HUDSON VALLEY HOLDING CORP. ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2012

– Bank Continues to Lower Funding Costs as Core Deposits Grow to 96 percent of Total Deposits –

– Generates 3.93 Percent Net Interest Margin, Even with Excess Cash from
First Quarter Loan Sales –

–Capital Ratios Increase to Highest Level in Eight Years –

- C&I Loan Balances Continue to Increase -

– Board Declares Dividend of $0.18 for the Third Quarter of 2012 –

YONKERS, N.Y. – August 1, 2012 – Hudson Valley Holding Corp. (NYSE: HVB) today reported solid profitability in the second quarter ended June 30, 2012, as the bank continued to lower funding costs and increase capital ratios while operating with a significant excess cash position following its successful loan sales in the first quarter of the year.

“Robust business loan and deposit balances in the second quarter reflect the stability of Hudson Valley’s niche commercial customer base and the strength of our bankers’ relationships throughout Metro New York,” President and Chief Executive Officer Stephen R. Brown said. “We also maintained competitive funding costs and core deposit growth, positioning us to profitably deploy the proceeds of last quarter’s loan sales. As we patiently evaluate new lending opportunities that will leverage Hudson Valley’s business banking approach in the communities we serve, our core franchise continues to prosper, building capital to the highest levels in eight years.”

The parent company of Hudson Valley Bank earned net income of $5.0 million, or $0.25 per diluted share, for the second quarter of 2012, compared to $7.4 million, or $0.38 per share, during the second quarter of 2011.

First quarter 2012 net income of $18.0 million, or $0.92 per share, included $9.4 million or $0.48 per share in after-tax net gains on the sale of $474 million in loans. The loan sales were pursuant to the bank’s previously announced understanding with the Office of the Comptroller of the Currency (OCC) to reduce concentrations of commercial real estate (CRE) and classified assets below 400 percent and 25 percent of risk-based capital, respectively. At June 30, 2012, the bank’s ratios of CRE and classified assets to risk-based capital were 365.4 percent and 24.6 percent.

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.

Hudson Valley’s net interest margin was 3.93 percent in the second quarter of 2012, compared to 4.75 percent in the first quarter of 2012 and 4.55 percent in the second quarter of 2011. The significant cash position derived from last quarter’s loan sales drove margin compression, lowering the yield on interest-earning assets to 4.26 percent from 5.14 percent in the linked quarter and 5.09 percent in the second quarter of 2011. Continued improvement in deposit funding costs partially offset this decline.

During the second quarter, the company’s average cost of deposits fell to 0.23 percent, five basis points lower than the linked quarter and 15 basis points below the second quarter of 2011. The company continues to seek prudent and profitable opportunities to deploy loan-sale proceeds beyond its first quarter 2012 purchase of $65.8 million in adjustable rate mortgages.

Hudson Valley continues to derive meaningful fee income from its deep commercial relationships. The bank earned $4.8 million in non-interest income during the second quarter of 2012, compared to $20.4 million (including the $15.9 million loan-sale gain) in the first quarter of 2012 and $3.8 million in the second quarter of 2011. Fee income saw modest growth on a linked quarter basis due to lower securities impairment charges and higher investment advisory fees, while deposit service charges were lower. Compared to last year’s second quarter, second quarter 2012 core banking fees were stable while overall fees grew $1.0 million due to losses on certain assets held for sale in 2011.

The company’s core relationship banking operations retained their characteristic efficiency during the second quarter, while corporate initiatives to attract executive-level talent and introduce best practices modestly increased the company’s expense run-rate. Non-interest expense was $21.0 million for the three months ended June 30, 2012, representing increases of $0.2 million, or 0.8 percent, from the first quarter of 2012 and $0.4 million, or 1.9 percent, from the second quarter of 2011. Hudson Valley’s efficiency ratio was 68.1 percent in the second quarter, compared to 56.8 percent and 58.8 percent in the linked and year-ago quarters, respectively.

Hudson Valley continued to maintain an enviable core deposit base in the second quarter of 2012. Core deposits, which exclude time deposits greater than $100,000, increased $18.9 million from the linked quarter to $2.3 billion, comprising 96 percent of total deposits. Stable and low-cost deposit funding remains the foundation of Hudson Valley’s commercial banking franchise.

Portfolio Credit Quality

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 $39.6 million at June 30, 2012, compared to $29.0 million at March 31, 2012, $58.9 million at December 31, 2011 and $64.5 million at June 30, 2011. NPAs totaled 1.40 percent of total assets at June 30, 2012, compared to 1.03 percent at March 31, 2012, 2.11 percent at December 31, 2011 and 2.29 percent at June 30, 2011.

The linked quarter increase in nonperforming assets reflected the progression of certain delinquent loans to nonaccrual status, in particular, a $13.1 million relationship with whom a workout plan was developed which included a $6.5 million payment received in early July. The 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 compared to December 31, 2011 and June 30, 2011.

Net charge-offs during the second quarter of 2012 were $5.0 million, and included $2.0 million which was included as a specific reserve component of the allowance for loan loss at March 31, 2012 and December 31, 2011. As a percentage of average loans, annualized net charge-offs were 1.27 percent in the second quarter of 2012, compared to 0.04 percent in the first quarter of 2012 and a net recovery position of 0.01 percent in the second quarter of 2011.

The provision for loan losses was $1.9 million for the second quarter. Provision for loan losses was $1.5 million and $1.4 million in the linked and year-ago quarters, respectively.

The bank’s allowance for loan losses was $28.7 million at June 30, 2012, compared to $31.9 million at March 31, 2012, $30.7 million at December 31, 2011 and $41.9 million at June 30, 2011. Allowances measured 1.85 percent, 1.94 percent, 1.95 and 2.17 percent of total loans at each of those dates, respectively.

Commercial Loan Portfolio

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

Commercial and industrial (C&I) loans totaled $231.1 million at June 30, 2012, a 3.9 percent increase from March 31, 2012. C&I loans totaled $218.5 million at December 31, 2011 and $227.0 million at June 30, 2011. The second quarter 2012 increase in C&I loans reflects increased emphasis on this type of lending as the bank works to reduce its overall concentration in CRE.

Reflecting the bank’s previously announced plans to reduce its commercial real estate concentration relative to risk-based capital, CRE loans totaled $633.6 million on June 30, 2012, decreasing from $705.6 million at March 31, 2012, $690.8 million at December 31, 2011 and $844.7 at June 30, 2011.

Progress on Commitments to Primary Banking Regulator

During the second quarter, Hudson Valley Bank submitted a capital plan to the OCC, as required under its written agreement with the regulator. The bank is operating in accordance with its capital plan without supervisory objection from the OCC.

“The board of directors is pleased with the progress toward addressing all of the commitments under our written agreement with the OCC,” Chairman James J. Landy said. “We believe we are on track toward meeting the obligations set forth in the agreement, while continuing to serve our commercial customers’ every need in the dedicated manner they’ve come to expect from Hudson Valley Bank.” Landy added, “Based upon our capital plan now in place, which includes provisions regarding payment of dividends, we anticipate the continuation of our current quarterly dividend.”

$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 August 13, 2012. The dividend will be payable on August 24, 2012.

Capital Strength

At June 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.0 percent, a Tier 1 risk-based capital ratio of 15.8 percent, and a Tier 1 leverage ratio of 9.6 percent.

Its Hudson Valley Bank subsidiary at June 30, 2012 recorded a total risk-based capital ratio of 16.8 percent, a Tier 1 risk-based capital ratio of 15.6 percent, and a Tier 1 leverage ratio of 9.5 percent.

Hudson Valley’s capital ratios remain in excess of “well capitalized” levels applicable to banks under current regulations. Further, Hudson Valley Bank’s capital ratios at June 30, 2012 were in excess of the following internal minimum capital ratios established under the Bank’s capital plan submitted to the OCC: total risk-based capital ratio of at least 13.0 percent, a Tier 1 risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 8.5 percent.

Second Quarter and Six Month Review

The Company recorded net income for the three month period ended June 30, 2012 of $5.0 million or $0.25 per diluted share, a decrease of $2.4 million compared to net income of $7.4 million or $0.38 per diluted share for the same period in the prior year. Net income for the six month period ended June 30, 2012 was $23.0 million or $1.17 per diluted share, an increase of $10.7 million compared to net income of $12.3 million or $0.63 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.

The decrease in earnings for the three month period ended June 30, 2012, compared to the same period in the prior year, was primarily due to a $4.1 million decrease in net interest income, the anticipated result of excess liquidity remaining from the proceeds of the loan sales conducted in the first and second quarters of 2012. The loan sales were conducted 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 decrease in net interest income, net income for the second quarter of 2012 was lower, compared to the same period in the prior year, as a result of a higher provision for loan losses and lower fee income, partially offset by lower losses on sales and revaluations of loans and other real estate owned and slightly higher non interest expenses. The increase in earnings for the six month period ended June 30, 2012, compared to the same period in the prior year, resulted primarily from pretax gain of $15.9 million resulting from the successful completion of $474 million of loan sales announced in the fourth quarter of 2011 and completed at the end of the first quarter of 2012. In addition to the gains on the loan sales, income for the six month period ended June 30, 2012 was higher, compared to the same period in the prior year, as a result of higher non interest income and a lower provision for loan losses, partially offset by lower net interest income, higher impairment charges on securities available for sale and slightly higher non interest expenses.

Total loans, excluding loans held for sale, decreased $89.2 million and $20.4 million during the three and six month periods ended June 30, 2012 compared to the prior year end. The overall decrease was primarily the result of pay downs and payoffs of existing loans exceeding new production and additional loan sales conducted in the second quarter of 2012, partially offset by the purchase of adjustable rate residential loans in the first quarter of 2012, which were purchased as partial redeployment of proceeds from sales of loans held for sale. The Company continues to provide lending availability to both new and existing customers.

Nonperforming assets decreased to $39.6 million at June 30, 2012, compared to $58.9 million at December 31, 2011. Overall asset quality continued to be adversely affected by the current state of the economy and the real estate market. Although there is evidence that the current economic downturn may have begun to slowly turn around, higher than normal levels of delinquent and nonperforming loans, slowdowns in repayments and declines in the loan-to-value ratios on existing loans continued during the first half of 2012. Despite recent reductions in classified and nonperforming loans, the company’s loan portfolio continued to be adversely impacted by the effects of declines in the demand for and values of virtually all commercial and residential real estate properties. These declines, together with the limited availability of residential mortgage financing, resulted in some continuing weakness in the overall asset quality of the company’s loan portfolio. As a result of these factors, the Company has continued to follow aggressive strategies for resolving problem assets and has maintained the allowance for loan loss at a higher than normal level. The provision for loan losses totaled $1.9 million and $3.3 million, respectively, for the three and six month periods ended June 30, 2012, compared to $1.5 million and $7.0 million, respectively, for the same periods in the prior year. The 2012 provision is significantly lower than in 2011 reflecting improvements achieved in the resolutions of classified and nonperforming loans. However, the provisions in both 2012 and 2011 are reflective of continued weakness in the overall economy, and the related effects of this weakness on the Company’s overall asset quality.

Total deposits increased slightly by $14.6 million during the six month period ended June 30, 2012, compared to the prior year end. The Company continued to emphasize its core deposit growth, while placing less emphasis on non core deposits including deposits which are obtained on a bid basis.

Liquidity from deposit growth and excess loan and investment repayments over new production was retained in the Company’s short-term liquidity portfolios, available to fund future loan growth. With interest rates remaining at historical low levels, this increase in liquidity contributed to significant margin compression. The net interest margin was 3.93 percent and 4.34 percent, respectively, for the three and six month periods ended June 30, 2012, compared to 4.55 percent and 4.47 percent, respectively, for the same periods in the prior year. The company expects some additional net interest margin compression in future quarters due to maturing loans and investments being reinvested at lower interest rates and until redeployment of the excess proceeds from the recent loan sales and other maturing assets can be completed in a manner consistent with the company’s risk management policies. 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 activities, tax equivalent basis net interest income decreased by $4.1 million or 13.6 percent to $26.1 million for the three month period ended June 30, 2012, compared to $30.2 million for the same period in the prior year. Tax equivalent basis net interest income decreased by $0.4 million or 0.7 percent to $57.9 million for the six month period ended June 30, 2012, compared to $58.3 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.6 million and $1.1 million, respectively, for the three and six month periods ended June 30, 2012, compared to $0.6 million and $1.2 million, respectively, for the same periods in the prior year.

The Company’s non interest income was $4.8 million and $25.1 million, respectively, for the three and six month periods ended June 30, 2012. This represented increases of $1.0 million and $16.6 million, respectively, compared to $3.8 million and $9.1 million, respectively, for the same periods in the prior year. The increase in the three month period ended June 30, 2012, compared to the same period in the prior year, resulted from higher other income and lower other losses, partially offset by lower service fees and lower investment advisory fees. The increase in the six month period ended June 30, 2012, compared to the same period in the prior year, resulted from a $15.9 million pretax gain on sales of loans completed in the first quarter of 2012 and higher other income, partially offset by lower service fees, lower investment advisory fees and higher impairment charges on securities available-for-sale. Investment advisory fee income was lower in 2012 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 six month period ended June 30, 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. Non interest income also included other losses of $1.0 million and $0.9 million, respectively, for the three and six month periods ended June 30, 2011. These losses related to sales and revaluations of other real estate owned and loans held for sale.

Non interest expense was $21.0 million and $41.9 million, respectively, for the three and six month periods ended June 30, 2012. This represented increases of $0.4 million or 1.9 percent and $0.8 million or 1.9 percent, respectively, compared to $20.6 million and $41.1 million, respectively, for the same periods 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 investigations and settlement discussions with the Securities and Exchange Commission (SEC) and the Department of Labor (DOL) 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 settlement discussions with the SEC and the DOL, 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 complete accrual cannot be determined. Other changes in non interest expense included decreases in costs associated with problem loan resolution and decreases in FDIC insurance, partially offset by increases in investments in technology and personnel to accommodate expanding risk management requirements and growth and the expansion of services and products available to new and existing customers.

Hudson Valley’s capital ratios remain significantly in excess of “well capitalized” levels generally applicable to banks under current regulations. At June 30, 2012, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.0 percent, a Tier 1 risk-based capital ratio of 15.8 percent, and a Tier 1 leverage ratio of 9.6 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. A reconciliation of the non-GAAP to GAAP measures accompanies this press release.

Conference Call

As previously announced, Hudson Valley will hold its quarterly conference call to review the company’s financial results on Wednesday, August 1, 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 Second Quarter Earnings Call.”

A replay of the call will be available one hour from the close of the conference through August 16, 2012 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference # 10015751; International Toll: +1-412-317-0088 - Conference # 10015751.

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

**************************************************************************************

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.

1

2

3

4

5