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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

For the fiscal year ended December 31, 2004

Commission File number 030525

HUDSON VALLEY HOLDING CORP.

Registrant’s telephone number, including area code: (914) 961-6100

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 126-2 of the Act.)  Yes  x  No  o

      The aggregate market value on June 30, 2004 of voting stock held by non-affiliates of the Registrant was approximately $168,756,000.

Documents incorporated by reference:

      Portions of the registrant’s definitive Proxy Statement for the 2005 Annual Meeting of Stockholders is incorporated by reference in Part III of this report.

FORM 10-K

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PART I

ITEM 1 — BUSINESS

General

      Hudson Valley Holding Corp. (the “Company”) is a New York corporation founded in 1982. The Company is registered as a bank holding company under the Bank Holding Company Act of 1956.

      The Company provides financial services through its wholly-owned subsidiary, Hudson Valley Bank (the “Bank”), a New York chartered commercial bank established in 1972. The Bank is an independent bank headquartered in Westchester County, New York. The Bank has 15 branch offices in Westchester County, New York, 2 in Bronx County, New York and 2 in Manhattan, New York. In addition, the Bank has a loan production office located in Queens County, New York. The Bank opened its second Manhattan branch location at 233 Broadway, New York, New York on April 26, 2004. In March 2005, the Bank applied for regulatory approval to open a branch location at 320 Park Avenue, New York, New York. Once opened this will be the Bank’s third branch location in Manhattan. Effective January 1, 2005, the Bank closed its loan production office located at 300 Westage Business Center Drive, Fishkill , New York (Dutchess County) due to staff turnover and inadequate loan production. In February 2005, the Bank applied for regulatory approval to convert its loan production office in Queens to a full service branch location.

      Effective October 1, 2004, the Bank acquired A.R. Schmeidler & Co., Inc., a money management firm with more than $500 million in assets under management, located at 555 Fifth Avenue in Manhattan, New York. The acquisition, which was made for cash, was accounted for as a purchase. The acquired company is not a significant subsidiary for accounting purposes. This acquisition is part of the Bank’s long-term strategic decision to diversify its revenue stream beyond the core business of taking deposits and making loans in its local communities by developing or acquiring closely related businesses or branches in the surrounding areas. The acquisition will enable the Bank to expand its investment management capabilities and provide a valuable service to its customers.

      On December 23, 2004, the Company entered into an Agreement and Plan of Consolidation (the “Agreement”) with New York National Bank, a national banking association (“NYNB”), whereby the Company would acquire NYNB as a wholly-owned bank subsidiary. This agreement is subject to numerous conditions, including all required regulatory approvals for which the Company and NYNB have made application as well as approval of NYNB shareholders. Management believes the acquisition of NYNB will further expand its presence in the Bronx and Manhattan where NYNB currently operates 5 branch locations. The Company anticipates that the acquisition will close by June 30, 2005 subject to the receipt of regulatory approvals and the satisfaction of other conditions contained in the Agreement.

      The Company and the Bank derive substantially all of their revenue and income from providing banking and related services to small and medium-sized businesses, professionals, municipalities, not-for-profit organizations and individuals within its market area. See “Our Market Area.”

      Our principal executive offices are located at 21 Scarsdale Road, Yonkers, New York 10707.

      The Bank’s principal customers are small and medium-sized businesses, professionals, municipalities, not-for-profit organizations and individuals. The Bank’s strategy is to operate as a community-oriented banking institution dedicated to providing personalized service to customers and focusing on products and services for selected segments of the market. The Bank believes that its ability to attract and retain customers is due primarily to its focused approach to its markets, its personalized and professional services, its product offerings, its experienced staff, its knowledge of its local markets and its ability to provide responsive solutions to customer needs. The Bank provides these products and services to a diverse range of customers and does not rely on a single large depositor for a significant percentage of deposits. The Bank anticipates that it will continue to expand in its current market and surrounding area by acquiring other banks and related businesses, adding staff and continuing to open new branch offices and loan production offices.

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Forward-Looking Statements

      This Annual Report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or the banking industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. For a discussion of some factors that could adversely effect our future performance, see “Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements.”

Subsidiaries of the Bank

      In 1991, the Bank formed a wholly-owned subsidiary, Hudson Valley Investment Corp., a Delaware corporation, primarily for the purpose of acquiring and managing a portfolio of investment securities, some of which were previously owned by the Bank. The Bank previously disclosed that it intended to liquidate this subsidiary, transferring all assets and liabilities to the Bank. Management has subsequently determined that the subsidiary should continue in operation and, therefore, will not be liquidated.

      In 1993, the Bank formed a wholly-owned subsidiary, Sprain Brook Realty Corp., primarily for the purpose of holding property obtained by the Bank through foreclosure in its normal course of business.

      In 1997, the Bank formed a subsidiary (of which the Bank owns more than 99 percent of the voting stock), Grassy Sprain Real Estate Holdings, Inc., a real estate investment trust, primarily for the purpose of acquiring and managing a portfolio of mortgage-backed securities, loans collateralized by real estate and other investment securities previously owned by the Bank.

      In 2001, the Bank began originating lease financing transactions through a wholly owned subsidiary, HVB Leasing Corp.

      In 2002, the Bank formed two wholly-owned subsidiaries. HVB Realty Corp. owns and manages five branch locations in Yonkers, New York and HVB Employment Corp. leases certain branch staff to the Bank.

      In 2004, the Bank acquired for cash A.R. Schmeidler & Co., Inc. as a wholly-owned subsidiary in a transaction accounted for as a purchase. This money management firm provides investment management services to its customers thereby generating fee income.

      The Company has no separate operations or revenues apart from the Bank and its subsidiaries. The Bank and its subsidiaries are referred to collectively as the “Bank”.

Employees

      At December 31, 2004, we employed 281 full-time employees and 28 part-time employees. We provide a variety of benefit plans, including group life, health, dental, disability, retirement and stock option plans. We consider our employee relations to be satisfactory.

Our Market Area

      Westchester County is a suburban county located in the northern sector of the New York metropolitan area. It has a large and varied economic base containing many corporate headquarters, research facilities, manufacturing firms as well as well-developed trade and service sectors. The median household income, based on 2002 census data, was $62,762. The County’s 2002 per capita income of $37,170 placed Westchester County among the highest of nation’s counties. In 2002, the County’s unemployment rate was 4.1 percent, as compared to New York State at 6.1 percent and the United States at 5.8 percent. The County has over 30,000

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      New York City, which borders Westchester County, is the nation’s financial capital and the home of more than 8 million individuals representing virtually every race and nationality. According to the 2002 census data, the median household income in the city was $41,603, while the per capita income was $25,472. This places New York City in the top ranks of cities across the United States. The city also has a vibrant and diverse business community with more than 590,000 businesses and professional service firms. New York City is comprised of five counties or boroughs: Bronx, Kings (Brooklyn), New York (Manhattan), Queens and Richmond (Staten Island).

      The city has many attractive attributes and the Bank believes that there is an opportunity for a community bank to service the small business and professionals niches very effectively. The Bank expanded into the New York City market with the opening of its first branch in the Bronx in 1999 and subsequently opened a second branch in this borough in 2002. The Bank entered the Manhattan market with the opening of a full-service branch in the Lincoln Building in 2002 and, in April 2004, a second full-service branch in lower Manhattan in the Woolworth Building. Further expansion in the city continued in 2003 with the opening of a loan production office in Rego Park, Queens. During the first quarter of 2005, the Bank applied for regulatory approval to convert this loan production office to a full service branch and to open a third Manhattan branch at 320 Park Avenue, New York, New York. The Bank will continue to evaluate expansion opportunities in these three, as well as the other two boroughs of New York City.

Competition

      The banking and financial services business in the Bank’s market area is highly competitive. There are approximately 19 commercial banks with branch banking offices in our Westchester County and New York City market area. In addition, a number of other depository institutions compete in our market area including savings banks, savings and loan associations, credit unions and brokerage houses. The branches of the Bank compete with local offices of large New York City commercial banks due to their proximity to and location within New York City. Other financial institutions, such as mutual funds, finance companies, factoring companies, mortgage bankers and insurance companies, also compete with the Bank for both loans and deposits. The Bank is smaller in size than most of its competitors. In addition, many non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks.

      Competition for depositors’ funds and for credit-worthy loan customers is intense. A number of larger banks are increasing their efforts to serve smaller commercial borrowers. Competition among financial institutions is based upon interest rates and other credit and service charges, the quality of service provided, the convenience of banking facilities, the products offered and, in the case of larger commercial borrowers, relative lending limits.

      Federal legislation permits adequately capitalized bank holding companies to expand across state lines to offer banking services. In light of this, it is possible for large organizations to enter many new markets, including our market area. Many of these competitors, by virtue of their size and resources, may enjoy efficiencies and competitive advantages over the Bank in pricing, delivery and marketing of their products and services. The passage of the Financial Services Modernization Act of 1999 (the “Gramm-Leach-Bliley Act”) may also increase the number of powerful competitors in our market by allowing other financial institutions to form or acquire banking subsidiaries.

      In response to competition, we have focused our attention on customer service and on addressing the needs of small to medium-sized businesses, professionals and not-for-profit organizations located in the communities in which we operate. We emphasize community relations and relationship banking. We believe that, despite the continued growth of large institutions and the potential for large out-of-area banking and financial institutions to enter our market area, there will continue to be opportunities for efficiently-operated, service-oriented, well-capitalized, community-based banking organizations to grow by serving customers that are not served well by larger institutions or do not wish to bank with such large institutions.

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      The Company’s strategy is to increase earnings through growth within its existing market. The Bank’s primary market area, Westchester County and New York City, has a high concentration of the types of customers that the Bank desires to serve. The Bank expects to continue to expand by opening new full service banking facilities and loan production offices, by expanding deposit gathering and loan originations in its market area, by enhancing and expanding computerized and telephonic products, by diversifying its products and services, by acquiring other banks and related businesses and through strategic alliances and contractual relationships.

      During the past five years, the Company has focused on maintaining existing customer relationships and adding new relationships by providing products and services that meet these customers’ needs. The focus of the Bank’s products and services continues to be small and medium size businesses, professionals, not-for-profit organizations and municipalities. The Bank has expanded its market from Westchester County to include sections of New York City. The Bank has opened eight new facilities during the past five years, one in White Plains, Westchester County, one in Yonkers, Westchester County, two in Manhattan, New York, one in Dutchess County, one in Queens County, and two in Bronx County, New York and anticipates opening at least one additional facility during 2005. The Bank closed its loan production office in Dutchess County effective January 1, 2005. The Bank expects to continue to open additional facilities in the future. The Bank has invested in technology based products and services to meet customer needs. In addition, the Bank has expanded products and services in its deposit gathering and lending programs, and its offering of investment management and trust services. As a result, the Bank has approximately doubled its total assets during this five year period.

Lending

      The Bank engages in a variety of lending activities which are primarily categorized as real estate, commercial and industrial, individual and lease financing. At December 31, 2004, gross loans totaled $877.0 million. Gross loans were comprised of the following loan types:

      At December 31, 2004, the Bank’s unsecured lending limit to one borrower under applicable regulations was approximately $24.2 million.

      In managing its loan portfolio, the Bank focuses on:

	(i) the application of its established underwriting criteria,

	(ii)	the establishment of individual lending authorities well below the Bank’s legal lending authority,
	(iii)	the involvement by senior management and the Board of Directors in the loan approval process for designated categories, types or amounts of loans,

	(iv) an awareness of concentration by industry or collateral, and
	(v) the monitoring of loans for timely payment and to seek to identify potential problem loans.

      The Bank utilizes its credit department to assess acceptable and unacceptable credit risks based upon the Bank’s established underwriting criteria. The Bank utilizes its loan officers, branch managers and credit department to identify changes in a borrower’s financial condition that may affect the borrower’s ability to perform in accordance with loan terms. Lending policies and procedures place an emphasis on assessing a borrower’s income flow as well as collateral values. Further, the Bank utilizes systems and analysis which assist in monitoring loan delinquencies. The Bank utilizes its loan officers, loan collection department and legal counsel in collection efforts on past due loans. Additional collateral or guarantees may be requested where delinquencies remain unresolved.

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      An independent loan review department reviews loans in the Bank’s portfolio and assigns a risk grading to each reviewed loan. Loans are reviewed based upon the type of loan, the collateral for the loan, the amount of the loan and any other pertinent information. The loan review department reports directly to the Board of Directors.

      See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Loan Portfolio” for further information related to the Company’s loan portfolio and lending activities.

Deposits

      The Bank offers deposit products ranging in maturity from demand-type accounts to certificates of deposit with maturities of up to 5 years. The Bank’s deposits are generally derived from customers within its primary marketplace. The Bank solicits only certain types of deposits from outside its market area, primarily from certain professionals and government agencies.

      The Bank sets its deposit rates to remain generally competitive with other financial institutions in its market, although the Bank does not generally seek to match the highest rates paid by competing institutions. The Bank has established a process to review interest rates on all deposit products and, based upon this process, updates its deposit rates weekly. The Company’s Asset/ Liability Management Policy and its Liquidity Policy set guidelines to manage overall interest rate risk and liquidity. These guidelines can affect the rates paid on deposits. Deposit rates are reviewed under these policies periodically since deposits are the Bank’s primary source of liquidity.

      The Bank offers deposit pick up services for certain business customers. The Bank has 11 automated teller machines, or ATMs, at various locations, which generate activity fees based on use by other banks’ customers.

      For more information regarding the Bank’s deposits, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Deposits.”

Portfolio Management Services

      The Bank provides investment management services to its customers and others through its subsidiary A. R. Schmeidler & Co., Inc., which it acquired in October 2004. The acquisition of this company by the Bank has allowed the Bank to expand its investment management services to its customers and to expand its revenue by offering such services. The Bank anticipates that it will continue to expand this line of business.

      The Bank also provides a software application to a limited number of customers designed to meet the specific administrative needs of bankruptcy trustees through a marketing and licensing agreement with the application vendor. The Bank has no current plans to expand this line of business. In addition, the Bank has participated in loans originated by various other financial institutions within the normal course of business and within standard industry practices.

Supervision and Regulation

      Banks and bank holding companies are extensively regulated under both federal and state law. We have set forth below brief summaries of various aspects of supervision and regulation which do not purport to be complete and which are qualified in their entirety by reference to applicable laws, rules and regulations.

      As a bank holding company, the Company is regulated by and subject to the supervision of the Board of Governors of the Federal Reserve System (the “FRB”) and is required to file with the FRB an annual report and such other information as may be required. The FRB has the authority to conduct examinations of the Company as well.

      The Bank Holding Company Act of 1956 (the “BHC Act”) limits the types of companies which we may acquire or organize and the activities in which they may engage. In general, a bank holding company and its subsidiaries are prohibited from engaging in or acquiring control of any company engaged in non-banking activities unless such activities are so closely related to banking or managing and controlling banks as to be a proper incident thereto. Activities determined by the FRB to be so closely related to banking within the

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      The BHC Act requires every bank holding company to obtain the prior approval of the FRB before acquiring substantially all the assets of, or direct or indirect ownership or control of more than five percent of the voting shares of, any bank. Subject to certain limitations and restrictions, a bank holding company, with the prior approval of the FRB, may acquire an out-of-state bank.

      In November 1999, Congress amended certain provisions of the BHC Act through passage of the Gramm-Leach-Bliley Act. Under this legislation, a bank holding company may elect to become a “financial holding company” and thereby engage in a broader range of activities than would be permissible for traditional bank holding companies. In order to qualify for the election, all of the depository institution subsidiaries of the bank holding company must be well capitalized and well managed, as defined under FRB regulations, and all such subsidiaries must have achieved a rating of “satisfactory” or better with respect to meeting community credit needs. Pursuant to the Gramm-Leach-Bliley Act, financial holding companies are permitted to engage in activities that are “financial in nature” or incidental or complementary thereto, as determined by the FRB. The Gramm-Leach-Bliley Act identifies several activities as “financial in nature”, including, among others, insurance underwriting and agency activities, investment advisory services, merchant banking and underwriting, and dealing in or making a market in securities.

      The Company believes it would meet the regulatory criteria that would enable it to elect to become a financial holding company. The Company has not yet determined whether to make such an election.

      The Gramm-Leach-Bliley Act also makes it possible for entities engaged in providing various other financial services to form financial holding companies and form or acquire banks. Accordingly, the Gramm-Leach-Bliley Act makes it possible for a variety of financial services firms to offer products and services comparable to the products and services offered by the Bank.

      There are various statutory and regulatory limitations regarding the extent to which present and future banking subsidiaries of the Company can finance or otherwise transfer funds to the Company or its non-banking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases, including regulatory limitation on the payment of dividends directly or indirectly to the Company from the Bank. Federal and state bank regulatory agencies also have the authority to limit further the Bank’s payment of dividends based on such factors as the maintenance of adequate capital for such subsidiary bank, which could reduce the amount of dividends otherwise payable. Under applicable banking statutes, at December 31, 2004, the Bank could have declared additional dividends of approximately $34.6 million to the Company without prior regulatory approval.

      Under the policy of the FRB, the Company is expected to act as a source of financial strength to its banking subsidiaries and to commit resources to support its banking subsidiaries in circumstances where we might not do so absent such policy. In addition, any subordinated loans by the Company to its banking subsidiaries would also be subordinate in right of payment to depositors and obligations to general creditors of such subsidiary banks. The Company currently has no loans to the Bank.

      The FRB has established capital adequacy guidelines for bank holding companies that are similar to the Federal Deposit Insurance Corporation (“FDIC”) capital requirements for the Bank described below. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources” and Note 10 to the Consolidated Financial Statements. As of December 31, 2004, our Tier 1 and Total risk-based capital ratios were 14.5 percent and 15.6 percent, respectively, and our leverage capital ratio

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      The Bank is organized under the Banking Law of the State of New York. Its operations are subject to federal and state laws applicable to commercial banks and to extensive regulation, supervision and examination by the New York Superintendent of Banks and the Banking Board of the State of New York, as well as by the FDIC, as its primary federal regulator and insurer of deposits. While the Bank is not a member of the Federal Reserve System, it is subject to certain regulations of the FRB. In addition to banking laws, regulations and regulatory agencies, the Bank is subject to various other laws, regulations and regulatory agencies, all of which directly or indirectly affect the Bank’s operations. The New York Superintendent of Banks and the FDIC examine the affairs of the Bank for the purpose of determining its financial condition and compliance with laws and regulations.

      The New York Superintendent of Banks and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies whether by the FDIC, Congress, the New York Superintendent of Banks or the New York Legislature could have a material adverse impact on the Bank.

      Federal laws and regulations also limit, with certain exceptions, the ability of state banks to engage in activities or make equity investments that are not permissible for national banks. The Company does not expect such provisions to have a material adverse effect on the Company or the Bank.

  Capital Standards

      The FDIC has adopted risk-based capital guidelines to which FDIC-insured, state-chartered banks that are not members of the Federal Reserve System, such as the Bank, are subject. The guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to the differences in risk profiles among banking organizations. Banks are required to maintain minimum levels of capital based upon their total assets and total “risk-weighted assets.” For purposes of these requirements, capital is comprised of both Tier 1 and Tier 2 capital. Tier 1 capital consists primarily of common stock and retained earnings. Tier 2 capital consists primarily of loan loss reserves, subordinated debt, and convertible securities. In determining total capital, the amount of Tier 2 capital may not exceed the amount of Tier 1 capital. A bank’s total “risk-based assets” are determined by assigning the bank’s assets and off-balance sheet items (e.g., letters of credit) to one of four risk categories based upon their relative credit risks. The greater the risk associated with an asset, the greater the amount of such asset that will be subject to capital requirements. Banks must satisfy the following three minimum capital standards:

	(1) Tier 1 capital in an amount equal to between 4 percent and 5 percent of total assets (the “leverage ratio”);
	(2) Tier 1 capital in an amount equal to 4 percent of risk-weighted assets; and
	(3) total Tier 1 and Tier 2 capital in an amount equal to 8 percent of risk-weighted assets.

      The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), defines specific capital categories based upon an institution’s capital ratios. The capital categories, in declining order, are: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; and (v) critically undercapitalized. Under FDICIA and the FDIC’s prompt corrective action rules, the FDIC may take any one or more of the following actions against an undercapitalized bank: restrict dividends and management fees, restrict asset growth and prohibit new acquisitions, new branches or new lines of business without prior FDIC approval. If a bank is significantly undercapitalized, the FDIC may also require the bank to raise capital, restrict interest rates a bank may pay on deposits, require a reduction in assets, restrict any activities that might cause risk to the bank, require improved management, prohibit the acceptance of deposits from correspondent banks and restrict compensation to any senior executive officer. When a bank becomes critically undercapitalized, (i.e., the ratio of tangible equity to total assets is equal to or less than 2 percent), the FDIC must, within 90 days thereafter, appoint a receiver for the bank or take such action as the FDIC determines would better achieve the purposes of the law. Even where such other action is taken, the FDIC

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      To be considered “adequately capitalized,” an institution must generally have a leverage ratio of at least 4 percent, a Tier 1 capital to risk-weighted assets ratio of at least 4 percent and total Tier 1 and Tier 2 capital to risk-weighted assets ratio of at least 8 percent. To be categorized as “well capitalized,” the Bank must maintain a minimum total risk-based capital ratio of 10 percent, a Tier 1 risk-based capital ratio of at least 6 percent and a Tier 1 leverage ratio of at least 5 percent. As of December 31, 2004, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions that we believe have changed the Bank’s category.

      See Note 10 to the Consolidated Financial Statements.

  Safety and Soundness Standards

      Federal law requires each federal banking agency to prescribe for depository institutions under its jurisdiction standards relating to, among other things: internal controls; information systems and audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; compensation; fees and benefits; and such other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness (the “Guidelines”) to implement these safety and soundness standards. The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The Guidelines address internal controls and information systems; internal audit system; credit underwriting; loan documentation; interest rate risk exposure; asset quality; earnings and compensation; fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the Guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard set by the Federal Deposit Insurance Act. The final regulations establish deadlines for submission and review of such safety and soundness compliance plans.

      The federal banking agencies also have adopted final regulations for real estate lending prescribing uniform guidelines for real estate lending. The regulations require insured depository institutions to adopt written policies establishing standards, consistent with such guidelines, for extensions of credit secured by real estate. The policies must address loan portfolio management, underwriting standards and loan to value limits that do not exceed the supervisory limits prescribed by the regulations.

  Premiums for Deposit Insurance

      The FDIC has implemented a risk-based assessment system, under which an institution’s deposit insurance premium assessment is based on the probability that the deposit insurance fund will incur a loss with respect to the institution, the likely amount of any such loss, and the revenue needs of the deposit insurance fund.

      Under this risk-based assessment system, banks are categorized into one of three capital categories (well capitalized, adequately capitalized, and undercapitalized) and one of three categories based on supervisory evaluations by its primary federal regulator (in the Bank’s case, the FDIC). The three supervisory categories are: financially sound with only a few minor weaknesses (Group A), demonstrates weaknesses that could result in significant deterioration (Group B), and poses a substantial probability of loss (Group C). The capital ratios used by the FDIC to define well-capitalized, adequately capitalized and undercapitalized are the same in the FDIC’s prompt corrective action regulations. The Bank is currently considered a “Well Capitalized Group A” institution and, therefore, is not subject to any quarterly FDIC Bank Insurance Fund (“BIF”) assessments. This could change in the future based on the capitalization of the BIF.

      FDIC insurance of deposits may be terminated by the FDIC, after notice and hearing, upon a finding by the FDIC that the insured institution has engaged in unsafe or unsound practices, or is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule or order of, or conditions imposed by, the FDIC. Neither the Company nor the Bank is aware of any practice, condition or violation that might lead to termination of deposit insurance.

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  Community Reinvestment Act and Fair Lending Developments

      Under the Community Reinvestment Act (“CRA”), as implemented by FDIC regulations, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not prescribe specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FDIC, in connection with its examination of a savings institution, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. The Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”) amended the CRA to require public disclosure of an institution’s CRA rating and require the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Institutions are evaluated and rated by the FDIC as “Outstanding”, “Satisfactory”, “Needs to Improve” or “Substantial Non Compliance.” Failure to receive at least a “Satisfactory” rating may inhibit an institution from undertaking certain activities, including acquisitions of other financial institutions, which require regulatory approval based, in part, on CRA Compliance considerations. As of its last CRA examination in December 2001, the Bank received a rating of “Satisfactory.”

  USA Patriot Act

      The USA Patriot Act of 2001, signed into law on October 26, 2001, enhances the powers of domestic law enforcement organizations and makes numerous other changes aimed at countering the international terrorist threat to the security of the United States. Title III of the legislation most directly affects the financial services industry. It is intended to enhance the federal government’s ability to fight money laundering by monitoring currency transactions and suspicious financial activities. The USA Patriot Act has significant implications for depository institutions and other businesses involved in the transfer of money. Under the USA Patriot Act, a financial institution must establish due diligence policies, procedures and controls reasonably designed to detect and report money laundering through correspondent accounts and private banking accounts. Financial institutions must follow regulations adopted by the Treasury Department to encourage financial institutions, their regulatory authorities, and law enforcement authorities to share information about individuals, entities, and organizations engaged in or suspected of engaging in terrorist acts or money laundering activities. Financial institutions must follow regulations adopted by the Treasury Department setting forth minimum standards regarding customer identification. These regulations require financial institutions to implement reasonable procedures for verifying the identity of any person seeking to open an account, maintain records of the information used to verify the person’s identity, and consult lists of known or suspected terrorists and terrorist organizations provided to the financial institution by government agencies. Every financial institution must establish anti-money laundering programs, including the development of internal policies and procedures, designation of a compliance officer, employee training, and an independent audit function. The passage of the USA Patriot Act has increased the compliance activities of the Bank, but has not otherwise affected its operations.

  Governmental Monetary Policy

      The Company’s and Bank’s business and earnings depend in large part on differences in interest rates. One of the most significant factors affecting the Company’s and the Bank’s earnings is the difference between (1) the interest rates paid by the Bank on its deposits and its other borrowings (liabilities) and (2) the interest rates received by the Bank on loans made to its customers and securities held in its investment portfolio (assets). The value of and yield on its assets and the rates paid on its liabilities are sensitive to changes in prevailing market rates of interest. Therefore, the earnings and growth of the Company and the Bank will be influenced by general economic conditions, the monetary and fiscal policies of the federal government, including the Federal Reserve System, whose function is to regulate the national supply of bank credit in order to influence inflation and overall economic growth. Its policies are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans, earned on investments or paid for deposits.

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      In view of changing conditions in the national and local economies, no prediction can be made by the Company as to possible future changes in interest rates, deposit levels, loan demand, or availability of investment securities and the resulting effect on the business or earnings of the Company and the Bank.

  Investment Advisers Act of 1940

      In 2004, we acquired all of the stock of A. R. Schmeidler & Co., Inc., a money manager registered as an investment adviser under the federal Investment Advisers Act of 1940. A. R. Schmeidler and its representatives are also registered under the laws of various states regulating investment advisers and their representatives. Regulation under the Investment Advisers Act requires the filing and updating of a Form ADV, filed with the Securities and Exchange Commission. The Investment Advisers Act regulates, among other things, the fees that may be charged to advisory clients, the custody of client funds, relationships with brokers and the maintenance of books and records.

Risk Factors

Our markets are intensely competitive, and our principal competitors are larger than us.

      We face significant competition both in making loans and in attracting deposits. This competition is based on, among other things, interest rates and other credit and service charges, the quality of services rendered, the convenience of the banking facilities, the range and type of products offered and the relative lending limits in the case of loans to larger commercial borrowers. Westchester County and New York City have a very high density of financial institutions, many of which are branches of institutions which are significantly larger than us and have greater financial resources and higher lending limits. Many of these institutions offer services that we do not or cannot provide. Nearly all such institutions compete with us to varying degrees.

      Our competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies, insurance companies and other financial service companies. Our most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations, and money market funds and other securities funds offered by brokerage firms and other similar financial institutions. We face additional competition for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms, and insurance companies.

      Competition may increase in the future as a result of regulatory change in the financial services industry. We expect to face increased competitive pressure from non-banking sources as a result of the Gramm-Leach-Bliley Act, which permits banks and bank holding companies to affiliate more easily with other financial service institutions, such as insurance companies and brokerage firms.

We operate in a highly regulated industry and could be adversely affected by governmental monetary policy or regulatory change.

      The Company, as a bank holding company, and the Bank are subject to regulation by several government agencies, including the FRB, the FDIC, the New York Superintendent of Banks, and the Banking Board of the State of New York. Changes in governmental economic and monetary policy not only can affect the ability of the Bank to attract deposits and make loans, but can also affect the demand for business and personal lending and for real estate mortgages.

      Government regulations affect virtually all areas of our operations, including our range of permissible activities, products and services, the geographic locations in which our services can be offered, the amount of capital required to be maintained to support operations, the right to pay dividends and the amount which the Bank can pay to obtain deposits. The passage of the Gramm-Leach-Bliley Act, which permits banks and bank holding companies to affiliate more easily with other financial service firms, could significantly change the nature of the financial services market over the next few years. There can be no assurance that we will be able to adapt successfully to changes initiated by this or other governmental or regulatory action.

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Our efforts to expand within our market and provide additional services by acquiring smaller banks and related businesses may not prove to be successful, and may subject us to unexpected costs or liabilities.

      We recently acquired a money management firm, A.R. Schmeidler & Co., Inc., and have agreed to acquire, subject to various conditions, a community-based national bank located in the Bronx. We could have difficulty integrating these new businesses within our organization, and the new businesses may not generate the revenues that we anticipate. In addition, we could be subject to new and unexpected liabilities as a result of making these acquisitions.

Our income is sensitive to changes in interest rates.

      The Bank’s profitability, like that of most banking institutions, depends to a large extent upon its net interest income. Net interest income is the difference between interest income received on interest-earning assets, including loans and securities, and the interest paid on interest-bearing liabilities, including deposits and borrowings. Accordingly, the Bank’s results of operations and financial condition depend largely on movements in market interest rates and its ability to manage its assets and liabilities in response to such movements.

      The Bank tries to manage its interest rate risk exposure by closely monitoring its assets and liabilities in an effort to reduce the effects of changes in interest rates primarily by altering the mix and maturity of the Bank’s loans, investments and funding sources.

      Currently, the Bank’s income would be minimally changed in the twelve months following December 31, 2004 due to changes in the interest rate environment. However, a continuation of the current trend of rising short-term interest rates and a flattening of the yield curve could have an adverse effect on the Bank’s net interest income by decreasing the spread between the rates earned on assets and paid on liabilities. Changes in interest rates also affect the volume of loans originated by the Bank, as well as the value of its loans and other interest-earning assets, including investment securities.

      In addition, changes in interest rates may result in an increase in higher cost deposit products within the Bank’s existing portfolio, as well as a flow of funds away from bank accounts into direct investments (such as U.S. Government and corporate securities, and other investment instruments such as mutual funds) to the extent that the Bank may not pay rates of interest competitive with these alternative investments. “See Quantitative and Qualitative Disclosures About Market Risk.”

We may incur liabilities under federal and state environmental laws with respect to foreclosed properties.

      Approximately 87% of the loans held by the Bank as of December 31, 2004 were secured, either on a primary or secondary basis, by real estate. Approximately half of these loans were commercial real estate loans, with most of the remainder being for single or multi-family residences. The Bank currently does not own any property acquired on foreclosure. However, the Bank has in the past and may in the future acquire properties through foreclosure on loans in default. Under federal and state environmental laws, the Bank could face liability for some or all of the costs of removing hazardous substances, contaminants or pollutants from properties acquired by the Bank on foreclosure. While other persons might be primarily liable, such persons might not be financially solvent or able to bear the full cost of the clean up. It is also possible that a lender that has not foreclosed on property but has exercised unusual influence over the borrower’s activities may be required to bear a portion of the clean up costs under federal or state environmental laws.

A downturn in the economy in our market area would adversely affect our loan portfolio and our growth potential.

      Our primary lending market area is concentrated in Westchester County, New York and New York City with a primary focus on small to medium-sized businesses, professionals and not-for-profit organizations located in this area. Accordingly, the asset quality of our loan portfolio is largely dependent upon the area’s economy and real estate markets. A downturn in the economy in our primary lending area would adversely affect our operations and limit our future growth potential.

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Technological change may affect our ability to compete.

      The banking industry continues to undergo rapid technological changes, with frequent introductions of new technology-driven products and services. In addition to improving customer services, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, on our ability to address the needs of customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. There can be no assurance that we will be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to the public.

      In addition, because of the demand for technology-driven products, banks are increasingly contracting with outside vendors to provide data processing and core banking functions. The use of technology-related products, services, delivery channels and processes exposes a bank to various risks, particularly transaction, strategic, reputation and compliance risks. There can be no assurance that we will be able to successfully manage the risks associated with our increased dependency on technology.

Our profitability depends on our customers’ ability to repay their loans and our ability to make sound judgments concerning credit risk.

      There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. We maintain an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Our judgment as to the adequacy of the allowance for loan losses is based upon a number of assumptions which we believe to be reasonable but which may or may not prove to be correct. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. Additions to the allowance for loan losses would result in a decrease in net income and capital.

Available Information

      The Company’s website address is http://www.hudsonvalleybank.com. The Company makes available free of charge on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. The Company provides electronic or paper copies of its filings free of charge upon request.

ITEM 2 — PROPERTIES

      The principal executive offices of the Company and the Bank, including administrative and operating departments, are located at 21 Scarsdale Road, Yonkers, New York, in premises that are owned by the Bank. The Bank’s main branch is located at 35 East Grassy Sprain Road, Yonkers, New York, in premises that are leased by the Bank.

      In addition to the main branch, the Bank operates 14 branches in Westchester County, New York. The following seven branches are owned by the Bank: 37 East Main Street, Elmsford, New York; 61 South Broadway, Yonkers, New York; 150 Lake Avenue, Yonkers, New York; 865 McLean Avenue, Yonkers, New York; 512 South Broadway, Yonkers, New York; 21 Scarsdale Road, Yonkers, New York; and 664 Main Street, Mount Kisco, New York. The following seven branches are leased by the Bank: 403 East Sandford Boulevard, Mount Vernon, New York; 1835 East Main Street, Peekskill, New York; 500 Westchester Avenue, Port Chester, New York; 233 Marble Avenue, Thornwood, New York; 328 Central Avenue, White Plains, New York, Five Huguenot Street, New Rochelle, New York and 40 Church Street, White Plains, New York.

      In addition to the branches in Westchester County, the Bank operates two branches in Bronx, New York, one at 3130 East Tremont Avenue and one at 975 Allerton Avenue, both in premises leased by the Bank. The Bank also operates two branches in Manhattan, New York at 60 East 42nd Street, New York, New York and

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      Of the leased properties, 6 properties, located in Peekskill, Port Chester, New Rochelle, Manhattan, Rego Park and Fishkill, New York, have lease terms that expire within the next 2 years, with each lease subject to the Bank’s renewal option. The Bank currently expects to exercise its renewal option on the leases of each of these properties except for the premises lease in Fishkill, New York, which expires in September 2005.

      The Bank’s subsidiary, A. R. Schmeidler & Co., Inc is located at 555 Fifth Avenue, New York, New York in premises leased by the subsidiary. This lease expires in December 2006. A. R. Schmeidler & Co., Inc currently expects to exercise its renewal option.

      The Bank currently operates 10 ATM machines, 9 of which are located in the Bank’s facilities. One ATM is located at an off-site location — St. Joseph’s Hospital in Yonkers, New York.

      In the opinion of management, the premises, fixtures and equipment used by the Company and the Bank are adequate and suitable for the conduct of their businesses. All facilities are well maintained and provide adequate parking.

ITEM 3 — LEGAL PROCEEDINGS

      Various claims and lawsuits are pending against the Company and its subsidiaries in the ordinary course of business. In the opinion of management, after consultation with legal counsel, resolution of each matter is not expected to have a material effect on the financial condition or results of operations of the Company and its subsidiaries.

ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of shareholders of Hudson Valley Holding Corp. during the fourth quarter of 2004.

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PART II

ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

      The Company’s common stock was held of record as of March 1, 2005 by approximately 845 shareholders. The Company’s common stock trades on a limited and sporadic basis in the over-the-counter market under the symbol “HUVL”. The Company has historically purchased shares of common stock from shareholders at a price that the Company believes to be the fair market value at the time. Some of these purchases are made pursuant to Stock Restriction Agreements which give the Company a right of first refusal if the shareholder wishes to sell his or her shares. The majority of transactions in the Company’s common stock are sales to the Company or private transactions. There can be no assurance that the Company will purchase any additional stock in the future.

      The table below sets forth the high and the low prices per share at which the Company purchased shares of its common stock from shareholders in 2004 and 2003. The price per share has been adjusted to reflect the 10 percent stock dividends to shareholders in December 2004 and 2003.

      The foregoing prices were not subject to retail markup, markdown or commission.

      In 1998, the Board of Directors of the Company adopted a policy of paying quarterly cash dividends to holders of its common stock. Quarterly cash dividends were paid as follows: In 2004, $0.37 per share to shareholders of record on February 6; $0.40 to shareholders of record May 7, August 6 and November 4. In 2003, $0.31 per share to shareholders of record on February 3; $0.34 to shareholders of record May 12, August 8 and November 7. Dividends per share have been adjusted to reflect the 10 percent stock dividends to shareholders in December 2004 and 2003.

      Stock dividends of 10 percent each (one share for every 10 outstanding shares) were declared by the Company for shareholders of record on December 10, 2004 and December 10, 2003.

      Effective December 13, 2004, the Board of Directors of the Company adjusted the price at which the Company would repurchase shares to $36.50 per share, or $42.00 per share for a transaction of at least 2,000 shares, taking into consideration the 10 percent stock dividend to shareholders in December 2004. This offer was limited to 75,000 shares and expired February 22, 2005, at which time the Company offered to repurchase up to 75,000 shares at a price of $37.50 per share or $43.25 per share for a transaction of at least 2,000 shares. This offer expires May 31, 2005.

      Any funds which the Company may require in the future to pay cash dividends, as well as various Company expenses, are expected to be obtained by the Company chiefly in the form of cash dividends from the Bank and secondarily from sales of common stock pursuant to the Company’s stock option plan. The ability of the Company to declare and pay dividends in the future will depend not only upon its future earnings and financial condition, but also upon the future earnings and financial condition of the Bank and its ability to transfer funds to the Company in the form of cash dividends and otherwise. The Company is a separate and distinct legal entity from the Bank. The Company’s right to participate in any distribution of the assets or earnings of the Bank is subordinate to prior claims of creditors of the Bank.

      On October 28, 2004, the Company sold 100 shares of its common stock to a family member of an existing common shareholder for $4,500 and on November 5, 2004, the Company sold 2,000 shares of its common stock to an existing common shareholder for $90,000 in transactions that did not involve a public

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      The following table sets forth information with respect to purchases made by the Company of its common stock during the three months ended December 31, 2004.

(1)	In August 2004, the Company announced that the Board of Directors had approved a share repurchase program which authorized the repurchase of up to 75,000 of the Company’s shares at a price of $39.00 per share, or a price of $45.00 per share for transactions of at least 2,000 shares. This offer expired on December 10, 2004.
(2)	In December 2004, the Company announced that the Board of Directors had approved a share repurchase program which authorized the repurchase of up to 75,000 of the Company’s shares at a price of $36.50 per share, or a price of $42.00 per share for transactions of at least 2,000 shares taking into consideration the 10 percent stock dividend to shareholders on December 10, 2004. This offer expired on February 22, 2005.

There is currently no active market for the common stock and there can be no assurance that a market will develop.

      Our common stock trades from time to time in the over-the-counter bulletin board market under the symbol “HUVL”. Trading in this market is sporadic. In the absence of an active market for our common stock, there can be no assurance that a shareholder will be able to find a buyer for his or her shares. Stock prices as a whole may also be lower than they would be if an active market were to develop, and may tend to fluctuate more dramatically.

      We have determined not to apply, at this time, for the listing of our common stock on a securities exchange. If we do apply in the future for such listing, there can be no assurance that the common stock will be listed on any securities exchange. Even if we successfully list the common stock on a securities exchange, there can be no assurance that any organized public market for the securities will develop or that there will be any private demand for the common stock. We could also fail to meet the requirements for continued inclusion on such exchange, such as requirements relating to the minimum number of public shareholders or the aggregate market value of publicly held shares.

      The liquidity of the common stock depends upon the presence in the marketplace of willing buyers and sellers. Liquidity also may be limited by other factors, including restrictions imposed on the common stock by shareholders.

      The Company has historically created a secondary market for its stock by issuing offers to repurchase shares from any shareholder. However, the Company is not obligated to issue such offers to repurchase shares in the future and may discontinue or limit such offers at any time.

      If the common stock is not listed on an exchange, it may not be accepted as collateral for loans, or if accepted, its value may be substantially discounted. As a result, investors should regard the common stock as a

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The development of a market for the common stock could be limited by existing agreements with respect to resale.

      A significant number of our shareholders are current or former directors and employees (or their family members) who purchased their shares subject to various Stock Restriction Agreements. Pursuant to these Stock Restriction Agreements, we enjoy a right of first refusal if the shareholder proposes to sell his or her shares to a third party. Historically, we have exercised our right of first refusal and have purchased a substantial portion of the shares offered to us pursuant to the Stock Restriction Agreements. Our repurchase of stock has effectively created a secondary market for the stock. We have no obligation to repurchase the common stock under the Stock Restriction Agreements or otherwise and there can be no assurance that we will purchase any additional shares in the future. If we continue to exercise our right to repurchase shares subject to the Stock Restriction Agreements, this will limit the availability of shares in public markets.

Government regulation restricts our ability to pay cash dividends.

      Dividends from the Bank are the only significant source of cash for the Company. However, there are various statutory and regulatory limitations regarding the extent to which the Bank can pay dividends or otherwise transfer funds to the Company. Federal and state bank regulatory agencies also have the authority to limit further the Bank’s payment of dividends based on such factors as the maintenance of adequate capital for the Bank, which could reduce the amount of dividends otherwise payable. The Company paid a cash dividend to our shareholders of $1.57 per share in 2004, and $1.33 per share in 2003 (adjusted for subsequent stock dividends). Under applicable banking statutes, at December 31, 2004, the Bank could have declared dividends of approximately $34.6 million to the Company without prior regulatory approval. No assurance can be given that the Bank will have the profitability necessary to permit the payment of dividends in the future; therefore, no assurance can be given that the Company would have any funds available to pay dividends to shareholders.

      Federal and state agencies require the Company and the Bank to maintain adequate levels of capital. The failure to maintain adequate capital or to comply with applicable laws, regulations and supervisory agreements could subject the Company, the Bank or its subsidiaries to federal and state enforcement provisions, such as the termination of deposit insurance, the imposition of substantial fines and other civil penalties and, in the most severe cases, the appointment of a conservator or receiver for a depositary institution. Moreover, dividends can be restricted by any of the Bank’s regulatory authorities if the agency believes that the Bank’s financial condition warrants such a restriction.

      In addition, the Company’s ability to declare and pay dividends is restricted under the New York Business Corporation Law, which provides that dividends may only be paid by a corporation out of its surplus.

      In the event of a liquidation or reorganization of the Bank, the ability of holders of debt and equity securities of the Company to benefit from the distribution of assets from the Bank upon any such liquidation or reorganization would be subordinate to prior claims of creditors of the Bank (including depositors), except to the extent that the Company’s claim as a creditor may be recognized. The Company is not currently a creditor of the Bank.

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Equity Compensation Plan Information

      The following table sets forth information regarding the Company’s Stock Option Plans. All equity compensation plans have been approved by the Company’s stockholders. The amounts presented are as of December 31, 2004, and do not include awards made subsequent to that date. Additional details related to the Company’s equity compensation plans are provided in Notes 1 and 8 to the consolidated financial statements.