Hudson Valley Holding Corp. has completed the sale of $474 million in loans after it was required to reduce its concentrations in commercial real estate and classified loans.

The $2.8 billion-asset company said Monday that the sale would result in a pre-tax gain of roughly $16 million in the first quarter. It has already started using the proceeds by purchasing $65 million of residential adjustable-rate mortgage loans supported by in-market real estate collateral, the Yonkers, N.Y., company said.Hudson Valley previously reported that the Office of the Comptroller of the Currency instructed it to reduce its concentrations in CRE and classified loans relative to its risk-based capital. The bank said it would sell the loans by midyear.

Hudson Valley is looking to reduce its concentration of commercial real estate loans to less than 400% of risk-based capital and its classified assets to less than 25% of risk-based capital. Hudson Valley's CRE loans represented 558% of risk-based capital at Dec. 31 and its classified loans ranged between 55% and 65% of risk-based capital in 2011.

The first portfolio was sold to four buyers and included $200 million in performing and nonperforming loans. These loans were primarily CRE credits, including classified assets totaling $53 million net of the market value adjustment. The carrying value of the CRE loans was reduced by $60 million at Dec. 31.

The second sale included $274 million in performing, non-classified multifamily loans. No market value adjustment was recorded when the portfolio was transferred to held for sale at Dec. 31.

Hudson Valley reported losing $22.9 million in the fourth quarter, compared with a profit of $7.1 million a year earlier. For 2011, it lost $2.1 million, compared with a profit of $5.1 million in 2010. The company said that the declines in profitability related to write downs associated with the transfer of loans to held-for-sale status to reduce its CRE and classified loan concentrations.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.