EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

SOURCE: HUDSON VALLEY HOLDING CORP.

     
FOR IMMEDIATE RELEASE   CONTACT
Hudson Valley Holding Corp.
21 Scarsdale Road
Yonkers, NY 10707 		 
Stephen R. Brown
President and CEO
(914) 771-3073
   
Michael J. Indiveri
Executive Vice President and CFO
(914) 768-6834

HUDSON VALLEY HOLDING CORP. ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2014

— Loans grew 7% versus prior quarter —

— Deposits grew 12% versus prior quarter —

— $304 million investment securities portfolio purchase deploys liquidity into higher yielding
assets —

— Appointment of chief banking officer augments executive team —

— Cash dividend increased to $0.08 per share —

YONKERS, N.Y. – July 25, 2014 – Hudson Valley Holding Corp. (NYSE: HVB) reported second quarter 2014 earnings, benefiting from loan and investment portfolio growth, credit quality improvement, and continued low funding costs.

The parent company of Hudson Valley Bank earned $2.4 million, or $0.12 per diluted share, in the second quarter of 2014, compared to $1.6 million, or $0.08 per diluted share, in the first quarter of 2014, and $3.5 million, or $0.18 per diluted share, in the second quarter of 2013. The Company recorded approximately $0.5 million ($0.3 million after tax, or $0.02 per diluted share) of charges related to executive severance payments as well as professional fees incurred to expand its residential lending operation.

“We are pleased that our strategy to deploy liquidity, diversify our product offerings and expand our customer base is positioning the Company to generate enhanced profitability and growth,” President and Chief Executive Officer Stephen R. Brown said. “The addition of our recently announced Chief Banking Officer rounds out our management team, and enables us to strengthen our relationships with our long standing customers as well as bring our successful high touch banking experience to an expanded customer base.”

Balance Sheet
Cash and cash equivalents totaled $507.4 million at June 30, 2014, decreasing 15.6 percent during the second quarter and 27.5 percent from December 31, 2013.

Investment securities totaled $844.7 million at June 30, 2014, increasing 56.9 percent during the second quarter and 54.0 percent from December 31, 2013. During June 2014, the Company purchased $304 million of high quality U.S. government agency bonds, mortgage-backed securities and collateralized mortgage-backed obligations. The securities had a 1.79 percent yield, a 4.8 year average life and duration of 3.8 years. The purchase enabled the Company to deploy liquidity into higher yielding assets with strong cash flows that can be reinvested into loans over the next 18 to 24 months.

Net loans totaled $1.74 billion at June 30, 2014, increasing 6.7 percent during the second quarter and 8.1 percent from December 31, 2013.

Commercial and industrial loans of $308.6 million represented 17.4 percent of total loans at June 30, 2014, compared to 17.1 percent at the end of the linked quarter and 17.7 percent at the end of the year-ago quarter.

Loans secured by 1-4 family residential mortgages of $302.4 million at June 30, 2014, represented 17.1 percent of total loans, compared to 19.0 percent at the end of the linked quarter and 15.0 percent at the end of the year-ago quarter.

Deposits totaled $2.86 billion at June 30, 2014, increasing 11.7 percent during the second quarter and 8.7 percent from December 31, 2013.

The Company maintained very high levels of core deposits, which represented 97 percent of total deposits at the end of the second quarter of 2014. Core deposits, which exclude time deposits greater than $100,000, totaled $2.8 billion at June 30, 2014, compared to $2.5 billion at both December 31, 2013 and June 30, 2013.

Portfolio Credit Quality

Overall portfolio trends continue to reflect a gradually improving credit environment.

Nonperforming assets (NPAs), which include nonaccrual loans, accruing loans delinquent over 90 days and other real estate owned (OREO), were $20.5 million at June 30, 2014, compared to $23.5 million at December 31, 2013 and $30.3 million at June 30, 2013. NPAs totaled 0.64 percent of total assets at June 30, 2014, compared to 0.78 percent at December 31, 2013 and 1.01 percent at June 30, 2013.

Net charge-offs were $0.1 million for the second quarter of 2014, compared to net recoveries of $0.8 million in the linked quarter and net charge-offs of $0.5 million in the year-ago quarter. As a percentage of average loans, annualized net charge-offs were 0.02 percent for the second quarter of 2014, and annualized net charge-offs were 0.13 percent in the year-ago quarter.

The Company’s allowance for loan losses was $27.3 million at June 30, 2014 compared to $26.0 million at December 31, 2013 and $25.9 million at June 30, 2013. The allowance measured 1.54 percent, 1.59 percent and 1.75 percent of total loans at each of those dates, respectively, reflecting both loan growth and continued improvement in overall credit quality.

Classified assets at June 30, 2014 represented 16.4 percent of Tier 1 capital plus the allowance for loan losses, compared to 20.7 percent at December 31, 2013 and 30.8 percent at June 30, 2013.

The Company’s provision for loan losses in the second quarter of 2014 was $0.5 million, compared to $0.1 million in the linked quarter and $0.3 million in the year-ago quarter.

Revenues and Margin
Net interest income was $22.1 million in the second quarter of 2014, compared to $21.7 million in the linked quarter and $21.1 million in the year-ago quarter.

The Company’s net interest margin was 3.05 percent in the second quarter of 2014, compared to 3.14 percent in the linked quarter and 3.06 percent in the year-ago quarter.

The yield on interest-earning assets averaged 3.22 percent in the second quarter of 2014, compared to 3.30 percent in the linked quarter and 3.27 percent in the year-ago quarter. Lower asset yields continued to be partially offset by the Company’s historically low average cost of deposits of 0.17 percent in both the second quarter of 2014, and the linked quarter and 0.20 percent in the year-ago quarter.

Non-interest income was $3.9 million for the second quarter of 2014, compared to $2.5 million for the linked quarter, which included a $1.9 million prepayment penalty on FHLB borrowings, and $3.9 million in the year-ago quarter.

Non-Interest Expense
Total non-interest expense for the second quarter of 2014 was $22.1 million, compared to $21.8 million in the linked quarter and $19.8 million in the year-ago quarter. Expense savings achieved in 2013 through the elimination of non-profitable operations, have been reinvested into new strategic initiatives designed to diversify our product offering and customer base. These initiatives are already producing value as a result of the activity of the new hires in Hudson Valley’s asset based lending and equipment financing units. As such, salaries and employee benefits expense was $12.7 million in the second quarter of 2014, compared to $13.0 million in the linked quarter and $11.1 million in the year-ago quarter. We believe any incremental increases in non-interest expense will be largely dependent upon expanding into new products and businesses.

Quarterly Cash Dividend and Capital Management
The Company’s board of directors declared a quarterly cash dividend of $0.08 per share, payable on August 15, 2014, to all common stock shareholders of record as of the close of business on August 8, 2014.

At June 30, 2014, the Company maintained a total risk-based capital ratio of 16.0 percent, a Tier 1 risk-based capital ratio of 14.7 percent, and a Tier 1 leverage ratio of 9.4 percent. Its Hudson Valley Bank subsidiary at June 30, 2014 maintained a total risk-based capital ratio of 15.7 percent, a Tier 1 risk-based capital ratio of 14.4 percent, and a Tier 1 leverage ratio of 9.2 percent.

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

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

Conference Call

As previously announced, the Company will hold its quarterly conference call to review the Company’s financial results on Monday, July 28, 2014 at 10:00 AM ET:

Domestic (toll free): 1-877-508-9602; International (toll): +1-412-317-1076.

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 8, 2014 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference # 10048930; International Toll: +1-412-317-0088 - Conference # 10048930.

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, headquartered in Yonkers, N.Y., Hudson Valley Holding Corp (NYSE:HVB) serves small- and mid-sized businesses, professional services firms, not-for-profit organizations and their principals throughout metropolitan New York.  The Company focuses on building strategic relationships with its niche customers, providing a full range of banking, deposit, financing, trust and investment management services, in addition to specialized services, such as asset based lending and equipment financing, across varied industries nationwide. With $3.2 billion in assets, $2.9 billion in deposits and 28 branches, Hudson Valley is the largest bank headquartered in Westchester County. 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.

**************************************************************************************

Forward Looking Statements

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, 2014. 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, 2013 include, but are not limited to:

  •   the Office of the Comptroller of the Currency (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 inability to deploy our excess cash, reduce our expenses and improve our operating leverage and efficiency;

  •   our ability 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;

  •   inability to effectively integrate and manage the new businesses and lending teams;

  •   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 additional 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 ability 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, or such higher capital levels as may be required;

  •   proposed legislative and regulatory action may adversely affect us and the financial services industry;

  •   legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) may subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;

  •   future increased Federal Deposit Insurance Corporation, or FDIC, special assessments or changes to regular assessments;

  •   potential liabilities under federal and state environmental laws;

  •   legislative and regulatory changes to laws governing New York State’s taxation of HVB’s REIT subsidiary.

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, 2014 and 2013
(In thousands, except per share data)
         
    Three Months Ended
    June 30
    2014   2013
Interest Income:
                
Loans, including fees
   $ 19,505     $ 18,826  
Securities:
                
Taxable
     2,755       2,390  
Exempt from Federal income taxes
     622       780  
Federal funds sold
     8       11  
Deposits in banks
     391       540  
Total interest income
     23,281       22,547  
 
                
Interest Expense:
                
Deposits
     1,172       1,292  
Securities sold under repurchase agreements and other short-term borrowings
     9       7  
Other borrowings
     —       180  
Total interest expense
     1,181       1,479  
 
                
Net Interest Income
     22,100       21,068  
Provision for loan losses
     460       289  
Net interest income after provision for loan losses
     21,640       20,779  
 
                
Non-Interest Income:
                
Service charges
     1,415       1,394  
Investment advisory fees
     1,871       1,959  
Realized gains on securities available for sale, net
     12       —  
Other income
     633       528  
Total non-interest income
     3,931       3,881  
 
                
Non-Interest Expense:
                
Salaries and employee benefits
     12,693       11,120  
Occupancy
     2,365       2,101  
Professional services
     1,928       1,731  
Equipment
     980       1,001  
Business development
     927       591  
FDIC assessment
     522       949  
Other operating expenses
     2,675       2,325  
Total non-interest expense
     22,090       19,818  
 
                
Income Before Income Taxes
     3,481       4,842  
Income Taxes
     1,041       1,355  
Net Income
   $ 2,440     $ 3,487  
 
                
Basic Earnings Per Common Share
   $ 0.12     $ 0.18  
Diluted Earnings Per Common Share
   $ 0.12     $ 0.18  

1

                                 
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)    
For the six months ended June 30, 2014 and 2013    
(In thousands, except per share data)    
         
    Six Months Ended
    June 30    
    2014   2013
Interest Income:
                                
Loans, including fees
           $ 39,043             $ 38,085  
Securities:
                                
Taxable
             5,073               4,585  
Exempt from Federal income taxes
             1,252               1,548  
Federal funds sold
             16               22  
Deposits in banks
             732               988  
Total interest income
             46,116               45,228  
         
Interest Expense:
                                
Deposits
             2,262               2,539  
Securities sold under repurchase agreements and other short-term borrowings
             15               16  
Other borrowings
             10               359  
Total interest expense
             2,287               2,914  
         
Net Interest Income
             43,829               42,314  
Provision for loan losses
             538               1,061  
Net interest income after provision for loan losses
             43,291               41,253  
         
Non-Interest Income:
                                
Service charges
             3,198               3,133  
Investment advisory fees
             3,798               3,892  
Realized gains on securities available for sale, net
             38               —  
Gains on sales and revaluation of loans held for sale and other real estate owned, net
             —               17  
Prepayment penalty — FHLB Borrowings
             (1,860 )             —  
Other income
             1,236               1,356  
Total non-interest income
             6,410               8,398  
         
Non-Interest Expense:
                                
Salaries and employee benefits
             25,732               22,402  
Occupancy
             4,384               4,210  
Professional services
             3,621               3,236  
Equipment
             1,978               2,057  
Business development
             1,598               1,043  
FDIC assessment
             1,128               1,893  
Other operating expenses
             5,439               4,588  
Total non-interest expense
             43,880               39,429  
         
Income Before Income Taxes
             5,821               10,222  
Income Taxes
             1,779               3,084  
Net Income
           $ 4,042             $ 7,138  
         
Basic Earnings Per Common Share
           $ 0.20             $ 0.36  
Diluted Earnings Per Common Share
           $ 0.20             $ 0.36  
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
                        
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        
June 30, 2014 and December 31, 2013
                        
(In thousands, except share and per share data)
                        
 
                        
 
           June 30   December 31
            2014     2013  
                     
ASSETS
                                
Cash and non-interest earning due from banks
                   $ 52,856     $ 37,711  
Interest earning deposits in banks
                     454,577       661,643  
                     
Total cash and cash equivalents
                     507,433       699,354  
Federal funds sold
                     15,539       27,134  
Securities available for sale, at estimated fair value (amortized cost of $839,454 in
                                
2014 and $550,785 in 2013)
                     839,193       542,198  
Securities held to maturity, at amortized cost (estimated fair value of $5,758 in
                                
2014 and $6,556 in 2013)
                     5,466       6,238  
Federal Home Loan Bank of New York (FHLB) stock
                     3,212       3,478  
Loans (net of allowance for loan losses of $27,275 in 2014 and $25,990 in 2013)
                     1,742,569       1,606,179  
Accrued interest and other receivables
                     17,394       14,663  
Premises and equipment, net
                     15,039       15,103  
Deferred income tax, net
                     24,513       31,433  
Bank owned life insurance
                     42,387       41,224  
Goodwill
                     5,142       5,142  
Other intangible assets
                     618       713  
Other assets
                     6,879       6,340  
TOTAL ASSETS
                   $ 3,225,384     $ 2,999,199  
                     
 
                                
LIABILITIES
                                
Deposits:
                                
Non-interest bearing
                   $ 1,082,169     $ 1,069,631  
Interest bearing
                     1,777,707       1,564,113  
Total deposits
                     2,859,876       2,633,744  
Securities sold under repurchase agreements and other short-term borrowings
                     46,072       34,379  
Other borrowings
             —               16,388  
Accrued interest and other liabilities
                     27,390       30,379  
TOTAL LIABILITIES
                     2,933,338       2,714,890  
                     
 
                                
STOCKHOLDERS’ EQUITY
                                
Preferred Stock, $0.01 par value; authorized 15,000,000 shares; no shares
                                
outstanding in 2014 and 2013, respectively
             —               —  
Common stock, $0.20 par value; authorized 25,000,000 shares: outstanding
                                
19,984,352 and 19,935,559 shares in 2014 and 2013, respectively
                     4,257       4,247  
Additional paid-in capital
                     351,860       351,108  
Retained earnings (deficit)
                     (5,465 )     (7,111 )
Accumulated other comprehensive loss
                     (1,042 )     (6,371 )
Treasury stock, at cost; 1,299,414 shares in 2014 and 2013
                     (57,564 )     (57,564 )
TOTAL STOCKHOLDERS’ EQUITY
                     292,046       284,309  
                     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
                   $ 3,225,384     $ 2,999,199  
                     
 
                        

2

                                                                                                                                                         
                    HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
                    Average Balances and Interest Rates
                    For the three months ended June 30, 2014 and 2013
                                                                                                                     
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
(dollars in thousands).
                    Three Months Ended June 30,
                                2014                                                           2013            
                    -                                                                   -                                           -        
(Unaudited)                   Average                           Yield/                           Average                           Yield/
                    Balance   Interest (3)   Rate                           Balance           Interest (3)   Rate
                                                         
ASSETS
                                                                                                                            
Interest earning assets:
                                                                                                                    
Deposits in Banks                   $   579,589                   $ 391           0.27 %                               $822,288           $ 540   0.26%
Federal funds sold                           19,898                   8           0.16 %                                       23,279           11   0.19%
Securities: (1)
                                                                                                                                    
Taxable                           530,332                   2,755           2.08 %                               421,394           2,390   2.27%
Exempt from federal income taxes
                   96,053                   957           3.99 %                                       82,236           1,200   5.84%
Loans, net (2)                   1,671,938                   19,505           4.67 %                               1,409,875           18,826   5.34%
Total interest earning assets
           2,897,810                   23,616           3.26 %                               2,759,072           22,967   3.33%
                                                                                 
Non-interest earning assets:
                                                                                                                    
Cash & due from banks
                   55,965                                                                       60,270                        
Other assets                           108,621                                                               132,272                        
Total non-interest earning assets
                   164,586                                                               192,542                        
                                                                                                                 
Total assets                   $3,062,396                                                               $2,951,614                        
                                                                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                                                                                    
Interest bearing liabilities:
                                                                                                                    
Deposits:
                                                                                                                            
Money market                   $   951,827                   $ 793           0.33 %                               $894,878           $ 784   0.35%
Savings                           122,539                   36           0.12 %                               123,925           95   0.31%
Time                           113,904                   132           0.46 %                               124,058           155   0.50%
Checking with interest
                   510,645                   211           0.17 %                               442,048           258   0.23%
Securities sold under repo & other s/t borrowings
                   32,297                   9           0.11 %                                       26,115           7   0.11%
Other borrowings                           -                   -           0.00 %                                       16,412           180   4.39%
Total interest bearing liabilities
           1,731,212                   1,181           0.27 %                               1,627,436           1,479   0.36%
                                                                                 
Non-interest bearing liabilities:
                                                                                                                    
Demand deposits                   1,014,081                                                               1,001,674                        
Other liabilities
                           25,947                                                                       27,658                        
Total non-interest bearing liabilities
           1,040,028                                                               1,029,332                        
                                                                                                                 
Stockholders’ equity (1)
                   291,156                                                               294,846                        
Total liabilities and stockholders’ equity
           $3,062,396                                                               $2,951,614                        
                                                                                                                 
Net interest earnings
                               $   22,435                                                               $ 21,488            
Net yield on interest earning assets
                                                   3.10 %                                                       3.12%
 
                                                                                                            
(1) Excludes unrealized gains (losses) on securities available for sale. Management believes that this presentation more closely reflects actual performance, as it is more consistent with the Company’s stated
                
asset/liability management strategies, which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates.
Effects of these adjustments are presented in the table below.
                                                                                                                                        
(2) Includes loans classified as non-accrual.
                                                                                                                                                
(3) The data contained in the table has been adjusted to a tax equivalent basis, based on the Company’s federal statutory rate of 35 percent. Management believes that this presentation provides comparability of net
        
interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. Effects of these adjustments are presented in the table below.
                
                    HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES                                                                                        
                            Average Balances and Interest Rates                                                                                        
                    For the six months ended June 30, 2014 and 2013                                                                                        
 
                                                                                                                            
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
        
(dollars in thousands).
                                                                                                                                                
                                                                    Six Months Ended June 30,                                                        
                     
                                              2014                                                                             2013                
                      -                                                   -                                   -          
(Unaudited)                   Average                           Yield/                           Average                           Yield/
                    Balance   Interest (3)   Rate                           Balance           Interest (3)   Rate
                                                         
ASSETS
                                                                                                                            
Interest earning assets:
                                                                                                                    
Deposits in Banks                   $   582,369                   $ 732           0.25 %                               $787,982           $ 988   0.25%
Federal funds sold                           20,141                   16           0.16 %                                       24,415           22   0.18%
Securities: (1)
                                                                                                                                    
Taxable                           493,825                   5,073           2.05 %                               403,689           4,585   2.27%
Exempt from federal income taxes
                   93,621                   1,926           4.11 %                                       83,058           2,382   5.74%
Loans, net (2)                   1,644,048                   39,043           4.75 %                               1,415,970           38,085   5.38%
Total interest earning assets
           2,834,004                   46,790           3.30 %                               2,715,114           46,062   3.39%
                                                                                 
Non-interest earning assets:
                                                                                                                    
Cash & due from banks
                   57,671                                                                       56,284                        
Other assets                           110,092                                                               134,438                        
Total non-interest earning assets
                   167,763                                                               190,722                        
                                                                                                                 
Total assets                   $3,001,767                                                               $2,905,836                        
                                                                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                                                                                    
Interest bearing liabilities:
                                                                                                                    
Deposits:
                                                                                                                            
Money market                   $   923,728                   $ 1,538           0.33 %                               $878,399           $ 1,625   0.37%
Savings                           123,420                   79           0.13 %                               127,108           187   0.29%
Time                           114,468                   265           0.46 %                               126,521           318   0.50%
Checking with interest
                   483,674                   380           0.16 %                               405,065           409   0.20%
Securities sold under repo & other s/t borrowings
                   30,608                   15           0.10 %                                       28,019           16   0.11%
Other borrowings                           453                   10           4.42 %                                       16,417           359   4.37%
Total interest bearing liabilities
           1,676,351                   2,287           0.27 %                               1,581,529           2,914   0.37%
                                                                                 
Non-interest bearing liabilities:
                                                                                                                    
Demand deposits                   1,006,537                                                               1,002,967                        
Other liabilities
                           28,375                                                                       28,458                        
Total non-interest bearing liabilities
           1,034,912                                                               1,031,425                        
                                                                                                                 
Stockholders’ equity (1)
                   290,504                                                               292,882                        
Total liabilities and stockholders’ equity
           $3,001,767                                                               $2,905,836                        
                                                                                                                 
Net interest earnings
                               $   44,503                                                               $ 43,148            
Net yield on interest earning assets
                                                   3.14 %                                                       3.18%
 
                                                                                                            
(1) Excludes unrealized gains (losses) on securities available for sale. Management believes that this presentation more closely reflects actual performance, as it is more consistent with the Company’s stated
                
asset/liability management strategies, which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates.
Effects of these adjustments are presented in the table below.
                                                                                                                                        
(2) Includes loans classified as non-accrual.
                                                                                                                                                
(3) The data contained in the table has been adjusted to a tax equivalent basis, based on the Company’s federal statutory rate of 35 percent. Management believes that this presentation provides comparability of net
        
interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. Effects of these adjustments are presented in the table below.
                
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIESFinancial HighlightsSecond Quarter 2014 and 2013(Dollars in thousands, except per share data)
                                        
 
                                                                                                                                        
    Three Months Ended           Three Months Ended           Six Months Ended                   Six Months Ended                                
    Jun 30, 2014           Jun 30, 2013                   Jun 30, 2014                           Jun 30, 2013                                        
                                                                                                                                 
Earnings:                                                                                                                                
Net Interest Income
   $22,100           $21,068                                   $43,829           $42,314                                
Non-Interest Income
   $3,931           $3,881                                   $6,410           $8,398                                
Non-Interest Expense
   $22,090           $19,818                                   $43,880           $39,429                                
Net Income           $2,440           $3,487                                   $4,042           $7,138                                
Net Interest Margin
   3.05%           3.06%                                   3.10%                   3.12 %                                
Net Interest Margin (FTE) (1)
   3.10%           3.12%                                   3.14%                   3.18 %                                
                                                                                                                                 
Diluted Earnings Per Share
   $0.12           $0.18                                   $0.20                   $ 0.36                                
Dividends Per Share
   $0.06           $0.06                                   $0.12                   $ 0.12                                
Return on Average Equity
   3.37%           4.75%                                   2.80%                   4.88 %                                
Return on Average Assets
   0.32%           0.47%                                   0.27%                   0.49 %                                
Efficiency Ratio (2)
   83.82%           78.12%                                   83.21%           76.52%                                
                                                                                                                                 
Average Balances:                                                                                                                                
Average Assets           $3,060,221           $2,949,423                           $2,998,209           $2,904,681                                
Average Net Loans           $1,671,938           $1,409,875                           $1,644,048           $1,415,970                                
Average Investments
   $626,385           $503,630                                   $587,446           $486,747                                
Average Interest Earning Assets
   $2,895,635           $2,756,881                           $2,830,446           $2,713,959                                
Average Deposits           $2,712,996           $2,586,583                           $2,651,827           $2,540,060                                
Average Borrowings
   $32,297           $42,527                                   $31,061           $44,436                                
Average Interest Bearing
                                                                                                                                                
Liabilities           $1,731,212           $1,627,436                           $1,676,351           $1,581,529                                
Average Stockholders’ Equity
   $289,761           $293,616                                   $288,258           $292,290                                
                                                                                                                                 
Asset Quality — During Period:
                                                                                                                        
Provision for Loan Losses
           $ 460           $289                                   $538           $1,061                                
Net Charge-offs (Recoveries)
           $ 90           $452                                   ($746)           $1,748                                
                                                                                                                                 
(1) See Non-GAAP financial measures and reconciliation to GAAP below.
                                                                                                                                        
(2) The efficiency ratio (a lower ratio indicates greater efficiency) compares non-interest expense to adjusted total revenue (taxable equivalent net interest income, plus non-interest
                                
income, excluding gains or losses on sales or revaluations of investment securities and other assets and penalties on prepayment of borrowings.
                                                                        
                                         
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
Selected Quarterly Balance Sheet Data
(Dollars in thousands except per share data)
                     
    Jun 30   Mar 31   Dec 31   Sep 30   Jun 30
    2014   2014   2013   2013   2013
 
                                        
Period End Balances:
                                        
Total Assets
   $ 3,225,359     $ 2,906,201     $ 2,999,199     $ 3,021,520     $ 2,981,975  
Total Investments
   $ 844,659     $ 538,292     $ 548,436     $ 536,339     $ 530,704  
Net Loans
   $ 1,742,569     $ 1,632,795     $ 1,606,179     $ 1,552,125     $ 1,454,191  
Goodwill and Other Intangible Assets
   $ 5,760     $ 5,807     $ 5,855     $ 24,602     $ 24,650  
Total Deposits
   $ 2,859,876     $ 2,562,018     $ 2,633,744     $ 2,664,940     $ 2,625,115  
Total Stockholders’ Equity
   $ 292,046     $ 287,553     $ 284,309     $ 290,702     $ 289,466  
Tangible Common Equity (1)
   $ 286,286     $ 281,746     $ 278,454     $ 266,100     $ 264,816  
Common Shares Outstanding
     19,984,352       20,032,431       19,935,559       19,903,337       19,898,145  
Book Value Per Share
   $ 14.61     $ 14.35     $ 14.26     $ 14.61     $ 14.55  
Tangible Book Value Per Share (1)
   $ 14.33     $ 14.06     $ 13.97     $ 13.37     $ 13.31  
Tangible Common Equity Ratio — HVHC (1)
     8.9 %     9.7 %     9.3 %     8.9 %     9.0 %
 
                                        
Tier 1 Leverage Ratio — HVHC
     9.4 %     9.7 %     9.5 %     9.2 %     9.3 %
Tier 1 Risk Based Capital Ratio — HVHC
     14.7 %     16.2 %     16.2 %     15.9 %     16.5 %
Total Risk Based Capital Ratio — HVHC
     16.0 %     17.5 %     17.5 %     17.2 %     17.7 %
Tier 1 Leverage Ratio — HVB
     9.2 %     9.5 %     9.3 %     9.0 %     9.1 %
Tier 1 Risk Based Capital Ratio — HVB
     14.4 %     15.9 %     15.8 %     15.7 %     16.2 %
Total Risk Based Capital Ratio — HVB
     15.7 %     17.2 %     17.1 %     16.9 %     17.4 %
 
                                        
Gross Loans (excluding Loans Held-For-Sale):
                                        
Commercial Real Estate
   $ 622,615     $ 587,366     $ 593,476     $ 598,996     $ 594,301  
Construction
     87,146       81,331       88,311       82,310       72,337  
Residential Multi-Family
     295,008       249,661       226,898       214,853       196,438  
Residential Other
     417,297       429,379       432,999       396,477       328,922  
Commercial and Industrial
     308,555       284,025       258,578       254,723       261,469  
Individuals
     11,427       12,908       17,388       17,352       16,752  
Lease Financing
     27,049       14,000       13,140       12,068       10,154  
Total Loans
   $ 1,769,097     $ 1,658,670     $ 1,630,790     $ 1,576,779     $ 1,480,373  
 
                                        
 
                                        
Asset Quality — Period End:
                                        
Allowance for Loan Losses
   $ 27,275     $ 26,904     $ 25,990     $ 25,863     $ 25,926  
Loans 31-89 Days Past Due Accruing
   $ 5,572     $ 9,590     $ 4,625     $ 3,704     $ 8,824  
Loans 90 Days or More Past Due Accruing (90 PD)
   $ 0     $ 0     $ 0     $ 0     $ 0  
Nonaccrual Loans (NAL)
   $ 20,546     $ 21,006     $ 23,489     $ 33,964     $ 30,267  
Other Real Estate Owned (OREO)
   $ 0     $ 0     $ 0     $ 0     $ 0  
Nonperforming Loans Held For Sale (HFS)
   $ 0     $ 0     $ 0     $ 0     $ 0  
Nonperforming Assets (90 PD+NAL+OREO+HFS)
   $ 20,546     $ 21,006     $ 23,489     $ 33,964     $ 30,267  
Allowance / Total Loans
     1.54 %     1.62 %     1.59 %     1.64 %     1.75 %
NAL / Total Loans
     1.16 %     1.27 %     1.44 %     2.15 %     2.04 %
NAL + 90 PD / Total Loans
     1.16 %     1.27 %     1.44 %     2.15 %     2.04 %
NAL + 90 PD + OREO / Total Assets
     0.64 %     0.72 %     0.78 %     1.12 %     1.01 %
Nonperforming Assets / Total Assets
     0.64 %     0.72 %     0.78 %     1.12 %     1.01 %
 
                                        
 
                                        
(1) See Non-GAAP financial disclosures and reconciliation to GAAP below.

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HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
Selected Quarterly Income Statement Data
(Dollars in thousands except per share data)
                                     
 
   Three Months Ended Jun 30, 2014   Three Months Ended Mar 31, 2014   Three Months Ended Dec 31, 2013   Three Months Ended Sep 30, 2013   Three Months Ended Jun 30, 2013
                     
Interest Income   $ 23,281     $ 22,835     $21,946   $ 22,409     $ 22,547  
Interest Expense     1,181       1,106     1,336     1,396       1,479  
Net Interest Income     22,100       21,729     20,610     21,013       21,068  
Provision for Loan Losses     460       78     648     767       289  
Non-Interest Income     3,931       2,479     2,557     4,189       3,881  
Non-Interest Expense     22,090       21,790     39,126     21,546       19,818  
Income (Loss) Before Income Taxes     3,481       2,340     (16,607)     2,889       4,842  
Income Taxes     1,041       738     (8,104)     394       1,355  
Net Income (Loss)   $ 2,440     $ 1,602     ($8,503)   $ 2,495     $ 3,487  
                                     
Diluted Earnings (Loss) Per Share   $ 0.12     $ 0.08     ($0.43)   $ 0.13     $ 0.18  
                                     
Net Interest Margin     3.05 %     3.14 %   2.95%     2.99 %     3.06 %
                                     
Average Cost of Deposits (1)     0.17 %     0.17 %   0.18%     0.18 %     0.20 %
                                     
                                     
(1) Includes noninterest bearing deposits                                    
                                 
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
Non-GAAP Financial Measures and Reconciliation to GAAP
(Dollars in thousands)
                 
    Three Months Ended   Six Months Ended
    June 30   June 30
    2014   2013   2014   2013
Total interest earning assets:
                                
As reported
   $ 2,895,635     $ 2,756,881     $ 2,830,446     $ 2,713,959  
Unrealized (loss) gain on securities
                                
available-for-sale (a)
     (2,175 )     (2,191 )     (3,558 )     (1,155 )
 
                                
Adjusted total interest earning assets (1)
   $ 2,897,810     $ 2,759,072     $ 2,834,004     $ 2,715,114  
 
                                
Net interest income:
                                
As reported
   $ 22,100     $ 21,068     $ 43,829     $ 42,314  
Adjustment to tax equivalency basis (b)
     335       420       674       834  
 
                                
Adjusted net interest income (1)
   $ 22,435     $ 21,488     $ 44,503     $ 43,148  
 
                                
Net yield on interest earning assets:
                                
As reported
     3.05 %     3.06 %     3.10 %     3.12 %
Effects of (a) and (b) above
     0.05 %     0.06 %     0.04 %     0.06 %
 
                                
Adjusted net yield on interest earning assets (1)
     3.10 %     3.12 %     3.14 %     3.18 %
 
                                
Average stockholders’ equity:
                                
As reported
   $ 289,761     $ 293,616     $ 288,258     $ 292,290  
Effects of (a) and (b) above
     (1,395 )     (1,230 )     (2,246 )     (592 )
 
                                
Adjusted average stockholders’ equity (1)
   $ 291,156     $ 294,846     $ 290,504     $ 292,882  
 
                                
Interest income:
                                
As reported
   $ 23,281     $ 22,547     $ 46,116     $ 45,228  
Adjustment to tax equivalency basis (b)
     335       420       674       834  
 
                                
Adjusted interest income (1)
   $ 23,616     $ 22,967     $ 46,790     $ 46,062  
 
                                
Gross yield on interest earning assets:
                                
As reported
     3.22 %     3.27 %     3.26 %     3.33 %
Effects of (a) and (b) above
     0.04 %     0.06 %     0.04 %     0.06 %
 
                                
Adjusted gross yield on interest earning assets (1)
     3.26 %     3.33 %     3.30 %     3.39 %
 
                                
                                         
HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
Non-GAAP Financial Measures and Reconciliation to GAAP (Continued)
(Dollars in thousands, except per share data)
                     
    Jun 30   Mar 31   Dec 31   Sep 30   Jun 30
    2014   2014   2013   2013   2013
-                                        
 
                                        
Tangible Equity Ratio:
                                        
Total Stockholders’ Equity:
                                        
As reported
   $ 292,046     $ 287,553     $ 284,309     $ 290,702     $ 289,466  
Less: Goodwill and other intangible assets
     5,760       5,807       5,855       24,602       24,650  
Tangible stockholders’ equity
   $ 286,286     $ 281,746     $ 278,454     $ 266,100     $ 264,816  
 
                                        
Total Assets:
                                        
As reported
   $ 3,225,384     $ 2,906,201     $ 2,999,199     $ 3,021,520     $ 2,981,975  
Less: Goodwill and other intangible assets
     5,760       5,807       5,855       24,602       24,650  
Tangible Assets
   $ 3,219,624     $ 2,900,394     $ 2,993,344     $ 2,996,918     $ 2,957,325  
 
                                        
Tangible equity ratio (2)
     8.9 %     9.7 %     9.3 %     8.9 %     9.0 %
 
                                        
Tangible Book Value Per Share:
                                        
Tangible stockholders’ equity
   $ 286,286     $ 281,746     $ 278,454     $ 266,100     $ 264,816  
Common shares outstanding
     19,984,352       20,032,431       19,935,559       19,903,337       19,898,145  
Tangible book value per share (2)
   $ 14.33     $ 14.06     $ 13.97     $ 13.37     $ 13.31  
 
                                        
 
                                        
(1) Adjusted total interest earning assets, net interest earnings, net yield on interest earning assets and average stockholders’ equity exclude the effects of unrealized net gains and losses on securities available for sale. These are non-GAAP financial measures. Management believes that this alternate presentation more closely reflects actual performance, as it is more consistent with the Company’s stated asset/liability management strategies which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates. As noted in the Company’s 2014 Proxy Statement, net income as a percentage of adjusted average stockholders’ equity is one of several factors utilized by management to determine total compensation.
(2) Tangible equity ratio and tangible book value for share are non-GAAP financial measurements. Management believes these non-GAAP financial measures provide information useful to investors in understanding the Company’s underlying operating performance and trends, and facilitates comparisons with the performance of other banks and are used by management to analyze the relative strength of the Company’s capital position.

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