Jim Landy has watched as newfangled lenders, late the darlings of Wall Street, came to dominate credit markets once controlled by the bricks-and-mortar banking world.
As it turns out, his old-school bank itself looks pretty good these days on Wall Street.
On average between 2005 and 2007, Hudson Valley Holding Corp. had the 17th-best return on equity of 200 mid-sized banks, according to a new report by U.S. Banker, a trade magazine published by an affiliate of Investcorp.
The Yonkers-based owner of Hudson Valley Bank produced an average return of 18.2 percent during that period, including the 17.7 percent return on equity it produced in 2007.
Founded in 1972, Hudson Valley Bank is the largest locally based bank in Westchester County, with $1.2 billion in deposits, or 4 percent of the market, as of last summer, according to the Federal Deposit Insurance Corp. New York City-based JPMorgan Chase & Co. leads the market with 26 percent of all Westchester deposits.
Landy said the bank has generated enviable returns by sticking to its philosophical roots, even as it has expanded geographically into New York City and neighboring Fairfield County, Conn.
“Our plan is to remain independent; we are not ”¦ for sale,” Landy said. “Anything we create we have to live with. We were challenged by people in the past few years about why we weren”™t making subprime loans. The people were calling for them, we just wouldn”™t do them. We just couldn”™t understand how it would end up positive for folks on either side in the long run.”
That approach has benefited investors in Hudson Valley Holding, whose shares are quoted under the ticker symbol “HUVL” on the over-the-counter bulletin board. Shares touched an all-time high of $68 on May 2, up from more than $59 at the start of the year. Since Landy was promoted CEO in January 2001, shares have quadrupled. Hudson Valley Holdings”™ largest shareholders are spouses Gregory and Marie Holcombe, who is the daughter of one of the company”™s founders.
Forty percent of Landy”™s own incentive-based compensation is pegged to the bank”™s return on equity. Another 25 percent is linked to deposit increases; 15 percent to loan growth; and 10 percent each to fee income and branch growth.
With Hudson Valley Bank”™s Westchester deposit market share flat this decade, the bank is now looking for growth outside the market.
After opening its first Connecticut branch last December in Stamford, Hudson Valley Bank announced plans in April for three additional branches in Greenwich, Westport and Fairfield. Landy indicated the bank will likely establish more branches in Connecticut, and he did not rule out an incursion into New Jersey.
The company”™s expansion obviously comes during a potential recession, which has the area”™s most experienced bankers uncertain on what to expect.
“I”™ve been in banking 30 years,” said Jim Fitzgerald, regional president for Wachovia Corp., which is second in Westchester market share with 18 percent of deposits. “On the financial credit-market side of things, I can”™t think of a time it”™s been this way.”
Landy and his loan officers are betting that businesses in their backyard will continue to produce returns ”“ in the first quarter, Hudson Valley Bank loaned more money than any previous quarter in its history.
Over mouthfuls of fish and pasta late last month at Roberto”™s in Crestwood, Landy got an earful on the local economy from area businesspeople and customers.
“We have always been a traditional lender that has been in the market through thick and thin,” Landy said. “People are continuing to invest in this economy, people are continuing moving forward.”
