SOURCE: HUDSON VALLEY HOLDING CORP.

HUDSON VALLEY HOLDING CORP. REPORTS SECOND QUARTER 2013 RESULTS INCLUDING LOAN AND SECURITIES
PORTFOLIO GROWTH

— Net income totaled $3.5 million, or $0.18 per share for the quarter ended June 30 —

— Loan originations and purchases totaled $112.3 million in the second quarter
and $137.0 million in the first half of 2013 —

— Securities portfolio grew by $46.9 million in the second quarter and
$75.4 million in the first half of 2013 —

— Non-interest expense lowered by 5.7% for the second quarter, and 6.0% for the first half of
2013, compared to the same periods last year —

YONKERS, N.Y. – July 23, 2013 – Hudson Valley Holding Corp. (NYSE: HVB) reported second quarter 2013 financial results, including solid earnings, continued expansion of core deposits, and growth in the bank’s loan and securities portfolios.

The parent company of Hudson Valley Bank earned $3.5 million, or $0.18 per diluted share, in the second quarter of 2013, compared to $3.7 million, or $0.18 per share, in the first three months of 2013 and $5.0 million, or $0.25 per share, in the second quarter of 2012.

“We made good progress on our efforts to deploy our cash into earning assets in the second quarter and first half of the year,” President and Chief Executive Officer Stephen R. Brown said. “As our results show, we’re executing our strategy for growing the breadth and diversity of loan products we can offer our niche customers in metro New York, while continuing our longstanding success in attracting and retaining the low-cost deposits that are the foundation of our franchise value.”

Liquidity Deployment

As previously announced, the bank is targeting total loan growth of about 10 percent in 2013, compared to the year prior, with total loan originations or purchases projected to exceed $200 million, in addition to expansion of its investment securities portfolio by $100 million this year.

Summary of Earning Asset Balances
(Excludes Loans-Held-For-Sale)

Hudson Valley continues to focus capital and investment on developing new middle market, small business and other business lending products to successfully grow and diversify its loan portfolio beyond its traditional strength in commercial real estate (CRE). The company remains committed to a prudent timeline for deployment of excess liquidity, without compromising credit quality, risk management or market strength.

Newly originated loans in the first half of 2013 totaled $100.7 million and included $50.6 million of commercial real estate loans, $30.2 million of business loans and $19.9 million of residential 1-4 family loans.

Loans purchased in the second quarter of 2013 totaled $36.3 million and are largely jumbo adjustable rate mortgages collateralized by single-family residences in and around metropolitan New York. Prior to their acquisition from an in-market financial institution late in the second quarter, Hudson Valley carried out a thorough on-site credit and compliance review of each of these loans, which exhibit high-quality credit risk characteristics, and carry an average yield of 3.09 percent.

Year-to-date, the bank has originated or purchased nearly $137 million in loans toward our $200 million target for 2013 – that’s more than 68 percent through June 30.

In addition, during the second quarter of 2013, the company experienced $8.6 million in payoffs and paydowns on problem credits as the company continues to actively facilitate resolutions.

The company believes its investment securities purchases continue to exhibit conservative interest rate and credit risk characteristics. Including recently acquired securities, Hudson Valley’s total portfolio yield averaged 2.53 percent in the second quarter of 2013, with an average duration of just 3.2 years.

Core Deposits

Even as the bank executed its liquidity deployment and loan growth strategy, Hudson Valley continued to drive the ongoing expansion of its core deposit franchise in the second quarter of 2013. These low-cost core deposits, which exclude time deposits greater than $100,000, grew to $2.5 billion, or 96.6 percent of total deposits, at June 30, 2013, compared to $2.4 billion and $2.3 billion at March 31, 2013 and June 30, 2012, respectively.

Contributing to core deposit growth in the second quarter were high levels of customer retention following previously announced branch consolidations that were completed in the first half of the year. At June 30, 2013, as a result of branch consolidations, Hudson Valley retained 88 percent of deposits which was higher than anticipated.

Continued improvement in the company’s historically low average cost of deposits to 20 basis points in the first and second quarters of 2013 from 23 basis points in the second quarter of 2012 continues to help to mitigate the impact of remaining excess liquidity on net interest margin.

Profitability

Hudson Valley’s net interest margin was 3.06 percent in the second quarter of 2013, compared to 3.18 percent in the first quarter of 2013 and 3.93 percent in the second quarter of 2012. As previously disclosed, the company continues to expect the pace of margin compression to moderate in 2013, as compared to the prior year. Looking ahead, Hudson Valley now expects stabilizing net interest margin as mid- and long-term interest rates begin to rise and the bank continues to make progress on deploying cash into earning assets.

Average loans totaled $1.41 billion in the second quarter of 2013 compared to $1.42 billion in the first quarter of 2013 and $1.58 billion in the second quarter of 2012. The yield on the loan portfolio declined by 8 basis points to 5.34 percent for the second quarter of 2013, compared to 5.42 percent for the first quarter of 2013 and declined by 41 basis points compared to 5.75 percent for the second quarter of 2012.

Net interest income totaled $21.1 million for the second quarter of 2013, compared to $21.2 million for the first quarter of 2013 and $25.5 million in the second quarter of 2012.

Hudson Valley’s total non-interest income was $3.9 million in the second quarter of 2013, compared to $4.5 million in the first quarter of 2013 and $4.8 million in the second quarter of 2012, primarily reflecting lower deposit service and investment management fees. Investment management fees were $2.0 million in the second quarter of 2013, compared to $1.9 million in the first three months of the year and $2.5 million in the year-ago quarter on lower balances.

Hudson Valley remained on pace to achieve its previously disclosed target of non-interest expense reductions of approximately 5.0 percent for the 12 months of 2013, compared to 2012, trimming these costs by 5.7 percent for the second quarter, and 6.0 percent for the six months ended June 30, 2013, compared to the same periods in the prior year. Non-interest expense fell to $19.8 million and $39.4 million for the three and six months ended June 30, 2013, respectively, compared to $21.0 million and $41.9 million for the three and six months ended June 30, 2012, respectively.

As of June 30, the bank completed all steps believed to be necessary for full implementation of expense reductions that were announced earlier this year in order to achieve Hudson Valley’s target for non-interest expense in 2013 and improve operating leverage and efficiency in the quarters ahead. However, we can provide no assurances that other factors may arise which will prevent us from reaching our target.

The bank’s efficiency ratio, which since the first half of 2012 has reflected the impact of excess liquidity on net interest income, was 78.1 percent in the second quarter of 2013, compared to 75.0 percent in the first quarter of 2013 and 68.1 percent in the second quarter of 2012.

Rising Rate Environment

Hudson Valley’s second quarter originations and asset purchases have further enhanced its asset sensitive balance sheet. The company believes that this positions it to profit from a rising interest rate environment. For example, the company estimates that net interest income from June 30, 2013 would increase 7.1 percent with a gradual 200 basis point increase in interest rates, given the bank’s balance sheet at the end of the second quarter and considering the continuation of the current shape and steepness of the yield curve.

Credit Quality

Overall portfolio trends continue to reflect an uneven but generally 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 $30.3 million at June 30, 2013, compared to $32.1 million at March 31, 2013 and $39.6 million at June 30, 2012. NPAs totaled 1.01 percent of total assets at June 30, 2013, compared to 1.14 percent at March 31, 2013 and 1.40 percent at June 30, 2012.

Reflecting generally improving credit trends, net charge-offs were $0.5 million for the second quarter of 2013, compared to $1.3 million and $5.0 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 second quarter of 2013, compared to 0.36 percent in the first quarter of 2013 and 1.27 percent in the second quarter of 2012.

The bank’s provision for loan losses in the second quarter of 2013 was $0.3 million, compared to $0.8 million in the linked quarter and $1.9 million in the year-ago quarter. The decline in the provision reflected meaningful recoveries during the second quarter from prior charge-offs.

The bank’s allowance for loan losses was $25.9 million at June 30, 2013, compared to $26.1 million at March 31, 2013 and $28.7 million at June 30, 2012. The allowance measured 1.75 percent, 1.84 percent and 1.85 percent of total loans at each of those dates, respectively. At June 30, 2013, classified assets represented 31.0 percent of risk-based capital, down from 36.2 percent at March 31, 2013.

Quarterly Cash Dividend

Hudson Valley’s board of directors declared a cash dividend of $0.06 per share, payable on August 16, 2013 to all common stockholders of record as of the close of business on August 5, 2013.

Capital Strength

At June 30, 2013, Hudson Valley Holding Corp. posted a total risk-based capital ratio of 17.7 percent, a Tier 1 risk-based capital ratio of 16.5 percent, and a Tier 1 leverage ratio of 9.3 percent. Its Hudson Valley Bank subsidiary at June 30, 2013 posted a total risk-based capital ratio of 17.4 percent, a Tier 1 risk-based capital ratio of 16.2 percent, and a Tier 1 leverage ratio of 9.1 percent.

Hudson Valley believes that it already meets the Basel III risk-based capital standards for financial institutions of its size when such standards are fully phased in. The Basel III standards were adopted by U.S. regulators earlier this month and go into effect on January 1, 2015.

Non-GAAP Financial Disclosures and Reconciliation to GAAP

In addition to disclosing Hudson Valley Holding Corp’s results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), management routinely supplements this disclosure 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, July 24, 2013 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 “Hudson Valley — Second Quarter Earnings Call.”

A replay of the call will be available one hour from the close of the conference through August 9, 2013 at 9:00 AM ET:

Domestic Toll Free: 1-877-344-7529 — Conference # 10030640; International Toll: +1-412-317-0088- Conference # 10030640.
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 June 30, 2013. 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.

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