10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2008

Commission File No. 030525

HUDSON VALLEY HOLDING CORP.

(Exact name of registrant as specified in its charter)

NEW YORK	13-3148745
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

21 Scarsdale Road, Yonkers, NY 10707

(Address of principal executive office with zip code)

914-961-6100

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.  Yes  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
		(do not check if a Smaller       Reporting Company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act.)  Yes  oNo  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Outstanding at
Class	May 1, 2008
Common stock, par value $0.20 per share	9,915,071

FORM 10-Q

TABLE OF CONTENTS

	Page
	No.
PART I — FINANCIAL INFORMATION
ITEM 1     CONDENSED FINANCIAL STATEMENTS		2
ITEM 2     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
ITEM 3     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		30
ITEM 4     CONTROLS AND PROCEDURES		30
PART II — OTHER INFORMATION
ITEM 1A   RISK FACTORS		31
ITEM 2     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		31
ITEM 6     EXHIBITS		31
SIGNATURES		32
EX-3.2: BY-LAWS OF HUDSON VALLEY HOLDING CORP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

1

PART 1 — FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Dollars in thousands, except per share amounts

	Three Months Ended
	March 31,
	2008			2007
Interest Income:
Loans, including fees	$	25,302		$	25,671
Securities:
Taxable		6,882			8,849
Exempt from Federal income taxes		2,244			2,291
Federal funds sold		627			200
Deposits in banks		46			45
Total interest income		35,101			37,056
Interest Expense:
Deposits		6,418			6,069
Securities sold under repurchase agreements and other short-term borrowings		480			3,059
Other borrowings		2,328			2,792
Total interest expense		9,226			11,920
Net Interest Income		25,875			25,136
Provision for loan losses		331			555
Net interest income after provision for loan losses		25,544			24,581
Non Interest Income:
Service charges		1,526			1,294
Investment advisory fees		2,725			1,972
Gain (loss) on securities available for sale, net		(485	)		19
Other income		521			295
Total non interest income		4,287			3,580
Non Interest Expense:
Salaries and employee benefits		9,940			8,895
Occupancy		1,759			1,632
Professional services		1,134			1,180
Equipment		1,007			727
Business development		493			502
FDIC assessment		89			42
Other operating expenses		2,564			2,437
Total non interest expense		16,986			15,415
Income Before Income Taxes		12,845			12,746
Income Taxes		4,398			4,445
Net Income	$	8,447		$	8,301
Basic Earnings Per Common Share	$	0.86		$	0.84
Diluted Earnings Per Common Share		0.82			0.82

See notes to condensed consolidated financial statements

2

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Dollars in thousands

	Three Months Ended
	March 31,
	2008			2007
Net Income	$	8,447		$	8,301
Other comprehensive income (loss), net of tax:
Unrealized holding gain on securities available for sale arising during the period		8,491			2,583
Income tax effect		(3,209	)		(1,045	)
		5,282			1,538
Reclassification adjustment for net loss (gain) realized on securities available for sale		485			(19	)
Income tax effect		(196	)		8
		289			(11	)
Unrealized holding gain on securities, net		5,571			1,527
Accrued benefit liability adjustment		174			(202	)
Income tax effect		(70	)		81
		104			(121	)
Other comprehensive gain		5,675			1,406
Comprehensive Income	$	14,122		$	9,707

See notes to condensed consolidated financial statements

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HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Dollars in thousands, except per share and share amounts

	March 31,			December 31,
	2008			2007
ASSETS
Cash and due from banks	$	51,990		$	51,067
Federal funds sold		66,108			99,054
Securities available for sale, at estimated fair value (amortized cost of $710,357 in 2008 and $749,354 in 2007)		716,472			746,493
Securities held to maturity, at amortized cost (estimated fair value of $33,193 in 2008 and $33,769 in 2007)		32,667			33,758
Federal Home Loan Bank of New York (FHLB) Stock		13,027			11,677
Loans (net of allowance for loan losses of $16,227 in 2008 and $17,367 in 2007)		1,361,768			1,289,641
Accrued interest and other receivables		15,921			15,252
Premises and equipment, net		28,578			27,356
Other real estate owned		1,900			—
Deferred income taxes, net		6,700			10,284
Bank owned life insurance		22,082			21,497
Goodwill		15,377			15,377
Other intangible assets		4,714			4,919
Other assets		4,367			4,373
TOTAL ASSETS	$	2,341,472		$	2,330,748
LIABILITIES
Deposits:
Non interest-bearing	$	625,422		$	568,418
Interest-bearing		1,154,163			1,244,124
Total deposits		1,779,585			1,812,542
Securities sold under repurchase agreements and other short-term borrowings		112,994			76,097
Other borrowings		210,837			210,844
Accrued interest and other liabilities		25,508			27,578
TOTAL LIABILITIES		2,129,087			2,127,061
STOCKHOLDERS’ EQUITY
Common stock, $0.20 par value; authorized 25,000,000 shares; outstanding 9,860,288 and 9,841,890 shares in 2008 and 2007, respectively		2,103			2,091
Additional paid-in capital		228,892			227,173
Retained earnings		5,876			2,369
Accumulated other comprehensive income (loss), net		1,309			(4,366	)
Treasury stock, at cost; 652,824 and 611,136 shares in 2008 and 2007, respectively		(25,795	)		(23,580	)
Total stockholders’ equity		212,385			203,687
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,341,472		$	2,330,748

See notes to condensed consolidated financial statements

4

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
Three Months Ended March 31, 2008 and 2007
Dollars in thousands, except share amounts

														Accumulated
	Number of								Additional					Other
	Shares			Common		Treasury			Paid-in		Retained			Comprehensive
	Outstanding			Stock		Stock			Capital		Earnings			Income (Loss)			Total
Balance at January 1, 2008		9,841,890		$	2,091	$	(23,580	)	$	227,173	$	2,369		$	(4,366	)	$	203,687
Net income												8,447						8,447
Grants and exercises of stock options, net of tax		60,086			12					1,686								1,698
Purchase of treasury stock		(44,265	)				(2,316	)										(2,316	)
Sale of treasury stock		2,577					101			33								134
Cash dividends												(4,940	)					(4,940	)
Accrued benefit liability adjustment, net of tax															104			104
Net unrealized gain on securities available for sale															5,571			5,571
Balance at March 31, 2008		9,860,288		$	2,103	$	(25,795	)	$	228,892	$	5,876		$	1,309		$	212,385

														Accumulated
	Number of								Additional					Other
	Shares			Common		Treasury			Paid-in		Retained			Comprehensive
	Outstanding			Stock		Stock			Capital		Earnings			Income (Loss)			Total
Balance at January 1, 2007		8,945,124		$	1,880	$	(14,804	)	$	202,963	$	2,437		$	(6,910	)	$	185,566
Net income												8,301						8,301
Grants and exercises of stock options, net of tax		51,121			10					1,436								1,446
Purchase of treasury stock		(40,014	)				(1,950	)										(1,950	)
Sale of treasury stock		1,058					35			17								52
Cash dividend												(4,397	)					(4,397	)
Accrued benefit liability adjustment, net of tax															(121	)		(121	)
Net unrealized gain on securities available for sale															1,527			1,527
Balance at March 31, 2007		8,957,289		$	1,890	$	(16,719	)	$	204,416	$	6,341		$	(5,504	)	$	190,424

See notes to condensed consolidated financial statements

5

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Dollars in thousands

	Three Months Ended
	March 31,
	2008			2007
				(as restated)
Operating Activities:
Net income	$	8,447		$	8,301
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		331			555
Depreciation and amortization		786			658
Realized loss (gain) on security transactions, net		485			(19	)
Amortization of premiums on securities, net		66			124
Increase in cash value of bank owned life insurance		(195	)		(75	)
Amortization of other intangible assets		205			205
Stock option expense and related tax benefits		336			284
Deferred taxes (benefit)		109			(317	)
Increase (decrease) in deferred loan fees, net		154			(38	)
(Increase) decrease in accrued interest and other receivables		(469	)		312
Decrease (increase) in other assets		6			(559	)
Excess tax benefits from share based payment arrangements		(118	)		(209	)
Decrease in accrued interest and other liabilities		(2,070	)		(1,918	)
Decrease (increase) in accrued benefit liability adjustment		174			(201	)
Net cash provided by operating activities		8,246			7,103
Investing Activities:
Decrease (increase) in short term investments		32,946			(110,884	)
Increase in FHLB stock		(1,350	)		(1,620	)
Proceeds from maturities and paydowns of securities available for sale		77,429			35,024
Proceeds from maturities and paydowns of securities held to maturity		1,099			1,679
Purchases of securities available for sale		(38,991	)		(15,299	)
Net increase in loans		(74,512	)		(2,979	)
Net purchases of premises and equipment		(2,008	)		(1,294	)
Premiums paid on bank owned life insurance		(390	)		(295	)
Net cash used in investing activities		(5,777	)		(95,668	)
Financing Activities:
Net (decrease) increase in deposits		(32,794	)		61,962
Net increase in securities sold under repurchase agreements and other short-term borrowings		36,897			29,868
Repayment of other borrowings		(7	)		(6	)
Proceeds from issuance of common stock		1,362			1,162
Excess tax benefits from share based payment arrangements		118			209
Proceeds from sale of treasury stock		134			52
Acquisition of treasury stock		(2,316	)		(1,950	)
Cash dividends paid		(4,940	)		(4,397	)
Net cash (used) in provided by financing activities		(1,546	)		86,900
Increase (decrease) in Cash and Due from Banks		923			(1,665	)
Cash and due from banks, beginning of period		51,067			61,805
Cash and due from banks, end of period	$	51,990		$	60,140
Supplemental Disclosures:
Interest paid	$	9,624		$	12,413
Income tax payments		4,945			5,120
Increase in other real estate owned		1,900			—

See notes to condensed consolidated financial statements

6

HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  Description of Operations

Hudson Valley Holding Corp. (the “Company”) is a New York corporation founded in 1982. The Company is registered as a bank holding company under the Bank Holding Company Act of 1956.

The Company provides financial services through its wholly-owned subsidiaries, Hudson Valley Bank, N.A. (“HVB”), a national banking association headquartered in Westchester County, New York and New York National Bank (“NYNB”), a national banking association headquartered in Bronx County, New York (together with HVB, “the Banks”). HVB is the successor to Hudson Valley Bank, a New York State bank originally established in 1982. NYNB is a national banking association which the Company acquired effective January 1, 2006. For the period from January 1, 2006 to November 19, 2007 NYNB was operated as a New York State bank. HVB has 17 branch offices in Westchester County, New York, 4 in Manhattan, New York, 2 in Bronx County, New York, 1 in Rockland County, New York, 1 in Queens County, New York and 1 in Fairfield County, Connecticut. . NYNB has 3 branch offices in Manhattan, New York and 2 in Bronx County, New York. In the fourth quarter of 2007, HVB opened a full service branch at 875 Mamaroneck Avenue, Mamaroneck, New York and April 2008, HVB opened a full service branch at 112 West 34th Street, Manhattan, New York. HVB has also received regulatory approval to relocate its Queens, New York branch to 162-05 Crocheron Avenue, Flushing, New York. HVB has applied to the Office of the Comptroller of the Currency (“OCC”) to open full services branches at 500 West Putnam Avenue, Greenwich, Connecticut; 2000 Post Road, Fairfield, Connecticut; 420 Post Road West, Westport, Connecticut and 16 Court Street, Brooklyn, New York

The Company provides investment management services through a wholly-owned subsidiary of HVB, A.R. Schmeidler & Co., Inc. (“ARS”), a money management firm, thereby generating fee income. ARS has offices at 500 Fifth Avenue in Manhattan, New York.

We derive substantially all of our revenue and income from providing banking and related services to businesses, professionals, municipalities, not-for-profit organizations and individuals within our market area, primarily Westchester County and Rockland County, New York, portions of New York City and Fairfield County, Connecticut.

Our principal executive offices are located at 21 Scarsdale Road, Yonkers, New York 10707.

Our principal customers are businesses, professionals, municipalities, not-for-profit organizations and individuals. Our strategy is to operate community-oriented banking institutions dedicated to providing personalized service to customers and focusing on products and services for selected segments of the market. We believe that our ability to attract and retain customers is due primarily to our focused approach to our markets, our personalized and professional services, our product offerings, our experienced staff, our knowledge of our local markets and our ability to provide responsive solutions to customer needs. We provide these products and services to a diverse range of customers and do not rely on a single large depositor for a significant percentage of deposits. We anticipate that we will continue to expand in our current market and surrounding area by acquiring other banks and related businesses, adding staff and continuing to open new branch offices and loan production offices.

2.  Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (comprising only normal recurring adjustments) necessary to present fairly the financial position of the Company at March 31, 2008 and the results of its operations, comprehensive income, and cash flows and changes in stockholders’ equity for the three month periods ended March 31, 2008 and 2007. The results of operations for the three month period ended March 31, 2008 are not necessarily indicative of the results of operations to be expected for the remainder of the year.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and predominant practices used within the banking industry. Certain information and note disclosures normally included in annual financial statements have been omitted.

7

In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and statements of income for the periods reported. Actual results could differ significantly from those estimates.

An estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses. In connection with the determination of the allowance for loan losses, management utilizes the work of professional appraisers for significant properties.

Intercompany items and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period’s presentation.

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2007 and notes thereto.

Allowance for Loan Losses — The Company maintains an allowance for loan losses to absorb probable losses incurred in the loan portfolio based on ongoing quarterly assessments of the estimated losses. The methodology for assessing the appropriateness of the allowance consists of several key components, which include a specific component for identified problem loans, a formula component, and an unallocated component. The specific component incorporates the results of measuring impaired loans as provided in Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan,” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures.” These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. A loan is not deemed to be impaired if there is a short delay in receipt of payment or if, during a longer period of delay, the Company expects to collect all amounts due including interest accrued at the contractual rate during the period of delay. Measurement of impairment can be based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. If the fair value of the impaired loan is less than the related recorded amount, a specific valuation allowance is established within the allowance for loan losses or a writedown is charged against the allowance for loan losses if the impairment is considered to be permanent. Measurement of impairment does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment such as the Company’s portfolios of home equity loans, real estate mortgages, consumer installment and other loans.

The formula component is calculated by applying loss factors to outstanding loans by type. Loss factors are based on historical loss experience. New loan types, for which there has been no historical loss experience, as explained further below, is one of the considerations in determining the appropriateness of the unallocated component.

The appropriateness of the unallocated component is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting the key lending areas of the Company and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan portfolio. Senior management reviews these conditions quarterly. Management’s evaluation of the loss related to these conditions is reflected in the unallocated component. Due to the inherent uncertainty in the process, management does not attempt to quantify separate amounts for each of the conditions considered in estimating the unallocated component of the allowance. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific credits or portfolio segments.

Actual losses can vary significantly from the estimated amounts. The Company’s methodology permits adjustments to the allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the loan portfolio as of the evaluation date have changed.

Management believes the allowance for loan losses is the best estimate of probable losses which have been incurred as of March 31, 2008. There is no assurance that the Company will not be required to make future

8

adjustments to the allowance in response to changing economic conditions, particularly in the Company’s service area, since the majority of the Company’s loans are collateralized by real estate. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments at the time of their examinations.

Income Recognition on Loans — Interest on loans is accrued monthly. Net loan origination and commitment fees are deferred and recognized as an adjustment of yield over the lives of the related loans. Loans, including impaired loans, are placed on a non-accrual status when management believes that interest or principal on such loans may not be collected in the normal course of business. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, in accordance with management’s judgment as to the collectability of principal. Loans can be returned to accruing status when they become current as to principal and interest, demonstrate a period of performance under the contractual terms, and when, in management’s opinion, they are estimated to be fully collectible.

Securities — Securities are classified as either available for sale, representing securities the Company may sell in the ordinary course of business, or as held to maturity, representing securities the Company has the ability and positive intent to hold until maturity. Securities available for sale are reported at fair value with unrealized gains and losses (net of tax) excluded from operations and reported in other comprehensive income. Securities held to maturity are stated at amortized cost. Interest income includes amortization of purchase premium and accretion of purchase discount. The amortization of premiums and accretion of discounts is determined by using the level yield method. Securities are not acquired for purposes of engaging in trading activities. Realized gains and losses from sales of securities are determined using the specific identification method. Declines in the fair value of securities below their cost that are other than temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: the length of time and extent that fair value has been less than cost, the financial condition and near term prospects of the issuer, and the Company’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

Goodwill and Other Intangible Assets — In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and identified intangible assets with indefinite useful lives are not subject to amortization. Identified intangible assets that have finite useful lives are amortized over those lives by a method which reflects the pattern in which the economic benefits of the intangible asset are used up. All goodwill and identified intangible assets are subject to impairment testing on an annual basis, or more often if events or circumstances indicate that impairment may exist. If such testing indicates impairment in the values and/or remaining amortization periods of the intangible assets, adjustments are made to reflect such impairment. The Company’s impairment evaluations as of December 31, 2007 did not indicate impairment of its goodwill or identified intangible assets. The Company is not aware of any events during the three month period ended March 31, 2008 which would have required additional impairment evaluations.

Income Taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the change is enacted.

Stock-Based Compensation — The Company has stock option plans that provide for the granting of options to directors, officers, eligible employees, and certain advisors, based upon eligibility as determined by the Compensation Committee. Options are granted for the purchase of shares of the Company’s common stock at an exercise price not less than the market value of the stock on the date of grant. Stock options under the Company’s plans vest over various periods. Vesting periods range from immediate to five years from date of grant. Options expire ten years from the date of grant. In accordance with the provisions of SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), compensation cost relating to share-based payment transactions is recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued. Non-employee stock options are expensed as of the date of grant. The fair value (present value of the estimated future benefit to the

9

option holder) of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. See Note 7 herein for additional discussion.

3.  Goodwill and Other Intangible Assets

In the fourth quarter 2004, the Company acquired A.R. Schmeidler & Co., Inc. in a transaction accounted for as an asset purchase for tax purposes. In connection with this acquisition, the Company recorded customer relationship intangible assets of $2,470 and non-compete provision intangible assets of $516, which have amortization periods of 13 years and 7 years, respectively. Deferred tax benefits have been provided for the tax effect of temporary differences in the amortization periods of these identified intangible assets for book and tax purposes.

Also, at the time of this acquisition, the Company recorded $4,492 of goodwill. In accordance with the terms of the acquisition agreement, the Company may make additional performance-based payments over the five years subsequent to the acquisition. These additional payments would be accounted for as additional purchase price and, as a result, would increase goodwill related to the acquisition. In December 2005, November 2006 and November 2007, the Company made the first three of these additional payments in the amounts of $1,572, $3,016 and $4,918, respectively. The deferred income tax effects related to temporary differences between the book and tax basis of identified intangible assets and goodwill deductible for tax purposes are included in net deferred tax assets in the Company’s Consolidated Balance Sheets.

On January 1, 2006, the Company acquired NYNB in a tax-free stock purchase transaction. In connection with this acquisition the Company recorded a core deposit premium intangible asset of $3,907 and a related deferred tax liability of $1,805. The core deposit premium has an estimated amortization period of 7 years. Also in connection with this acquisition, the Company recorded $1,528 of goodwill.

The following table sets forth the gross carrying amount and accumulated amortization for each of the Company’s intangible assets subject to amortization as of March 31, 2008 and December 31, 2007.

	(000’s)
	March 31, 2008				December 31, 2007
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Deposit Premium	$	3,907	$	1,256	$	3,907	$	1,116
Customer Relationships		2,470		665		2,470		618
Employment Related		516		258		516		240
Total	$	6,893	$	2,179	$	6,893	$	1,974

Intangible assets amortization expense was $206 for both three month periods ended March 31, 2008 and 2007. The annual intangible assets amortization expense is estimated to be approximately $822 in each of the three years subsequent to December 31, 2007.

Goodwill was $15,377 at both March 31, 2008 and December 31, 2007.

4.  Income Taxes

On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company and its subsidiaries file various income tax returns in the U.S. federal jurisdiction and the New York State and New York City jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years 2004 through 2007. The Company is currently open to audit by New York State under the statute of limitations for the years 2006 and 2007.

The Company has performed an evaluation of its tax positions in accordance with the provisions of FIN 48 and has concluded that as of both January 1, 2007 and March 31, 2008, there were no significant uncertain tax positions requiring additional recognition in its financial statements and does not believe that there will be any material changes in its unrecognized tax positions over the next 12 months.

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The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no accruals for interest or penalties during the three months ended March 31, 2008.

5.  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for each of the periods indicated:

	Three Months Ended
	March 31,
	2008		2007
	(000’s except share data)
Numerator:
Net income available to common shareholders for basic and diluted earnings per share	$	8,447	$	8,301
Denominator:
Denominator for basic earnings per common share — weighted average shares		9,863,124		9,849,150
Effect of dilutive securities:
Stock options		392,494		320,018
Denominator for diluted earnings per common share — adjusted weighted average shares		10,255,618		10,169,168
Basic earnings per common share	$	0.86	$	0.84
Diluted earnings per common share	$	0.82	$	0.82
Dividends declared per share	$	0.50	$	0.45

In December 2007, the Company declared a 10% stock dividend. Share and per share amounts for 2007 have been retroactively restated to reflect the issuance of the additional shares.

6.  Benefit Plans

In addition to defined contribution pension and savings plans which cover substantially all employees, the Company provides additional retirement benefits to certain officers and directors pursuant to unfunded supplemental defined benefit plans. The following table summarizes the components of the net periodic pension cost of the defined benefit plans (dollars in thousands).

	Three Months
	Ended
	March 31,
	2008		2007
Service cost	$	102	$	94
Interest cost		144		140
Amortization of transition obligation		24		24
Amortization of prior service cost		5		34
Amortization of net loss		148		128
Net periodic pension cost	$	422	$	420

The Company makes contributions to the unfunded defined benefit plans only as benefit payments become due. The Company disclosed in its 2007 Annual Report on Form 10-K that it expected to contribute $611 to the unfunded defined benefit plans during 2008. For the three month period ended March 31, 2008, the Company contributed $153 to these plans.

7.   Stock-Based Compensation

The Company has stock option plans that provide for the granting of options to directors, officers, eligible employees, and certain advisors, based upon eligibility as determined by the Compensation Committee. Options are granted for the purchase of shares of the Company’s common stock at an exercise price not less than the market value of the stock on the date of grant. Stock options under the Company’s plans vest over various periods. Vesting

11

periods range from immediate to five years from date of grant. Options expire ten years from the date of grant. In accordance with the provisions of SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), compensation cost relating to share-based payment transactions is recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued. Stock options are expensed over their respective vesting periods.

The following table summarizes stock option activity for the three month period ended March 31, 2008:

								Weighted
				Weighted		Aggregate		Average
				Average		Intrinsic		Remaining
				Exercise		Value(1)		Contractual
	Shares			Price		($000’s)		Term(Yrs.)
Outstanding at December 31, 2007		1,026,590		$	27.88
Granted		1,000			52.00
Exercised		(60,086	)		38.36
Forfeited or Expired		(7,297	)		22.66
Outstanding at March 31, 2008		960,207			28.16	$	22,894		5.9
Exercisable at March 31, 2008		720,337			24.99	$	19,459		5.2
Available for future grant		874,499

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2008. This amount changes based on changes in the market value of the Company’s stock.

The fair value (present value of the estimated future benefit to the option holder) of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The following table illustrates the assumptions used in the valuation model for activity during the three month periods ended March 31, 2008 and 2007.

	Three months
	ended
	March 31,
	2008			2007
Weighted average assumptions:
Dividend yield		3.6	%		4.4	%
Expected volatility		30.9	%		9.8	%
Risk-free interest rate		3.8	%		4.6	%
Expected lives (years)		7.0			7.0

The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience.

The weighted average fair values of options granted during the three month periods ended March 31, 2008 and 2007 were $11.61 per share and $3.00 per share, respectively. Net compensation expense of $218 and $76 related to the Company’s stock option plans was included in net income for the three month periods ended March 31, 2008 and 2007, respectively. The total tax benefit related thereto was $3 and $20 for the three month periods ended March 31, 2008 and 2007, respectively. Unrecognized compensation expense related to non-vested share-based compensation granted under the Company’s stock option plans totaled $1,054 at March 31, 2008. This expense is expected to be recognized over a weighted-average period of 2.4 years.

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The following table presents a summary status of the Company’s non-vested options as of March 31, 2008, and changes during the three month period ended March 31, 2008:

				Weighted-
	Number			Average
	of			Grant Date
	Shares			Fair Value
Non-vested at December 31, 2007		316,536			39.53
Granted		1,000			64.00
Vested		(70,369	)		29.92
Forfeited or Expired		(7,297	)		43.03
Non-vested at March 31, 2008		239,870			42.34

8.   Fair Value

Effective January 1, 2008, the Company adopted Statement of FAS No. 157 “Fair Value Measurements”, (“SFAS No. 157”), which requires additional disclosures about the Company’s assets and liabilities that are measured at fair value. As discussed in Note 9 below, SFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1:  Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing and asset or liability.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. While management believes the Company’s valuation methodologies are appropriate and consistent with other financial institutions, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges, which is a Level 1 input, or matrix pricing, which is a mathematical technique widely used to in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities, which is a Level 2 input.

Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.

Other real estate owned are reported at fair value less anticipated costs to sell. Fair value is based on third party or internally developed appraisals, considering the assumptions in the valuation and are considered Level 2 or Level 3 inputs.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at March 31, 2008 Using
	(000’s)
	Quoted Prices in		Significant		Significant
	Active Markets		Other		Unobservable		Total
	for Identical		Observable Inputs		Inputs		March 31,
	Assets (Level 1)		(Level 2)		(Level 3)		2008
Assets:
Available for sale securities		—	$	728,867	$	20,272	$	749,139
Other real estate owned		—		—		1,900		1,900
Impaired loans		—		—		11,635		11,635

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9.  Recent Accounting Pronouncements

Fair Value Measurements — In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, provides a framework for measuring the fair value of assets and liabilities and requires additional disclosure about fair value measurement. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued Staff Position (“FSP”) 157-2, “Effective Date of FASB Statement No. 157.” This FSP delays the effective date of FAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of SFAS No. 157 by the Company on January 1, 2008 did not have any impact on its consolidated results of operations and financial condition.

Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans‘(“SFAS No. 158”). This statement, which amends FASB Statement Nos. 87, 88, 106 and 132R, requires employers to recognize the overfunded and underfunded status of a defined benefit postretirement plan as an asset or a liability on its balance sheet and to recognize changes in that funded status in the year in which the changes occur through other comprehensive income, net of tax. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. The effective date of the requirement to initially recognize the funded status of the plan and to provide the required disclosures was December 31, 2006. The requirement to measure plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008.

Accounting for Purchases of Life Insurance — In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5, Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases of Life Insurance) (“EITF No. 06-5”.) EITF No. 06-5 requires that a policyholder consider contractual terms of a life insurance policy in determining the amount that could be realized under the insurance contract. It also requires that if the contract provides for a greater surrender value if all individual policies in a group are surrendered at the same time, that the surrender value be determined based on the assumption that policies will be surrendered on an individual basis. In addition, EITF No. 06-5 requires disclosure when there are contractual restrictions on the Company’s ability to surrender a policy. The adoption of EITF 06-5 by the Company on January 1, 2007 did not have any impact on its consolidated results of operations and financial condition.

The Fair Value Option for Financial Assets and Financial Liabilities — In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 provides entities with an option to report certain financial assets and liabilities at fair value, with changes in fair value reported in earnings, and requires additional disclosures related to an entity’s election to use fair value reporting. It also requires entities to display the fair value of those assets and liabilities for which the entity has elected to use fair value on the face of the balance sheet. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008, the effective date of the standard.

Other — Certain 2007 amounts have been reclassified to conform to the 2008 presentation.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section presents discussion and analysis of the Company’s consolidated financial condition at March 31, 2008 and December 31, 2007, and consolidated results of operations for the three month periods ended March 31, 2008 and March 31, 2007. The Company is consolidated with its wholly-owned subsidiaries, Hudson Valley Bank, NA and its subsidiaries, Grassy Sprain Real Estate Holdings, Inc., Sprain Brook Realty Corp., HVB Leasing Corp., HVB Employment Corp., HVB Realty Corp. and A.R. Schmeidler & Co., Inc. (collectively “HVB”), and New York National Bank and its subsidiary 369 East 149th Street Corp. (collectively “NYNB”). This discussion and analysis should be read in conjunction with the financial statements and supplementary financial information contained in the Company’s 2007 Annual Report on Form 10-K.

Overview of Management’s Discussion and Analysis

This overview is intended to highlight selected information included in this Quarterly Report on Form 10-Q. It does not contain sufficient information for a complete understanding of the Company’s financial condition and operating results and, therefore, should be read in conjunction with this entire Quarterly Report on Form 10-Q and the Company’s 2007 Annual Report on Form 10-K.

The Company derives substantially all of its revenue from providing banking and related services to businesses, professionals, municipalities, not-for profit organizations and individuals within its market area, primarily Westchester County and Rockland County, New York, portions of New York City and Fairfield County, Connecticut. The Company’s assets consist primarily of loans and investment securities, which are funded by deposits, borrowings and capital. The primary source of revenue is net interest income, the difference between interest income on loans and investments, and interest expense on deposits and borrowed funds. The Company’s basic strategy is to grow net interest income and non interest income by the retention of its existing customer base and the expansion of its core businesses and branch offices within its current market and surrounding areas. The Company’s primary market risk exposure is interest rate risk. Interest rate risk is the exposure of net interest income to changes in interest rates.

Net income for the three month period ended March 31, 2008 was $8.4 million or $0.82 per diluted share, a slight increase of $0.1 million or 1.2 percent compared to $8.3 million or $0.82 per diluted share for the three month period ended March 31, 2007. Excluding the effects of a $97 million temporary deposit in a money market account from late December 2007 through early February 2008, the Company achieved growth in both its core businesses of loans and deposits during the three month period ended March 31, 2008, primarily as a result of the addition of new customers and additional loans and deposits from existing customers, partially offset by seasonal declines in certain deposits, and other declines related to a slowdown in the overall economy in general and, in particular, in activity related to the commercial real estate industry, a significant source of business for the Company. In addition, the Company continued to increase its fee based revenue through its subsidiary A.R. Schmeidler & Co., Inc., a registered investment advisory firm located in Manhattan, New York, which at March 31, 2008 had approximately $1.4 billion in assets under management as compared to approximately $1.1 billion at March 31, 2007.

Despite an increase in non-performing assets, overall asset quality continued to be good as a result of the Company’s conservative underwriting and investment standards. Recently, there has been considerable national media attention regarding increases in delinquencies and defaults primarily resulting from “sub-prime” residential mortgage lending. The Company does not generally engage in sub-prime lending, except in occasional circumstances where additional underwriting factors are present which justify extending the loan. The Company does not offer loans with low “teaser” rates or high loan-to-value ratios to sub-prime borrowers. In addition, the Company has not invested in mortgage-backed securities secured by sub-prime loans.

Short-term interest rates, which rose gradually in 2005 and into the second quarter of 2006, remained virtually unchanged from September, 2006 through the first half of September 2007. The immediate effect of this rise in interest rates was positive to the Company, due to more assets than liabilities repricing in the near term. The rise in short-term rates, however, was not accompanied with similar increases in longer term interest rates resulting in a flattening and eventual inversion of the yield curve. The persistence of this condition throughout the second half of 2006 and the first three quarters of 2007 had put downward pressure on the Company’s net interest income as liabilities continued to reprice at higher rates and maturing longer term assets repriced at similar or only slightly

15

higher rates. The 300 basis point reduction of short-term interest rates from September 2007 through March 2008 has resulted in some improvement in the yield curve, however, despite the improvement in the shape of the yield curve, the Company expects continued downward pressure on net interest income for the near future.

As a result of the effects of interest rates and growth in the Company’s core businesses of loans and deposits, tax equivalent basis net interest income increased by $0.7 million or 2.7 percent to $27.1 million for the three month period ended March 31, 2008, compared to $26.4 million for the same period in the prior year. The effect of the adjustment to a tax equivalent basis was $1.2 million for both of the three month periods ended March 31, 2008 and 2007.

Non interest income, excluding net gains and losses on securities transactions, was $4.8 million for the three month period ended March 31, 2008, an increase of $1.2 million or 33.3 percent compared to $3.6 million for the same period in the prior year. The increase was primarily due to growth in the investment advisory fee income of A.R. Schmeidler & Co., Inc., and also reflected increases in deposit activity and other service fees and other income. The net realized loss on securities for the three months ended March 31, 2008 included a $0.5 million pretax adjustment for other than temporary impairment related to the Company’s investment in a mutual fund. The investment, which had a previous pretax other than temporary impairment adjustment of $0.6 million in December 2007, was sold in April 2008 due to its inability to meet the Company’s performance expectations.

Non interest expense was $17.0 million for the three month period ended March 31, 2008, an increase of $1.6 million or 10.4 percent compared to $15.4 million for the same period in the prior year. The increase reflects the Company’s continued investment in its branch offices, technology and personnel to accommodate growth in loans and deposits, the expansion of services and products available to new and existing customers and the upgrading of certain internal processes.

The Company uses a simulation analysis to estimate the effect that specific movements in interest rates would have on net interest income. Excluding the effects of planned growth and anticipated new business, the simulation analysis at March 31, 2008 shows the Company’s net interest income increasing moderately if interest rates rise and decreasing moderately if interest rates fall.

The Company has established specific policies and operating procedures governing its liquidity levels to address future liquidity needs, including contingent sources of liquidity. The Company believes that its present liquidity and borrowing capacity are sufficient for its current business needs.

The Company, HVB and NYNB are subject to various regulatory capital guidelines. To be considered “well capitalized,” an institution must generally have a leverage ratio of at least 5 percent, a Tier 1 ratio of 6 percent and a Total capital ratio of 10 percent. The Company, HVB and NYNB exceeded all current regulatory capital requirements to be considered in the “well-capitalized” category at March 31, 2008. Management plans to conduct the affairs of the Company and its subsidiary banks so as to maintain a strong capital position in the future.

Critical Accounting Policies

Allowance for Loan Losses — The Company maintains an allowance for loan losses to absorb losses incurred in the loan portfolio based on ongoing quarterly assessments of the estimated losses. The Company’s methodology for assessing the appropriateness of the allowance consists of several key components, which include a specific component for identified problem loans, a formula component, and an unallocated component. The specific component incorporates the results of measuring impaired loans as provided in SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures.” These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. A loan is not deemed to be impaired if there is a short delay in receipt of payment or if, during a longer period of delay, the Company expects to collect all amounts due including interest accrued at the contractual rate during the period of delay. Measurement of impairment can be based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant

16

change. If the fair value of the impaired loan is less than the related recorded amount, a specific valuation allowance is established within the allowance for loan losses or a writedown is charged against the allowance for loan losses if the impairment is considered to be permanent. Measurement of impairment does not apply to large groups of smaller balance homogenous loans that are collectively evaluated for impairment such as the Company’s portfolios of home equity loans, real estate mortgages, installment and other loans.

The formula component is calculated by applying loss factors to outstanding loans by type. Loss factors are based on historical loss experience. New loan types, for which there has been no historical loss experience, as explained further below, is one of the considerations in determining the appropriateness of the unallocated component.

The appropriateness of the unallocated component is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting the key lending areas of the Company and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan portfolio. Senior management reviews these conditions quarterly. Management’s evaluation of the loss related to these conditions is reflected in the unallocated component. Due to the inherent uncertainty in the process, management does not attempt to quantify separate amounts for each of the conditions considered in estimating the unallocated component of the allowance. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific credits or portfolio segments.

Actual losses can vary significantly from the estimated amounts. The Company’s methodology permits adjustments to the allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the loan portfolio as of the evaluation date have changed.

Management believes the allowance for loan losses is the best estimate of probable losses which have been incurred as of March 31, 2008. There is no assurance that the Company will not be required to make future adjustments to the allowance in response to changing economic conditions, particularly in the Company’s service area, since the majority of the Company’s loans are collateralized by real estate. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments at the time of their examinations.

Income Recognition on Loans — Interest on loans is accrued monthly. Net loan origination and commitment fees are deferred and recognized as an adjustment of yield over the lives of the related loans. Loans, including impaired loans, are placed on a non-accrual status when management believes that interest or principal on such loans may not be collected in the normal course of business. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against interest income. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, in accordance with management’s judgment as to the collectability of principal. Loans can be returned to accruing status when they become current as to principal and interest, demonstrate a period of performance under the contractual terms, and when, in management’s opinion, they are estimated to be fully collectible.

Securities — Securities are classified as either available for sale, representing securities the Company may sell in the ordinary course of business, or as held to maturity, representing securities the Company has the ability and positive intent to hold until maturity. Securities available for sale are reported at fair value with unrealized gains and losses (net of tax) excluded from operations and reported in other comprehensive income. Securities held to maturity are stated at amortized cost. Interest income includes amortization of purchase premium and accretion of purchase discount. The amortization of premiums and accretion of discounts is determined by using the level yield method. Securities are not acquired for purposes of engaging in trading activities. Realized gains and losses from sales of securities are determined using the specific identification method. Declines in the fair value of securities below their cost that are other than temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: the length of time and extent that fair value has been less than cost, the financial

17

condition and near term prospects of the issuer, and the Company’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

Goodwill and Other Intangible Assets — In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and identified intangible assets with indefinite useful lives are not subject to amortization. Identified intangible assets that have finite useful lives are amortized over those lives by a method which reflects the pattern in which the economic benefits of the intangible asset are used up. All goodwill and identified intangible assets are subject to impairment testing on an annual basis, or more often if events or circumstances indicate that impairment may exist. If such testing indicates impairment in the values and/or remaining amortization periods of the intangible assets, adjustments are made to reflect such impairment. The Company’s impairment evaluations as of December 31, 2007 did not indicate impairment of its goodwill or identified intangible assets. The Company is not aware of any events during the three month period ended March 31, 2008 which would have required additional impairment evaluations.

Bank Owned Life Insurance — The Company has purchased life insurance policies on certain key executives. In accordance with Emerging Issues Task Force finalized Issue No. 06-5, Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases of Life Insurance) (“EITF No. 06-5”), bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Prior to adoption of EITF 06-5, the Company recorded bank owned life insurance at its cash surrender value.

Retirement Plans — Pension expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Supplemental retirement plan expense allocates the benefits over years of service.

Results of Operations for the Three Month Periods Ended March 31, 2008 and March 31, 2007

Summary of Results

The Company reported net income of $8.4 million for the three month period ended March 31, 2008, an increase of $0.1 million or 1.2 percent compared to $8.3 million reported for the same period in the prior year. The increases in net income in the current year period compared to the prior year period resulted from higher net interest income, higher non interest income, a lower provision for loan loss and slightly lower income taxes, partially offset by higher non interest expense. In addition, the three month period ended March 31, 2008 included a $0.5 million pretax adjustment for other than temporary impairment related to the Company’s investment in a mutual fund.

Diluted earnings per share were $0.82 for both three month periods ended March 31, 2008 and 2007. Annualized returns on average equity and average assets were 16.2 percent and 1.5 percent, respectively, for the three month period ended March 31, 2008, compared to 17.6 percent and 1.5 percent, respectively, for the same period in the prior year. Annualized returns on adjusted average equity and adjusted average assets were 16.3 percent and 1.5 percent, respectively, for the three month period ended March 31, 2008, compared to 17.2 percent and 1.4 percent, respectively, for the same period in the prior year. Adjusted average stockholders’ equity and adjusted average assets exclude the effects of net unrealized gains and losses on securities available for sale. Management believes this alternate presentation more closely reflects actual performance, as it is more consistent with the Company’s stated asset/liability management strategies, which have not resulted in significant realization of temporary market gains or losses on securities available for sale which were primarily related to changes in interest rates.

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Average Balances and Interest Rates

The following table sets forth the average balances of interest earning assets and interest bearing liabilities for the three month periods ended March 31, 2008 and March 31, 2007, as well as total interest and corresponding yields and rates. The data contained in the table has been adjusted to a tax equivalent basis, based on the federal statutory rate of 35 percent in 2008 and 2007.

	Three Months Ended							Three Months Ended
	March 31, 2008							March 31, 2007
	Average				Yield/			Average				Yield/
	Balance		Interest(3)		Rate			Balance		Interest(3)		Rate
	(000’s except percentages)							(000’s except percentages)
ASSETS
Interest earning assets:
Deposits in banks	$	5,633	$	46		3.27	%	$	3,288	$	45		5.47	%
Federal funds sold		67,114		627		3.74			16,220		200		4.93
Securities:(1)
Taxable		560,541		6,882		4.91			719,524		8,849		4.92
Exempt from federal income taxes		214,470		3,452		6.44			214,852		3,525		6.56
Loans, net(2)		1,321,788		25,302		7.66			1,210,253		25,671		8.48
Total interest earning assets		2,169,546		36,309		6.69			2,164,137		38,290		7.08
Non interest earning assets:
Cash and due from banks		46,949							52,616
Other assets		99,043							81,733
Total non interest earning assets		145,992							134,349
Total assets	$	2,315,538						$	2,298,486
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Money market	$	656,850	$	3,558		2.17	%	$	448,062	$	2,769		2.47	%
Savings		93,775		217		0.93			93,570		192		0.82
Time		260,426		2,217		3.41			280,011		2,742		3.92
Checking with interest		157,134		426		1.08			149,819		366		0.98
Securities sold under repurchase agreements and other short-term borrowings		92,128		480		2.08			250,226		3,059		4.89
Other borrowings		210,839		2,328		4.42			249,367		2,792		4.48
Total interest bearing liabilities		1,471,152		9,226		2.51			1,471,055		11,920		3.24
Non interest bearing liabilities:
Demand deposits		605,236							605,362
Other liabilities		31,358							28,956
Total non interest bearing liabilities		636,594							634,318
Stockholders’ equity(1)		207,792							193,113
Total liabilities and stockholders’ equity(1)	$	2,315,538						$	2,298,486
Net interest earnings			$	27,083						$	26,370
Net yield on interest earning assets						4.99	%						4.87	%

(1)	Excludes unrealized gains (and losses) on securities available for sale
(2)	Includes loans classified as non-accrual
(3)	Effects of adjustments to a tax equivalent basis were increases of $1,208 and $1,234 for the three month periods ended March 31, 2008 and March 31, 2007, respectively.

19

Interest Differential

The following table sets forth the dollar amount of changes in interest income, interest expense and net interest income between the three month periods ended March 31, 2008 and March 31, 2007.

	(000’s)
	Three Month Period Increase
	(Decrease) Due to Change in
	Volume			Rate			Total(1)
Interest Income:
Deposits in banks	$	32		$	(31	)	$	1
Federal funds sold		628			(201	)		427
Securities:
Taxable		(1,955	)		(12	)		(1,967	)
Exempt from federal income taxes(2)		(6	)		(67	)		(73	)
Loans, net		2,366			(2,735	)		(369	)
Total interest income		1,065			(3,046	)		(1,981	)
Interest expense:
Deposits:
Money market		1,290			(501	)		789
Savings		—			25			25
Time		(192	)		(333	)		(525	)
Checking with interest		18			42			60
Securities sold under repurchase agreements and other short-term borrowings		(1,933	)		(646	)		(2,579	)
Other borrowings		(431	)		(33	)		(464	)
Total interest expense		(1,248	)		(1,446	)		(2,694	)
Increase in interest differential	$	2,313		$	(1,600	)	$	713

(1)	Changes attributable to both rate and volume are allocated between the rate and volume variances based upon their absolute relative weights to the total change.
(2)	Equivalent yields on securities exempt from federal income taxes are based on a federal statutory rate of 35 percent in 2008 and 2007.

Net Interest Income

Net interest income, the difference between interest income and interest expense, is the most significant component of the Company’s consolidated earnings. For the three month period ended March 31, 2008, net interest income, on a tax equivalent basis, increased $0.7 million or 2.7 percent to $27.1 million compared to $26.4 million for the same period in the prior year. Net interest income for the three month period ended March 31, 2008 was higher due to a slight increase in the excess of average interest earning assets over average interest bearing liabilities of $5.3 million or 0.8 percent to $698.3 million compared to $693.0 million for the same period in the prior year and an increase in the tax equivalent basis net interest margin to 4.99% for the three month period ended March 31, 2008 from 4.87% for the same period in the prior year.

Interest income is determined by the volume of, and related rates earned on, interest earning assets. Interest income, on a tax equivalent basis, decreased $2.0 million or 5.2 percent to $36.3 million for the three month period ended March 31, 2008, compared to $38.3 million for the same period in the prior year. Average interest earning assets increased $5.4 million or 0.2 percent to $2,169.5 million for the three month period ended March 31, 2008, compared to $2,164.1 million for the same period in the prior year. Volume decreases in taxable securities, tax-exempt securities and generally lower interest rates, partially offset by volume increases in loans, federal funds sold

20

and interest bearing deposits, contributed to the lower interest income in the three month period ended March 31, 2008 compared to the same period in the prior year.

Average total securities, excluding average net unrealized losses on available for sale securities, decreased by $159.4 million or 17.1 percent to $775.0 million for the three month period ended March 31, 2008, compared to $934.4 million for the same period in the prior year. The decrease in average total securities in the three month period ended March 31, 2008, compared to the same period in the prior year, resulted primarily from a planned reduction in leverage conducted by the Company as part of its ongoing asset/liability management efforts. During 2007, management utilized certain cash flow from maturing investments to reduce higher cost short-term and other borrowings rather than reinvest these funds at the unattractive yields then available. Other cash flows from maturing investments were redeployed into loans. The average yield on securities was slightly higher for the three month period ended March 31, 2008 compared to the same period in the prior year. Average tax equivalent basis yield on securities for the three month period ended March 31, 2008 was 5.33 percent, compared to 5.30 percent for the same period in the prior year. As a result, tax equivalent basis interest income from securities was lower for the three month period ended March 31, 2008, compared to the same period in the prior year, due to lower volume, partially offset by slightly higher interest rates.

Average net loans increased $111.5 million or 9.2 percent to $1,321.8 million for the three month period ended March 31, 2008, compared to $1,210.3 million for the same period in the prior year. The increase in average net loans reflects the Company’s continuing emphasis on making new loans, expansion of loan production facilities and more effective market penetration. The average yield on loans was 7.66 percent for the three month period ended March 31, 2008 compared to 8.48 percent for the same period in the prior year. As a result, interest income on loans was lower for the three month period ended March 31, 2008, compared to the same period in the prior year, due to lower interest rates, partially offset by higher volume.

Interest expense is a function of the volume of, and rates paid for, interest bearing liabilities, comprised of deposits and borrowings. Interest expense decreased $2.7 million or 22.7 percent to $9.2 million for the three month period ended March 31, 2008, compared to $11.9 million for the same period in the prior year. Average interest bearing liabilities were virtually unchanged at $1,471.2 million for the three month period ended March 31, 2008, compared to $1,472.1 million for the same period in the prior year. The slight increase in average interest bearing liabilities for the three month period ended March 31, 2008, compared to the same period in the prior year, resulted from volume increases in money market deposits, checking with interest and savings deposits, partially offset by volume decreases in time deposits, securities sold under agreements to repurchase and other short term borrowings, and long-term borrowed funds. Deposits increased from new customers, existing customers and the continued growth resulting from the addition of new branches. The 2008 average money market deposits balance included the effects of a $97 million temporary deposit from January 1, 2008 through February 8, 2008. The decreases in average securities sold under agreements to repurchase and other borrowings for the three months ended March 31, 2008, compared to the same period in the prior year, resulted from management’s utilization of cash flow from maturing investment securities to reduce borrowings in a planned leverage reduction program conducted as part of the Company’s ongoing asset/liability management efforts. Average interest rates on interest bearing liabilities were lower during the three month period ended March 31, 2008, compared to the same period in the prior year, due to lower average interest rates on money market deposits, time deposits, short-term borrowings and long-term borrowings, partially offset by higher average interest rates on checking with interest deposits and savings deposits. The average interest rate paid on interest bearing liabilities was 2.51 percent for the three month period ended March 31, 2008, compared to 3.24 percent for the same period in the prior year. As a result, interest expense was lower for the three month period ended March 31, 2008, compared to the same period in the prior year primarily due to lower average interest rates.

Average non interest bearing demand deposits remained virtually unchanged at $605.2 million for the three month period ended March 31, 2008, compared to $605.4 million for the same period in the prior year. These deposits are an important component of the Company’s asset/liability management and have a direct impact on the determination of net interest income.

21

The interest rate spread on a tax equivalent basis for the three month periods ended March 31, 2008 and 2007 is as follows:

	Three Month
	Period Ended
	March 31,
	2008			2007
Average interest rate on:
Total average interest earning assets		6.69	%		7.08	%
Total average interest bearing liabilities		2.51			3.24
Total interest rate spread		4.18			3.84

Interest rate spreads increased in the current year period compared to the prior year period. This increase resulted from a greater decrease in the average interest rates on interest bearing liabilities over that of interest earning assets. Management cannot predict what impact market conditions will have on its interest rate spread, and additional future compression in net interest rate spread may occur.

  Provision for Loan Losses

The Company recorded a provision for loan losses of $0.3 million and $0.6 million for the three month periods ended March 31, 2008 and 2007, respectively. The provision for loan losses is charged to income to bring the Company’s allowance for loan losses to a level deemed appropriate by management. See “Financial Condition” for further discussion.

  Non Interest Income

Non interest income, excluding net realized gains and losses on securities available for sale, increased $1.2 million to $4.8 million for the three month period ended March 31, 2008, compared to $3.6 million for the prior year period.

Service charges income increased $0.2 million or 17.9 percent to $1.5 million for the three month period ended March 31, 2008, compared to $1.3 million for the prior year period. The increase was primarily due to growth in deposit activity and other services charges and increases in scheduled fees.

Investment advisory fee income for the three month period ended March 31, 2008 increased $0.7 million or 35.0 percent to $2.7 million from $2.0 million in the prior year period. The increase was primarily due to increases in assets under management resulting from net increase in assets from existing customers, addition of new customers and net increases in asset value.

Other income for the three month period ended March 31, 2008 increased $0.2 million or 66.7 percent to $0.5 million from $0.3 million in the prior year period. The increase was primarily the result of increased rental income and income on bank owned life insurance.

In 2008, net realized losses on securities included a $0.5 million adjustment for other than temporary impairment related to the Company’s investment in a mutual fund.

  Non Interest Expense

Non interest expense for the three month period ended March 31, 2008 increased $1.6 million or 10.4 percent to $17.0 million from $15.4 million in the prior year period. These increases reflect the overall growth of the Company and resulted from increases in salaries and employee benefits expense, occupancy expense, FDIC assessment and other operating expenses partially offset by a slight decrease in professional services.

Salaries and employee benefits, the largest component of non interest expense, for the three month period ended March 31, 2008 increased 11.2 percent to $9.9 million from $8.9 million in the prior year period. This increase resulted from additional staff to accommodate the growth in loans and deposits, the opening of new branch

22

facilities, and merit increases. In addition, salaries and employee benefits increased as a result of higher costs of employee benefit plans and costs associated with related payroll taxes.

Occupancy expense for the three month period ended March 31, 2008 increased 12.5 percent to $1.8 million from $1.6 million in prior year period. This increase reflected the Company’s continued expansion, including the opening of new branch facilities, as well as rising costs on leased facilities, real estate taxes, utility costs, maintenance costs and other costs to operate the Company’s facilities.

Professional services for the three month period ended March 31, 2008 decreased 8.3 percent to $1.1 million from $1.2 million in the prior year period. The decrease was due to expenses recorded in the prior period related to the information management project partially offset by higher audit costs associated with requirements of the Sarbanes-Oxley Act of 2002.

Equipment expense for the three month period ended March 31, 2008 increased 42.9 percent to $1.0 million from $0.7 million in the prior period. The increase was due to the implementation of the new telephone system, higher costs to maintain the Company’s equipment and additional equipment for new branch facilities.

Business development expense for the three month period ended March 31, 2008 was essentially unchanged from the prior year period.

The assessment of the Federal Deposit Insurance Corporation (“FDIC”) for the three month period ended March 31, 2008 increased 111.9 percent to $89,000 from $42,000 in the prior year period. This increase was primarily due to an increase in the assessment rate on deposits.

Significant changes, more than 5 percent, in other components of non interest expense for the three month period ended March 31, 2008 compared to March 31, 2007, were due to the following:

•  Increase of $38,000 (135.7%) in other insurance expense, resulting from increases in banker’s professional and automobile insurance costs partially offset by reductions in the estimates of the net cost of certain life insurance policies.

•  Increase of $187,000 (51.1%) in stationery and printing costs due to increased consumption resulting from company expansion and increased costs of paper.

•  Increase of $12,000 (5.7%) in courier costs due to increased fuel costs.

•  Increase of $138,000 (26.0%) in outside service costs due to increased data processing costs.

•  Decrease of $26,000 (18.0%) in dues, meetings and seminar expense due to decreased participation in such events.

Income Taxes

Income taxes of $4.4 million were recorded in both of the three month periods ended March 31, 2008, and 2007, respectively. The Company is currently subject to a statutory Federal tax rate of 35 percent, a New York State tax rate of 7.1 percent plus a 17 percent surcharge, and a New York City tax rate of approximately 9 percent. The Company’s overall effective tax rate was 34.2 percent for the three month period ended March 31, 2008 compared to 34.9 percent for the same period in the prior year. The decrease in the overall effective tax rates for 2008, compared to the prior year period, resulted primarily from a decrease in the percentages of income subject to New York State tax.

In the normal course of business, the Company’s Federal, New York State and New York City corporation tax returns are subject to audit. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years 2004 through 2007. The Company is currently open to audit by New York State under the statute of limitations for the years 2006 and 2007. Other pertinent tax information is set forth in the Notes to Condensed Consolidated Financial Statements included elsewhere herein.

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Financial Condition

Assets

The Company had total assets of $2,341.5 million at March 31, 2008, an increase of $10.8 million or 0.5 percent from $2,330.7 million at December 31, 2007.

Federal Funds Sold

Federal funds sold totaled $66.1 million at March 31, 2008, a decrease of $33.0 million from $99.1 million at December 31, 2007. The decrease resulted from timing differences in the redeployment of available funds into loans and longer term investments and volatility in certain deposit types and relationships.

Securities and FHLB Stock

The Company invests in stock of the Federal Home Loan Bank of New York (“FHLB”) and other securities which are rated with an investment grade by nationally recognized credit rating organizations and, on a limited basis, in non-rated securities. Non-rated securities totaled $31.7 million at March 31, 2008 and were comprised primarily of obligations of municipalities located within the Company’s market area.

Securities totaled $749.1 million at March 31, 2008, a decrease of $31.2 million or 4.0 percent from $780.3 million at December 31, 2007. Securities classified as available for sale, which are recorded at estimated fair value, totaled $716.5 million at March 31, 2008, a decrease of $30.0 million or 4.0 percent from $746.5 million at December 31, 2007. Securities classified as held to maturity, which are recorded at amortized cost, totaled $32.7 million at March 31, 2007, a decrease of $1.1 million or 3.3 percent from $33.8 million at December 31, 2006. The following table sets forth the amortized cost, gross unrealized gains and losses and the estimated fair value of securities at March 31, 2008:

			Gross
	Amortized		Unrealized				Estimated
Classified as Available for Sale	Cost		Gains		Losses		Fair Value
			(000’s)
U.S. Treasuries and government agencies	$	78,726	$	503		—	$	79,229
Mortgage-backed securities		359,699		3,190	$	1,101		361,788
Obligations of state and political subdivisions		219,308		4,884		170		224,022
Other debt securities		21,710		29		1,968		19,771
Total debt securities		679,443		8,606		3,239		684,810
Mutual funds and other equity securities		30,914		748		—		31,662
Total	$	710,357	$	9,354	$	3,239	$	716,472
Classified as Held to Maturity
Mortgage-backed securities	$	27,535	$	342	$	7	$	27,870
Obligations of state and political subdivisions		5,132		191		—		5,323
Total	$	32,667	$	533	$	7	$	33,193

U.S. Treasury and government agency obligations classified as available for sale totaled $79.2 million at March 31, 2008, a decrease of $27.6 million or 25.8 percent from $106.8 million at December 31, 2007. The decrease was due to maturities and calls of $45.3 million which were partially offset by purchases of $16.9 million and other increases of $0.8 million. There were no U.S. Treasury or government agency obligations classified as held to maturity at March 31, 2008 or at December 31, 2007.

Mortgage-backed securities, including collateralized mortgage obligations (“CMO’s”), classified as available for sale totaled $361.8 million at March 31, 2008, a decrease of $17.1 million or 4.5 percent from $378.9 million at December 31, 2007. The decrease was due to maturities and principal paydowns of $25.0 million which were partially offset by other increases of $7.9 million. Mortgage-backed securities, including CMO’s, classified as

24

held to maturity totaled $27.5 million at March 31, 2008, a decrease of $1.1 million or 3.8 percent from $28.6 million at December 31, 2007. The decrease was due to maturities and principal paydowns of $1.1 million.

Obligations of state and political subdivisions classified as available for sale totaled $224.0 million at March 31, 2008, an increase of $16.5 million or 8.0 percent from $207.5 million at December 31, 2007. The increase was due to purchases of $21.8 million and other increases of $1.4 million, which were partially offset by maturities and calls of $6.7 million. Obligations of state and political subdivisions classified as held to maturity totaled $5.1 million at both March 31, 2008 and December 31, 2007. The combined available for sale and held to maturity obligations at March 31, 2008 were comprised of approximately 71 percent of New York State political subdivisions and 29 percent of a variety of other states and their subdivisions all with diversified maturity dates. The Company considers such securities to have favorable tax equivalent yields.

Other debt securities, consisting primarily of corporate bonds and trust preferred securities, totaled $19.8 million at March 31, 2008, a decrease of $1.7 million or 7.9 percent from $21.5 million at December 31, 2007. The decrease resulted from maturities and calls of $0.5 million and other decreases of $1.2 million. All other debt securities are classified as available for sale.

Mutual funds and other equity securities totaled $31.7 million at March 31, 2008, a decrease of $0.1 million or 0.3 percent from $31.8 million at December 31, 2007. The decrease resulted from other decreases of $0.4 million partially offset by purchases of $0.3 million. Other decreases include a $0.5 million pretax adjustment for other than temporary impairment related to the Company’s investment in a mutual fund. The investment, which had an adjusted book value of $21.9 million as of March 31, 2008 and had a previous pretax other than temporary impairment adjustment of $0.6 million in December 2007, was sold in April 2008 due to its inability to meet the Company’s performance expectations. All mutual funds and other equity securities are classified as available for sale.

The Banks, as members of the FHLB, invest in stock of the FHLB as a prerequisite to obtaining funding under various programs offered by the FHLB. The Banks must purchase additional shares of FHLB stock to obtain increases in such borrowings. Shares in excess of required amounts for outstanding borrowings are generally redeemed by the FHLB. The investment in FHLB stock totaled $13.0 million at March 31, 2008, compared to $11.7 million at December 31, 2007.

Except for securities of the U.S. Treasury and government agencies, there were no obligations of any single issuer which exceeded ten percent of stockholders’ equity at March 31, 2008 or December 31, 2007.

Loans

Net loans totaled $1,361.8 million at March 31, 2008, an increase of $72.2 million or 5.6 percent from $1,289.6 million at December 31, 2007. The increase resulted principally from a $45.9 million increase in commercial real estate loans, $11.0 million increase in commercial and industrial loans and a $0.8 million increase in lease financing, $5.0 million increase in construction loans, $0.8 million increase in loans to individuals and a $7.7 million increase in residential real estate loans. The increase in loans reflect the Company’s continuing emphasis on making new loans, expansion of loan production facilities, and more effective market penetration.

25

Major classifications of loans at March 31, 2008 and December 31, 2007 are as follows:

	March 31,			December 31,
	2008			2007
	(000’s)
Real Estate:
Commercial	$	400,892		$	355,044
Construction		216,756			211,837
Residential		332,241			324,488
Commercial and industrial		388,010			377,042
Individuals		30,502			29,686
Lease financing		13,300			12,463
Total		1,381,701			1,310,560
Deferred loan fees, net		(3,706	)		(3,552	)
Allowance for loan losses		(16,227	)		(17,367	)
Loans, net	$	1,361,768		$	1,289,641

The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more and still accruing and other real estate owned as of March 31, 2008 and December 31, 2007:

	March 31,			December 31,
	2008			2007
	(000’s except percentages)
Non-accrual loans at period end	$	11,635		$	10,719
Loans past due 90 days or more and still accruing		1,071			3,953
Other real estate owned		1,900			—
Nonperforming assets to total assets at period end		0.58	%		0.46	%

Gross interest income that would have been recorded if these borrowers had been current in accordance with their original loan terms was $331,000 and $933,000 for the three month period ended March 31, 2008 and the year ended December 31, 2007, respectively. There was no interest income on nonperforming assets included in net income for the three month period ended March 31, 2008 and the year ended December 31, 2007.

Allowance for Loan Losses

The Company maintains an allowance for loan losses to absorb probable losses incurred in the loan portfolio based on ongoing quarterly assessments of estimated losses. The Company’s methodology for assessing the appropriateness of the allowance consists of several key components, which include a specific component for identified problem loans, a formula component and an unallocated component.

26

The specific component of the allowance for loan losses is the result of our analysis of impaired and other problem loans and our determination of the amount required to reduce the carrying amount of such loans to estimated fair value.

The formula component of the allowance for loan losses is the result of the application of historical loss experience to outstanding loans by type. Loss experience for each year is based upon average charge-off experience for the prior three year period by loan type.

The unallocated component of the allowance for loan losses is the result of management’s consideration of other relevant factors affecting loan collectibility. Due to the inherent uncertainty in the process, management does not quantify separate amounts for each of the conditions considered in estimating the unallocated component of the allowance. Management periodically adjusted the unallocated component to an amount that, when considered with the specific and formula components, represented its best estimate of probable losses in the loan portfolio as of each balance sheet date. The following factors were considered in determining the unallocated component of the allowance for loan losses at March 31, 2008:

•  Economic and business conditions — Indications of increased inflation, such as the pronounced rise in energy costs, increases in the cost of raw materials used in construction and significant increases in real estate taxes within the Company’s market area, together with the general slowdown in real estate activity and the recent crisis in the sub-prime mortgage market have had negative effects on the demand for and value of real estate, the primary collateral for the Company’s loans, and the ability of borrowers to repay their loans. Consideration of such events that trigger economic uncertainty are part of the determination of the unallocated component of the allowance.

•  Concentration — Construction loans totaled $216.7 million or 15.9 percent of net loans at March 31, 2008. These loans currently have a higher degree of risk than other types of loans which the Company makes, since repayment of the loans is generally dependent on the borrowers’ ability to successfully construct and sell or lease completed properties. Further exacerbating the ability to sell newly constructed homes and condominiums is the tightening of credit in the secondary markets for residential borrowers, particularly sub-prime borrowers and, recently, jumbo loan borrowers. Therefore, the borrowers’ ability to pay and collateral values may be negatively impacted. During the three month period ended March 31, 2008, the percentage of the construction portfolio representing completed properties has decreased indicating some improvement in sales. Continuation of such improvement would result in lower extension risk in the portfolio. Changes in concentration and the associated changes in various risk factors are not fully reflected in the formula component of the allowance due to the lag caused by using three years historical losses in determining the loss factors. Therefore, consideration of concentrations is a part of the determination of the unallocated component of the allowance.

•  Credit quality — The dollar amount of nonperforming loans increased slightly to $11.6 million or 0.84 percent of total loans at March 31, 2008, compared to $10.7 million or 0.82 percent of total loans

27

at December 31, 2007. The Company’s regular periodic loan review process noted continued strength in overall credit quality and some improvement in the indicators affecting the construction loan portfolio. However the continuation of recent trends of rising construction and energy costs, as well as real estate taxes, an increase in the inventory of new residential construction and its time on the market and recent declines in real estate values in the Company’s primary market area may negatively impact the borrowers’ ability to pay and collateral values. We believe that recent reductions in interest rates and indications that real estate values in the Company’s primary market area may be stabilizing, could have a positive impact on overall asset quality. During the three month period ended March 31, 2008, certain loans were downgraded due to potential deterioration of collateral values, the borrowers’ cash flows or other specific factors that negatively impacted the borrowers’ ability to meet their loan obligations, while a number of other potential problem loans were resolved. Certain of these loans are also considered in connection with the analysis of impaired loans performed to determine the specific component of the allowance. However, due to the uncertainty of that determination, such loans are also considered in the process of determining the unallocated component of the allowance.

•  Loan Participations — The Company expanded the number of banks from which we will purchase loan participations, particularly outside our primary market area. While we review each loan, we greatly rely on the other bank’s knowledge of their customer and marketplace. While the Company has experienced a record of performance with certain more established loan participant relationships, many of these relationships are new and we do not yet have an established record of performance. Therefore, any probable losses with respect to these new loan participation relationships are not reflected in the formula component of the allowance for loan losses.

Deposits

Deposits totaled $1,779.7 million at March 31, 2008, a decrease of $32.8 million or 1.8 percent from $1,812.5 million at December 31, 2007. The following table presents a summary of deposits at March 31, 2008 and December 31, 2007:

	(000’s)
	March 31,		December 31,		Increase
	2008		2007		(Decrease)
Demand deposits	$	625,586	$	568,418	$	57,168
Money market accounts		659,613		730,429		(70,816	)
Savings accounts		93,532		93,331		201
Time deposits of $100,000 or more		195,346		202,151		(6,805	)
Time deposits of less than $100,000		61,245		60,493		752
Checking with interest		144,427		157,720		(13,293	)
Total Deposits	$	1,779,748	$	1,812,542	$	(32,794	)

The decrease in deposits resulted from the withdrawal of a $97.0 million money market account partially offset by new account relationships and increased account activity.

Borrowings

Total borrowings were $323.8 million at March 31, 2008, an increase of $36.9 million or 12.9 percent from $286.9 million at December 31, 2007. The overall increase resulted primarily from a $29.7 million increase in other short-term borrowings and a $7.2 million increase in short-term repurchase agreements. Borrowings are utilized as part of the Company’s continuing efforts to effectively leverage its capital and to manage interest rate risk.

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Stockholders’ Equity

Stockholders’ equity totaled $212.4 million at March 31, 2008, an increase of $8.7 million or 4.3 percent from $203.7 million at December 31, 2007. The increase in stockholders’ equity resulted from net income of $8.4 million for the three month period ended March 31, 2008, $5.7 million increase in accumulated comprehensive income, $1.7 million net increases related to grants and exercises of stock options and $0.1 million of proceeds from the sale of treasury stock. These increases were partially offset by $4.9 million of cash dividends paid on common stock, and $2.3 million in purchases of treasury stock.

The Company’s and the Banks’ capital ratios at March 31, 2008 and December 31, 2007 are as follows:

							Minimum for
							Capital
	March 31,			December 31,			Adequacy
	2008			2007			Purposes
Leverage ratio:
Company		8.3	%		8.3	%		4.0	%
HVB		8.4			8.1			4.0
NYNB		7.1			7.1			4.0
Tier 1 capital:
Company		12.2	%		12.5	%		4.0	%
HVB		12.3			12.3			4.0
NYNB		11.6			11.3			4.0
Total capital:
Company		13.2	%		13.7	%		8.0	%
HVB		13.3			13.4			8.0
NYNB		12.6			12.6			8.0

The Company, HVB and NYNB each exceed all current regulatory capital requirements to be considered in the “well capitalized” category at March 31, 2008.

Liquidity

The Company’s liquid assets, at March 31, 2008, include cash and due from banks of $52.0 million and Federal funds sold of $66.1 million. Federal funds sold represent the Company’s excess liquid funds that are invested with other financial institutions in need of funds and which mature daily.

Other sources of liquidity include maturities and principal and interest payments on loans and securities. The loan and securities portfolios are of high credit quality and of mixed maturity, providing a constant stream of maturing and reinvestable assets, which can be converted into cash should the need arise. The ability to redeploy these funds is an important source of medium to long term liquidity. The amortized cost of securities having contractual maturities, expected call dates or average lives of one year or less amounted to $155.9 million at March 31, 2008. This represented 21.0 percent of the amortized cost of the securities portfolio. Excluding installment loans to individuals, real estate loans other than construction loans and lease financing, $251.0 million, or 18.2 percent of loans at March 31, 2008, mature in one year or less. The Company may increase liquidity by selling certain residential mortgages, or exchanging them for mortgage-backed securities that may be sold in the secondary market.

Non interest bearing demand deposits and interest bearing deposits from businesses, professionals, not-for-profit organizations and individuals are a relatively stable, low-cost source of funds. The deposits of the Bank (excluding temporary deposits) generally have shown a steady growth trend as well as a generally consistent deposit mix. However, there can be no assurance that deposit growth will continue or that the deposit mix will not shift to higher rate products.

HVB and NYNB are members of the FHLB. HVB has a borrowing capacity of up to $200 million under two lines of credit at March 31, 2008, at various terms secured by FHLB stock owned and to be purchased and certain

29

other assets of HVB. HVB had $30.0 million outstanding under these lines from the FHLB at March 31, 2008. NYNB has a borrowing capacity of $26.6 million under two lines of credit at March 31, 2008, at various terms secured by FHLB stock owned and to be purchased and certain other assets of NYNB. NYNB had no balances outstanding under these lines from the FHLB at March 31, 2008. The Company’s short-term borrowings included $82.5 million under securities sold under agreements to repurchase at March 31, 2008, and had securities totaling $255.4 million at March 31, 2008 that could be sold under agreements to repurchase, thereby increasing liquidity. In addition, HVB has agreements with two investment firms to borrow up to $410 million under Retail CD Brokerage Agreements and has agreements with correspondent banks for purchasing Federal funds up to $85 million. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank’s discount window, which borrowings must be collateralized by U.S. Treasury and government agency securities.

Management considers the Company’s sources of liquidity to be adequate to meet any expected funding needs and to be responsive to changing interest rate markets.

Forward-Looking Statements

The Company has made, and may continue to make, 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 March 31, 2008. 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. The Company 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.

In addition to those factors previously disclosed by the Company and those factors identified elsewhere herein, the following factors could cause actual results to differ materially from such forward-looking statements:

•  competitive pressure on loan and deposit product pricing;

•  other actions of competitors;

•  adverse changes in economic conditions, especially those effecting real estate;

•  the extent and timing of actions of the Federal Reserve Board;

•  a loss of customer deposits;

•  changes in customer’s acceptance of the Banks’ products and services;

•  regulatory delays or conditions imposed by regulators in connection with the conversion of the Banks to national banks, acquisitions or other expansion plans;

•  increases in federal and state income taxes and/or the Company’s effective income tax rate;

•  the extent and timing of legislative and regulatory actions and reform; and

•  difficulties in integrating acquisitions, offering new services or expanding into new markets.

Impact of Inflation and Changing Prices

The Condensed Consolidated Financial Statements and Notes thereto presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollar amounts or estimated fair value without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike industrial companies, nearly all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk at December 31, 2007 were previously reported in the Company’s 2007 Annual Report on Form 10-K. There have been no material changes in the Company’s market risk exposure at March 31, 2008 compared to December 31, 2007.

The Company’s primary market risk exposure is interest rate risk since substantially all transactions are denominated in U.S. dollars with no direct foreign exchange or changes in commodity price exposure.

All market risk sensitive instruments are classified either as available for sale or held to maturity with no financial instruments entered into for trading purposes. The Company from time to time uses derivative financial instruments to manage risk. The Company did not enter into any new derivative financial instruments during the three month period ended March 31, 2008. The Company had no derivative financial instruments in place at March 31, 2008.

The Company uses a simulation analysis to evaluate market risk to changes in interest rates. The simulation analysis at March 31, 2008 shows the Company’s net interest income increasing moderately if interest rates rise and decreasing moderately if interest rates fall, considering a continuation of the current flat yield curve. A change in the shape or steepness of the yield curve will impact our market risk to changes in interest rates.

The Company also prepares a static gap analysis which, at March 31, 2008, shows a positive cumulative static gap of $123.1 million in the one year time frame.

The Company’s policy limit on interest rate risk has remained unchanged since December 31, 2002. The following table illustrates the estimated exposure under a rising rate scenario and a declining rate scenario calculated as a percentage change in estimated net interest income assuming a gradual shift in interest rates for the next 12 month measurement period, beginning March 31, 2008.

	Percentage Change in
	Estimated Net Interest Income
Gradual Change in Interest Rates	from March 31, 2008					Policy Limit
+200 basis points		3	.0		%		(5.0	)%
−100 basis points		(3	.5	)	%		(5.0	)%

As of March 31, 2008, a 100 basis point downward change in interest rates was substituted for the 200 basis point downward scenario previously used, as management believes that a 200 basis point downward change is not a meaningful analysis in light of current interest rate levels. The percentage change in estimated net interest income in the +200 and -100 basis points scenario is within the Company’s policy limits.

Item 4.  Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information the Company must disclose in its reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported on a timely basis. Any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of March 31, 2008. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2008, the Company’s disclosure controls and procedures were effective in bringing to their attention on a timely basis information required to be disclosed by the Company in reports that the Company files or submits under the Exchange Act. Also, during the quarter ended March 31, 2008, there has not been any change that has affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1A.   Risk Factors

Our business is subject to various risks. These risks are included in our 2007 Annual Report on Form 10-K under “Risk Factors”. There has been no material change in such risk factors.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

On February 20, 2008 and February 25, 2008, the Company sold 2,500 and 77 shares of its common stock to existing shareholders for $130,000 and $4,004 in cash in transactions that did not involve a public offering. In conducting the sales, the Company relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder as the purchasers of such securities were accredited investors. The proceeds from the sales were used for general corporate purposes.

The following table sets forth information with respect to purchases made by the Company of its common stock during the three month period ended March 31, 2008:

							Maximum
					Total number		number of
					of shares		shares that
					purchased as		may yet be
	Total number		Average		part of publicly		purchased
	of shares		price paid		announced		under the
Period	purchased		per share		programs		programs(2)
January 1, 2008 -January 31, 2008(1)		15,989	$	52.00		15,989		—
February 1, 2008 -February 26, 2008(1)		10,054	$	52.00		10,054		—
February 27, 2008 -February 29, 2008(2)		1,605		53.16		1,452		—
February 1, 2008 -February 29, 2008		11,659	$	52.32		11,506
March 1, 2008 -March 31, 2008(2)		16,617	$	52.75		16,617		233,383
Total		44,265	$	50.40		44,112

(1)	In November 2007, the Company announced that the Board of Directors had approved a share repurchase program, effective December 10, 2007, which authorized the repurchase of up to 250,000 of the Company’s shares at a price of $52.00 per share. This offer expired on February 26, 2008.
(2)	In February 2008, the Company announced that the Board of Directors had approved a share repurchase program, effective February 27, 2008, which authorized the repurchase of up to 250,000 of the Company’s shares at a price of $52.75 per share. This offer expires on May 27, 2008.

Item 6.  Exhibits

(A) Exhibits

3.1	Amended and Restated Certificate of Incorporation of Hudson Valley Holding Corp.(1)
3.2	Amended and Restated By-Laws of Hudson Valley Holding Corp.(filed herewith).
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

(1) Incorporated herein by reference in this document to the Form 10-K filed on March 15, 2007.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HUDSON VALLEY HOLDING CORP.

By:  /s/  Stephen R. Brown

Stephen R. Brown

Senior Executive Vice President,

Chief Financial Officer and Treasurer

May 12, 2008

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

BYLAWS

OF

HUDSON VALLEY HOLDING CORP.

ARTICLE I
OFFICES

     SECTION 1. Name. The legal name of this corporation (hereinafter referred to as the “Corporation”) is Hudson Valley Holding Corp.

     SECTION 2. Principal Office. The principal office of the Corporation shall be located in the City of Yonkers, State of New York or at such other location as the Board may determine from time to time.

     SECTION 3. Other Offices. The Corporation may have such other offices either within or without the State of New York as the Board of Directors of the Corporation (hereinafter referred to as the “Board”) may from time to time determine.

ARTICLE II
MEETINGS OF SHAREHOLDERS

     SECTION 1. Annual Meeting. The annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the annual meeting, shall be held on such date and at such time as shall be fixed by the Board.

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     SECTION 2. Special Meetings. Except as otherwise specifically provided by statute, special meetings of the shareholders for any purpose or purposes may be called (i) by a majority of the Board, (ii) by the Chairman of the Board, (iii) by the Chief Executive Officer of the Corporation or (iv) by any one or more shareholders owning in the aggregate, not less than fifty (50%) percent of the stock of the Corporation. Such request shall state the purpose or purposes of the proposed special meeting. Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice of meeting.

     SECTION 3. Place of Meetings. Meetings of shareholders shall be held in the city, town or village in which the principal office of the Corporation is located or at such other place as the Board may legally designate, as fixed in the call and notice of meeting or waiver thereof.

     SECTION 4. Notice of Annual or Special Meetings. A notice setting forth the day, hour and place of each annual or special meeting of shareholders shall be mailed, postage prepaid, to each shareholder of record entitled to vote, at the shareholders last known post office address as the same appears on the stock records of the Corporation, or such notice shall be left with each such shareholder at their residence or usual place of business, not less than ten (10) no more than fifty (50) days before such annual or special meeting. In the case of a special meeting, the notice shall also state (i) the purpose or purposes thereof, and (ii) at whose direction the notice of meeting is being issued.

     SECTION 5. Adjournment. Any meeting of shareholders, annual or special, may be adjourned from time to time. If a meeting is adjourned and the Board fixes a new record date for the adjourned meeting, a written notice of the adjourned meeting shall be given to each shareholder of

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record on the new record date entitled to notice. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.

     SECTION 6. Waiver of Notice. Notice of any shareholder’s meeting may be waived in writing by any shareholder either before or after the time stated therein for convening the meeting, which notice may also be given electronically or by facsimile transmission. The attendance of any shareholder at any shareholder meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by the shareholder.

     SECTION 7. Notice of Business.

     (a) At an annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (ii) by or at the direction of the Board, or (iii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in this Section 7, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 7.

     (b) For business to be properly brought before a shareholder meeting by a shareholder, the shareholder must give timely notice thereof in writing to the Secretary of the Corporation pursuant to this Section 7. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day nor earlier than the close of business on the one hundred twentieth (120^th)

3

day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date or other prior public disclosure of the date of the meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120^th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth day following the day on which such notice of the date of the meeting or such public disclosure was first made. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above. To be in proper written form, a shareholder’s notice to the Secretary of the Corporation shall set forth in writing as to each matter the shareholder proposes to bring before the annual meeting:

(i)	a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the meeting;
(ii)	a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting;
(iii)	the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business;
(iv)	the number of shares of the Corporation which are beneficially owned by the shareholder;
(v)	any material interest of the shareholder in such business; and
(vi)	if the shareholder intends to solicit proxies in support of such stockholder’s

4

proposal, a representation to that effect. The foregoing notice requirements shall be deemed satisfied by a shareholder if the shareholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such shareholder’s proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; provided, however, that if such shareholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 7. The chairman of an annual meeting may refuse to permit any business to be brought before an annual meeting which fails to comply with the foregoing procedures or, in the case of a shareholder proposal, if the shareholder solicits proxies in support of such shareholder’s proposal without having made the representation required by clause (vi) of this Section 7.

     SECTION 8. Voting.

     (a) Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation (the “Certificate”) or these Bylaws, each shareholder entitled to vote at any meeting of shareholders shall be entitled to one vote in person or by proxy for each share of stock of the Corporation entitled to be voted upon the matter in question held by him or her and registered in his or her name on the books of the Corporation.

5

     (b) Shares of its own stock belonging to the Corporation, or to another corporation if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation, shall not be entitled to vote.

     (c) Shares held by an administrator, executor, guardian, conservator, committee or other fiduciary, except a trustee, may be voted by him or her, either in person or by proxy, without transfer of such shares into his or her name. Shares held by a trustee may be voted by him or her, either in person or by proxy, only after the shares have been transferred into his or her name as trustee or into the name of his or her nominee. Shares of its own stock held by a trust company as sole trustee, whether registered in its own name as such trustee or in the name of its nominee, shall not be voted by the registered owner in the election of directors unless under the terms of the trust the manner in which such shares shall be voted may be determined by a donor or beneficiary of the trust and unless such donor or beneficiary actually directs how such shares shall be voted, and shares of its own stock held by trust company and one or more persons as trustees may be voted by such other person or persons, as trustees, in the same manner as if he, she or they were the sole trustee.

     (d) Shares held by or under control of a receiver may be voted by him or her without the transfer thereof into his or her name if authority to do so is contained in a properly authenticated order of the court by which such receiver was appointed.

     (e) A shareholder whose shares are pledged as collateral for any loan or credit obligation shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee.

6

     (f) At all meetings of shareholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. Any other action, except as otherwise expressly required by the Certificate, these Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, shall be decided by the affirmative vote of a majority in interest of the shareholders present in person or by proxy and entitled to vote on such matters, provided a quorum is present. In the election of directors and for any other action, the vote at any meeting of the shareholders on any question need not be by ballot. On a vote by ballot each ballot shall be signed by the voting shareholder or on his or her behalf by his or her proxy, and it shall show the number of shares voted by him or her.

     SECTION 9. Quorum. Except for a special election of directors pursuant to Section 603 of the New York Business Corporation Law, the shareholders of record of a majority of the issued and outstanding shares of stock of the Corporation entitled to be voted at such meeting, present either in person or by proxy, shall constitute a quorum for the transaction of business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholder. The shareholders present may adjourn the meeting despite the absence of a quorum.

     SECTION 10. Proxies. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him or her by proxy.

     (a) Every proxy must be signed by the shareholder or his or her attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise

7

provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided in Section 608 of the New York Business Corporation Law or as provided in the proxy itself.

     (b) The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of shareholders.

     (c) Except as otherwise provided by written agreement between the parties, the record holder of shares which are held by a pledgee as security or which belong to another, upon demand therefore and payment of necessary expenses thereof, shall issue to the pledgor or to such owner of such shares a proxy to vote or take other action thereon.

     (d) A shareholder shall not sell his or her vote or issue a proxy to vote to any person for any sum of money or anything of value.

     (e) A proxy which is entitled “irrevocable proxy” and which states that it is irrevocable, is irrevocable when it is held by a pledgee or a person who has purchased or agreed to purchase the shares. Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed.

     (f) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability is noted conspicuously on the face or back of the certificate representing such shares.

     (g) No officer or employee of the Corporation shall act as proxy at any meeting of the Corporation.

8

     SECTION 11. Books and records; right of inspection, prima facie evidence. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board and executive committee, if any, and shall keep at the office of the Corporation, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof.

     Any person who shall have been a shareholder of record of the Corporation upon at least five (5) days’ written demand shall have the right to examine in person or by agent or attorney, during usual business hours, the Corporation’s minutes of the proceedings of its shareholders and record of shareholders and to make extracts there from for any purpose reasonably related to such person’s interest as shareholder.

     An inspection authorized by the above section may be denied to such shareholder upon his or her refusal to furnish to the Corporation or its transfer agent an affidavit that such inspection is not desired for a purpose which is in the interest of a business and other than the business of the Corporation that he or she has not, within five (5) years from the date of such request, sold or offered for sale any list of shareholders of any corporation of any type or kind, whether or not formed under any law of this state, or aided or abetted any person in procuring any such record of shareholders for any such purpose.

     SECTION 12. Shareholders’ Derivative Action. An action may be brought in the right of

9

the Corporation to procure a judgment in its favor, by a holder of shares or of a beneficial interest in such shares of the Corporation.

     In any such action, it shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he or she was such a holder at the time of the transaction of which he or she complains, or that his or her shares or his or her interest therein transferred upon him or her by operation of law.

     In any such action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort. Such action shall not be discontinued, compromised or settled, without the approval of the court having jurisdiction over the action.

     If the action on behalf of the Corporation was successful, in whole or in part, or if anything was received by the plaintiff as the result of a judgment, compromise or settlement of an action or a claim, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, and shall direct him, her or them to account to the Corporation for the remainder of the proceeds so received by him, her or them. This section shall not apply to any judgment rendered for the benefit of injured shareholders only and limited to a recovery of the loss or damage sustained by them.

     SECTION 13. Security for Expenses in Shareholders’ Derivative Action. In any shareholder derivative action, if the plaintiff holds less than five percent of any class of the outstanding shares or holds a beneficial interest in shares representing less than five percent, then unless the shares and beneficial interest of such plaintiff have a fair value in excess of fifty thousand dollars, the corporation in whose right such action is brought shall be entitled at any stage of the

10

proceedings before final judgment, to require the plaintiff to give security for the reasonable expenses, including attorney’s fees, which may be incurred by it in connection with such action and by the other party’s defendant in connection therewith for which the corporation may become liable under this article, under any contract or otherwise under law, to which the corporation shall have recourse in such amount as the court having jurisdiction of such action shall determine upon the termination of such action.

     SECTION 14. Organization. Meetings of shareholders shall be presided over by the Chairman of the Board, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the Chief Executive Officer, or in his absence by the Senior Executive Vice President, or in the absence of the foregoing persons by a Chairman designated by the Board, or in the absence of such designation, by a Chairman chosen at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in his absence the Chairman of the meeting may appoint any person to act as secretary of the meeting.

     SECTION 15. Conduct of Meetings. The date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of shareholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of shareholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding officer of the meeting, may include, without limitation, the following:

11

(i)	the establishment of an agenda or order of business for the meeting;
(ii)	rules and procedures for maintaining order at the meeting and the safety of those present;
(iii)	limitations on attendance at or participation in the meeting to shareholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the Chairman of the meeting shall determine;
(iv)	restrictions on entry to the meeting after the time fixed for the commencement thereof; and
(v)	limitations on the time allotted to questions or comments by participants.

     Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.

ARTICLE III
BOARD OF DIRECTORS

     SECTION 1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board. Except as expressly limited by law, the Board may adopt such rules and regulations for the conduct of its meetings and the management and affairs of the Corporation as it may deem proper.

     SECTION 2. Number. The Board shall consist of no less than five (5) no more than twenty (20) persons, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of a majority of the shareholders at any meeting thereof.

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     SECTION 3. Election and Nomination of Directors. Directors shall be elected by the shareholders of the Corporation at the annual meeting or at any special meeting called for the election of directors. Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors. Each director shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been elected and qualified. Nominations of candidates for election as directors may be made:

(i)	at the direction of the Board; or
(ii)	pursuant to the Corporation’s notice of meeting (or any supplement thereto).

     SECTION 4. Qualification and Term of Directors. To serve on the Board a director must be at least twenty-five (25) years of age. No director shall serve beyond the end of the calendar year of his or her eightieth (80^th ) birthday unless a one (1) year extension is approved by a two-thirds vote of the entire Board, excluding, however, (i) the vote of the director being considered for an extension, and (ii) the votes of those directors on the Board whose age is eighty (80) or greater. Not more than one-third of the directors shall be active officers or employees of Hudson Valley Holding Corp., Hudson Valley Bank, N.A., or any of its subsidiaries. For purposes of this Section, an outside director shall mean a person who is not currently employed by the Corporation, Hudson Valley Bank, N.A. or any of its subsidiaries or affiliates. All directors who are not outside directors shall be known as inside directors. Collectively, inside and outside directors shall be known as directors and shall have equal voting rights. Each director shall hold office until the annual meeting

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of the shareholders next following his or her election and until his or her successor shall have been elected and shall have qualified, or until his or her death, or until he or she shall earlier resigns. This Section 4 of Article III shall not be amended by the Board except upon a vote of two-thirds of the directors then in office.

     SECTION 5. Resignations. A director may resign at any time by giving written notice to the Chairman of the Board. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

     SECTION 6. Removal of Directors. Any or all of the directors may be removed for cause (i) by the vote of a majority of all outstanding shares entitled to vote or, (ii) by the action of the Board. Directors may be removed without cause only by vote of a majority of all outstanding shares entitled to vote.

     SECTION 7. Vacancies and Newly Created Directorships. All vacancies in the office of director, including newly created directorships resulting from an increase in the number of directors, may be filled either (i) by the shareholders of the Corporation entitled to vote for the election of directors, at a meeting of the shareholders called for that purpose, or (ii) by vote of two-thirds of the directors then in office, and each new director so chosen shall hold office until the next annual meeting of shareholders and until his or her successor shall have been elected and shall have qualified, or until his or her earlier death, or until he or she shall resign. This Section shall not be amended by the Board except upon a vote of two-thirds of the directors then in office.

     SECTION 8. Establishment of Committees of the Board of Directors.

     (a) The Corporation shall have such committees of the Board as the Board shall

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determine from time to time. The Board, by resolution adopted by a majority of the entire Board, may designate from among its members (1) an Executive Committee consisting of at least five (5) directors, (2) a Compensation and Organization Committee, and (3) an Audit and Examination Committee and any such other committees, which are deemed appropriate from time to time, each consisting of three or more directors, and each of which, to the extent provided in the resolutions and permitted by law, shall have all the authority of the Board, except that no such committee shall have authority as to the following matters:

i.	The submission to shareholders of any action that needs shareholders’ authorization under this Section.
ii.	The filling of vacancies in the Board or in any such committee.
iii.	The amendment or appeal of the by-laws, or the adoption of new by-laws.
iv.	The amendment or repeal of any resolution of the Board which by its terms shall not be so amendable or repealable.

     (b) The Board may designate one or more directors as alternate members of any such committee, who may replace any absent member or members at any meeting of such committee.

     (c) Each such committee shall serve at the pleasure of the Board. The designation of any such committee, the delegation thereto of authority, or action by any such committee pursuant to such authority shall not alone constitute performance by any member of the Board who is not a member of the committee in question, of his or her duty to the Corporation under the NY Business Corporation Law.

     (d) Except as provided by law, the Board may, from time to time, establish, eliminate and modify the power and authority of any of the Board’s committees; change the size of a committee; and add, remove or replace the Chairman or member of any committee.

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     SECTION 9. Compensation of Directors. The Compensation and Organization Committee shall have authority to fix the compensation of directors for services in any capacity, or to allow a fixed sum plus expenses, if any, for attendance at meetings of the Board or of committees of directors. Nothing contained in this Section 9 of Article III shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving compensation therefore.

     SECTION 10. Regular Meetings. Regular meetings of the Board may be held without notice at such times and places, within or without the State of New York, as may from time to time be fixed by the Board. The Corporation must hold a regular monthly meeting at least ten (10) times a year and during any three (3) consecutive calendar months the Board must meet at least twice. The executive committee shall meet at least once in each thirty (30) day period during which the Board does not meet.

     The Board shall, after their due qualification, hold an annual meeting for the election of officers within five (5) days after the annual meeting of shareholders.

     SECTION 11. Special Meetings; Notice; Waiver. Special meetings of the Board may be held at any time and place, within or without the State of New York, upon the call of the Chairman of the Board or by the Chief Executive Officer by oral, telegraphic or written notice, duly given to or sent or mailed to each director not less than one (1) day before such meeting. Special meetings shall also be called by the Chairman of the Board or the Chief Executive Officer on the written request of any two (2) directors.

     Notice of a special meeting need not be given to any director who submits a signed waiver of

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notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or prior to its conclusion, the lack of notice to him or her.

     A notice, or waiver of notice, need not specify the purpose of any special meeting of the Board.

     SECTION 12. Quorum; Action by the Board; Adjournment. At any meeting of the Board, a majority of the director positions on the Board shall constitute a quorum at any meeting for the transaction of business, except that when the number of directors constituting the whole Board shall be an even number, one-half of that number, but not less than five (5), shall constitute a quorum.

     The vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board, except as may be otherwise specifically provided by statute, or these Bylaws.

     A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place.

     SECTION 13. Telephonic Participation. Any one or more members of the Board or any committee thereof may participate in a meeting of such Board or committee by means of a telephone conference or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. The minutes of the telephonic meeting shall record the names of the directors participating.

     SECTION 14. Ex Officio Member Of Committees. Both the Chairman of the Board and the Chief Executive Officer shall be a member “ex officio” of all committees of the

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Board, except where expressly prohibited by statute, the Certificate of Incorporation or these Bylaws or by the terms of any plan or other document establishing any such committee.

     SECTION 15. Organization. Meetings of the Board shall be presided over by the Chairman of the Board, or in his absence by the Chief Executive Officer of the Corporation, or, in his absence, by a Chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the Chairman of the meeting may appoint any person to act as secretary of the meeting.

ARTICLE IV
CHAIRMAN OF THE BOARD

     SECTION 1. Chairman of the Board. The Board shall appoint one of its members to be the Chairman of the Board to serve at its pleasure. The Chairman of the Board may, at the discretion of the Board, be an officer of the Corporation, subject to the control of the Board, and shall report directly to the Board. The Chairman of the Board shall preside at all meetings of the Board. The Chairman of the Board shall:

(1)	Supervise the carrying out of the policies adopted or approved by the Board;
(2)	Have general powers, as well as the specific powers conferred by these Bylaws; and
(3)	Have and may exercise such further powers and duties as from time to time may be conferred upon, or assigned by the Board.

     SECTION 2. Compensation. The compensation of the Chairman of the Board of the Corporation shall be established by the Compensation and Organizational Committee.

ARTICLE V
OFFICERS

     SECTION 1. Officers of the Corporation. The officers of the Corporation shall be elected by the Board and may consist of the following: a President, a Chief Executive Officer, a Vice

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President, a Treasurer, a Secretary and such other officers as the Board may determine from time to time. The officers shall be chosen annually by the Board. Each officer shall hold office until his or her successor shall have been elected and shall have qualified, or until his or her death or until his or her earlier resignation or removal in the manner hereafter provided.

     SECTION 2. Chief Executive Officer. The Board shall appoint one of its members to be the Chief Executive Officer of the Corporation. In the absence of the Chairman, the Chief Executive Officer shall preside at any meeting of the Board. The Chief Executive Officer shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation, or practice, to the office of Chief Executive Officer, or imposed by these Bylaws. The Chief Executive Officer shall also have and may exercise such further powers and duties as from time-to-time may be conferred, or assigned by the Board.

     SECTION 3. President. The Board shall appoint a President of the Corporation. In the absence of the Chairman or the Chief Executive Officer, the President shall preside at any meeting of the Board. The President shall also have and may exercise such further powers and duties as from time-to-time may be conferred, or assigned by the Board.

     SECTION 4. Vice President. The Board may appoint one or more vice presidents, including, without limitation, senior executive vice presidents and executive vice presidents. Each vice president shall have such powers and duties as may be assigned by the Board. The Board shall designate one senior executive vice president, in the absence of the Chief Executive Officer of the President, to perform all the duties of the Chief Executive Officer or the President.

     SECTION 5. Secretary. The Board shall appoint a secretary or other designated office who shall be secretary of the Board and of the association, and shall keep accurate minutes of all

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meetings. The secretary shall:

(1)	Attend to the giving of all notices required by these By-laws;
(2)	Be custodian of the corporate seal, records, documents, and papers of the association;
(3)	Provide for the keeping of proper records of all transactions of the association;
(4)	Have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the office of secretary, or imposed by these Bylaws; and
(5)	Perform such other duties as may be assigned from time-to-time, by the Board.

     SECTION 6. Other Officers. The Board may appoint one or more assistant vice presidents, one or more assistant secretaries, and such other officers and attorneys in fact as from time to time may appear to the Board to be required or desirable to transact the business of the Corporation. Such officers shall respectively exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon, or assigned to, them by the Board, the Chairman of the Board, or the president and chief executive officer. The Board may authorize an officer to appoint one or more officers or assistant officers.

     SECTION 7 Resignation and Removal. Any officer may resign at any time by giving written notice to the Chairman of the Board. Any such resignation shall take effect at the time specified therein, or if no time is so specified, upon its receipt by the Chairman of the Board. Any officer may be removed, either with or without cause, at any time by the vote of a majority of the Board.

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     SECTION 8. Powers and Duties. The powers and duties of officers shall be as determined from time to time by resolution of the Board, or in such other manner as the Board may authorize, not inconsistent with statute, or Bylaws. To the extent not so provided by the Board, the powers and duties of the officers shall be those powers which generally pertain and are applicable to their respective roles and offices.

     SECTION 9. Compensation. The compensation of all officers of the Corporation shall be established by the Compensation and Organization Committee.

     SECTION 10. Vacancies. Any vacancy in any office by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any meeting.

ARTICLE VI
INDEMNITY

     SECTION 1. Definitions. For purposes of this Article VI, the following terms shall have the following meanings unless the context otherwise requires:

     (a) “Director” or “Officer” means an individual who is or was a director or officer, respectively, of the Corporation or who, while a director or officer of the Corporation is or was serving at the Corporation’s request as a director or officer. “Director” or “Officer” includes, unless the context requires otherwise, the estate or personal representative of a director or officer.

     (b) “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses, including, without limitation, counsel fees, incurred with respect to a proceeding commenced against a director or officer.

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     (c) “Official Capacity” means: (a) when used with respect to a director, the office of a director in the Corporation; and (b) when used with respect to an individual other than a director, the office in the Corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Corporation. “Official Capacity” does not include service for any other domestic corporation or any trust, employee benefit plan or entity.

     (d) “Party” means an individual who was or is threatened to be made a defendant or respondent in a proceeding.

     (e) “Proceeding” means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal.

     SECTION 2. Duty of Directors and Officers; Oath of Directors. Directors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care and skill which ordinarily prudent individuals would exercise under similar circumstances in like positions. In discharging their duties, directors and officers, when acting in good faith, may rely upon (a) financial statements of the Corporation represented to them to be correct by the President or the Chief Financial Officer of the Corporation having charge of its books of account, or stated in a written report by an independent accountant to reflect the financial condition of the Corporation, and (b) reports required to be submitted to them or prepared in the ordinary course of business by an officer or committee charged with the responsibility therefore.

     When appointed or elected, each director shall take an oath that he or she will, so far as the duty devolves on him or her, diligently and honestly administer the affairs of the Corporation, and will not knowingly violate, or willingly permit to be violated, any of the provisions of law applicable to the Corporation.

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     SECTION 3. Authority to Indemnify Directors and Officers.

     (a) Non Derivative Actions: Except as otherwise provided by statute, regulation, the Certificate or these Bylaws, the Corporation shall, subject to the limitations of Section 4 of this Article VI, indemnify any individual who is a party to any proceeding (other than one by or in the right of the Corporation to procure a judgment in its favor), because he or she is or was a director or officer of the Corporation against liability if:

(i)	the individual conducted himself or herself in good faith;
(ii)	he or she reasonably believed: (i) in the case of conduct in his or her official capacity that it was in the best interests of the Corporation; and (ii) in all other cases, that his or her conduct was not opposed to the best interests of the Corporation; and
(iii)	in the case of any criminal proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful; or
(iv)	he or she engaged in conduct for which broader indemnification has been made permissible or obligatory by statute, regulation, under a provision of the Certificate or these Bylaws.

     The termination of a proceeding by judgment, settlement or conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director or officer did not meet the standard of conduct described in this Section.

     (b) Derivative Actions: Except as otherwise provided by statute, regulation, or these Bylaws, the Corporation shall, subject to the limitations of Section 4 of this Article VI, indemnify any individual made a party to an action by or in the right of the Corporation to procure a judgment

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in its favor because he or she is or was a director or officer against reasonable expenses incurred by him or her in connection with such action, if such director or officer acted, in good faith, for a purpose which he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation. Notwithstanding the foregoing, no indemnification under this Section shall be made in respect of (a) a threatened action, or a pending action which is settled, or (b) any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that the court in which the action was brought determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper.

     SECTION 4. Payment of Indemnification Other Than by Court Award.

     1. Any director or officer who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding shall be entitled to indemnification from the Corporation.

     2. Except (i) as provided for in subdivision (1) above and, (ii) order by a court, any indemnification from the Corporation must be authorized in each specific case:

(a)	By the Board acting by a quorum consisting of directors who are not parties to such action or proceeding upon a finding that the director or officer has met the standard of conduct set forth in Article VI, Section 2 hereof, or
(b)	If a quorum under subparagraph (1) is not obtainable or even, if obtainable, a quorum of disinterested directors so directs:

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(i)	By the Board upon the opinion in writing of independent counsel that indemnification is proper in the circumstances because the applicable standard of conduct set forth in Article VI Section 2 hereof and has been met by such director or officer, or
(ii)	By the shareholders upon a finding that the director or officer has met the applicable standard or conduct set forth in Article VI Section 2 hereof.

3. Expenses incurred in defending a civil or criminal action or proceeding may be paid by the Corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay the expenses so advanced by the Corporation.

     SECTION 5. Indemnification of Directors and Officers by a Court. Notwithstanding the failure of the Corporation to provide indemnification, and despite any contrary resolution of the Board or of the shareholders, indemnification awarded by a court must be paid by the Corporation to the extent authorized by law.

     SECTION 6. Insurance for Indemnification of Directors and Officers. The Corporation may purchase and maintain insurance:

     (1) To indemnify itself for any obligation which it incurs as a result of the indemnification of directors and officers under the provisions of this Article VI, and

     (2) To indemnify directors and officers in instances in which they may be indemnified by the Corporation under the provisions of this Article VI, and

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     (3) To indemnify directors and officers in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article VI provided the contract of insurance covering such directors and officers provides, in a manner acceptable to the superintendent of insurance, for a retention amount and for co-insurance.

ARTICLE VII
ISSUE AND TRANSFER OF CAPITAL STOCK

     SECTION 1. Certificates. Certificates of capital stock and other documentary evidences of equity securities shall be in such form authorized or adopted by the Board. Each certificate shall be signed by the Chairman of the Board, the President, the Chief Executive Officer or by any Senior Executive Vice President, and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof, provided that the certificate shall also contain such other recitals as may be required by law. Any or all such signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue.

     The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board.

     SECTION 2. Lost or Destroyed Certificates. In the event that a person alleges to have lost or destroyed his or her certificate(s) theretofore issued by the Corporation, the Board may either:

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(i) direct a new certificate(s) to be issued in place of any certificate(s) theretofore issued by the Corporation, alleged to have been lost or destroyed; or (ii) direct that the shares represented thereby be represented by a book entry upon the stock ledger of the Corporation, upon the making of an affidavit of the fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or entry on the stock ledger of the Corporation, the Board may, in its discretion and as a condition precedent to the issuance thereto, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

     SECTION 3. Transfers of Shares.

     (a) Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof, or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or transfer agent for such stock, if any, and if such shares are represented by a certificate, upon surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided, however, that the Corporation shall be entitled to recognize and enforce any applicable lawful restriction or transfer. The person in whose name shares are registered on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Security or to

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such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

     (b) Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to cancel the old certificate; and either (i) issue a new certificate to the person entitled thereto, and cancel the old certificate; or (ii) direct that a book entry be made upon the stock ledger of the Corporation reflecting such transfer.

     (c) With respect to uncertificated securities, upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the Corporation shall be made only on the stock ledger of the Corporation by the registered holder thereof, or by the registered holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer agent or a registrar, if any.

     (d) No transfer shall be made within ten (10) days next preceding the annual meeting of shareholders.

     (e) The Corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of New York.

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     SECTION 4. Fixing Record Date. The Board by resolution shall fix a date as the record date for any determination of shareholders, such date in any case to be not more than seventy (70) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring determination of shareholders is to be taken. When a record date has been determined for shareholders entitled to vote in any meeting as provided in this section, such record date shall apply to any adjournment thereof.

     SECTION 5. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by statute.

     SECTION 6. Book Entry Shares. The Corporation may, at its option issue shares of its capital stock in book-entry (uncertificated) form. In such event, all references herein to the delivery of stock certificates shall be inapplicable. The Corporation’s transfer agent shall keep appropriate records indicating the number of shares of capital stock owned by each person to whom shares are issued, any restrictions applicable to such shares of capital stock and the duration thereof, and other relevant information. Upon expiration of any applicable restrictions for any reason, the transfer agent shall effect delivery of such shares of capital stock by adjusting its records to reflect the expiration of such restrictions, and by notifying the person in whose name such shares were issued that such restrictions have lapsed.

ARTICLE VIII
MISCELLANEOUS PROVISIONS

     SECTION 1. Corporate Seal. The corporate seal shall have inscribed thereon the name of

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the Corporation and shall be in such form as the Board may from time to time determine.

     SECTION 2. Fiscal Year. The fiscal year of the Corporation shall be the twelve (12) months ending December 31.

     SECTION 3. Checks and Notes. All checks, drafts or other orders for the payment of money shall be signed by such officer or officers or other person or persons as shall be thereunto authorized from time to time by resolution of the Board.

     SECTION 4. Waivers of Notice. Whenever notice is required or to be given by statute, or these Bylaws, a waiver thereof, by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of shareholders shall constitute a waiver of notice of such meeting, except when the shareholder attends a meeting for the express purpose of objecting, prior to the conclusion of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the shareholders, directors or members of a committee of directors need be specified in any waiver of notice.

     SECTION 5. Proxies. All proxies or instruments authorizing any person to attend, vote, consent or otherwise act at any and all meetings of shareholders of any entity in which the Corporation shall own shares or in which it shall otherwise be interested shall be executed by the Chairman of the Board or such other officer as the Chairman of the Board may from time to time determine.

     SECTION 6. Contracts. The Board may by resolution authorize any officer(s), agent(s) or employee(s) to enter into any contract or engagement and to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to

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specific instances; and, unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or for any amount.

     SECTION 7. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time period.

     SECTION 8. Governing Law. Except as otherwise provided herein, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York.

     SECTION 9. Dividends. The Board shall have the power to fix and determine and to vary, from time to time, the amount of the working capital of the Corporation before declaring any dividends among its shareholders, and to direct and determine the use and disposition of any net profits or surplus, and to determine the date or dates for the declaration and payment of dividends and to determine the amount of any dividend, and the amount of any reserves necessary in their judgment before declaring any dividends among its shareholders, and to determine the amount of the net profits of the Corporation from time to time available for dividends.

ARTICLE IX
CONFLICTS OF INTEREST

     No contract or transaction between the Corporation and one or more of its directors between the Corporation and any other corporation, partnership, association, or other organization of which

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one or more of its officers, partners, or members are directors or officers of the corporation, or which one or more of the Corporation’s directors or officers have a financial or other interest, shall be void or voidable solely by reason thereof, or solely because the director or officer is present at or participates in the meeting of the Board or a committee thereof which authorized the contract or transaction, if:

     (1) Any duality of interest or possible conflict of interest on the part of any director of the Corporation is disclosed to the other members of the Board or committee either through an annual questionnaire or at a meeting at which a matter involving such duality or conflict of interest is considered or acted upon; and

     (2) Any director having a duality of interest or possible conflict or interest on any matter refrains from voting or using his personal influence on the matter. The minutes shall reflect that a disclosure was made and the abstention from voting.

     The foregoing requirements shall not be construed as preventing a director from briefly stating his position in the matter, nor from answering pertinent questions of other members of the Board or committee. Each director of the Corporation shall be advised of this policy upon entering on the duties of his or her office and shall answer an annual questionnaire.

ARTICLE X
AMENDMENTS

     SECTION 1. Power to Amend. The Bylaws, or any of them, may be altered, amended or repealed, and new bylaws may be made (i) by the Board, by vote of a majority of the number of

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directors then in office as directors, acting at any meeting of the Board, or (ii) by the vote of the holders of not less than fifty percent (50%) of the total voting power of all outstanding shares of voting stock of the Corporation, at any meeting of shareholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of such shareholders meeting.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James J. Landy, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Hudson Valley Holding Corp.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  James J. Landy
James J. Landy
President and Chief Executive Officer

Date:  May 12, 2008

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen R. Brown, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Hudson Valley Holding Corp.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Stephen R. Brown
Stephen R. Brown
Senior Executive Vice President,
Chief Financial Officer and Treasurer

Date:  May 12, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Hudson Valley Holding Corp. (the “Company”) for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Landy, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  James J. Landy
James J. Landy
President and Chief Executive Officer

Dated:  May 12, 2008

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Hudson Valley Holding Corp. (the “Company”) for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen R. Brown, Senior Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Stephen R. Brown
Stephen R. Brown
Senior Executive Vice President,
Chief Financial Officer and Treasurer

Dated:  May 12, 2008