SOURCE: HUDSON VALLEY HOLDING CORP.

Stephen R. Brown

Sr. EVP, CFO & Treasurer

(914) 771-3212

HUDSON VALLEY HOLDING CORP. FIRST QUARTER 2012 RESULTS INCLUDE SUBSTANTIAL GROWTH IN NET INCOME,
EARNINGS, AND NET INTEREST MARGIN

- Bank Continues to Improve Credit Metrics, Lower Funding Costs and
Deliver Strong Operating Efficiency -

- Board Declares Dividend of $0.18 -

- Formal Agreement with OCC Addresses Previously Disclosed Regulatory Matters -

YONKERS, N.Y. – April 25, 2012 – Hudson Valley Holding Corp. (NYSE: HVB) today reported net income of $18.0 million, or $0.92 per diluted share, for the quarter ended March 31, 2012, compared to a net loss of $22.9 million, or $1.18 per diluted share, during the prior quarter and net income of $4.8 million, or $0.25 per diluted share, during the first quarter of 2011.

After-tax net gains on a previously announced sale of $474 million in loans in the first quarter of 2012 amounted to $9.4 million or $0.48 per share. Excluding the effect of the loan sale in the first quarter of 2012 and the related credit mark in the fourth quarter of 2011, net income increased 59.3 percent on a linked quarter basis and 79.2 percent compared to the first quarter of 2011.

All earnings per share data reported today reflect additional shares outstanding as a result of Hudson Valley’s 10 percent stock dividend issued in December 2011.

“Our relationships with customers remain strong and profitable, as demonstrated by this quarter’s growth in customer accounts, core deposit balances, fee income generation and net interest income earned,” President and Chief Executive Officer James J. Landy said. “Additionally, during the quarter we successfully completed the planned and profitable disposition of held-for-sale loans and an initial redeployment of the proceeds, a full three months ahead of schedule. This is particularly gratifying as we’ve done so while continuing to fully meet the needs of our customers and competing aggressively in the marketplace, every single day.”

Hudson Valley’s net interest margin increased to 4.75 percent in the first quarter of 2012, compared to 4.60 percent in the fourth quarter of 2011 and 4.39 percent in the first quarter of 2011. Favorable re-pricing of both interest-earning assets and liabilities during the quarter drove the improvement over the linked quarter. The company’s average cost of deposits fell to 28 basis points in the first quarter of 2012, compared to an average of 32 basis points in the fourth quarter of 2011 and 40 basis points in the first quarter of 2011.

The company grew top line revenue in the first quarter, in spite of industry trends and the current low-rate and difficult regulatory environment. Growth in net interest income from margin expansion contributed to strong top line revenue growth from the linked quarter and year-ago quarter, with linked-quarter growth being additionally aided by higher service charges and investment advisory fees.

Non-interest expense was $20.9 million for the three months ended March 31, 2012, representing increases of $1.9 million, or 10.1 percent, from the fourth quarter of 2011 and $0.4 million, or 2.0 percent, from the first quarter of 2011.

Hudson Valley continued to maintain its strong efficiency ratio at 56.8 percent in the first quarter of 2012, compared to 52.8 percent in the fourth quarter of 2011 and 60.3 percent in the first quarter of 2011.

Portfolio Credit Quality

The successful sale of $474 million in held-for-sale loans, including $27.8 million in nonperforming loans held-for-sale, significantly improved the bank’s key asset quality measures during the first quarter of 2012.

Hudson Valley’s total nonperforming assets (NPAs), including nonaccrual loans, nonaccrual loans held for sale, accruing loans delinquent over 90 days and other real estate owned (OREO), were $29.0 million at March 31, 2012, compared to $58.9 million at December 31, 2011 and $ 64.7 million at March 31, 2011. NPAs totaled 1.03 percent of total assets at March 31, 2012, compared to 2.11 percent at December 31, 2011 and 2.44 percent at March 31, 2011. Hudson Valley’s NPAs as a percent of total assets at the end of 2012’s first quarter fell to their lowest level since December 31, 2008.

Net charge-offs during the first quarter of 2012 were $0.2 million, reflecting a meaningful improvement in asset quality and increased recoveries. As a percentage of average loans, annualized net charge-offs were 0.04 percent in the first quarter of 2012, compared to 13.03 percent in the fourth quarter of 2011 and 0.95 percent in the first quarter of 2011. The elevated ratio of annualized net charge-offs to average loans in last year’s fourth quarter reflected the write downs on loans transferred to held-for-sale during that quarter.

Loan loss provision of $1.4 million recorded in this year’s first quarter represented a significant decrease from both the year-ago and linked quarters. Loan loss provision in the fourth quarter of 2011 was $54.6 million, including $48.1 million in net credit marks taken to reduce the carrying value of loans in anticipation of the bulk sales completed in the first three months of 2012. Loan loss provision for the first quarter of 2011 was $5.5 million.

The bank’s allowance for loan losses was $31.9 million at March 31, 2012, compared to $30.7 million at December 31, 2011 and $40.3 million at March 31, 2011. Allowances measured 1.94 percent, 1.95 percent, and 2.21 percent of total loans at each of those dates, respectively.
Lending Activity

Hudson Valley Bank continues to actively originate loans to meet the funding needs of middle-market commercial customers and their principals in Westchester and Rockland counties, lower Connecticut and metropolitan New York City.

CRE loans totaled $705.6 million on March 31, 2012, increasing 2.1 percent from December 31, 2011, excluding loans held for sale. CRE loans totaled $822.0 million at March 31, 2011.

Commercial and industrial (C&I) loans totaled $222.5 million at March 31, 2012, a 1.8 percent increase from December 31, 2011. C&I loans totaled $234.7 million at March 31, 2011.

The bank redeployed a portion of the proceeds from the company’s first quarter loan sale by purchasing $65.8 million in adjustable rate mortgages in the period, increasing residential loan balances to $568.5 million at March 31, 2012, compared to $514.8 million at December 31, 2011 and $548.3 million at March 31, 2011.

$0.18 Cash Dividend Declared

Hudson Valley’s board of directors declared a cash dividend of $0.18 per share, payable to all common stock shareholders of record as of the close of business on May 7, 2012. The dividend will be payable on May 18, 2012. This dividend represents 20 percent of GAAP net income earned in first quarter of 2012, or 41 percent of earnings excluding the gain on loans sold during the first three months of the year.

Capital Strength

At March 31, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 16.3 percent, a Tier 1 risk-based capital ratio of 15.0 percent, and a Tier 1 leverage ratio of 9.4 percent.

Its Hudson Valley Bank subsidiary at March 31, 2012 recorded a total risk-based capital ratio of 15.8 percent, a Tier 1 risk-based capital ratio of 14.6 percent, and a Tier 1 leverage ratio of 9.1 percent.

Hudson Valley’s capital ratios remain in excess of “well capitalized” levels applicable to banks under current regulations. Further, Hudson Valley’s capital ratios at March 31, 2012 were in excess of the following individual requirements imposed on its bank subsidiary in 2009 by the OCC: total risk-based capital ratio of at least 12.0 percent, a Tier 1 risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 8.0 percent.

Formal Agreement with Primary Banking Regulator

On February 1, 2012, Hudson Valley announced that during a routine exam and discussions with the Office of the Comptroller of the Currency (OCC), the bank was made aware that it would be required to reduce its concentration in commercial real estate loans, including multi-family lending, as well as classified loans. As previously disclosed, the company’s response to these discussions with the OCC included a commitment to reduce concentrations of CRE loans and classified assets to less than 400 percent and 25 percent of risk-based capital, respectively, in the near term.

Primarily as a result of the bank’s sale of $474 million in loans, during the first quarter of 2012 Hudson Valley reduced CRE loans to 401 percent of risk-based capital from 558 percent at the end of last year, while lowering classified assets to 27 percent of risk-based capital. Classified assets ranged between 56 percent and 67 percent of risk-based capital in 2011, before the impact of loan marks at December 31, 2011.

Also on February 1, Hudson Valley announced its new dividend policy capping dividend payments at no more than 50 percent of quarterly net income in 2012, and in future periods if CRE loans and classified assets exceed 400 percent and 25 percent of risk-based capital, respectively.

As forecast on February 1, the board of directors of Hudson Valley Bank yesterday signed a formal written agreement with the OCC. With this agreement, Hudson Valley is committing to adopt best practices modeled on those of the nation’s larger financial institutions, as well as evolving expectations of regulatory agencies on community banks. Included in the agreed-upon commitments are enhancements to the bank’s procedures, systems, policies, programs, plans, training and resources. The agreement is consistent with the CRE lending and classified asset concentration commitments Hudson Valley announced on February 1. The written agreement imposes no specific capital ratio mandates or other quantitative conditions or obligations on Hudson Valley and does not impose any limit on the bank board’s ability to pay dividends to its parent, except those imposed by the law. The bank expects to submit to the OCC a capital plan, containing the bank’s near term and long term dividend policy, pursuant to the written agreement.

“The board of directors is pleased with both the pace and quality of our dialogue with the OCC, which resulted in a signed formal agreement that places no further quantitative obligations on the bank, beyond the required reductions in concentrations disclosed on February 1^st,” Chairman William E. Griffin said. “This provides clarity on our regulator’s current expectations for the bank, and we have full confidence in the ability of Jim Landy and our entire management team to meet or exceed the obligations set forth in the agreement. The board is committed to ensuring management has the resources needed to meet not only the terms of the agreement, but the needs and expectations of our customers, just as Hudson Valley Bank has done successfully for the last 40 years.”

First Quarter Review

The company recorded net income of $18.0 million or $0.92 per diluted share for the three month period ended March 31, 2012, compared to net income of $4.8 million or $0.25 per diluted share for the same period in the prior year. Per share amounts for the 2011 periods have been adjusted to reflect the effects of the 10 percent stock dividend issued in December 2011.

Earnings for the first quarter of 2012 included a pretax gain of $15.9 million resulting from the successful completion of $474 million of loan sales announced in the fourth quarter of 2011 as part of the company’s efforts to reduce the levels of nonperforming and other classified loans, and also to reduce the overall concentration in commercial real estate loans. In addition to the gains on the loan sales, income for the first quarter of 2012 was higher, compared to the same period in the prior year, primarily as a result of higher net interest income and a significantly lower provision for loan losses, partially offset by lower noninterest income, higher impairment charges on securities available for sale and slightly higher noninterest expenses.

Total loans, excluding loans held for sale, increased $68.8 million during the three month period ended March 31, 2012 compared to the period ended December 31, 2011. This increase resulted primarily from the purchase of $65.8 million of adjustable rate residential loans, which were purchased as a partial redeployment of the proceeds from the aforementioned loan sales. Additional redeployment of loan sale proceeds is expected as appropriate product becomes available.

Nonperforming assets decreased to $29.0 million at March 31, 2012, compared to $58.9 million at December 31, 2011. The reduction was the result of the sale or resolution of $27.8 million of nonperforming loans previously transferred to loans held-for-sale and $2.1 million of reductions of other nonperforming loans.

Total deposits decreased $1.4 million during the three month period ended March 31, 2012, compared to the prior year end. The company continued to experience growth in new customers both in existing branches and new branches added during the last two years. This growth was offset by planned reductions in certain deposit balances, primarily higher cost municipal demand deposits.

The company’s short-term liquidity increased significantly during the first quarter of 2012 primarily as a result of not fully redeploying the proceeds of the aforementioned loan sales. The loan sales were completed during the last few days of the first quarter of 2012 and, as a result, had little impact on the quarter’s net interest margin, which increased to 4.75 percent, compared to 4.39 percent for the same period in the prior year. The 2012 increase was primarily the result of reinvestment of 2011 excess liquidity into loans, primarily local market multi-family loans. Prior to the loan sales, this reinvestment had significantly offset margin compression resulting from interest rates continuing at historically low levels. The company expects net interest margin compression in future quarters due to maturing loans and investments being reinvested at lower interest rates and until full redeployment of the proceeds from the recent loan sales can be completed in a manner consistent with both the company’s risk management policies and the requirements of the OCC. Regardless of the timing of the aforementioned redeployment, if interest rates continue at current levels, we expect that additional downward pressure on net interest margin will continue.

As a result of the aforementioned activity in the company’s core businesses of loans and deposits and other asset/liability management activities, tax equivalent basis net interest income increased by $3.7 million or 13.3 percent to $31.8 million for the three month period ended March 31, 2012, compared to $28.1 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.5 million for the three month period ended March 31, 2012, compared to $0.6 million for the same period in the prior year.

The company’s non interest income was $20.8 million for the three month period ended March 31, 2012, compared to $5.4 million for the same period in the prior year. The increase resulted primarily from the $15.9 million pretax gain on sales of loans, partially offset by decreases in investment advisory fees and service charges and an increase in pre-tax impairment charges on securities available for sale. Advisory fee income decreased by $0.2 million primarily as a result of the effects of continued fluctuation in both domestic and international equity markets. Service charges decreased slightly due to decreased activity. Pre-tax impairment charges on securities available for sale were $0.5 million for the three month period ended March 31, 2012 and $0.2 million for the same period in the prior year. The impairment charges were related to the company’s investments in pooled trust preferred securities. The company has continued to hold its investments in pooled trust preferred securities as it does not believe that the current market value estimates for these investments are indicative of their underlying value. The pooled trust preferred securities are primarily backed by various U.S. financial institutions, many of which are experiencing severe financial difficulties as a result of the current economic downturn. Continuation of these conditions may result in additional impairment charges on these securities in the future.

Non interest expense was $20.9 million for the three month period ended March 31, 2012. This represented an increase of $0.4 million or 2.0 percent compared to $20.5 million for the same period in the prior year. The increase in non interest expense resulted primarily from an additional provision of $1.3 million related to the previously announced ongoing investigations by the Securities and Exchange Commission (SEC) relating to issues surrounding the brokerage practices and policies and disclosures about such practices of the company’s investment advisory subsidiary, A.R. Schmeidler & Co., Inc. Based on ongoing discussions with the SEC, the company believes it has substantially accrued for any penalties and related costs anticipated in the final resolution of this matter although, until final agreement is reached, the exact result cannot be determined. Noninterest expenses for the three month period ended March 31, 2012, compared to the same period in the prior year also reflected increases in costs associated with problem asset resolution, and investment in technology and personnel to accommodate growth and the expansion of services and products available to new and existing customers. These increases were partially offset by the partial reduction of previously accrued officers’ incentive compensation and a lower FDIC insurance assessment.

Hudson Valley’s capital ratios remain in excess of “well capitalized” levels generally applicable to banks under current regulations. At March 31, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 16.3 percent, a Tier 1 risk-based capital ratio of 15.0 percent, and a Tier 1 leverage ratio of 9.4 percent. At March 31, 2012, Hudson Valley Bank posted a total risk-based capital ratio of 15.8 percent, a Tier 1 risk-based capital ratio of 14.6 percent, and a Tier 1 leverage ratio of 9.1 percent.

Non-GAAP Financial Disclosures and Reconciliation to GAAP

In addition to evaluating Hudson Valley Holding Corp’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, Hudson Valley will hold its quarterly conference call to review the company’s financial results on Wednesday, April 25, 2012 at 10:00 AM ET:

Domestic (toll free): 1-877-317-6789; International (toll): + 1-412-317-6789.

All participants should dial in at least ten minutes prior to the call and request the “HVB First Quarter Earnings Call.”

A replay of the call will be available one hour from the close of the conference through May 10, 2012 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference #10012498; International Toll: +1-412-317-0088 - Conference #10012498.

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.
About Hudson Valley Holding Corp: Hudson Valley Holding Corp., headquartered in Yonkers, NY, is the parent company of Hudson Valley Bank (”Hudson Valley”). Hudson Valley Bank is a Westchester based Bank with more than $2.8 billion in assets, serving the metropolitan area with 36 branches located in Westchester, Rockland, the Bronx, Manhattan and Brooklyn in New York and Fairfield County and New Haven County, in Connecticut. Hudson Valley specializes in providing a full range of financial services to businesses, professional services firms, not-for-profit organizations and individuals; and provides investment management services through a subsidiary, A. R. Schmeidler & Co., Inc. Hudson Valley Holding Corp.’s common stock is traded on the NYSE under the ticker symbol “HVB” and is included in the Russell 3000® Index. Additional information on Hudson Valley Bank can be obtained on their web-site at www.hudsonvalleybank.com

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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 December 31, 2011. 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, 2011 include, but are not limited to:

We assume no obligation for updating any such forward-looking statements at any given time.

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