The parent company of Hudson Valley Bank, which has branches in New Haven and Fairfield counties, said it had a net loss of $11 million in the second quarter mainly due to a significant increase in loan loss provisions.

The loss compares to earnings of $300,000 for the same period in 2009 and earnings of $4.9 million in the first quarter of the year.

For the six month period ended June 30, the net loss was $6.1 million compared to earnings of $6.9 million for the same period in 2009.

The quarterly results reflect a significant addition to the provision for loan losses resulting from a decision by the company to implement a more aggressive workout strategy for the resolution of problem assets in light of a sluggish economic recovery, continued weakness in local real estate activity and market values and growing difficulty in resolving problem loans in a timely fashion through traditional foreclosure proceedings due to increased bankruptcy filings and overcrowded court systems, according to a statement.

"Our core business continues to produce positive financial results. The second quarter and year-to-date disappointing financial results are attributable to asset quality challenges and, in particular, our determination to resolve more expeditiously our problem loans," said President and CEO James J. Landy. "We have analyzed our identified problem loans as well as other loans we believe have the potential to become problems in the near future against our new workout strategy. A specific approach to resolve each loan was developed and we provided through our reserves what we believe will be the loss incurred in light of our new strategy. We believe that our new strategy and the reserves we have established will provide for the effective resolution of our problem loans."

He added, "We are encouraged by our robust core deposit growth in 2010. Increasing low cost core deposits remains the cornerstone of our business plan. Our cost of funds continues to decline and remains one of the lowest in our industry. Our core deposits provide a solid foundation from which we can grow. Loan demand has softened significantly this year. As a result, our short-term funds have increased causing our margins to decline. We expect loan growth will remain soft for the near term. We believe this situation is temporary and we anticipate loan growth will rebound as the economy gains strength. We do, however, see a slow economic recovery ahead."