SOURCE: HUDSON VALLEY HOLDING CORP.

HUDSON VALLEY HOLDING CORP. ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND 12 MONTHS OF 2013

— Bank exceeds loan growth targets while reducing operating expenses and continuing to improve
asset quality—

— Cash dividend of $0.06 cents per share declared —

YONKERS, N.Y. – January 27, 2014 – Hudson Valley Holding Corp. (NYSE: HVB) reported fourth quarter and 12 month results for 2013 including growth of the Bank’s loan and securities portfolios and core deposits, lower recurring operating expenses and continued improvement in asset quality.

“We are pleased with the progress we made on many fronts during 2013. We added very talented members to our management team, took definitive steps to grow and diversify our loan portfolio and we have fully resolved issues raised in 2012 by the Office of the Comptroller of the Currency with their lifting of the Formal Written Agreement in October, 2013,” stated Stephen R. Brown, President and Chief Executive Officer. “We now turn our full attention to increasing profitability through continued growth and diversification of our loan portfolio utilizing our experienced management team, our ample capital, our stable low cost deposits and our strengthened infrastructure,” Brown added.

The parent Company of Hudson Valley Bank reported a loss of $8.5 million, or $0.43 per diluted share, in the fourth quarter of 2013. Profitability was reduced by an $11.1 million after tax, or $0.55 per diluted share goodwill impairment charge and a $0.7 million after tax loss, or $0.04 per diluted share, other than temporary impairment charge on the Company’s $10 million portfolio of collateralized debt obligation bank issued trust preferred securities. The Company earned $3.1 million, or $0.16 per diluted share, in the fourth quarter of 2012.

The following table details the Company’s net income and diluted earnings per common share and the effect of the goodwill impairment and other-than-temporary impairment charge.

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“While actively addressing the asset management business’ recent performance, we will not be distracted from executing our strategy for efficiently growing the size and diversity of our Bank’s loan and security portfolios with high-quality earning assets,” President and Chief Executive Officer Stephen R. Brown said. “The actions taken in 2013 to deploy liquidity enabled the Company to reduce the rate of net interest margin compression, while our remaining liquidity and strong deposit franchise position us to take advantage of rising rates. More important, though, are the lasting structural and cultural changes we’ve made in our business to drive long-term value for our customers and shareholders.”

Liquidity Deployment

The success of Hudson Valley’s liquidity deployment strategy lowered cash to $699.4 million at December 31, 2013, a 15.5% reduction from $827.5 million at December 31, 2012.

Loan originations and loan purchases of $402 million exceeded the Company’s full-year target growth of 10% or $200 million. The Bank also purchased $296 million in investment securities in 2013, offsetting securities portfolio run-off by more than $93 million. Loan originations of $94 million in the fourth quarter reflect the Company’s focus on increasing value through organic growth and decreasing reliance on purchased assets to deploy liquidity.

Hudson Valley continues to focus capital and investment on developing new middle market, small business and other lending products to successfully grow and diversify its loan portfolio beyond its traditional strength in commercial real estate (CRE). Brown said “Our asset-based lending team has hit the ground running and we are already seeing results from this investment.”

While the Company continues to expand its portfolio of earning assets, the prolonged low interest rate environment continues to negatively affect the yield on interest-earning assets. The yield on interest-earning assets averaged 3.14 percent in the fourth quarter of 2013, compared to 3.19 percent in the linked quarter and 3.50 percent in the fourth quarter of 2012. Even with its excess cash position, Hudson Valley’s net interest margin was 2.95 percent in the fourth quarter of 2013, compared to 2.99 percent in the linked quarter and 3.28 percent in the fourth quarter of 2012.

The Company maintained its historically low average cost of deposits at 0.18 percent in the fourth quarter of 2013, unchanged from the linked quarter and 3 basis points below the fourth quarter of 2012.

The year ending December 31, 2013 saw continued growth of Hudson Valley’s low-cost core deposit base, which represented 97 percent of total deposits at year end. Core deposits, which exclude time deposits greater than $100,000, totaled $2.5 billion at December 31, 2013, representing an increase of $126.3 million over the core deposit balance at December 31, 2012.

Non-Interest Income and Non-Interest Expense

Total non-interest income was $2.6 million in the fourth quarter of 2013, compared to $4.2 million in the linked quarter and $4.3 million in the fourth quarter of 2012. Hudson Valley’s service charge revenue was $1.2 million in the fourth quarter of 2013, compared to $1.4 million in both the linked quarter and the fourth quarter of 2012. The fourth quarter of 2013 included the $1.2 million other-than-temporary impairment charge related to management’s intent to sell the trust preferred collateralized debt obligations. Hudson Valley’s investment management fees remained relatively stable at about $1.9 million in the fourth quarter of 2013, unchanged from the linked quarter and a decrease from $2.2 million in the fourth quarter of 2012.

Non-interest expense for 2013 included approximately $1.3 million of non-recurring fees and expenses incurred to fully address matters raised by the Office of the Comptroller of the Currency in the previously disclosed Formal Written Agreement, which was lifted in October. Excluding the $18.7 million pre-tax impact of the goodwill impairment and the $1.3 million write-off associated with the branch consolidations, and the above mentioned non-recurring fees, non-interest expense declined by $3.7 million or 4.5 percent in 2013, close to meeting the Company’s target 5.0 percent reduction in non-interest expense year over year.

The Bank’s efficiency ratio, which has reflected the impact of excess liquidity on net interest income, excluding the impact of the goodwill impairment, was 82.5 percent in the fourth quarter of 2013, compared to 84.2 percent in the third quarter of 2013 and 75.7 percent in the fourth quarter of 2012.

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Portfolio Credit Quality

The Company demonstrated continued progress toward diversifying its lending base. During 2013 loans secured by 1-4 family residential mortgages balances grew by $36.5 million, or 9.2 percent, over the linked quarter and by $107.2 million, or 32.9 percent, over the fourth quarter of 2012. Loans secured by 1-4 family residential mortgages totaled $433.0 million at December 31, 2013, compared to $325.8 million at the end of the fourth quarter of 2012.

CRE represented 307 percent of risk-based capital at December 31, 2013, and continues to be within the Company’s previously disclosed commitment to maintain CRE concentration levels below 400 percent.

Overall portfolio trends continue to reflect a gradually improving credit environment across Hudson Valley’s niche commercial franchise in metropolitan New York. 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 $23.5 million at December 31, 2013, compared to $34.0 million at September 30, 2013 and $35.1 million at December 31, 2012. NPAs totaled 0.78 percent of total assets at December 31, 2013, compared to 1.12 percent at September 30, 2013 and 1.21 percent at December 31, 2012.

Reflecting generally improving credit trends, net charge-offs declined to $0.5 million for the fourth quarter of 2013, compared to $0.8 million and $3.0 million in the linked and year-ago quarters, respectively. As a percentage of average loans, annualized net charge-offs were 0.13 percent in the fourth quarter of 2013, compared to 0.23 percent in the third quarter of 2013 and 0.82 percent in the fourth quarter of 2012.

The Bank’s provision for loan losses in the fourth quarter of 2013 was $0.6 million, compared to $0.8 million in the linked quarter and $1.5 million in the fourth quarter of 2012.

The Bank’s allowance for loan losses was $26.0 million at December 31, 2013, compared to $25.9 million at September 30, 2013 and $26.6 million at December 31, 2012. The allowance measured 1.59 percent, 1.64 percent and 1.81 percent of total loans at each of those dates, respectively.

At December 31, 2013, classified assets represented 20.7 percent of Tier 1 capital plus the allowance, compared to 29.1 at September 30, 2013 and 35.6 percent at December 31, 2012.

The goodwill impairment charge was primarily driven by the recent loss of clients and a reduction in the projected earnings capacity of the Company’s asset management subsidiary. The goodwill impairment represents a noncash accounting adjustment which will not affect cash flows, liquidity or tangible capital. Since goodwill is excluded from regulatory capital, the impairment charge will not have an adverse impact on the capital ratios of the Company and its Banking subsidiary Hudson Valley Bank, both of which will continue to have regulatory capital in excess of levels to be considered well capitalized. The Company’s asset management subsidiary’s earnings for the year 2013, before the impairment charge was $0.9 million, or $0.05 per diluted share. The Company does not consider these earnings to be material to the Company’s financial results.

The other than temporary impairment charge on the Company’s trust preferred securities portfolio resulted from management’s decision to sell the trust preferred securities portfolio in late December given the uncertainty of the pending final regulations of the Volker rule. The Company sold its entire portfolio of trust preferred securities, in January 2014, for approximately $8.7 million, prior to the federal Banking agencies’ interim final rule. The securities had been carried at an estimated fair value of $3.3 million.

Quarterly Cash Dividend and Capital Management

Hudson Valley’s board of directors declared a quarterly cash dividend of $0.06 per share, payable on February 14, 2014 to all common stock shareholders of record as of the close of business on February 7, 2014.

At December 31, 2013, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.5 percent, a Tier 1 risk-based capital ratio of 16.2 percent, and a Tier 1 leverage ratio of 9.5 percent. Its Hudson Valley Bank subsidiary at December 31, 2013 posted a total risk-based capital ratio of 17.1 percent, a Tier 1 risk-based capital ratio of 15.8 percent, and a Tier 1 leverage ratio of 9.3 percent.

Subsequent Event

In early January 2014, the Company prepaid all of its outstanding Federal Home Loan Bank borrowings. The borrowings totaled $16.4 million and the related prepayment penalty totaled $1.9 million. The effect of the prepayment will be reflected in the Company’s first quarter 2014 financial results.

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 addition, Hudson Valley Holding Corp. in this press release discloses net income exclusive of the charge related to goodwill impairment and other-than-temporary impairment charge. The Company believes that this presentation of net income is important to investors because it provides a more appropriate comparison to the prior quarter and prior year results.

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.

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Conference Call

As previously announced, Hudson Valley will hold its quarterly conference call to review the Company’s financial results on Tuesday, January 28, 2014 at 10:00 AM ET:

Domestic (toll free): 1-888-317-6016; International (toll): + 1-412-317-6016.

All participants should dial in at least ten minutes prior to the call and request the “HVB Fourth Quarter 2013 Earnings Call.”

A replay of the call will be available one hour from the close of the conference through February 10, 2014 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference ## 10039312; International Toll: +1-412-317-0088 - Conference # 10039312.

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. Through its Hudson Valley Bank subsidiary, Hudson Valley Holding Corp. (NYSE: HVB) serves small- and mid-sized businesses, professional services firms, not-for-profit organizations and select individuals in metropolitan New York. Headquartered in Yonkers, N.Y., the Company provides a full range of Banking, trust and investment management services to niche commercial customers and their principals throughout Westchester and Rockland counties, the Bronx, Brooklyn and Manhattan. Hudson Valley is the largest Bank headquartered in Westchester County, with $3.0 billion in assets, $2.6 billion in deposits and 28 branches. Its common stock is traded on the New York Stock Exchange and is a Russell 3000^® Index component. More information is available 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 31.2012. 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, 2012 include, but are not limited to:

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