEMBER 31, 2012
AVERAGE
DEPOSITS PER % OF STRATEGIC
% OF STRATEGIC % OF STRATEGIC CLIENT CLIENT
CLIENT TOTAL BANK RELATIONSHIP RELATIONSHIPS
SEGMENT RELATIONSHIPS DEPOSITS (IN THOUSANDS) WITH LOANS
Attorney 28% 20% $809 29%
Not for Profit 18% 15% $898 37%
Property Managers /
Real Estate Investors 18% 25% $1,553 57%
Municipalities 2% 7% $3,959 7%
General Business 34% 21% $701 49%
TOTAL / AVERAGE 100% 88% $984
HVB General Business Average Loan = $526,519 Businesses in Market > 500,000
> $290 BILLION LENDING OPPORTUNITY
29
Focus on Growing Fee Revenue
FEE INCOME A KEY FOCUS
While net interest income is the primary source of Hudson Valley’s revenue, we have been successful in diversifying revenue sources
Over the last 10 years we have grown fee income from 5% of total revenue to more than 14%
We see opportunity to gain more asset management and trust revenue
25% 23.3%
21.5%
Revenue 20%
Total 15% 14.4%
of
% 10%
5.1%
Income 5%
Fee
0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
HVB Peer Median
Fee Income excludes realized gains and losses on investment securities and other non recurring items as defined by SNL. Peers = Median of US based, publicly traded commercial banks with assets between $1 $5 billion as of Dec 31, 2012.
30
INVESTMENT HIGHLIGHTS
31
HVB Investment Highlights
EFFICIENT AND LOW COST OPERATOR
Longstanding record as an efficient operator
BALANCE SHEET STEWARD
Low deposit funding costs support a NIM that exceeds traditional commercial banks
Balance sheet is in transition:
Balancing desire to deploy excess liquidity with long term risk positioning objectives
Moving away from commercial real estate focus
Diversifying our lending focus to broader in market C&I opportunities
Underwriting and credit quality a key focus
Capital ratios in excess of “well capitalized” and prescribed minimums
FOCUS ON SHAREHOLDER RETURNS
Growing returns to shareholders supports the ability to pay a meaningful dividend
High insider ownership aligns management’s and board’s interests with shareholders’
32
Key Takeaways
HISTORIC DIFFERENTIATING QUALITIES REMAIN OUR STRENGTH
Low cost core deposit base = source of stable funding for future growth
Efficient mindset is in our DNA
“Private Bank” approach wins and retains customers
AN INCREASINGLY NIMBLE AND SOPHISTICATED BANK
Ahead of the curve in adopting best practices typically reserved for $10 $25 billion banks
Increased sophistication = heightened competitive edge
Developing diversified lending skills as a strategic and tactical focus
USING ENHANCED OPERATIONAL EFFECTIVENESS TO OUR ADVANTAGE
Quicker reaction to customers’ needs
Quicker reaction to regulatory and market changes
Quicker ability to diversify lending sources and maximize capital allocation
Results in: Quicker ability to grow shareholder returns
33
HVB Valuation Compared to Peers
Today * One Year Ago *
Price / Price /
Dividend Price / Tangible Dividend Price / Tangible
Yield Book Book Yield Book Book
HVB 1.6 1.01x 1.10x 4.0 1.25x 1.38x
SNL U.S. Bank $1B $5B Index 1.9% 1.37x 1.56x 1.9% 1.25x 1.44x
Median of $1B $5B NY NJ Banks 3.1% 1.20x 1.49x 3.4% 1.10x 1.38x
| * |
|
February 6, 2013 and February 6, 2012 |
34
THANK YOU
QUESTIONS
APPENDIX
FINANCIAL DETAIL AND NON GAAP RECONCILIATION
New York Metro Market Profile
BANK DEPOSITS & COMPETITIVE ENVIRONMENT
HVB competes against national, regional and local banks
There are 122 banks operating in this New York Metro Market (1)
The five county market is deposit rich more than three quarters of a trillion dollars (1)
If this market were a state, it would rank 3rd in deposit size behind California with $953.5 billion and well ahead of Texas with $599.0 billion
Summary of Deposits by State (1)
Rank State Deposits ($ in 000)
| 1 |
|
New York $ 1,065,665,215 |
| 2 |
|
California $ 953,488,261 |
HVB’s NY Metro Market $ 789,813,635
| 3 |
|
Texas $ 599,030,737 |
| 4 |
|
Florida $ 423,907,631 |
| 5 |
|
Illinois $ 393,026,185 |
| (1) |
|
FDIC Summary of Deposits as of June 30, 2012 |
37
New York Metro Market Profile
NICHE BUSINESSES
Just as this market is deposit rich, it is also rich with HVB’s targeted niche businesses
We have leading market share among Westchester attorneys and property managers
High growth potential in all other segments and counties, each with HVB market share currently <2%
HVB NICHE BUSINESS BY COUNTY (1)
Manhattan /
Segment Brooklyn Bronx Westchester Rockland Total
NY
Attorney 9,200 1,873 564 2,411 611 15,036
Not for Profit 7,673 8,636 3,368 3,450 1,435 24,638
Real Estate Investors 4,462 1,278 586 968 243 7,358
Property Managers 5,717 3,325 1,348 2,049 563 12,778
Municipalities 897 457 293 556 208 2,372
Sub Total 27,949 15,569 6,159 9,434 3,060 62,182
DATA DEMONSTRATES TREMENDOUS UNTAPPED ORGANIC GROWTH POTENTIAL IN HVB’S CORE NICHE MARKETS
| 1 |
|
Dunn & Bradstreet Market Data based on Primary & Secondary NAICS codes |
38
New York Metro Market Profile
DEMOGRAPHICS
Along with being rich in deposits and HVB’s niche businesses, the market also has very favorable demographics
Consumer Demographics (1) Population Housing Units (2) Home ownership rate Persons per household, 2006 2010 Median household income 2006 2010 Median Income Per Capita Unemployment Rate (3) Business Demographics (4) Revenues: < $1 million Revenues: $1 million $5 million Revenue: > $5 million Revenue: Not reported
Total Business Entities
Manhattan / Brooklyn Bronx Westchester Rockland Total
NY
1,585,873 2,504,700 1,385,108 949,113 311,687 19,378,102
847,090 1,000,293 511,896 370,821 104,057 8,108,103
22.8% 30.3% 20.7% 62.7% 71.0% 55.2%
2.09 2.68 2.79 2.64 3.02 2.59
$64,971 $43,567 $34,264 $79,619 $82,534 $ 55,603
$59,149 $23,605 $17,575 $47,814 $34,304 $ 30,948
8.8% 11.0% 14.0% 7.5% 7.3% 8.9%
8.8% 9.5% 11.9% 7.0% 6.6% 8.2%
145,225 90,512 31,535 58,414 17,945 343,631
13,999 4,302 1,453 3,313 955 24,022
6,930 1,155 475 1,285 275 10,120
18,895 9,192 4,488 5,454 1,699 39,728
185,049 105,161 37,951 68,466 20,874 417,501
| (1) |
|
2010 US Census Quick Facts by State|County |
(2) A housing unit is defined as a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied
| (3) |
|
County unemployment rates as of December, 2012 Bureau of Labor Statistics (4) Hoovers|D&B |
39
HVB’s Position in the Market
DEPOSIT SHARE
Except for Westchester and the Bronx, HVB’s market share in each county is less than 1%
HVB ranks 25 out of 122 institutions with $2.37 billion in deposits and 0.29% market share (1)
HVB is a small market share play in a very large market
HVB Deposits by County
HVB Deposits (1) HVB Market Total Market Deposits (1)
County HVB Branches ($ in 000) Share ($ in 000)
Westchester 18 $ 1,770,169 3.55% $ 49,881,254
Manhattan 5 $ 321,111 0.05% $ 682,797,129
Bronx 4 $ 194,924 1.84% $ 10,582,328
Rockland 2 $ 75,508 0.85% $ 8,906,783
Brooklyn 1 $ 11,883 0.03% $ 37,646,141
Total NY Metro 30 $ 2,373,595 0.30% $ 789,813,635
| (1) |
|
FDIC Summary of Deposits as of 6/30/12 |
40
Quarterly Loan Balances
Period Ending
Dollars in Millions 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012
REAL ESTATE
C&D RESIDENTIAL 67 63 62 53 51 53 48 34
C&D NON RESIDENTIAL 102 85 83 57 56 43 43 41
OWNER OCCUPIED CRE 317 324 318 244 256 229 195 181
NON OWNER OCCUPIED CRE 505 521 500 447 449 405 389 369
MULTIFAMILY LOANS 249 365 507 228 225 213 209 196
| 1 |
|
4 FAMILY MORTGAGE 181 191 187 175 232 237 214 216 |
HOME EQUITY 118 116 118 113 111 109 109 110
COMMERCIAL & INDUSTRIAL 235 228 222 219 222 231 266 289
CONSUMER 28 27 28 27 27 19 20 19
LEASE FINANCING 15 13 13 12 15 14 14 14
OTHER 2 2 2 0 1 3 3 3
TOTAL (1) $1,819 $1,935 $2,040 $1,575 $1,645 $1,557 $1,510 $1,472
| (1) |
|
Total is gross of unearned income. |
41
Strength in Diversified Commercial Lending
LOAN COMPOSITION Dec 31, 2012
MULTIFAMILY LOANS 13%
| 1 |
|
4 FAMILY MORTGAGE 15% |
HOME EQUITY 7%
COMMERCIAL & INDUSTRIAL 20%
OWNER OCCUPIED CRE 12%
NON OWNER OCCUPIED CRE 26%
Loan Balances December 31
In Millions 2011 2012
REAL ESTATE
C&D RESIDENTIAL $53 $34
C&D NON RESIDENTIAL 57 41
OWNER OCCUPIED CRE 244 181
NON OWNER OCCUPIED CRE 447 369 78%
MULTIFAMILY LOANS 228 196
| 1 |
|
4 FAMILY MORTGAGE 175 216 |
HOME EQUITY 113 110
COMMERCIAL & INDUSTRIAL 219 289
CONSUMER 27 19
LEASE FINANCING 12 14
OTHER 0 3
TOTAL (1) $1,575 $1,472
42
Composition of Commercial Loans
BALANCE OUTSTANDING AT DEC 31, 2012 (IN MILLIONS)
OWNER
INVESTOR OCCUPIED TOTAL C&I +
SEGMENT C&I OWNED CRE CRE CRE
Attorney $14 $4 $5 $23
Municipalities 2 3 0 4
Not For Profit 112 8 72 192
General Business 100 122 82 304
Property Managers & Real Estate
Investors 75 232 23 330
TOTAL $303 $369 $182 $853
Table excludes Construction & Development loans.
43
Loan Portfolio Granularity
DECEMBER 31, 2012
% OF DOLLARS % OF LOANS
OUTSTANDING BY OUTSTANDING BY
LOAN AMOUNT TIER SIZE OF LOAN NUMBER OF LOANS
< $250,000 6.34% 63.21%
$250,000 to <$1 million 21.03% 21.51%
$1 million to < $5 million 52.99% 13.79%
$5 million and greater 19.64% 1.48%
Total 100.00% 100.00%
Table excludes Residential loans.
44
Portfolio Granularity Risk Ratings
% of “Pass” Rated Loans
Portfolio Risk Ratings at Dec 31, 2012
91% 90.1%
89.5% 89.7%
90% 89.2%
88.8%
89%
88%
87%
86% 85.1%
85% 84.3%
84%
83%
82%
81%
Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
Total Special Sub
(in millions)* Pass Mention standard
Commercial Real Estate:
Owner occupied $182 72.8% 3.6% 23.6%
Non owner occupied 369 96.7% 1.2% 2.1%
Construction:
Commercial 41 72.0% 13.1% 14.9%
Residential 34 85.1% 2.6% 12.3%
Residential:
Multifamily 196 98.4% 0.0% 1.6%
| 1 |
|
4 family 89 65.5% 22.9% 11.6% |
Home equity 1 0.0% 0.0% 100.0%
Commercial & Industrial 289 93.6% 1.2% 5.2%
Lease Financing & Other 31 96.2% 2.7% 1.1%
Total Loans $1,232 89.2% 3.4% 7.4%
*Total of non homogeneous loans individually classified as to credit risk as of the most recent analysis performed
45
Portfolio Granularity Delinquencies
% OF TOTAL LOANS % OF TOTAL ASSETS
12/31/2012 9/30/2012 6/30/2012 12/31/2012 9/30/2012 6/30/2012
31 89 days Past 0.96% 0.54% 0.60% 0.49% 0.28% 0.33%
Due incl. NAL
90+ days Past 1.74% 1.63% 1.43% 0.88% 0.84% 0.79%
Due incl. NAL
Total Past Due 2.70% 2.17% 2.03% 1.37% 1.12% 1.12%
incl. NAL
Total Nonaccrual 2.37% 2.81% 2.53% 1.20% 1.44% 1.40%
Loans (NAL)
Note: Balances exclude Loans Held For Sale
46
Quarterly Summary Financial Highlights
Earnings
Dollars in thousands, except per share amounts Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 (a) Q1 2012 Q2 2012 Q3 2012 Q4 2012
Net Interest Income $27,468 $29,614 $30,038 $30,739 $31,296 $31,296 $25,508 $24,115 $22,410
Non Interest Income $5,219 $3,831 $5,714 $4,136 $4,419 $20,354 $4,789 $4,353 $4,346
Non Interest Expense $20,450 $20,648 $20,090 $18,967 $20,876 $20,876 $21,034 $20,035 $20,593
Net Income (Loss) $4,824 $7,432 $8,508 ($22,901) $8,656 $18,013 $4,961 $3,134 $3,073
Net Interest Margin 4.39% 4.55% 4.47% 4.60% 4.75% 4.75% 3.93% 3.60% 3.28%
Diluted Earnings (Loss) Per Share $0.25 $0.38 $0.43 ($1.17) $0.44 $0.92 $0.25 $0.16 $0.16
Dividends Per Share $0.14 $0.14 $0.18 $0.18 $0.18 $0.18 $0.18 $0.18 $0.18
Return on Average Equity 6.62% 10.13% 11.33% 30.07% 12.20% 25.51% 6.72% 4.32% 4.18%
Return on Average Assets 0.71% 1.06% 1.18% 3.19% 1.21% 2.53% 0.71% 0.44% 0.43%
Efficiency Ratio 60.33% 58.81% 56.67% 52.79% 56.85% 56.85% 68.06% 69.33% 75.73%
Tangible Common Equity Ratio 10.1% 9.7% 9.6% 9.1% 9.6% 9.6% 9.6% 9.2% 9.3%
Average Assets $2,699,169 $2,791,988 $2,872,159 $2,867,304 $2,845,223 $2,845,223 $2,795,090 $2,874,634 $2,883,086
Average Net Loans $1,727,420 $1,840,076 $1,928,888 $2,028,587 $1,997,391 $1,997,391 $1,577,190 $1,505,942 $1,467,153
Average Deposits $2,270,147 $2,383,267 $2,468,359 $2,463,056 $2,466,159 $2,466,159 $2,408,726 $2,489,378 $2,514,818
Average Stockholders’ Equity $291,426 $293,390 $300,338 $304,624 $282,459 $282,459 $295,378 $290,189 $293,886
| (a) |
|
Excludes income from loan sales. |
47
Non GAAP Reconciliation
Excluding
Loan Sale
in thousands except share and per
share numbers 2006 2007 2008 2009 2010 2011 2012(a) 2012(a,b)
Net Income as reported $ 34,059 $ 34,483 $ 30,877 $ 19,012 $ 5,113 $ (2,137) $ 29,181 $ 19,824
Exclude:
Income Tax (1) 18,034 18,259 15,646 7,310 (1,406) (5,413) 16,945 10,367
Provision for Loan Loss (2) 2,130 1,470 11,025 24,306 46,527 64,154 8,507 8,507
Pre tax, Pre provision Earnings $ 54,223 $ 54,212 $ 57,548 $ 50,628 $ 50,234 $ 56,604 $ 54,633 $ 38,698
Weighted Average Diluted shares 14,881,560 14,906,752 14,973,866 15,307,674 19,455,971 19,462,055 19,626,959 19,626,959
Diluted Earnings per Share as
reported Effects of (1) and (2)
above $ 2.29 $ 2.31 $ 2.06 $ 1.24 $ 0.26 $ (0.11) $ 1.49 $ 1.01
1.35 1.33 1.78 2.07 2.32 3.02 1.29 0.96
Pre Tax, Pre Provision Diluted
Earnings per Share $ 3.64 $ 3.64 $ 3.84 $ 3.31 $ 2.58 $ 2.91 $ 2.78 $ 1.97
Tangible Equity Ratio:
Total Stockholders’ Equity:
As reported $ 185,566 $ 203,687 $ 207,500 $ 293,678 $ 289,917 $ 277,562 $290,971 $ 290,971
Less: Goodwill and other
intangible assets 16,349 20,296 25,040 27,118 26,296 25,493 24,745 24,745
Tangible stockholders’ equity $ 169,217 $ 183,391 $ 182,460 $ 266,560 $ 263,621 $ 252,069 $ 266,226 $ 266,226
Total Assets:
As reported $ 2,291,734 $ 2,330,748 $ 2,540,890 $ 2,665,556 $ 2,669,033 $ 2,797,670 $2,891,246 $ 2,891,246
Less: Goodwill and other
intangible assets 16,349 20,296 25,040 27,118 26,296 25,493 24,745 24,745
Tangible assets $ 2,275,385 $ 2,310,452 $ 2,515,850 $ 2,638,438 $ 2,642,737 $ 2,772,177 $ 2,866,501 $ 2,866,501
Tangible equity ratio 7.4% 7.9% 7.3% 10.1% 10.0% 9.1% 9.3% 9.3%
| (a) |
|
Year Ended Dec 31,2012 |
(b) The loan sale in the first quarter of 2012 resulted in a gross gain of $15,935. Related income taxes totaled $6,564.
48
Investment Philosophy and Focus
INVESTMENT PHILOSOPHY:
For equity, buy the most assets and cash flow for the fewest dollars in the key beneficiaries of secular growth trends
For fixed income, preservation of principal is primary consideration with income secondary
PORTFOLIO FOCUS:
Preservation of principal
Capital appreciation
Protection of purchasing power
49
Firm Overview
OUR PRIMARY OBJECTIVE IS TO INCREASE THE PURCHASING POWER OF OUR CLIENTS’ PORTFOLIOS
Long only absolute return managers using a distinct Graham & Dodd stock selection approach with a macro view that seeks to identify global capital flows
Independent investment management firm established in 1971, acquired by Hudson Valley Bank in 2004
$1.3 billion in assets under administration*
Team of 21 professionals including investment and client service teams
Client Asset Mix
Institutional 44%
High Net Worth 56%
*Includes assets under management & advisement
ASSETS UNDER MANAGEMENT
(12/31/2012)
$1.3 Billion
Fixed 19%
Cash 8%
Equity 73%
50
Asset Growth
$1,800
18
$1,600 1,590
$1,400 262
1,398 1,369 189
$1,200 1,289
$1,000 1,123
millions) 1,043 1,031
(in $800
809
$600
Assets 596
$400
$200
$0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Assets Under Management Assets Under Advisement
51
MULTICAP & BALANCED PERFORMANCE
DECEMBER 31, 2012
YEAR 12/31/1999 INCEPTION
TO DATE TO DATE TO DATE
Multicap 2.93 116.69 619.31 (1/21/93)
Balanced 2.39 110.39 455.93 (12/31/92)
Equity 2.35 82.47 491.85
Fixed Income 4.92 109.48 244.43
S & P 500 w/div 15.95 23.34 382.51
Russell 3000 w/div 16.42 34.74 393.39
Barclays US Treas Intermediate 1.53 91.97 184.67
Merrill Lynch Corp Bds 1 10 Yrs 9.45 131.67 263.86
Performance data is net of management fees and net of transaction costs.
| * |
|
These performance figures are supplemental information to the GIPS Compliant presentation. |
52
Strategy for Growth
EXPAND DISTRIBUTION
HVB
Trust
New York Metro Market
Third Party Programs
Family Offices and Ultra High Net Worth
Foundations and Endowments
STRATEGIC AND HIGHLY SELECTIVE ACQUISITIONS
People
Firms
53
THANK YOU FOR YOUR INTEREST IN HUDSON VALLEY HOLDING CORP.
March 2013 Ticker: HVB www.hudsonvalleybank.com