SOURCE: HUDSON VALLEY HOLDING CORP.

Stephen R. Brown

Sr. EVP, CFO & Treasurer

(914) 771-3212

HUDSON VALLEY HOLDING CORP. ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND 12 MONTHS OF 2011

- Announces Loan Sales to Modify Asset Mix, Reducing Concentration of CRE Loans and Classified
Assets as a Percentage of Risk-based Capital –

- Board Declares $0.18 Cash Dividend for the First Quarter of 2012 -

- Maintains Well Capitalized Regulatory Ratios -

YONKERS, N.Y. – February 1, 2012 – Hudson Valley Holding Corp. (NYSE: HVB) today reported fourth quarter and 12 month results for 2011 and announced plans for bulk loan sales to modify its asset mix, reducing the concentration of commercial real estate (CRE) and classified assets in its portfolio.

The company’s fourth quarter 2011 net loss was $22.9 million, or $1.18 per diluted share, compared to net income of $7.1 million or $0.36 per diluted share in the same period last year. For the 12 months of 2011, Hudson Valley reported a net loss of $2.1 million, or $0.11 per diluted share, compared to net income of $5.1 million, or $0.26 per diluted share, the year prior.

Declines in fourth quarter and for the year ended 2011 profitability were due largely to write downs associated with the transfer of loans to held-for-sale status in contemplation of loan sales to reduce classified loans and the concentration of commercial real estate loans.

Excluding the after-tax impact of the credit mark related to the loan sale, the parent company of Hudson Valley Bank earned $5.4 million, or $0.27 per diluted share, in the fourth quarter 2011 and $26.1 million, or $1.34 per diluted share, for the 12 months of 2011. All per share data reported today reflect additional shares outstanding as a result of the 10 percent stock dividend declared by Hudson Valley in November 2011.

“Our strong pre-tax, pre-provision earnings illustrate Hudson Valley’s fundamentally sound business and business plan, and outstanding commercial franchise in the markets we serve,” President and Chief Executive Officer James J. Landy said. “We’ve forged deep and long-lasting relationships with our loyal customers, many of which are measured in decades, and we look forward to continuing our record of success for the long-term benefit of our customers, communities and shareholders.”

Modifying Asset Mix

As part of a routine safety and soundness exam conducted by the bank’s primary regulator, the Office of the Comptroller of the Currency (OCC), Hudson Valley was made aware that it would be required to reduce its concentration in commercial real estate (CRE) and classified loans, relative to risk-based capital. In response, Hudson Valley is planning to sell a total of approximately $474 million in performing and non-performing loans by mid-2012, a significant step toward reducing the bank’s concentrations of CRE loans and classified assets to less than 400 percent and 25 percent of risk-based capital, respectively. The company has reviewed its plans in detail with the OCC.

While the bank may be subject to some form of administrative action in the future, management and the board believe Hudson Valley is taking decisive actions to reduce CRE and classified asset concentrations as measured against risk-based capital.

The transfer of these loans to held-for-sale status at December 31, 2011 resulted in market value adjustments that reduced fourth quarter net income by approximately $28 million, after tax, or $1.45 per share. The market value adjustments reduced the carrying value of classified assets expected to be sold by mid-2012. No market valuation adjustments were recorded on multifamily loans transferred to held-for-sale status, as they are expected to be sold at or above par value.

“With the market turmoil of the past few years, the regulatory goal posts have moved, and the changing regulatory landscape has resulted in new litmus tests for financial institutions,” Senior Executive Vice President and Chief Financial Officer Stephen R. Brown said. “As regulatory scrutiny focuses on smaller institutions, we will adopt best practices modeled on those of larger banks as well as evolving expectations of regulatory agencies. Doing so will put us in a better position over the long term to compete with the larger banks, as a result of these changes.”

Historic Strength in Commercial Real Estate Lending

The bank has always had a primary focus in commercial real estate lending and has regularly disclosed its plans and loan concentrations to the OCC and in public filings. Like many community banks, CRE lending has been Hudson Valley’s single largest category of lending, averaging at quarter end 488 percent of risk-based capital over the last three years, and totaling 509 percent at September 30, 2011. This concentration in CRE lending includes the steady and transparent growth in Hudson Valley’s program of multifamily lending since early 2010.

At December 31, 2011, Hudson Valley CRE loans represented 558 percent of risk-based capital, or 386 percent when excluding the effect of loans transferred to held-for-sale status.

“Commercial real estate lending has long been a successful and profitable business for us, and we remain committed to this focus so that we can meet the needs of our middle-market commercial customers and their principals, day in and day out,” CEO Landy said.

Classified loans — credits deemed to be of substandard credit quality and whose full repayment of principal and interest is questionable — ranged between 55 percent to 65 percent of risk-based capital in 2011, before the impact of loan marks at December 31, 2011.

“We have become increasingly frustrated with a protracted property foreclosure process that prevents banks from resolving delinquent business loans, thereby tying up funds that would otherwise be used to add to the capital we deploy to finance other entrepreneurs’ and executives’ investments in small- and mid-sized businesses in the communities we serve,” Landy said. “We have worked diligently to resolve classified loans, in spite of today’s foreclosure process, general economic conditions and political rhetoric designed to demonize an industry, rather than actually addressing the challenges at hand. Given these conditions, the loan sales we announced today make abundant sense.”

$0.18 Cash Dividend Declared

Hudson Valley’s board of directors declared a $0.18 cash dividend per share, payable to all common stock shareholders of record as of the close of business on February 13, 2012. The dividend will be payable on February 24, 2012.

In connection with the company’s actions to reduce certain asset concentrations as they relate to capital, the board has also adopted a dividend policy to cap dividend payments going forward 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 always, the board will evaluate on a quarterly basis the extent to which dividends will be utilized to return value to shareholders, balanced against the need to maintain capital levels to fully serve Hudson Valley customers’ banking needs and meet or exceed regulatory standards.

Capital Strength

At December 31, 2011, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 12.6 percent, a Tier 1 risk-based capital ratio of 11.3 percent, and a Tier 1 leverage ratio of 8.8 percent.

Its Hudson Valley Bank subsidiary at December 31, 2011 posted a total risk-based capital ratio of 12.1 percent, a Tier 1 risk-based capital ratio of 10.8 percent, and a Tier 1 leverage ratio of 8.4 percent.

On a pro forma basis, assuming the $474 million loan sales had been completed on December 31, 2011 at the marks taken, before any reinvestment, the bank subsidiary would have recorded a total risk-based capital ratio of 15.4 percent, a Tier 1 risk-based capital ratio of 13.8 percent, a Tier 1 leverage ratio of 8.4 percent, a CRE concentration of 386 percent of risk-based capital, and classified assets of 28 percent of risk-based capital.

Hudson Valley’s capital ratios remain in excess of “well capitalized” levels applicable to banks under current regulations, and management expects the holding company and bank to remain well capitalized during this period in which it plans to reduce its concentration of CRE loans and classified assets.

Further, Hudson Valley’s capital ratios at December 31, 2011 were in excess of the following requirements imposed on its bank subsidiary in 2009 by the OCC. The individual requirements are: 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.

Results of Core Operations

Hudson Valley continued to maintain its strong efficiency ratio at 52.8 percent in the fourth quarter of 2011, compared to 56.7 percent in the third quarter of 2011 and 58.4 percent in the fourth quarter of 2010.

Hudson Valley’s net interest margin increased to 4.60 percent in the fourth quarter of 2011, compared to 4.47 percent in the third quarter of 2011 and 4.29 percent in the fourth quarter of 2010.

Non-interest expense was $19.0 million for the three months ended December 31, 2011, representing decreases of $1.1 million, or 5.6 percent, from the third quarter of 2011 and $200,000, or 0.9 percent, from the fourth quarter of 2010. Non-interest expense in the fourth quarter of 2011 reflects issues related to its investment advisor subsidiary A.R. Schmeidler & Co., Inc. (ARS). The Securities and Exchange Commission (SEC) is currently conducting an investigation of ARS relating to compliance with certain provisions of the Investment Advisers Act of 1940. The investigation resulted from a routine examination of ARS’s investment advisory business and relates to ARS’s brokerage practices and policies and disclosure about such practices. Hudson Valley incurred significant legal expenses and anticipates that it will continue to incur additional legal expenditures in connection with the investigation, which is ongoing. ARS is fully cooperating with the SEC. ARS is considering certain remedial steps to address the concerns raised by the SEC. Based upon developments to date, Hudson Valley expects that ARS will be required to pay certain costs to resolve the matter. Management of the company is unable to predict how long the SEC investigation will last, the exact result, or what the final amount of costs and legal expenses will be.

Core deposits increased to 93.7 percent of Hudson Valley’s $2.4 billion in total deposits at December 31, 2011. Deposits totaled $2.5 billion at September 30, 2011 and $2.2 billion at December 31, 2010.

The company’s average cost of deposits fell to 32 basis points in the fourth quarter of 2011, compared to an average of 36 basis points in the third quarter of 2011 and 44 basis points in the fourth quarter of 2010.

Lending Activity

Net loans, excluding loans held-for-sale, totaled $1.6 billion at December 31, 2011, compared to $2.0 billion at September 30, 2011 and $1.7 billion at December 31, 2010. CRE loan balances, excluding loans held-for-sale, were $690.8 million at December 31, 2011, compared to $818.0 million at September 30, 2011 and $796.3 million at December 31, 2010. Multifamily loan balances, excluding loans held-for-sale, were $227.6 million at December 31, 2011, compared to $507.1 million at September 30, 2011 and $152.3 million at December 31, 2010. The OCC considers multifamily loans to constitute CRE for concentration purposes.

Portfolio Credit Quality

For the fourth quarter of 2011, Hudson Valley’s loan loss provision was $54.6 million, compared to $2.5 million in the third quarter of 2011 and $5.8 million in the fourth quarter of 2010. The credit mark established through the transfer of $474 million in loans to held-for-sale increased the current quarter’s provision by $48.1 million.

Hudson Valley’s total nonperforming assets, including non-accrual loans, non-accrual loans held for sale, accruing loans delinquent over 90 days and other real estate owned (OREO), were $58.9 million at December 31, 2011 ($31.1 million excluding loans held-for-sale), compared to $61.7 million at September 30, 2011 and $64.1 million at December 31, 2010. Nonperforming assets (NPAs) totaled 2.11 percent of total assets at December 31, 2011, compared to 2.11 percent at September 30, 2011 and 2.40 percent at December 31, 2010.

The bank’s allowance for loan losses was $30.7 million, or 1.95 percent of total loans, at December 31, 2011. Allowances were $42.1 million, or 2.07 percent of total loans, at September 30, 2011, and $39.0 million, or 2.25 percent of total loans, at December 31, 2010.

The company recorded net charge-offs of $66.1 million in the fourth quarter of 2011, $60.2 million of which is directly related to the aforementioned transfer of loans to held-for-sale status. Net charge-offs were $2.3 million in the third quarter of 2011 and $3.8 million in the fourth quarter of 2010.

Fourth Quarter and 12 Month Review

The Company recorded net losses of $22.9 million or ($1.18) per diluted share and $2.1 million or ($0.11) per diluted share, respectively, for the three and twelve month periods ended December 31, 2011, compared to net income of $7.1 million or $0.36 per diluted share and $5.1 million or $0.26 per diluted share, respectively, for the same periods in the prior year. Per share amounts for the 2010 periods have been adjusted to reflect the effects of the 10 percent stock dividend issued in December 2011.

The decrease in 2011 earnings resulted primarily from the significant additions to the provision for loan losses which totaled $54.6 million and $64.1 million, respectively, for the three and twelve month periods ended December 31, 2011 compared to $5.8 million and $46.5 million, respectively, for the same periods in the prior year. The large provision in the fourth quarter of 2011 resulted from write-downs associated with management’s decision to transfer of $473.8 million of loans to the held-for-sale status in contemplation of bulk loan sales designed to reduce both classified loans and the Company’s overall concentration in commercial real estate loans. The Company believes that these actions are necessary to address both the continued weakness in the overall economy and changing expectations of regulatory agencies.

Total loans, excluding loans held for sale, decreased $463.9 million and $156.3 million, respectively, during the three and twelve month periods ended December 31, 2011 compared to the prior year end. These decreases resulted primarily from the transfer of $473.8 million of loans to the held-for-sale category, charge-offs and pay downs of existing loans.

Nonperforming assets decreased to $58.9 million at December 31, 2011, compared to $64.1 million at December 31, 2010. Nonperforming assets at December 31, 2011 included $27.8 million of nonperforming loans held-for-sale, which are included in a loan sale expected to close in the first quarter of 2012. The Company recognized $72.4 million of net charge-offs during the twelve month period ended December 31, 2011 of which $60.2 million related to the transfer of loans to the held-for-sale status. The Company believes that these aggressive actions appropriately address asset quality problems, concentration risk, and decisive changes within the regulatory climate.

Total deposits increased $190.9 million during the twelve month period ended December 31, 2011, compared to the prior year end. The Company continued to experience significant growth in new customers both in existing branches and new branches added during the last two years. Proceeds from deposit growth were used to fund loan growth, reduce maturing term borrowings, increase the securities portfolio or were retained in liquid investments, principally interest earning bank deposits.

The Company reduced its short-term liquidity during 2011 primarily as a result of reinvestment of available liquidity in new loans, primarily local market multi-family loans. This reinvestment has significantly offset margin compression resulting from interest rates continuing at historically low levels. The Company also reduced its term borrowings by $71.3 million during 2011. As a result, the net interest margin increased to 4.60 percent and for the three month period ended December 31, 2011, increased compared to 4.47 percent for the three month period ended September 30, 2011, and from 4.29 percent for three month period ended December 31, 2010. If interest rates continue at current levels, 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 $3.1 million or 10.9 percent to $31.3 million for the three month period ended December 31, 2011, compared to $28.2 million for the same period in the prior year. Tax equivalent basis net interest income increased by $6.4 million or 5.6 percent to $120.2 million for the twelve month period ended December 31, 2011, compared to $113.8 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $0.5 million and $2.3 million, respectively, for the three and twelve month periods ended December 31, 2011, compared to $0.7 million and $3.2 million, respectively, for the same periods in the prior year.

The Company’s non interest income was $4.1 million and $18.9 million, respectively, for the three and twelve month periods ended December 31, 2011. This represented a decrease of $0.3 million or 6.1 percent for the three month period and an increase of $5.2 million or 37.7 percent for the twelve month period, compared to $4.4 million and $13.7 million, respectively, for the same periods in the prior year. The overall 2011 increase resulted primarily from increases in investment advisory fees and service charges and a decrease in pre-tax impairment charges on securities available for sale. Advisory fee income increased primarily as a result of the effects of continued improvement in both domestic and international equity markets. Pre-tax impairment charges on securities available for sale were $0.1 million and $0.4 million, respectively, for the three and twelve month periods ended December 31, 2011 and $0.2 million and $2.6 million, respectively, for the same periods 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 income also included other losses of $0.5 million and $0.4 million, respectively, for the three and twelve month periods ended December 31, 2011 and no loss and a $2.0 million loss for the twelve month period ended December 31, 2010. These losses are related to sales and revaluations of other real estate owned and loans held for sale.

Non interest expense was $19.0 million and $80.2 million, respectively, for the three and twelve month periods ended December 31, 2011. This represented a decrease of $0.1 million or 0.9 percent and an increase of $6.0 million or 8.1 percent, respectively, compared to $19.1 million and $74.1 million, respectively, for the same periods in the prior year. The overall increase in 2011 non interest expense resulted primarily from the Company’s partial reinstatement of an incentive compensation plan previously terminated in 2009, increases in costs associated with problem loan resolution and other real estate owned, and investment in technology and personnel to accommodate growth and the expansion of services and products available to new and existing customers.

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, February 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 Year End Earnings call.”

A replay of the call will be available one hour from the close of the conference through February 15, 2012 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference #10008437; International Toll: +1-412-317-0088 - Conference #10008437.

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. (HUVL), headquartered in Yonkers, NY, is the parent company of Hudson Valley Bank (HVB). Hudson Valley Bank is a Westchester based Bank with more than $2.7 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. HVB 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, 2010 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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