##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
    FORM 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the fiscal year ended December 31, 2007
  Commission File number 030525
  HUDSON VALLEY HOLDING
    CORP.
 (Exact name of registrant as
    specified in its charter)
    New York(State or other jurisdiction of
    incorporation or organization)

13-3148745(I.R.S. Employer
    Identification No.)21 Scarsdale Road, Yonkers, New York(Address of principal executive
    offices)

10707(Zip Code)   Registrants telephone number, including area code:
    (914) 961-6100
  Securities Registered Pursuant to Section 12(b) of the
    Act: None
    Securities Registered Pursuant to Section 12(g) of the
    Act:
  Name ofeach exchangeon whichTitle of each Class

registeredCommon Stock, ($0.20 par value per share)

None   o x
  o x
  x o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o x o o
  Rule 12b-2 o x
   Outstanding atMarch 3,Class

2008Common Stock
    ($0.20 par value)

9,876,202 Shares      Documents incorporated by reference:




---



##### 





FORM
    10-K
 TABLE OF CONTENTS
  Page No.PART IITEM 1

BUSINESS


1ITEM 1A

RISK FACTORS


11ITEM 1B

UNRESOLVED STAFF COMMENTS


14ITEM 2

PROPERTIES


14ITEM 3

LEGAL PROCEEDINGS


14ITEM 4

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


14PART IIITEM 5

MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


15ITEM 6

SELECTED FINANCIAL DATA


19ITEM 7

MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


21ITEM 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


52ITEM 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


56ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


89ITEM 9A

CONTROLS AND PROCEDURES


89ITEM 9B

OTHER INFORMATION


90PART IIIITEM 10

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


90ITEM 11

EXECUTIVE COMPENSATION


90ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS


90ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


90ITEM 14

PRINCIPAL ACCOUNTANT FEES AND SERVICES


90PART IVITEM 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


91SIGNATURES


93EX-11: STATEMENTS RE: COMPUTATION OF PER SHARE EARNINGSEX-21: SUBSIDIARIESEX-23: CONSENTS OF EXPERTS AND COUNSELEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




---



##### Table of Contents



PART
    I
 ITEM
    1  BUSINESS  General
              Forward-Looking
    Statements
  Form 10-K
 1




---



##### Table of Contents



Subsidiaries
    of the Banks
                Employees
    Our
    Market Area
       2




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Competition
           3




---



##### Table of Contents



Lending
    Real estate


68.0
%Commercial and industrial


28.7Individuals


2.3Lease financing


1.0Total


100.0
%         (ii)
    the establishment of individual lending authorities well below
    the Banks legal lending authority,(iii)
    the involvement by senior management and the Board of Directors
    in the loan approval process for designated categories, types or
    amounts of loans,             4




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Deposits
          Portfolio
    Management Services
    Other
    Services
    Supervision
    and Regulation
       5




---



##### Table of Contents



6




---



##### Table of Contents



Regulation
    of Bank Subsidiaries
    Dividend
    Limitations
    Capital
    Standards
     7




---



##### Table of Contents



FIRREA
  FDIC-insured FDIC-insured
    Loans to
    Related Parties
        Community
    Reinvestment Act and Fair Lending Developments
   8




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##### Table of Contents



USA
    Patriot Act
    Sarbanes-Oxley
    Act of 2002
      
    a prohibition on personal loans made or arranged by the issuer
    to its directors and executive officers (except for loans made
    by a bank subject to Regulation O);
    independence requirements for audit committee members;
    independence requirements for company auditors;
    certification of financial statements within the Annual Report
    on
    Form 10-K
    and Quarterly Reports on
    Form 10-Q
    by the chief executive officer and the chief financial officer;
    the forfeiture by the chief executive officer and the chief
    financial officer of bonuses or other incentive-based
    compensation and profits from the sale of an issuers
    securities by such officers in the twelve month period following
    initial publication of any financial statements that later
    require restatement due to corporate misconduct;
    disclosure of off-balance sheet transactions;
    two-business day filing requirements for insiders filing on
    Form 4;
    disclosure of a code of ethics for financial officers and filing
    a Current Report on
    Form 8-K
    for a change in or waiver of such code; 9




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##### Table of Contents




    the reporting of securities violations up the ladder
    by both in-house and outside attorneys;
    restrictions on the use of non-GAAP financial measures in press
    releases and SEC filings;
    the formation of a public accounting oversight board;
    various increased criminal penalties for violations of
    securities laws;
    an assertion by management with respect to the effectiveness of
    internal control over financial reporting; and  Governmental
    Monetary Policy
      Investment
    Advisers Act of 1940
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
 10




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##### Table of Contents



ITEM
    1A  RISK FACTORS  Risks
    Related to Our Business
  Our
    markets are intensely competitive, and our principal competitors
    are larger than us.
        We
    operate in a highly regulated industry and could be adversely
    affected by governmental monetary policy or regulatory
    change.
      Our
    efforts to expand within our market and provide additional
    services by acquiring smaller banks and related businesses may
    not prove to be successful, and may subject us to unexpected
    costs or liabilities.
    The
    opening of new branches could reduce our
    profitability.
   11




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##### Table of Contents



Our
    income is sensitive to changes in interest rates.
          We may
    incur liabilities under federal and state environmental laws
    with respect to foreclosed properties.
    A
    downturn in the economy in our market area would adversely
    affect our loan portfolio and our growth potential.
    A
    downturn in the real estate market could negatively affect our
    business.
     12




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##### Table of Contents



Technological
    change may affect our ability to compete.
      Our
    profitability depends on our customers ability to repay
    their loans and our ability to make sound judgments concerning
    credit risk.
    Risks
    Related to Our Common Stock
  Form 10-K.
 13




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##### Table of Contents



ITEM
    1B  UNRESOLVED STAFF COMMENTS   ITEM
    2  PROPERTIES  th
    97-77 Queens
         ITEM
    3  LEGAL PROCEEDINGS   ITEM
    4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS   14




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##### Table of Contents



PART
    II
 ITEM
    5  MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES      2007


2006High


Low


High


LowFirst Quarter

$
53.79


$
38.86


$
42.36


$
34.71Second Quarter


50.91



39.77



47.93



35.33Third Quarter


51.59



50.91



47.31



37.60Fourth Quarter


52.00



51.59



50.00



36.84              15




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##### Table of Contents



Total Number


Maximum Numberof Shares


of SharesPurchased as


That MayPart of


Yet BeTotal Number


Average Price


Publicly


Purchasedof Shares


Paid Per


Announced


Under thePeriod

Purchased


Share


Programs


Programs(2)October 2007(1)


5,553


$
56.75



5,553November 2007(1)


3,565



56.75



3,565December 1 - December 8, 2007(1)


2,869



56.75



2,869December 9 - December 31, 2007(2)


5,130



52.00



5,130Total December 2007


7,999



55.33



7,999



244,870Total


17,117



56.08



17,117



244,870     (1)
    In August 2007, the Company announced that the Board of
    Directors had approved a share repurchase program, effective
    August 30, 2007, which authorized the repurchase of up to
    250,000 of the Companys shares at a price of $56.75 per
    share. This offer expired on December 7, 2007.(2)
    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.  There is
    currently no active market for the common stock and there can be
    no assurance that a market will develop.
           16




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The
    development of a market for the common stock could be limited by
    existing agreements with respect to resale.
    Government
    regulation restricts our ability to pay cash
    dividends.
         17




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##### Table of Contents



Stockholder
    Return Performance Graph
    Total
    Return Performance
  
  Period EndingTotal Return Index for:

12/31/02


12/31/03


12/31/04


12/31/05


12/31/06


12/31/07Hudson Valley Holding Corp.


100.00



180.71



178.59



158.96



171.34



216.99Russell 2000


100.00



147.25



174.24



182.18



215.64



212.26SNL Bank $1B-$5B Index


100.00



135.99



167.83



164.97



190.90



139.06   market-capitalization
 18




---



##### Table of Contents



ITEM 6 
    SELECTED FINANCIAL DATA  Form 10-K. Form 10-K. Form 10-K.
  Year Ended December 31,2007


2006


2005


2004


2003(000s except share data)Operating Results:Total interest income

$
150,367


$
141,157


$
110,364


$
88,432


$
76,520Total interest expense


46,299



41,600



25,306



16,795



15,444Net interest income


104,068



99,557



85,058



71,637



61,076Provision for loan losses


1,470



2,130



2,059



473



437Income before income taxes


52,742



52,094



46,983



40,970



35,962Net income


34,483



34,059



30,945



27,540



24,207Basic earnings per common share


3.52



3.46



3.15



2.83



2.53Diluted earning per common share


3.39



3.35



3.04



2.77



2.47Weighted average shares outstanding


9,789,018



9,847,917



9,822,647



9,732,197



9,564,416Diluted weighted average share outstanding


10,181,512



10,164,306



10,170,674



9,927,759



9,783,462Cash dividends per common share


1.80



1.59



1.39



1.18



0.99   December 31,2007


2006


2005


2004


2003Financial position:Securities

$
780,251


$
917,660


$
883,992


$
875,120


$
861,410Loans, net


1,289,641



1,205,243



1,009,819



862,496



707,104Total assets


2,330,748



2,291,734



2,032,721



1,840,874



1,669,513Deposits


1,812,542



1,626,441



1,407,996



1,235,341



1,124,900Borrowings


286,941



456,559



435,212



427,593



386,400Stockholders equity


203,687



185,566



169,789



159,662



142,361  19




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##### Table of Contents



Financial
    Ratios
    December 31,2007


2006


2005


2004


2003Earnings RatiosNet income as a percentage of:Average earning assets


1.59
%


1.64
%


1.67
%


1.63
%


1.60
%Average total assets


1.49



1.54



1.58



1.55



1.53Average total stockholders equity


18.03



19.40



18.77



18.33



17.55Adjusted average total stockholders equity(1)


17.61



18.57



18.54



18.55



18.51Capital RatiosAverage total stockholders equity to average total assets


8.27
%


7.95
%


8.44
%


8.48
%


8.70
%Average net loans as a multiple of average total
    stockholders equity


6.45



6.44



5.63



5.20



4.80Leverage capital


8.31



7.74



8.30



8.17



8.43Tier 1 capital (to risk weighted assets)


12.61



12.32



13.82



14.46



15.63Total risk-based capital (to risk weighted assets)


13.77



13.49



14.94



15.59



16.88OtherAllowance of loan losses as a percentage of year-end loans


1.33
%


1.37
%


1.32
%


1.35
%


1.59
%Loans (net) as a percentage of year-end total assets


55.33



52.59



49.68



46.85



42.35Loans (net) as a percentage of year-end total deposits


71.15



74.10



71.72



69.82



62.86Securities as a percentage of year-end total assets


32.03



40.04



41.02



47.54



51.60Average interest earning assets as a percentage of average
    interest bearing liabilities


146.83



148.34



153.96



155.28



154.39Dividends per share as a percentage of diluted earnings per share


51.52



47.70



45.40



42.62



39.71    (1)
    Adjusted average stockholders equity excludes unrealized
    losses, net of tax, of $4,521, $7,846, and $2,108 in 2007, 2006
    and 2005, respectively, and unrealized gains, net of tax, of
    $1,706 and $7,143 in 2004 and 2003, respectively, 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. As noted in the Companys Proxy Statement,
    which is incorporated herein by reference, net income as a
    percentage of adjusted average stockholders equity is one
    of several factors utilized by management to determine total
    compensation. 20




---



##### Table of Contents



ITEM 7 
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS  Regulation S-X Form 10-K.
  Overview
    of Managements Discussion and Analysis
  Form 10-K. Form 10-K.
         21




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##### Table of Contents



Critical
    Accounting Policies
  Application of Critical Accounting Policies 
  Allowance for Loan Losses 
 22




---



##### Table of Contents



Income Recognition on Loans 
 23




---



##### Table of Contents



Securities 
  Goodwill and Other Intangible Assets 
  Bank Owned Life Insurance  No. 06-5, Bulletin No. 85-4 No. 06-5), EITF 06-5,
  Retirement Plans 
  Results
    of Operations for Each of the Three Years in the Period Ended
    December 31, 2007
  Summary
    of Results
       24




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##### Table of Contents



25




---



##### Table of Contents



Average
    Balances and Interest Rates
    (000s except percentages)Year ended December 31,2007


2006


2005Average





Yield/


Average





Yield/


Average





Yield/Balance


Interest(3)


Rate


Balance


Interest(3)


Rate


Balance


Interest(3)


RateASSETSInterest earning assets:Deposits in banks

$
10,537


$
527



5.00
%

$
4,749


$
205



4.32
%

$
2,992


$
129



4.31
%Federal funds sold


58,603



2,938



5.01



12,669



600



4.74



23,907



841



3.52Securities:(1)Taxable


665,761



32,868



4.94



733,062



34,591



4.72



703,359



28,377



4.03Exempt from federal income taxes


214,093



14,022



6.55



213,885



14,206



6.64



201,188



13,612



6.77Loans, net(2)


1,233,360



104,920



8.51



1,131,300



96,527



8.53



928,866



72,169



7.77Total interest earning assets


2,182,354



155,275



7.12



2,095,665



146,129



6.97



1,860,312



115,128



6.19Non interest earning assets:Cash and due from banks


51,887











46,836











42,706Other assets


85,390











78,093











53,500Total non interest earning assets


137,277











124,929











96,206Total assets

$
2,319,631










$
2,220,594










$
1,956,518LIABILITIES AND STOCKHOLDERS EQUITYInterest bearing liabilities:Deposits:Money market

$
560,325


$
15,052



2.69
%

$
431,628


$
8,950



2.07
%

$
384,214


$
4,115



1.07
%Savings


93,223



775



0.83



97,567



675



0.69



74,317



386



0.52Time


276,908



10,787



3.90



246,538



8,181



3.32



188,460



3,907



2.07Checking with interest


153,446



1,545



1.01



134,874



1,053



0.78



125,934



462



0.37Securities sold under repurchase agreements and other short-term
    borrowings


167,255



7,809



4.67



234,959



11,149



4.75



170,072



4,909



2.89Other borrowings


230,014



10,331



4.49



258,308



11,592



4.49



263,108



11,527



4.38Total interest bearing liabilities


1,481,171



46,299



3.13



1,403,874



41,600



2.96



1,206,105



25,306



2.10Non interest bearing liabilities:Demand deposits


612,346











601,983











562,533Other liabilities


30,292











31,347











20,927Total non interest bearing liabilities


642,638











633,330











583,460Stockholders equity(1)


195,822











183,390











166,953Total liabilities and stockholders equity(1)

$
2,319,631










$
2,220,594










$
1,956,518Net interest earnings





$
108,976










$
104,529










$
89,822Net yield on interest earning assets










4.99
%










4.99
%










4.83
%   (1)
    Excludes unrealized gains and losses on securities
    available for sale.(2)
    Includes loans classified as non-accrual.(3)
    Effect of adjustment to a tax equivalent basis was $4,908,
    $4,972 and $4,764 for the years ended December 31, 2007,
    2006 and 2005, respectively. 26




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##### Table of Contents



Interest
    Differential
    (000s)2007 Compared to 2006


2006 Compared to 2005Increase (Decrease)


Increase (Decrease)Due to Change in


Due to Change inVolume


Rate


Total(1)


Volume


Rate


Total(1)Interest income:Deposits in banks

$
250


$
72


$
322


$
76






$
76Federal funds sold


2,175



163



2,338



(395
)

$
154



(241
)Securities:Taxable


(3,176
)


1,453



(1,723
)


1,198



5,016



6,214Exempt from federal income taxes


14



(198
)


(184
)


859



(265
)


594Loans, net


8,708



(315
)


8,393



15,728



8,630



24,358Total interest income


7,971



1,175



9,146



17,466



13,535



31,001Interest expense:Deposits:Money market


2,669



3,433



6,102



508



4,327



4,835Savings


(30
)


130



100



121



168



289Time


1,008



1,598



2,606



1,204



3,070



4,274Checking with interest


145



347



492



33



558



591Securities sold under repurchase agreements and other short-term
    borrowings


(3,213
)


(127
)


(3,340
)


1,873



4,367



6,240Other borrowings


(1,270
)


9



(1,261
)


(210
)


275



65Total interest expense


(691
)


5,390



4,699



3,529



12,765



16,294Increase in interest differential

$
8,662


$
(4,215
)

$
4,447


$
13,937


$
770


$
14,707   (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.  Net
    Interest Income
   27




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##### Table of Contents



28




---



##### Table of Contents



2007


2006


2005Average interest rate on:Total average interest earning assets


7.12
%


6.97
%


6.19
%Total average interest bearing liabilities


3.13



2.96



2.10Total interest rate spread


3.99



4.01



4.09     Non
    Interest Income
   29




---



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Non
    Interest Expense
     30




---



##### Table of Contents



2007


2006


2005Employees at December 31,Full Time Employees


431



395



314Part Time Employees


40



45



45   (000s except percentages)Salaries and Employee BenefitsSalaries

$
26,210


$
22,956


$
17,902Payroll Taxes


2,146



2,005



1,472Medical Plans


1,771



1,734



1,328Incentive Compensation Plans


4,320



3,725



2,755Employee Retirement Plans


2,267



1,657



1,570Other


859



714



547Total

$
37,573


$
32,791


$
25,574Percentage of total non interest expense


58.1
%


56.1
%


57.7
%            31




---



##### Table of Contents



2007


2006


2005(000s except percentages)Other Operating ExpensesOther insurance

$
65


$
(9
)

$
(186
)Stationery and printing


1,446



1,338



872Communications expense


1,411



1,220



1,073Courier expense


1,050



1,003



772Other loan expense


453



350



351Outside services


2,441



2,537



1,587Dues, meetings and seminars


560



482



471Other


2,723



2,658



1,529Total

$
10,149


$
9,579


$
6,469Percentages of total non interest expense


15.7
%


16.4
%


14.6
%       Income
    Taxes
      Financial
    Condition at December 31, 2007 and 2006
  Securities
    Portfolio
   32




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##### Table of Contents



held-to-maturity held-to-maturity
      2007
    (000s)
  GrossUnrealized


Estimated FairClassified as Available for Sale

Amortized Cost


Gains


Losses


ValueU.S. Treasury and government agencies

$
107,083


$
90


$
384


$
106,789Mortgage-backed securities


384,711



628



6,464



378,875Obligations of states and political subdivisions


204,184



3,555



191



207,548Other debt securities


22,231



39



791



21,479Total debt securities


718,209



4,312



7,830



714,691Mutual funds and other equity securities


31,145



682



25



31,802Total

$
749,354


$
4,994


$
7,855


$
746,493Classified as Held to
    MaturityMortgage-backed securities

$
28,626


$
41


$
178


$
28,489Obligations of states and political subdivisions


5,132



148







5,280Total

$
33,758


$
189


$
178


$
33,769  33




---



##### Table of Contents



2006
    (000s)
  GrossUnrealized


Estimated FairClassified as Available for Sale

Amortized Cost


Gains


Losses


Value(000s)U.S. Treasury and government agencies

$
137,180


$
12


$
2,711


$
134,481Mortgage-backed securities


480,955



167



9,165



471,957Obligations of states and political subdivisions


209,502



3,427



676



212,253Other debt securities


27,889



357



5



28,241Total debt securities


855,526



3,963



12,557



846,932Mutual funds and other equity securities


30,644



610



448



30,806Total

$
886,170


$
4,573


$
13,005


$
877,738Classified as Held to
    MaturityMortgage-backed securities

$
34,791






$
596


$
34,195Obligations of states and political subdivisions


5,131


$
93



3



5,221Total

$
39,922


$
93


$
599


$
39,416     After 1 but within


After 5 but withinWithin 1 Year


5 Years


10 Years


After 10 Years


TotalAmount


Yield


Amount


Yield


Amount


Yield


Amount


Yield


Amount


Yield(000s except percentages)U.S. Treasury and government agencies

$
81,659



3.59
%

$
22,425



4.47
%

$
2,999



5.15
%









$
107,083



3.82
%Mortgage-backed securities


148,977



4.84
%


224,288



4.98



36,065



4.81


$
4,007



4.81
%


413,337



4.91Obligations of states and political subdivisions


43,868



3.89



84,094



6.90



80,532



5.98



822



6.25



209,316



6.54Other debt securities


21,196



6.71



1,035



5.83



















22,231



6.67Total

$
295,700



4.93
%

$
331,842



5.43
%

$
119,596



5.61
%

$
4,829



5.06
%

$
751,967Estimated fair value

$
293,342






$
329,916






$
120,417






$
4,785






$
748,460      34




---



##### Table of Contents



35




---



##### Table of Contents



Loan
    Portfolio
  Real Estate Loans:
           36




---



##### Table of Contents



1-6 unit
  Commercial and Industrial Loans:
  Loans to Individuals and Leasing:
      
    Increases of $64.9 million and $69.8 million in 2007
    and 2006, respectively, in commercial real estate mortgages. The
    increases were due to increased activity in commercial mortgages
    and, in 2006, the acquisition of NYNB,
    Decrease of $41.1 million in 2007 and increase of
    $74.2 million in 2006 , respectively, in construction
    loans. The decrease was due to paydowns and a general slowdown
    in construction projects and the increase resulted from a
    greater emphasis on this product in 2006 including an expanded
    offering and focused marketing,
    Increases in residential real estate mortgages of
    $34.9 million and $13.2 million in 2007 and 2006,
    respectively, primarily as a result of increased activity
    principally in multi-family loans and, in 2006, the acquisition
    of NYNB, 37




---



##### Table of Contents




    Increases in commercial and industrial loans of
    $21.8 million and $38.3 million in 2007 and 2006,
    respectively, primarily due to increased activity and a greater
    emphasis on this product with resulting increased market
    penetration and, in 2006, the acquisition of NYNB,
    Increases of $3.7 million and $0.4 million in 2007 and
    2006, respectively, in lease financings, and
    Increases in loans to individuals of $0.9 million and
    $3.1 million in 2007 and 2006, respectively.    (000s)2007


2006


2005


2004


2003Real Estate:Commercial

$
355,044


$
290,185


$
220,384


$
233,452


$
241,566Construction


211,837



252,941



178,731



116,064



60,892Residential


324,488



289,553



276,384



222,392



178,518Commercial and industrial


377,042



355,214



316,907



277,013



218,130Individuals


29,686



28,777



25,632



21,787



15,256Lease financing


12,463



8,766



8,348



6,276



6,000Total


1,310,560



1,225,436



1,026,386



876,984



720,362Deferred loan fees


(3,552
)


(3,409
)


(3,042
)


(2,687
)


(1,817
)Allowance for loan losses


(17,367
)


(16,784
)


(13,525
)


(11,801
)


(11,441
)Loans, net

$
1,289,641


$
1,205,243


$
1,009,819


$
862,496


$
707,104         (000s except percentages)After1ButWithin


within


After1


5


5Year


years


Years


Total


PercentLoans:Real estate  commercial

$
38,503


$
309,394


$
7,147


$
355,044



37.6
%Real estate  construction


191,961



18,103



1,773



211,837



22.4Commercial and industrial


125,408



144,848



106,786



377,042



40.0Total

$
355,872


$
472,345


$
115,706


$
943,923



100.0
% 38




---



##### Table of Contents



(000s except percentages)After1ButWithin


within


After1


5


5Year


years


Years


Total


PercentRate Sensitivity:Fixed or predetermined interest rates

$
95,112


$
413,783


$
89,623


$
598,518



63.4
%Floating or adjustable interest rates


260,760



58,562



26,083



345,405



36.6Total

$
355,872


$
472,345


$
115,706


$
943,923



100.0
%Percent


37.7
%


50.0
%


12.3
%


100.0
%       (000s except percentages)2007


2006


2005


2004


2003Non-accrual loans at year end

$
10,719


$
5,572


$
3,837


$
2,301


$
2,913OREO at year end


















Restructured loans at year end


















Total nonperforming assets

$
10,719


$
5,572


$
3,837


$
2,301


$
2,913Loans past due 90 days or more and still accruing


3,953



3,879



3,522



3,227



1,431Additional interest income that would have been recorded if
    these borrowers had complied with contractual loan terms


933



474



283



243



188Nonperforming assets to total assets at year end


0.46
%


0.24
%


0.19
%


0.13
%


0.17
%        39




---



##### Table of Contents



Allowance
    for Loan Losses and Provision for Loan Losses
  Allowance
    for Loan Losses
          (000s)December


Change


December


Change


December31,


During


31,


During


31,2007


2007


2006


2006


2005Components:Specific

$
1,777


$
(18
)

$
1,795


$
495


$
1,300Formula


1,040



(49
)


1,089



464



625Unallocated


14,550



650



13,900



2,300



11,600Total Allowance

$
17,367






$
16,784






$
13,525Net Change






583







3,259Amount Acquired














1,529Net
    recoveries/(charge-offs)






(887
)






(400
)Provision for loan losses





$
1,470






$
2,130  40




---



##### Table of Contents



Change During


December 31,


Change During


December 31,2005


2004


2004


2003Components:Specific

$
(315
)

$
1,615


$
83


$
1,532Formula


(761
)


1,386



77



1,309Unallocated


2,800



8,800



200



8,600Total Allowance





$
11,801






$
11,441Net Change


1,724







360Net
    recoveries/(charge-offs)


(335
)






(113
)Provision for loan losses

$
2,059






$
473         2007
  
    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 or possible slowing economic conditions are part of
    the determination of the unallocated component of the allowance.
    Concentration  Construction loans totaled
    $211.8 million or 16.4 percent of net loans at
    December 31, 2007. 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. During the year ended
    December 31, 2007, the number of completed properties and
    their time on the market has increased and there has been
    further downward pressure on prices. 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. Such
    concentration and the associated increase in various risk
    factors are not 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 to $10.7 million or 0.82 percent of
    total loans at December 31, 2007, compared to
    $5.6 million or 0.45 percent of total loans at
    December 31, 2006. Although the Companys regular
    periodic loan review process noted continued strength in overall 41




---



##### Table of Contents



credit quality, the continuation of recent trends of rising
    construction, energy and interest costs, as well as real estate
    taxes, an increase in the inventory of new residential
    construction and its time on the market and recent indications
    of a decline in real estate values in the Companys primary
    market area may negatively impact the borrowers ability to
    pay and collateral values. 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. 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. Since many of these
    relationships are new, we do not yet have an established record
    of performance and, 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.    2006
  
    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, significant increases in real estate taxes within
    the Companys market area and the steady rise in short-term
    interest rates which began in the third quarter of 2004,
    continued throughout 2005 and the first half of 2006. Such
    conditions 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
    or possible slowing economic conditions are part of the
    determination of the unallocated component of the allowance.
    Concentration  Construction loans increased to
    $252.9 million or 20.6 percent of total loans at
    December 31, 2006 from $178.7 million or
    17.4 percent of total loans at December 31, 2005.
    These loans generally 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.
    Increases in such concentrations, and the associated increase in
    risk, is not 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
    changes in concentrations is a part of the determination of the
    unallocated component of the allowance.
    Credit quality  Delinquencies increased within HVB
    and NYNBs portfolios during the year ended
    December 31, 2006. In addition, the dollar amount of
    nonperforming loans increased, partially due to the addition of
    $1.0 million of nonperforming loans acquired with NYNB.
    Although the Companys regular periodic loan review process
    noted continued strength in overall credit quality, the
    continuation of recent trends of rising construction, energy and
    interest costs, as well as real estate taxes, an increase in the
    inventory of new residential construction and its time on the
    market and recent indications of a decline in real estate values
    in the Companys primary market area may negatively impact
    the borrowers ability to pay and collateral values.
    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. 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. 42




---



##### Table of Contents




    Loan Participations  We 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. Since many of these relationships are
    new, we do not yet have an established record of performance
    and, 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.    2005
  
    Economic and business conditions  Signs of increased
    inflation, such as the recent pronounced rise in energy costs,
    increases in the cost of raw materials used in construction,
    significant increases in real estate taxes within the
    Companys market area and the gradual rise in short-term
    interest rates which began in the third quarter of 2004,
    continued throughout 2005 and into the first quarter of 2006.
    Continuation of such conditions could have negative effects on
    the demand for or 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 is part of the determination of the
    unallocated component of the allowance.
    Concentration  Concentration in construction loans
    increased to 17.4 percent of total loans at December 31,
    2005 from 13.2 percent at December 31, 2004. These
    loans generally 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.
    Increases in such concentrations, and the associated increase in
    risk, is not 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 changes
    in concentrations is a part of the determination of the
    unallocated component of the allowance.
    Credit quality  Delinquencies increased slightly
    during the year ended December 31, 2005, and the dollar
    amount of nonperforming loans also increased, primarily due to
    the addition of a $1.6 million construction loan on which
    the Company has been notified of a title issue on its
    collateral, apparently as a result of fraudulent satisfactions
    filed by the borrower on the Companys lien and a prior
    lien. Other than the aforementioned loan, the Companys
    regular periodic loan review process noted continued strength in
    overall credit quality which is believed to have been mainly
    attributable to the continued strength in real estate values in
    the Companys primary market area. However, continuation of
    recent trends of rising construction, energy and interest costs,
    as well as real estate taxes, may negatively impact the
    borrowers ability to pay and collateral values. Certain
    loans were downgraded due to potential deterioration of
    collateral values, the borrowers cash flows or other
    specific factors that negatively impact the borrowers
    ability to meet their loan obligations. Certain of these loans,
    including the aforementioned $1.6 million loan, 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.
    New loan products  The Company introduced a series of
    low cost home equity products since the fourth quarter of 2002.
    As of December 31, 2005, home equity loans represent
    approximately 7.8 percent of total loans. Any probable
    losses with respect to these products are not reflected in the
    formula component of the allowance for loan losses since there
    is no loss history.   43




---



##### Table of Contents



(000s except percentages)2007


2006


2005


2004


2003Net loans outstanding at end of year

$
1,289,641


$
1,205,243


$
1,009,819


$
862,496


$
707,104Average net loans outstanding during the year


1,233,360



1,131,300



928,866



780,331



662,800Allowance for loan losses:Balance, beginning of year

$
16,784


$
13,525


$
11,801


$
11,441


$
11,510Amount acquired






1,529











Provision charged to expense


1,470



2,130



2,059



473



43718,254



17,184



13,860



11,914



11,947Charge-offs and recoveries during the year:Charge offs:Real estate:Commercial














(62
)


(540
)Construction


(237
)














Residential


(16
)


(153
)










Commercial and industrial


(649
)


(216
)


(318
)


(102
)


(176
)Lease financing and individuals


(139
)


(76
)


(53
)


(30
)


(1
)Recoveries:Real estate:Commercial










4







Construction


















Residential


20















Commercial and industrial


97



22



26



72



197Lease financing and individuals


37



23



6



9



14Net charge-offs during the year


(887
)


(400
)


(335
)


(113
)


(506
)Balance, end of year

$
17,367


$
16,784


$
13,525


$
11,801


$
11,441Ratio of net charge-offs to average net loans outstanding during
    the year


0.07
%


0.04
%


0.04
%


0.01
%


0.08
%Ratio of allowance for loan losses to gross loans outstanding at
    end of the year


1.33
%


1.39
%


1.32
%


1.35
%


1.59
%  44




---



##### Table of Contents



2007


2006Percentage








Percentageof








ofLoans








Loansin








inAmount





each


Amount





eachof


Loan


Category


of


Loan


CategoryLoan


Amounts


by


Loan


Amounts


byLoss


by


Total


Loss


by


TotalAllowance


Category


Loans


Allowance


Category


LoansReal Estate:Commercial

$
157


$
355,044



27.09
%

$
337


$
290,185



23.68
%Construction


500



211,837



16.16
%


800



252,941



20.64
%Residential


1,035



324,487



24.76
%


16



289,553



23.63
%Commercial and industrial


867



377,042



28.77
%


1,389



355,214



28.99
%Lease financing and individuals


258



42,150



3.22
%


342



37,543



3.06
%Unallocated


14,550











13,900







Total

$
17,367


$
1,310,560



100.00
%

$
16,784


$
1,225,436



100.00
%   2005


2004


2003Percentage








Percentage








Percentageof








of








ofLoans








Loans








Loansin








in








inAmount





each


Amount





each


Amount





eachof


Loan


Category


of


Loan


Category


of


Loan


CategoryLoan


Amounts


by


Loan


Amounts


by


Loan


Amounts


byLoss


by


Total


Loss


by


Total


Loss


by


TotalAllowance


Category


Loans


Allowance


Category


Loans


Allowance


Category


LoansReal Estate:Commercial

$
168


$
220,384



21.47
%

$
779


$
233,452



26.62
%

$
167


$
241,566



33.53
%Construction


800



178,731



17.41
%


122



116,064



13.23
%


79



60,892



8.45
%Residential


153



276,384



26.93
%






222,392



25.36
%


85



178,518



24.78
%Commercial and industrial


794



316,907



30.88
%


2,091



277,013



31.59
%


2,498



218,130



30.28
%Lease financing and individuals


10



33,980



3.31
%


9



28,063



3.20
%


12



21,256



2.96
%Unallocated


11,600











8,800











8,600







Total

$
13,525


$
1,026,386



100.00
%

$
11,801


$
876,984



100.00
%

$
11,441


$
720,362



100.00
%       Provision
    for Loan Losses
   45




---



##### Table of Contents



Deposits
        (000s)2007


2006Demand deposits

$
568,418


$
644,447Money market accounts


730,429



417,089Savings accounts


93,331



95,741Time deposits of $100,000 or more


202,151



197,794Time deposits of less than $100,000


60,493



112,089Checking with interest


157,720



159,281Total

$
1,812,542


$
1,626,441     (000s)3 months or less

$
141,688Over 3 through 6 months


25,329Over 6 through 12 months


34,702Over 12 months


432Total

$
202,151        46




---



##### Table of Contents



(000s except percentages)Year ended December 31,2007


2006


2005Average


Average


AverageAmount


Rate


Amount


Rate


Amount


RateDemand deposits  Non interest bearing

$
612,346






$
601,983






$
562,533



Money market accounts


560,325



2.69
%


431,628



2.07
%


384,214



1.07
%Savings accounts


93,223



0.83
%


97,567



0.69
%


74,317



0.52
%Time deposits


276,908



3.90
%


246,538



3.32
%


188,460



2.07
%Checking with interest


153,446



1.01
%


134,874



0.78
%


125,934



0.37
%Total

$
1,696,248



1.66
%

$
1,512,590



1.25
%

$
1,335,458



0.66
%   Borrowings
   47




---



##### Table of Contents



(000s except percentages)2007


2006


2005Average balance:


Short-term


$
167,255


$
234,959


$
170,072Other borrowings



230,014



258,308



263,108Weighted average interest rate (for the year):


Short-term



4.7
%


4.8
%


2.9
%Other borrowings



4.5



4.5



4.4Weighted average interest rate (at year end):


Short-term



2.6
%


2.0
%


2.6
%Other borrowings



4.4



4.8



4.4Maximum month-end outstanding amount:


Short-term


$
254,581


$
289,575


$
200,423Other borrowings



249,369



264,395



263,119     Capital
    Resources
           48




---



##### Table of Contents



2007


2006


2005Tier 1 capital:Company


12.5
%


12.3
%


13.8
%HVB


12.3



12.3



13.8NYNB


11.3



12.5



Total capital:Company


13.7
%


13.5
%


14.9
%HVB


13.4



13.5



14.9NYNB


12.6



13.7



       2007


2006


2005Company


8.3
%


7.8
%


8.3
%HVB


8.1



7.8



8.1NYNB


7.1



7.0



     Liquidity
       49




---



##### Table of Contents



After


After1


3Year


Yearsbut


butWithin


Within


Within


After1


3


5


5Year


Years


Years


Years


TotalContractual Obligations:(1)Time Deposits

$
245,149


$
9,727


$
7,518


$
250


$
262,644FHLB Borrowings


14,024



109,053



71,310



16,457



210,844Operating lease and license obligations


3,288



6,674



4,692



9,667



24,321Total

$
262,461


$
125,454


$
83,520


$
26,374


$
497,809Credit Commitments:Available lines of credit

$
128,863


$
68,826


$
13,844


$
77,832


$
289,365Other loan commitments


89,385















89,385Letters of credit


11,885



1,013











12,898Total

$
230,133


$
69,839


$
13,844


$
77,832


$
391,648         50




---



##### Table of Contents



Quarterly
    Results of Operations (Unaudited)
    2007 Quarters


2006 QuartersFourth


Third


Second


First


Fourth


Third


Second


FirstInterest income

$
37,050


$
38,117


$
38,144


$
37,056


$
37,811


$
35,853


$
34,711


$
32,782Net interest income


26,500



26,342



26,090



25,136



25,765



24,880



24,909



24,003Provision for loan losses


180



180



555



555



526



529



598



477Income before income taxes


13,261



13,880



12,855



12,746



13,448



13,733



13,279



11,634Net income


8,714



9,091



8,377



8,301



8,766



8,883



8,701



7,709Basic earnings per common share


0.89



0.93



0.86



0.84



0.89



0.90



0.89



0.78Diluted earnings per common share


0.86



0.89



0.82



0.82



0.86



0.87



0.86



0.76   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. 51




---



##### Table of Contents



ITEM 7A
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK             52




---



##### Table of Contents



Percentage Change


Percentage Changein Estimated


in EstimatedNet Interest


Net InterestIncome from


Income fromGradual Change in Interest Rates

December 31, 2007


December 31, 2006+200 basis points


1.8
%


(2.2
)%200 basis points


(4.8
)%


(1.7
)%                53




---



##### Table of Contents



Interest
    Rate Sensitivity Analysis By Repricing Date
  December 31, 2007
  Over


Over


OverOne


Three


OneDay


Months


Yearto


to


to


OverOne


Three


One


Five


Five


Non-InterestDay


Months


Year


Years


Years


Bearing


TotalAssets:Loans, net





$
580,555


$
111,990


$
429,743


$
143,515


$
23,838


$
1,289,641Mortgage Backed securities






45,654



112,173



216,262



33,412







407,501Other securities






65,045



93,355



107,554



118,473







384,427Other earning assets

$
99,875























99,875Other assets






















149,166



149,166Total Assets


99,875



691,254



317,518



753,559



295,400



173,004



2,330,610Liabilities & Stockholders Equity:Interest bearing deposits





$
887,714


$
82,531


$
17,245


$
256,634






$
1,244,124Other borrowed funds

$
76,097



6



14,016



180,350



16,472







286,941Demand deposits





















$
568,418



568,418Other liabilities






















27,238



27,238Stockholders equity






















203,889



203,889Total Liabilities & Stockholders Equity


76,097



887,720



96,547



197,595



273,106



799,545



2,330,610Net interest rate sensitivity gap

$
23,778


$
(196,466
)

$
220,971


$
555,964


$
22,294


$
(626,541
)


Cumulative gap

$
23,778


$
(172,688
)

$
48,283


$
604,247


$
626,541







Cumulative gap to interest earning assets


1.09
%


(7.92
)%


2.21
%


27.70
%


28.72
%  54




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##### Table of Contents



December 31, 2006
  (000s except percentages)Over


Over


OverOne


Three


OneDay


Months


Yearto


to


to


OverOne


Three


One


Five


Five


Non-InterestDay


Months


Year


Years


Years


Bearing


TotalAssets:Loans, net





$
571,739


$
97,168


$
421,523


$
104,955


$
9,858


$
1,205,243Mortgage-backed securities






39,379



119,969



308,901



39,067







507,316Other securities






57,539



52,354



159,892



154,570







424,355Other earning assets

$
17,651























17,651Other assets






















137,169



137,169Total Assets


17,651



668,657



269,491



890,316



298,592



147,027



2,291,734Liabilities & Stockholders Equity:Interest bearing deposits





$
636,186


$
77,635


$
18,378


$
249,795






$
981,994Other borrowed funds

$
89,849



147,345



18



219,149



198







456,559Demand deposits





















$
644,447



644,447Other liabilities






















23,168



23,168Stockholders equity






















185,566



185,566Total Liabilities & Stockholders Equity


89,849



783,531



77,653



237,527



249,993



853,181



2,291,734Net interest rate sensitivity gap

$
(72,198
)

$
(114,874
)

$
191,838


$
652,789


$
48,599


$
(706,154
)


Cumulative gap

$
(72,198
)

$
(187,072
)

$
4,766


$
657,555


$
706,154







Cumulative gap to interest earning assets


(3.35
)%


(8.68
)%


0.22
%


30.52
%


32.77
%  55




---



##### Table of Contents



ITEM
    8  FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


57REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


58CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2007 AND
    2006 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
    DECEMBER 31, 2007:Consolidated Statements of Income


59Consolidated Statements of Comprehensive
    Income


60Consolidated Balance Sheets


61Consolidated Statements of Changes in
    Stockholders Equity


62Consolidated Statements of Cash Flows


63Notes to Consolidated Financial Statements


64  56




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                57




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board
    of Directors and Stockholders of
              Deloitte &
    Touche LLP
    58




---



##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31, 2007, 2006 and
    2005

Dollars in thousands, except per share amounts 2007


2006


2005Interest Income:Loans, including fees

$
104,920


$
96,527


$
72,169Securities:Taxable


32,868



34,591



28,377Exempt from Federal income taxes


9,114



9,234



8,848Federal funds sold


2,938



600



841Deposits in banks


527



205



129Total interest income


150,367



141,157



110,364Interest Expense:Deposits


28,159



18,859



8,870Securities sold under repurchase agreements and other short-term
    borrowings


7,809



11,149



4,909Other borrowings


10,331



11,592



11,527Total interest expense


46,299



41,600



25,306Net Interest Income


104,068



99,557



85,058Provision for loan losses


1,470



2,130



2,059Net interest income after provision for loan losses


102,598



97,427



82,999Non Interest Income:Service charges


4,701



4,529



3,973Investment advisory fees


9,053



7,008



4,569Realized loss on securities available for sale, net


(559
)


(199
)


(1,158
)Other income


1,626



1,741



919Total non interest income


14,821



13,079



8,303Non Interest Expense:Salaries and employee benefits


37,573



32,791



25,574Occupancy


6,437



5,779



3,760Professional services


4,704



4,941



4,319Equipment


3,289



2,821



2,297Business development


2,332



2,120



1,722FDIC assessment


193



381



178Other operating expenses


10,149



9,579



6,469Total non interest expense


64,677



58,412



44,319Income Before Income Taxes


52,742



52,094



46,983Income Taxes


18,259



18,035



16,038Net Income

$
34,483


$
34,059


$
30,945Basic Earnings per Common Share

$
3.52


$
3.46


$
3.15Diluted Earnings per Common Share


3.39



3.35



3.04    59




---



##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2007, 2006 and
    2005

Dollars in thousands 2007


2006


2005Net Income

$
34,483


$
34,059


$
30,945Other comprehensive income, (loss) net of tax:Unrealized holding gain (loss) on securities available for sale
    arising during the year


5,012



696



(12,823
)Income tax effect


(2,194
)


(285
)


5,2292,818



411



(7,594
)Reclassification adjustment for net loss realized on securities
    available for sale


559



199



1,158Income tax effect


(226
)


(81
)


(472
)333



118



686Unrealized holding gain (loss) on securities, net


3,151



529



(6,908
)Accrued benefit liability adjustment


(1,011
)


(22
)


436Income tax effect


404



9



(175
)(607
)


(13
)


261Other comprehensive income (loss)


2,544



516



(6,647
)Comprehensive Income

$
37,027


$
34,575


$
24,298    60




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##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

December 31, 2007 and 2006

Dollars in thousands, except per share and share amounts 2007


2006ASSETSCash and due from banks

$
51,067


$
61,805Federal funds sold


99,054



11,858Securities available for sale, at estimated fair value
    (amortized cost of $749,354 in 2007 and $886,170 in 2006)


746,493



877,738Securities held to maturity, at amortized cost (estimated fair
    value of $33,769 in 2007 and $39,416 in 2006)


33,758



39,922Federal Home Loan Bank of New York (FHLB) stock


11,677



14,011Loans (net of allowance for loan losses of $17,367 in 2007 and
    $16,784 in 2006)


1,289,641



1,205,243Accrued interest and other receivables


15,252



16,921Premises and equipment, net


27,356



21,669Deferred income taxes, net


10,284



11,302Bank owned life insurance


21,497



10,513Goodwill


15,377



10,608Other intangible assets


4,919



5,741Other assets


4,373



4,403TOTAL ASSETS

$
2,330,748


$
2,291,734LIABILITIESDeposits:Non interest-bearing

$
568,418


$
644,447Interest-bearing


1,244,124



981,994Total deposits


1,812,542



1,626,441Securities sold under repurchase agreements and other short-term
    borrowings


76,097



207,188Other borrowings


210,844



249,371Accrued interest and other liabilities


27,578



23,168TOTAL LIABILITIES


2,127,061



2,106,168Commitments and contingencies (Note 13)STOCKHOLDERS EQUITYCommon Stock, $0.20 par value; authorized 25,000,000 shares;
    outstanding 9,841,890 and 8,945,124 shares in 2007 and
    2006, respectively


2,091



1,880Additional paid-in capital


227,173



202,963Retained earnings


2,369



2,437Accumulated other comprehensive loss


(4,366
)


(6,910
)Treasury stock, at cost; 611,136 and 452,646 shares in 2007
    and 2006, respectively


(23,580
)


(14,804
)Total stockholders equity


203,687



185,566TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
2,330,748


$
2,291,734    61




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##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
    EQUITY

For the years ended December 31, 2007, 2006 and
    2005

Dollars in thousands, except share amounts AccumulatedNumber














Otherof








Additional





ComprehensiveShares


Common


Treasury


Paid-In


Retained


IncomeOutstanding


Stock


Stock


Capital


Earnings


(Loss)


TotalBalance at January 1, 2005


7,359,160


$
1,680


$
(29,313
)

$
185,438


$
1,492


$
365


$
159,662Net income


















30,945







30,945Grants and exercises of stock options, net of tax


142,415



28







4,698











4,726Purchase of treasury stock


(110,126
)






(5,492
)














(5,492
)Sale of treasury stock


7,473







217



65











282Stock dividend


739,830



148







17,171



(17,319
)






Cash dividends


















(13,687
)






(13,687
)Accrued benefit liability adjustment, net of tax






















261



261Net unrealized loss on securities available for sale






















(6,908
)


(6,908
)Balance at December 31, 2005


8,138,752



1,856



(34,588
)


207,372



1,431



(6,282
)


169,789Net income


















34,059







34,059Grants and exercises of stock options, net of tax


116,319



24







4,510











4,534Purchase of treasury stock


(129,703
)






(6,593
)














(6,593
)Sale of treasury stock


5,730







180



61











241Stock dividend


814,026







26,197



(8,980
)


(17,217
)






Cash dividends


















(15,836
)






(15,836
)Accrued benefit liability adjustment, net of tax






















(13
)


(13
)Adjustment for the initial application of SFAS No. 158, net of
    tax






















(1,144
)


(1,144
)Net unrealized gain on securities available for sale






















529



529Balance at December 31, 2006


8,945,124



1,880



(14,804
)


202,963



2,437



(6,910
)


185,566Net income


















34,483







34,483Grants and exercises of stock options, net of tax


160,766



32







7,041











7,073Purchase of treasury stock


(193,361
)






(10,109
)














(10,109
)Sale of treasury stock


34,871







1,333



562











1,895Stock dividend


894,490



179







16,607



(16,786
)






Cash dividends


















(17,765
)






(17,765
)Accrued benefit liability adjustment, net of tax






















(607
)


(607
)Net unrealized gain on securities available for sale






















3,151



3,151Balance at December 31, 2007


9,841,890


$
2,091


$
(23,580
)

$
227,173


$
2,369


$
(4,366
)

$
203,687    62




---



##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2007, 2006 and
    2005

Dollars in thousands 2006


2005As Restated


As Restated2007


See Note 17


See Note 17Operating Activities:Net income

$
34,483


$
34,059


$
30,945Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for loan losses


1,470



2,130



2,059Depreciation and amortization


2,878



2,572



2,000Realized loss on security transactions, net


559



199



1,158Amortization of premiums on securities, net


389



598



2,662Increase in cash value of bank owned life insurance


(581
)


(427
)


(474
)Amortization of other intangible assets


822



822



264Stock option expense and related tax benefits


995



944



550Deferred taxes (benefit)


(998
)


1,283



(821
)Increase in deferred loan fees


142



365



354Decrease (increase) in accrued interest and other receivables


1,669



(4,296
)


(1,454
)Decrease (increase) in other assets


30



(799
)


(340
)Excess tax benefits from share based payment arrangements


(239
)


(247
)


(257
)Increase in accrued interest and other liabilities


4,410



3,444



1,937(Increase) decrease in accrued benefit liability adjustment


(1,012
)


(1,921
)


437Net cash provided by operating activities


45,017



38,726



39,020Investing Activities:(Increase) decrease in short term investments


(87,196
)


5,471



(11,629
)Increase (decrease) in FHLB stock


2,334



(339
)


534Proceeds from maturities of securities available for sale


178,701



165,145



144,797Proceeds from maturities of securities held to maturity


6,205



10,282



20,919Proceeds from sales of securities available for sale


3,003



45,634



50,032Purchases of securities available for sale


(45,876
)


(254,629
)


(240,105
)Decrease in payable for securities purchased










(491
)Net increase in loans


(86,010
)


(197,921
)


(149,737
)Net purchases of premises and equipment


(8,565
)


(10,650
)


(1,524
)Premiums paid on bank owned life insurance


(10,403
)


(680
)


(705
)Increase in goodwill


(4,769
)


(4,544
)


(1,573
)Increase in other intangible assets






(3,907
)


Net cash used in investing activities


(52,576
)


(246,138
)


(189,482
)Financing Activities:Net increase in deposits


186,101



218,445



172,655Repayment of other borrowings


(38,527
)


(51,276
)


(24
)Proceeds from other borrowings






37,550



Net (decrease) increase in securities sold under repurchase
    agreements and short term borrowings


(131,091
)


35,073



7,643Proceeds from issuance of common stock


6,078



3,590



4,176Proceeds from sale of treasury stock


1,895



241



282Cash dividends paid


(17,765
)


(15,836
)


(13,687
)Acquisition of treasury stock


(10,109
)


(6,593
)


(5,492
)Excess tax benefits from share based payment arrangements


239



247



257Net cash (used in) provided by financing activities


(3,179
)


221,441



165,810(Decrease) Increase in Cash and Due from Banks


(10,738
)


14,029



15,348Cash and due from banks, beginning of year


61,805



47,776



32,428Cash and due from banks, end of year

$
51,067


$
61,805


$
47,776Supplemental Disclosures:Interest paid

$
45,428


$
39,567


$
24,212Income tax payments


19,452



19,089



16,135    63




---



##### Table of Contents



HUDSON
    VALLEY HOLDING CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share and share
    amounts



1  Summary
    of Significant Accounting Policies



Description of Operations and Basis of
    Presentation The consolidated financial
    statements include the accounts of Hudson Valley Holding Corp.
    and its wholly owned subsidiaries, Hudson Valley Bank N.A.
    (HVB) and New York National Bank (NYNB),
    (collectively the Company). The Company acquired
    NYNB effective January 1, 2006 in a tax free stock purchase
    transaction for approximately $13.5 million in cash. At the
    time of the acquisition, including the effects of purchase
    accounting, NYNB had total assets of $136.5 million, net
    loans of $59.9 million and total deposits of
    $117.7 million. The Company offers a broad range of banking
    and related services to businesses, professionals,
    municipalities, not-for-profit organizations and individuals.
    HVB, a national banking association headquartered in Westchester
    County, New York has 16 branch offices in Westchester County,
    New York, 3 in Manhattan, New York, 2 in Bronx County, New York,
    1 in Queens County, New York 1 in Rockland County, New York and
    1 in Fairfield County, Connecticut. NYNB, a national banking
    association headquartered in Bronx County, New York has 3
    branch offices in Manhattan, New York and 2 in Bronx County, New
    York. The Company also provides investment management services
    to its customers through its wholly-owned subsidiary, A.R.
    Schmeidler & Co., Inc. (ARS), a Manhattan, New
    York based money management firm acquired in 2004. NYNB and ARS
    are not significant subsidiaries for purposes of disclosing
    additional information related to each acquisition. All
    inter-company accounts are eliminated. The consolidated
    financial statements have been prepared in accordance with
    generally accepted accounting principles. In preparing the
    consolidated financial statements, management is required to
    make estimates and assumptions that affect the reported amounts
    of assets and liabilities as of the date of the consolidated
    balance sheet and income and expenses for the period. 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.



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.



Loans Loans are reported at their outstanding
    principal balance, net of the allowance for loan losses, and
    deferred loan origination fees and costs. Loan origination fees
    and certain direct loan origination costs are deferred and
    recognized over the life of the related loan or commitment as an
    adjustment to yield, or taken directly into income when the
    related loan is sold or commitment expires.



Interest Rate Contracts The Company, from
    time to time, uses various interest rate contracts such as
    forward rate agreements, interest rate swaps, caps and floors,
    primarily as hedges against specific assets and liabilities.
    Statement of Financial Accounting Standards (SFAS)
    No. 133, Accounting for Derivative Instruments and
    Hedging Activities, as amended by SFAS No. 137,
    Accounting for Derivative Instruments and Hedging
    Activities  Deferral of the Effective Date of SFAS
    Statement No. 133 and as amended by SFAS
    No. 149, Amendment of Statement 133 on
    Derivative Instruments and Hedging Activities requires
    that all derivative instruments, including interest rate
    contracts, be recorded on the balance sheet at their fair value.
    Changes in the fair value of derivative instruments are recorded
    each period in current earnings or other comprehensive income,

64




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Allowance for Loan Losses 
         65




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Loan Restructurings 
  Income Recognition on Loans 
  Premises and Equipment 
  Other Real Estate Owned 
  Goodwill and Other Intangible Assets
  Income Taxes 
  Stock-Based Compensation
 66




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Earnings per Common Share 
    2007


2006


2005Weighted average common shares:Basic


9,789,018



9,847,917



9,822,647Effect of stock options


392,494



316,389



348,027Diluted


10,181,512



10,164,306



10,170,674     Disclosures About Segments of an Enterprise and Related
    Information 
  Bank Owned Life Insurance  No. 06-5, Bulletin No. 85-4 No. 06-5), EITF 06-5,
  Retirement Plans 
  Recent
    Accounting Pronouncements
  Fair Value Measurements
 67




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  157-2,
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans
  Accounting for Purchases of Life Insurance  No. 06-5, Bulletin No. 85-4 No. 06-5.) No. 06-5 No. 06-5 EITF 06-5
  The Fair Value Option for Financial Assets and Financial
    Liabilities 
  Other 
 68




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  2  Securities
  December 31,2007


2006Estimated











EstimatedAmortized


Gross Unrealized


Fair


Amortized


Gross Unrealized


FairCost


Gains


Losses


Value


Cost


Gains


Losses


ValueClassified as Available for SaleU.S. Treasury and government agencies

$
107,083


$
90


$
384


$
106,789


$
137,180


$
12


$
2,711


$
134,481Mortgage-backed securities


384,711



628



6,464



378,875



480,955



167



9,165



471,957Obligations of states and political subdivisions


204,184



3,555



191



207,548



209,502



3,427



676



212,253Other debt securities


22,231



39



791



21,479



27,889



357



5



28,241Total debt securities


718,209



4,312



7,830



714,691



855,526



3,963



12,557



846,932Mutual funds and other equity securities


31,145



682



25



31,802



30,644



610



448



30,806Total

$
749,354


$
4,994


$
7,855


$
746,493


$
886,170


$
4,573


$
13,005


$
877,738   December 31,2007


2006Estimated











EstimatedAmortized


Gross Unrealized


Fair


Amortized


Gross Unrealized


FairCost


Gains


Losses


Value


Cost


Gains


Losses


ValueClassified as Held to MaturityMortgage-backed securities

$
28,626


$
41


$
178


$
28,489


$
34,791






$
596


$
34,195Obligations of states and political subdivisions


5,132



148







5,280



5,131


$
93



3



5,221Total

$
33,758


$
189


$
178


$
33,769


$
39,922


$
93


$
599


$
39,416      69




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    December 31,
    2007
  Duration of Unrealized LossLess than 12 Months


Greater than 12 Months


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


LossClassified as Available for
    SaleU.S. Treasury and government agencies

$
4,997


$
1


$
73,762


$
383


$
78,759


$
384Mortgage-backed securities


43,692



487



207,645



5,977



251,337



6,464Obligations of states and political subdivisions


8,327



42



21,662



149



29,989



191Other debt securities


19,887



791











19,887



791Total debt securities


76,903



1,321



303,069



6,509



379,972



7,830Mutual funds and other equity securities


77



16



27



9



104



25Total temporarily impaired securities

$
76,980


$
1,337


$
303,096


$
6,518


$
380,076


$
7,855Classified as Held to
    MaturityMortgage-backed securities

$
4,951


$
116


$
7,219


$
62


$
12,170


$
178Obligations of states and political subdivisions






















Total temporarily impaired securities

$
4,951


$
116


$
7,219


$
62


$
12,170


$
178   December 31,
    2006
  Duration of Unrealized LossLess than 12 Months


Greater than 12 Months


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedClassified as Available for
    Sale

Value


Loss


Value


Loss


Value


LossU.S. Treasury and government agencies

$
96,800


$
2,611


$
35,160


$
100


$
131,960


$
2,711Mortgage-backed securities


306,940



8,203



139,334



962



446,274



9,165Obligations of states and political subdivisions


32,521



536



30,624



140



63,145



676Other debt securities










552



5



552



5Total debt securities


436,261



11,350



205,670



1,207



641,931



12,557Mutual funds and other equity securities


29,593



443



12



5



29,605



448Total

$
465,854


$
11,793


$
205,682


$
1,212


$
671,536


$
13,005   70




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Duration of Unrealized LossLess than 12 Months


Greater than 12 Months


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


LossClassified as Held to MaturityMortgage-backed securities

$
28,539


$
547


$
6,252


$
49


$
34,791


$
596Obligations of states and political subdivisions


275



2



183



1



458



3Total

$
28,814


$
549


$
6,435


$
50


$
35,249


$
599       Available for SaleAmortized


FairCost


ValueContractual MaturityWithin 1 year

$
146,724


$
146,518After 1 but within 5 years


107,554



108,869After 5 but within 10 years


83,530



84,873After 10 years


822



836Mortgage-backed Securities


413,337



407,364Total

$
751,967


$
748,460   3  Credit
    Commitments and Concentrations of Credit Risk
    2007


2006Contract


ContractAmount


AmountCredit commitments-variable

$
375,052


$
297,427Credit commitments-fixed


3,698



3,234Guarantees written


12,898



14,637  71




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          Residential


CommercialProperty


Property


Total2007Loans

$
351,500


$
758,218


$
1,109,718Credit commitments


150,771



133,029



283,800$
502,271


$
891,247


$
1,393,5182006Loans

$
327,301


$
747,204


$
1,074,505Credit commitments


100,589



97,748



198,337$
427,890


$
844,952


$
1,272,842    72




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  4  Loans
    December 312007


2006Real Estate:Commercial

$
355,044


$
290,185Construction


211,837



252,941Residential


324,488



289,553Commercial and industrial


377,042



355,214Individuals


29,686



28,777Lease financing


12,463



8,766Total


1,310,560



1,225,436Deferred loan fees


(3,552
)


(3,409
)Allowance for loan losses


(17,367
)


(16,784
)Loans, net

$
1,289,641


$
1,205,243       December 312007


2006


2005Balance, beginning of year

$
16,784


$
13,525


$
11,801Add (deduct):Provision for loan losses


1,470



2,130



2,059Amount acquired






1,529



Recoveries on loans previously charged-off


154



45



36Charge-offs


(1,041
)


(445
)


(371
)Balance, end of year

$
17,367


$
16,784


$
13,525      73




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006


2005Amount

$
10,719


$
5,572


$
3,837Interest income recorded










Interest income that would have been recorded under the original
    contract terms


933



474



283         5  Premises
    and Equipment
    December 312007


2006Land

$
2,589


$
2,589Buildings


18,679



18,368Leasehold improvements


6,319



5,663Furniture, fixtures and equipment


20,849



19,862Automobiles


671



665Total


49,107



47,147Less accumulated depreciation and amortization


(21,751
)


(25,479
)Premises and equipment, net

$
27,356


$
21,668     6
    Goodwill
    and Other Intangible Assets     74




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      2007


2006Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


AmortizationDeposit Premium

$
3,907


$
1,116


$
3,907


$
558Customer Relationships


2,470



618



2,470



427Employment Related


516



240



516



166Total

$
6,893


$
1,974


$
6,893


$
1,151     Year

Amount2008

$
8222009


8222010


8222011


8032012


748     7
    Deposits    (000s)2007


2006Demand deposits

$
568,418


$
644,447Money Market accounts


730,429



417,089Savings accounts


93,331



95,741Time deposits of $100,000 or more


202,151



197,794Time deposits of less than $100,000


60,493



112,089Checking with interest


157,720



159,281Total Deposits

$
1,812,542


$
1,626,441    75




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (000s)2007


20063 months or less

$
141,688


$
142,844Over 3 months through 6 months


25,329



22,544Over 6 months through 12 months


34,702



32,406Over 12 months


432



Total

$
202,151


$
197,794   8  Borrowings
        2007


2006


2005Average balance:Short-term

$
167,255


$
234,959


$
170,072Other Borrowings


230,014



258,308



263,108Weighted average interest rate:Short-term


4.7
%


4.8
%


2.9
%Other Borrowings


4.5



4.5



4.4Maximum month-end outstanding amount:Short-term

$
254,581


$
289,575


$
200,423Other Borrowings


249,369



264,395



263,119      76




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9  Income
    Taxes
    Years Ended December 312007


2006


2005Income tax at statutory rate

$
18,442



35.0
%

$
18,233



35.0
%

$
16,444



35.0
%State income tax, net of Federal benefit


2,704



5.1



2,746



5.3



2,529



5.3Tax-exempt interest income


(2,914
)


(5.5
)


(2,970
)


(5.7
)


(2,918
)


(6.2
)Non-deductible expenses and other


27



0.1



26







(17
)


Provision for income taxes

$
18,259



34.7
%

$
18,035



34.6
%

$
16,038



34.1
%     Years Ended December 312007


2006


2005Federal:Current

$
15,007


$
14,786


$
12,823Deferred


(880
)


(991
)


(650
)State and Local:Current


4,473



4,591



4,037Deferred


(341
)


(351
)


(172
)Total

$
18,259


$
18,035


$
16,038     December 31, 2007


December 31, 2006Asset


Liability


Asset


LiabilityAllowance for loan losses

$
7,028






$
6,743Supplemental pension benefit


3,042







2,535Accrued benefit liability


1,641







1,235Securities available for sale


955







3,375Interest on non-accrual loans


421







345Deferred compensation


413







587Share based compensation costs


186







191Other


111











(29
)Intangible Assets






(1,911
)






(1,936
)Property and equipment





$
(1,602
)





$
(1,744
)Total

$
13,797


$
(3,513
)

$
15,011


$
(3,709
)Net deferred tax asset

$
10,284






$
11,302    77




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            10  Stockholders
    Equity
       78




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Actual


Minimum For Capital Adequacy Purposes


Minimum To Be Well Capitalized Under Prompt Corrective Action
    ProvisionCapital Ratios:

Amount


Ratio


Amount


Ratio


Amount


RatioHVB Only:As of December 31, 2007:Total Capital (To Risk Weighted Assets)

$
190,043



13.5
%

$
112,612



8.0
%

$
140,765



10.0
%Tier 1 Capital (To Risk Weighted Assets)


173,936



12.4



56,306



4.0



84,459



6.0Tier 1 Capital (To Average Assets)


173,936



8.2



84,909



4.0



106,137



5.0As of December 31, 2006:Total Capital (To Risk Weighted Assets)

$
182,502



13.5
%

$
108,126



8.0
%

$
135,157



10.0
%Tier 1 Capital (To Risk Weighted Assets)


166,901



12.3



54,063



4.0



81,094



6.0Tier 1 Capital (To Average Assets)


166,901



7.8



85,808



4.0



107,260



5.0NYNB Only:As of December 31, 2007:Total Capital (To Risk Weighted Assets)

$
11,103



12.6
%

$
7,054



8.0
%

$
8,817



10.0
%Tier 1 Capital (To Risk Weighted Assets)


9,991



11.3



3,527



4.0



5,290



6.0Tier 1 Capital (To Average Assets)


9,991



7.1



5,590



4.0



6,987



5.0As of December 31, 2006:Total Capital (To Risk Weighted Assets)

$
10,576



13.7
%

$
6,159



8.0
%

$
7,699



10.0
%Tier 1 Capital (To Risk Weighted Assets)


9,604



12.5



3,079



4.0



4,619



6.0Tier 1 Capital (To Average Assets)


9,604



7.0



5,524



4.0



6,905



5.0   Actual


Minimum For Capital Adequacy PurposesAmount


Ratio


Amount


RatioConsolidated:As of December 31, 2007:Total Capital (To Risk Weighted Assets)

$
205,297



13.8
%

$
119,264



8.0
%Tier 1 Capital (To Risk Weighted Assets)


187,930



12.6



59,632



4.0Tier 1 Capital (To Average Assets)


186,949



8.3



90,510



4.0As of December 31, 2006:Total Capital (To Risk Weighted Assets)

$
192,642



13.5
%

$
114,017



8.0
%Tier 1 Capital (To Risk Weighted Assets)


175,857



12.3



57,009



4.0Tier 1 Capital (To Average Assets)


175,857



7.8



90,681



4.0     Rule 15c3-1
 79




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Stock
    Dividend
    11  Stock-Based
    Compensation
      WeightedAggregate


AverageShares


Weighted Average


Intrinsic


RemainingUnderlying


Exercise Price


Value(1)


ContractualOutstanding Options

Options


Per Share


($000s)


Term (Yrs.)As of December 31, 2006


1,026,374


$
24.84Granted


197,173



51.41Cancelled or expired


(20,617
)


45.13Exercised


(176,340
)


34.47As of December 31, 2007


1,026,590


$
27.88



24,756



6.1Exercisable as of December 31, 2007


710,054


$
24.44



19,566



5.3Available for future grant


868,202    (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 December 31, 2007. This amount changes
    based on changes in the market value of the Companys stock. 80




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Weighted AverageNumber


RemainingExercise Price


of


Life


ExerciseRange


Options


(yrs)


Price$
11.70


$
22.96



373,973



3.5


$
18.90$
23.12


$
29.20



370,564



6.6


$
26.38$
33.06


$
53.91



282,053



8.8


$
41.78Total Options Outstanding

$
11.70


$
53.91



1,026,590



6.1


$
27.88Exercisable

$
11.70


$
52.84



710,054



5.3


$
24.44Not Exercisable

$
22.70


$
53.91



316,536



7.9


$
35.60     Years Ended December 312007


2006


2005Weighted average assumptions:Dividend yield


3.6
%


4.4
%


4.5
%Expected volatility


30.9
%


9.8
%


5.8
%Risk-free interest rate


3.8
%


4.6
%


3.6
%Expected lives


2.5



4.8



4.9         Weighted-Average GrantNumber of


Date FairShares


ValueNonvested at December 31, 2006


313,128



33.20Granted


101,498



61.52Vested


(79,292
)


40.06Forfeited or Expired


(18,798
)


50.52Nonvested at December 31, 2007


316,536



39.53  81




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  12  Benefit
    Plans
              2007


2006Change in benefit obligation:Benefit obligation at beginning of year

$
9,307


$
8,309Service cost


404



307Interest cost


565



523Amendments






340Actuarial (gain) loss


1,905



340Benefits paid


(611
)


(513
)Benefit obligation at end of year


11,570



9,306Change in plan assets:Fair value of plan assets at beginning of year






Actual return on assets






Employer contributions


611



513Benefits paid


(611
)


(513
)Fair value of plan assets at end of year






     2007


2006Net actuarial loss

$
3,709


$
2,455Prior service cost


394



634$
4,103


$
3,089  82




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006Weighted average assumptions:Discount rate


5.25
%


6.25
%Expected return on plan assets






Rate of compensation increase


5.00
%


5.00
%Components of net periodic benefit cost and other amounts
    recognized in other comprehensive income:Service cost

$
404


$
307Interest cost


565



523Expected return on plan assets






Amortization of transition obligation


95



95Amortization of prior service cost


145



147Amortization of net loss


652



167Net periodic benefit cost

$
1,861


$
1,239Net loss


1,157



Amortization of prior service cost


(145
)


Total recognized in other comprehensive income


1,012



Total recognized in net periodic benefit cost and other
    comprehensive income

$
2,873


$
       Pension Benefits2008

$
6112009


6842010


8532011


6802012


865Years 2013-2017


5,060  83




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   13  Commitments,
    Contingent Liabilities and Other Disclosures
    Year Ending December 31,2008

$
3,2882009


3,3342010


3,3402011


2,3762012


2,316Thereafter


9,667Total minimum future rentals

$
24,321         Cash
    Reserve Requirements
    Restrictions
    on Funds Transfers
    14  Segment
    Information
     84




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  15  Fair
    Value of Financial Instruments
    December 312007


2006Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair Value(In millions)Assets:Financial assets for which carrying value approximates fair value

$
150.1


$
150.1


$
73.7


$
73.7Securities, FHLB stock and accrued interest


797.0



797.0



937.8



937.3Loans and accrued interest


1,314.8



1,336.8



1,230.3



1,224.8Liabilities:Deposits with no stated maturity and accrued interest


1,553.8



1,553.8



1,318.0



1,318.0Time deposits and accrued interest


263.7



265.7



311.4



313.4Securities sold under repurchase agreements and other short-term
    borrowings and accrued interest


76.1



76.1



208.1



208.1Other borrowings and accrued interest


211.8



206.4



250.6



250.3Financial liabilities for which carrying value approximates fair
    value














     Financial assets for which carrying value approximates fair
    value
  Securities, FHLB stock and accrued
    interest
  Loans and accrued interest
  Deposits with no stated maturity and accrued
    interest
  Time deposits and accrued interest
 85




---



##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Securities sold under repurchase agreements and other
    short-term borrowings and accrued
    interest
  Other borrowings and accrued
    interest
  16  Condensed
    Financial Information of Hudson Valley Holding Corp.
 (Parent Company Only)
  Condensed Balance Sheets
    2007


2006AssetsCash

$
4,954


$
350Investment in subsidiaries


198,100



184,576Other assets


25



Equity securities


1,199



1,289Total Assets

$
204,278


$
186,215Liabilities and Stockholders EquityOther liabilities

$
591


$
649Stockholders equity


203,687



185,566Total Liabilities and Stockholders Equity

$
204,278


$
186,215   Condensed
    Statements of Income
    2007


2006


2005Dividends from subsidiaries

$
24,708


$
32,955


$
14,255Dividends from equity securities


65



61



50Other income


12



24



3Operating expenses


234



537



506Income before equity in undistributed earnings in the
    subsidiaries


24,551



32,503



13,802Equity in undistributed earnings of the subsidiaries


9,932



1,556



17,143Net Income

$
34,483


$
34,059


$
30,945  86




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Condensed
    Statements of Cash Flows
    2007


2006


2005Operating Activities:Net income

$
34,483


$
34,059


$
30,945Adjustments to reconcile net income to net cash provided by
    operating activities:Equity in undistributed earnings of the subsidiaries


(9,932
)


(1,556
)


(17,143
)Increase in other assets


(25
)






Increase (decrease) in other liabilities


(20
)


(121
)


195Other changes, net


(11
)


(38
)


(3
)Net cash provided by operating activities


24,495



32,344



13,994Investing Activities:Proceeds from sales of equity securities


19



29



3Purchase of equity securities including acquisition of New York
    National Bank


(9
)


(13,520
)


(6
)Net cash provided (used) in investing activities


10



(13,491
)


(3
)Financing Activities:Proceeds from issuance of common stock and sale of treasury stock


7,973



3,831



4,458Purchase of treasury stock


(10,109
)


(6,593
)


(5,492
)Cash dividends paid


(17,765
)


(15,836
)


(13,687
)Net cash used in financing activities


(19,901
)


(18,598
)


(14,721
)Increase (decrease) in Cash and Due from Banks


4,604



255



(730
)Cash and due from banks, beginning of year


350



95



825Cash and due from banks, end of year

$
4,954


$
350


$
95   17  Restatement
     87




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##### Table of Contents



HUDSON VALLEY HOLDING CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    AsPreviously





As(Dollars in thousands)

Presented


Adjustment


RestatedFor the year ended December 31, 2006:Increase in cash value of bank owned life insurance





$
(427
)

$
(427
)Amortization of other intangible assets






822



822Deferred tax (benefit)

$
959



324



1,283Decrease (increase) in other assets


(9,211
)


8,412



(799
)Net cash provided by operating activities


29,595



9,131



38,726Premiums paid on bank owned life insurance






(680
)


(680
)Increase in goodwill






(4,544
)


(4,544
)Increase in other intangible assets






(3,907
)


(3,907
)Net cash used in investing activities


(237,007
)


(9,131
)


(246,138
)For the year ended December 31, 2005:Increase in cash value of bank owned life insurance





$
(474
)

$
(474
)Amortization of other intangible assets






264



264Deferred tax (benefit)

$
(671
)


(150
)


(821
)Decrease (increase) in other assets


(2,978
)


2,638



(340
)Net cash provided by operating activities


36,742



2,278



39,020Premiums paid on bank owned life insurance






(705
)


(705
)Increase in goodwill






(1,573
)


(1,573
)Net cash used in investing activities


(187,204
)


(2,278
)


(189,482
)  88




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##### Table of Contents



ITEM 9  CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.  CONTROLS
    AND PROCEDURES    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
         89




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##### Table of Contents



ITEM 9B.  OTHER
    INFORMATION    PART
    III
  ITEM 10.  DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   ITEM 11.  EXECUTIVE
    COMPENSATION   ITEM 12.  SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND
    RELATED STOCKHOLDER MATTERS      Number of





Number ofShares to





Shares Remainingbe Issued





Available forUpon Exercise


Weighted-Average Exercise


Future Issuance Underof


Price of


Equity CompensationPlan Category

Outstanding Options


Outstanding Options


PlansEquity compensation plans approved by stockholders


1,026,590


$
27.88



868,202Equity compensation plans not approved by stockholders










   Form 10-K.
 ITEM
    13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE   ITEM
    14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES   90




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##### Table of Contents



PART
    IV
  ITEM 15.  EXHIBITS
    AND FINANCIAL STATEMENT SCHEDULES  1. Financial
    Statements
    
    Report of Independent Registered Public Accounting Firm
    Report of Independent Registered Public Accounting Firm
    Consolidated Statements of Income for the Years Ended
    December 31, 2007, 2006 and 2005
    Consolidated Statements of Comprehensive Income for the Years
    Ended December 31, 2007, 2006 and 2005
    Consolidated Balance Sheets at December 31, 2007 and 2006
    Consolidated Statements of Changes in Stockholders Equity
    for the Years Ended December 31, 2007, 2006 and 2005
    Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2007, 2006 and 2005
    Notes to Consolidated Financial Statements  2. Financial
    Statement Schedules
   91




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##### Table of Contents



3. Exhibits
    Required by Securities and Exchange Commission Regulation
    S-K
  Number


Exhibit Title3.1


Amended and Restated Certificate of Incorporation of Hudson
    Valley Holding
    Corp.(8)3.2


By-Laws of Hudson Valley Holding
    Corp.(7)3.3


Specimen of Common Stock
    Certificate(7)4.1


Specimen Stock Restriction Agreement Between the Company and a
    Shareholder who Acquired Shares from the Company or a
    Shareholder Subject to the
    Agreement(6)10.1


Hudson Valley Bank Amended and Restated Directors Retirement
    Plan Effective May 1,
    2004(2)10.2


Hudson Valley Bank Restated and Amended Supplemental Retirement
    Plan, effective
    December 1, 1995*(7)10.3


Hudson Valley Bank Supplemental Retirement Plan of
    1997*(7)10.4


2002 Stock Option
    Plan*(1)10.5


Specimen Non-Statutory Stock Option
    Agreement*(7)10.6


Specimen Incentive Stock Option
    Agreement*(5)10.7


Consulting Agreement Between the Company and Director
    John A.
    Pratt, Jr.*(7)10.8


Acquisition Agreement dated June 29, 2004 by and among the
    shareholders of A. R. Schmeidler & Co., Inc., as Sellers,
    A. R. Schmeidler & Co., Inc., Hudson Valley Bank, as Buyer,
    and Hudson Valley Holding
    Corp.(3)10.9


Agreement and Plan of Consolidation, dated December 23,
    2004, between Hudson Valley Holding Corp., a New York
    corporation and registered bank holding company and New York
    National Bank, a national banking
    association.(4)11


Statements re: Computation of Per Share
    Earnings(9)21


Subsidiaries of the
    Company(9)23


Consents of Experts and
    Counsel(9)31.1


Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of
    2002(9)31.2


Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of
    2002(9)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(9)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(9)     (1)
    Incorporated herein by reference in this document to
    Appendix A and Exhibit A to Appendix A to the
    Registrants Proxy Statement for the 2002 Annual Meeting of
    Stockholders(2)
    Incorporated herein by reference in this document to the
    Form 10-Q
    filed on May 10, 2004(3)
    Incorporated herein by reference in this document to the
    Form 8-K
    filed on June 30, 2004(4)
    Incorporated herein by reference in this document to the
    Form 8-K
    filed on December 27, 2004(5)
    Incorporated herein by reference in this document to the
    Form 10-K
    filed on March 11, 2005(6)
    Incorporated herein by reference in the document to the
    Form 10-Q
    filed on August 9, 2006(7)
    Incorporated herein by reference in the document to the
    Form 10-K
    filed on March 15, 2007(8)
    Incorporated herein by reference in the document to the
    Form 10-Q
    filed November 9, 2007(9)
    Filed herewith 92




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##### Table of Contents



SIGNATURES       By:
    /s/  James
    J. Landy       James
    J. Landy
     Stephen
    R. Brown
      William
    E. Griffin
     James
    M. Coogan
     Gregory
    F. Holcombe
     Adam
    Ifshin
     Michael
    J. Maloney
      Angelo
    R. Martinelli
     William
    J. Mulrow
     John
    A. Pratt Jr.
     Cecile
    D. Singer
     Craig
    S. Thompson
     Andrew
    J. Reinhart
     93