SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934


      For the Quarter Ended September 30, 2002 Commission File No. 1-12811
                            ------------------


                            U.S.B. HOLDING CO., INC.
                            ------------------------
             (Exact name of registrant as specified in its charter)

                    DELAWARE                           36-3197969
                    --------                           ----------
           (State or other jurisdiction of           (I.R.S. Employer
           incorporation or organization)            Identification No.)


                    100 DUTCH HILL ROAD, ORANGEBURG, NEW YORK
                  --------------------------------------------
                  10962 (Address of principal executive office
                                 with zip code)

                                  845-365-4600
                                  ------------
               (Registrant's telephone number including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.


                                        YES      X           NO
                                           -------------       --------------


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

                  CLASS                     OUTSTANDING AT NOVEMBER 4, 2002
                  -----                     -------------------------------

         Common stock, par value                      18,477,642
             $0.01 per share



<PAGE>


                            U.S.B. HOLDING CO., INC.

                                TABLE OF CONTENTS
                                -----------------


                                                                  PAGE NO.
                                                                  --------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

         CONDENSED CONSOLIDATED STATEMENTS OF
         CONDITION AS OF SEPTEMBER 30, 2002 AND
         DECEMBER 31, 2001.                                            1

         CONDENSED CONSOLIDATED STATEMENTS OF
         INCOME FOR THE THREE MONTHS ENDED
         SEPTEMBER 30, 2002 AND 2001.                                  2

         CONDENSED CONSOLIDATED STATEMENTS OF
         INCOME FOR THE NINE MONTHS ENDED
         SEPTEMBER 30, 2002 AND 2001.                                  3

         CONDENSED CONSOLIDATED STATEMENTS OF
         CASH FLOWS FOR THE NINE MONTHS ENDED
         SEPTEMBER 30, 2002 AND 2001.                                  4

         CONDENSED CONSOLIDATED STATEMENTS OF
         CHANGES IN STOCKHOLDERS' EQUITY FOR THE
         NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001.                6

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL
         STATEMENTS.                                                   8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.               19
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK.                                           28

ITEM 4.  CONTROLS AND PROCEDURES                                      29

PART II. OTHER INFORMATION AND SIGNATURES

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                            30
         SIGNATURES                                                   34
         CERTIFICATIONS                                               35

                                      - i -


<PAGE>



ITEM 1.                  PART I - FINANCIAL INFORMATION

U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
----------------------------------------------------------
<TABLE>
<CAPTION>

(000'S, EXCEPT SHARE DATA)                                             SEPTEMBER 30,  DECEMBER 31,
                                                                           2002           2001
                                                                     ------------    -----------
<S>                                                                        <C>            <C>
ASSETS
------
Cash and due from banks                                               $    93,499    $    48,721
Federal funds sold                                                         84,800         21,100
                                                                      -----------    -----------
Cash and cash equivalents                                                 178,299         69,821
Interest bearing deposits in other banks                                       47            290
Securities:
    Available for sale (at estimated fair value)                          522,996        454,001
    Held to maturity (estimated fair value of
       $345,890 in 2002 and $298,429 in 2001)                             340,436        298,883
Loans, net of allowance for loan losses of
    $13,330 in 2002 and $12,412 in 2001                                 1,280,697      1,158,534
Premises and equipment, net                                                10,987         11,343
Accrued interest receivable                                                13,642         10,087
Other real estate owned (OREO)                                                 34             34
Federal Home Loan Bank of New York stock                                   22,702         20,815
Other assets                                                               13,565         16,318
                                                                      -----------    -----------
TOTAL ASSETS                                                          $ 2,383,405    $ 2,040,126
                                                                      ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Non-interest bearing deposits                                         $   327,196    $   210,811
Interest bearing deposits:
    NOW accounts                                                          168,580         84,136
    Money market accounts                                                  88,040         82,381
    Savings deposits                                                      417,530        431,893
    Time deposits                                                         649,705        616,737
                                                                      -----------    -----------
TOTAL DEPOSITS                                                          1,651,051      1,425,958
Accrued interest payable                                                    5,238          7,244
Accrued expenses and other liabilities                                     16,155         14,024
Securities transactions not yet settled                                    55,264             --
Securities sold under agreements to repurchase                            344,005        303,279
Federal Home Loan Bank of New York advances                               111,758        114,291
                                                                      -----------    -----------
TOTAL                                                                   2,183,471      1,864,796
Corporation-Obligated mandatory redeemable capital
     securities of subsidiary trusts                                       50,000         40,000
Minority interest-junior preferred stock of consolidated subsidiary           129            130
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY:
     Preferred stock, no par value
          Authorized shares: 10,000,000 in 2002 and 100,000 in
          2001; no shares outstanding                                          --             --
    Common stock, $0.01 par value; authorized shares - 50,000,000;
     issued shares - 19,775,903 in 2002 and 19,531,188 in 2001                198            195
    Additional paid-in capital                                            139,591        137,627
    Retained earnings                                                      22,098          8,457
    Treasury stock, at cost; common shares 1,298,816 in 2002 and
       1,151,842 in 2001                                                  (15,745)       (13,381)
    Common stock held for benefit plans                                    (1,742)        (1,601)
    Deferred compensation obligation                                        1,416          1,178
    Accumulated other comprehensive income                                  3,989          2,725
                                                                      -----------    -----------
TOTAL STOCKHOLDERS' EQUITY                                                149,805        135,200
                                                                      -----------    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $ 2,383,405    $ 2,040,126
                                                                      ===========    ===========
</TABLE>

See notes to condensed consolidated financial statements.


                                       1
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
-------------------------------------------------------
<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                             2002           2001
                                                            -------        -------
                                                          (000'S, EXCEPT SHARE DATA)
<S>                                                         <C>            <C>
INTEREST INCOME:
Interest and fees on loans                                  $21,561        $21,179
Interest on federal funds sold                                  266            428
Interest and dividends on securities:
    Mortgage-backed securities                                4,269          6,001
    U.S. Treasury and government agencies                     4,576          4,068
    Obligations of states and political subdivisions            907            863
    Corporate and other                                         216             11
Interest on deposits in other banks                               4              2
Dividends on Federal Home Loan Bank of New York stock           190            497
                                                            -------        -------
TOTAL INTEREST INCOME                                        31,989         33,049
                                                            -------        -------
INTEREST EXPENSE:
Interest on deposits                                          6,995         11,890
Interest on borrowings                                        5,566          4,630
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trusts                909            739
                                                            -------        -------
TOTAL INTEREST EXPENSE                                       13,470         17,259
                                                            -------        -------

NET INTEREST INCOME                                          18,519         15,790
Provision for credit losses                                     590            418
                                                            -------        -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES        17,929         15,372
                                                            -------        -------

NON-INTEREST INCOME:
Service charges and fees                                        838            883
Other                                                           819            688
Gains on securities transactions - net                          335             --
                                                            -------        -------
TOTAL NON-INTEREST INCOME                                     1,992          1,571
                                                            -------        -------

NON-INTEREST EXPENSES:
Salaries and employee benefits                                6,097          5,360
Occupancy and equipment                                       1,560          1,533
Advertising and business development                            527            523
Professional fees                                               350            255
Communications                                                  267            228
Stationery and printing                                         196            222
FDIC insurance                                                   65             70
Amortization of intangibles                                     227            225
Other                                                           811            654
                                                            -------        -------
TOTAL NON-INTEREST EXPENSES                                  10,100          9,070
                                                            -------        -------
Income before income taxes                                    9,821          7,873
Provision for income taxes                                    3,312          2,717
                                                            -------        -------
NET INCOME                                                  $ 6,509        $ 5,156
                                                            =======        =======

BASIC EARNINGS PER COMMON SHARE                             $  0.35        $  0.28
                                                            =======        =======

DILUTED EARNINGS PER COMMON SHARE                           $  0.34        $  0.27
                                                            =======        =======
</TABLE>

See notes to condensed consolidated financial statements.

                                       2
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
-------------------------------------------------------
<TABLE>
<CAPTION>

                                                                  NINE MONTHS ENDED
                                                                   SEPTEMBER 30,
                                                                 2002           2001
                                                               --------       --------
                                                             (000'S, EXCEPT SHARE DATA)
<S>                                                            <C>            <C>
INTEREST INCOME:
Interest and fees on loans                                     $ 63,153       $ 65,112
Interest on federal funds sold                                      640          1,532
Interest and dividends on securities:
    Mortgage-backed securities                                   13,643         18,715
    U.S. Treasury and government agencies                        12,610         11,180
    Obligations of states and political subdivisions              2,702          2,495
    Corporate and other                                             643             32
Interest on deposits in other banks                                   9              7
Dividends on Federal Home Loan Bank of New York stock               636          1,696
                                                               --------       --------
TOTAL INTEREST INCOME                                            94,036        100,769
                                                               --------       --------
INTEREST EXPENSE:
Interest on deposits                                             21,155         41,529
Interest on borrowings                                           16,141         12,442
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trusts                  2,464          1,715
                                                               --------       --------
TOTAL INTEREST EXPENSE                                           39,760         55,686
                                                               --------       --------

NET INTEREST INCOME                                              54,276         45,083
Provision for credit losses                                       3,187            838
                                                               --------       --------
Net interest income after provision for credit losses            51,089         44,245
                                                               --------       --------

NON-INTEREST INCOME:
Service charges and fees                                          2,465          2,599
Other                                                             2,364          1,659
Gains on securities transactions - net                            1,703          1,533
                                                               --------       --------
TOTAL NON-INTEREST INCOME                                         6,532          5,791
                                                               --------       --------

NON-INTEREST EXPENSES:
Salaries and employee benefits                                   17,607         15,561
Occupancy and equipment                                           4,713          4,673
Advertising and business development                              1,436          1,351
Professional fees                                                   872            674
Communications                                                      790            737
Stationery and printing                                             597            644
FDIC insurance                                                      205            211
Amortization of intangibles                                         678            677
Other                                                             2,422          1,970
                                                               --------       --------
TOTAL NON-INTEREST EXPENSES                                      29,320         26,498
                                                               --------       --------
Income before income taxes                                       28,301         23,538
Provision for income taxes                                        9,677          8,144
                                                               --------       --------
NET INCOME                                                     $ 18,624       $ 15,394
                                                               ========       ========

BASIC EARNINGS PER COMMON SHARE                                $   1.01       $   0.84
                                                               ========       ========

DILUTED EARNINGS PER COMMON SHARE                              $   0.98       $   0.82
                                                               ========       ========

</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
----------------------------------------------------------
<TABLE>
<CAPTION>

                                                                           NINE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                           2002          2001
                                                                         ---------     ---------
                                                                                 (000's)
OPERATING ACTIVITIES
<S>                                                                      <C>           <C>
Net income                                                               $  18,624     $  15,394
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Provision for credit losses                                              3,187           838
    Depreciation and amortization                                            2,029         2,132
    Amortization of premiums on securities - net                             1,103           937
    Non-cash benefit plan expense                                              207           200
    Deferred income tax (benefit) provision - net                           (2,345)        5,955
    Gains on securities transactions - net                                  (1,703)       (1,533)
(Increase) decrease in accrued interest receivable                          (3,555)          146
Decrease in accrued interest payable                                        (2,006)       (1,447)
Other - net                                                                  6,228         3,793
                                                                         ---------     ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                   21,769        26,415
                                                                         ---------     ---------

INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                        44,342       162,380
Proceeds from principal paydowns, redemptions and maturities of:
   Securities available for sale                                           148,896        90,355
   Securities held to maturity                                             147,242       133,325
Purchases of securities available for sale                                (204,311)     (323,411)
Purchases of securities held to maturity                                  (188,731)     (105,935)
Net (purchases) redemptions of Federal Home Loan Bank
    of New York stock                                                       (1,887)       16,370
Net decrease (increase) in interest bearing deposits in other banks            243            (5)
Increase in loans outstanding - net                                       (125,350)      (41,601)
Purchases of premises and equipment - net                                     (995)       (1,152)
                                                                         ---------     ---------
NET CASH USED FOR INVESTING ACTIVITIES                                    (180,551)      (69,674)
                                                                         ---------     ---------

FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
   NOW, money market and savings accounts                                  192,125       131,130
Net increase (decrease) in time deposits, net of
   withdrawals and maturities                                               32,968      (146,116)
Net increase (decrease) in securities sold under agreements
   to repurchase -  short-term                                                 726          (248)
Proceeds from securities sold under agreements to
   repurchase - long-term                                                   40,000        55,000
Proceeds from Federal Home Loan Bank of New York
   advances - long-term                                                         --        70,000
Repayment of securities sold under agreements to
    repurchase - long-term                                                      --       (10,000)
Repayment of Federal Home Loan Bank of New York
    advances - long-term                                                    (2,533)       (2,618)
Net proceeds from issuance of Corporation-Obligated mandatory
    redeemable capital securities of subsidiary trusts                       9,673        19,364
Cash dividends paid                                                         (4,983)       (4,193)
Redemption of junior preferred stock of  consolidated subsidiary, net           (1)           --
Proceeds from issuance of common stock                                         238           235
Purchases of treasury stock                                                   (953)         (820)
                                                                         ---------     ---------
Net cash  provided by financing activities                                 267,260       111,734
                                                                         ---------     ---------
</TABLE>
         -Continued-

                                        4
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  (UNAUDITED)  (cont'd)
---------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                NINE MONTHS ENDED
                                                                                  SEPTEMBER 30,
                                                                               2002          2001
                                                                           ------------- --------------
                                                                                    (000's)

<S>                                                                           <C>          <C>
INCREASE IN CASH AND CASH EQUIVALENTS                                         $ 108,478    $  68,475
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                   69,821       74,891
                                                                              ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $ 178,299    $ 143,366
                                                                              =========    =========

Supplemental Disclosures:
   Interest paid                                                              $  41,766    $  57,133
                                                                              ---------    ---------
   Income tax payments                                                        $   8,447    $     129
                                                                              ---------    ---------
   Transfer of held to maturity securities to available for sale securities   $      --    $   9,592
                                                                              ---------    ---------
   Change in shares held in trust for deferred compensation                   $    (238)   $    (268)
                                                                              ---------    ---------
   Change in deferred compensation obligation                                 $     238    $     268
                                                                              ---------    ---------
   Change in accumulated other comprehensive income                           $   1,264    $   6,630
                                                                              ---------    ---------
   Purchases of treasury stock related to exercise of stock options           $  (1,493)   $  (1,341)
                                                                              ---------    ---------
   Non-cash exercise of stock options and related tax benefit                 $   1,619    $   1,615
                                                                              ---------    ---------
   Issuance of treasury stock related to the exercise of stock options        $     179    $     187
                                                                              ---------    ---------
   Purchase of securities not yet settled:
      Available for sale                                                      $  55,264    $  19,981
                                                                              ---------    ---------
      Held to maturity                                                        $      --    $  39,969
                                                                              ---------    ---------
 Exchange of Tappan Zee Financial, Inc. common shares to
    treasury stock                                                            $     (97)   $      --
                                                                              ---------    ---------
</TABLE>


See notes to condensed consolidated financial statements.

                                        5
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
-------------------------------------------------------------------------------

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
                           (000's, except share data)
<TABLE>
<CAPTION>


                                              COMMON STOCK          ADDITIONAL                              COMMON STOCK
                                           SHARES          PAR         PAID-IN    RETAINED     TREASURY         HELD FOR
                                      OUTSTANDING        VALUE         CAPITAL    EARNINGS        STOCK    BENEFIT PLANS
                                      -----------        -----         -------     --------    --------    -------------
<S>                                     <C>                <C>       <C>             <C>      <C>                <C>

Balance at  January 1, 2002             18,379,346         $ 195     $ 137,627       $8,457   $ (13,381)         $(1,601)

Net income                                                                           18,624


Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $1,495
   Reclassification adjustment
     of net gains for securities
     sold net of taxes of $611

   Other comprehensive income

Total comprehensive income

Cash dividends:
   Common ($0.27 per share)                                                          (4,973)

   Junior Preferred stock                                                               (10)


Common stock options exercised
   and related tax benefit                 260,092             3         1,854                      179


Purchases of treasury stock               (162,351)                                              (2,543)


ESOP shares committed to
   be released                                                             110                                        97


Deferred compensation obligation                                                                                    (238)
                                        ----------         -----     ---------     --------    --------        ---------


BALANCE AT
SEPTEMBER 30, 2002                      18,477,087         $ 198     $ 139,591     $ 22,098    $(15,745)       $  (1,742)
                                        ==========         =====     =========     ========    ========        =========
</TABLE>



<TABLE>
<CAPTION>

                                                          ACCUMULATED
                                            DEFERRED            OTHER          TOTAL
                                        COMPENSATION    COMPREHENSIVE  STOCKHOLDERS'
                                          OBLIGATION           INCOME         EQUITY
                                          ----------           ------         ------
<S>                                          <C>            <C>              <C>

Balance at  January 1, 2002                  $1,178         $    2,725       $135,200

Net income                                                                     18,624


Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $1,495                              2,136          2,136
   Reclassification adjustment
     of net gains for securities
     sold net of taxes of $611                                    (872)          (872)
                                                            ----------        --------
   Other comprehensive income                                    1,264          1,264
                                                                              --------
Total comprehensive income                                                     19,888

Cash dividends:
   Common ($0.27 per share)                                                    (4,973)

   Junior Preferred stock                                                         (10)


Common stock options exercised
   and related tax benefit                                                      2,036


Purchases of treasury stock                                                    (2,543)


ESOP shares committed to
   be released                                                                    207


Deferred compensation obligation                238                                --
                                           --------           --------       --------


BALANCE AT
SEPTEMBER 30, 2002                         $  1,416           $  3,989       $149,805
                                           ========           ========       ========
</TABLE>

See notes to condensed consolidated financial statements.

                                       6
<PAGE>


U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
--------------------------------------------------------------------------------

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                           (000'S, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>


                                              COMMON STOCK          ADDITIONAL                              COMMON STOCK
                                           SHARES          PAR         PAID-IN    RETAINED     TREASURY         HELD FOR
                                      OUTSTANDING        VALUE         CAPITAL    EARNINGS        STOCK    BENEFIT PLANS
                                      -----------        -----         -------     --------    --------    -------------
<S>                                    <C>            <C>          <C>          <C>          <C>                 <C>
Balance at  January 1, 2001            16,591,111     $    175     $   111,942  $   17,116   $  (11,158)         $(1,431)

Net income                                                                          15,394

Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $5,243
   Reclassification adjustment
     of net gains for securities
     sold, net of taxes of $536

   Other comprehensive income

Total comprehensive income

Cash dividends:
   Common $0.23 per share                                                           (4,182)
   Junior preferred stock                                                              (11)

Common stock options exercised
    and related tax benefit               306,023            3           1,908                      187

Purchases of treasury stock              (170,485)                                               (2,161)

Amortization of RRP awards                                                  10                                        21

ESOP shares committed to
   be released                                                              70                                        99

Deferred compensation obligation                                                                                    (268)
                                       ----------      -------       ---------  ----------     --------       ----------
BALANCE AT
SEPTEMBER 30, 2001                     16,726,649      $   178       $ 113,930  $   28,317     $ (13,132)      $  (1,579)
                                       ==========      =======       =========  ==========     =========       =========


<CAPTION>
                                                        ACCUMULATED
                                         DEFERRED             OTHER          TOTAL
                                     COMPENSATION     COMPREHENSIVE  STOCKHOLDERS'
                                       OBLIGATION            INCOME         EQUITY
                                      -----------     -------------   ------------
<S>                                      <C>                 <C>      <C>
Balance at  January 1, 2001              $  856              $  377   $    117,877

Net income                                                                  15,394

Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $5,243                           7,384          7,384
   Reclassification adjustment
     of net gains for securities
     sold, net of taxes of $536                                (754)          (754)
                                                        -----------     ----------
   Other comprehensive income                                 6,630          6,630
                                                                       -----------
Total comprehensive income                                                  22,024

Cash dividends:
   Common $0.23 per share                                                   (4,182)
   Junior preferred stock                                                      (11)

Common stock options exercised
    and related tax benefit                                                  2,098

Purchases of treasury stock                                                 (2,161)

Amortization  of RRP awards                                                     31

ESOP shares committed to
   be released                                                                 169

Deferred compensation obligation            268                                 --
                                        -------            --------     ----------
BALANCE AT
SEPTEMBER 30, 2001                      $ 1,124            $  7,007      $ 135,845
                                        =======            ========      =========
</TABLE>


See notes to condensed consolidated financial statements.


                                        7

<PAGE>


U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


1.      PRINCIPLES OF CONSOLIDATION
        ---------------------------


        The condensed consolidated financial statements include the accounts of
        U.S.B. Holding Co., Inc. and its wholly-owned subsidiaries (the
        "Company"), Union State Bank (the "Bank"), including its wholly-owned
        subsidiaries, Dutch Hill Realty Corp., U.S.B. Financial Services, Inc,
        and TPNZ Preferred Funding Corporation ("TPNZ"), as well as Union State
        Capital Trust I, Union State Statutory Trust II, USB Statutory Trust
        III, and Ad Con, Inc. All significant intercompany accounts and
        transactions are eliminated in consolidation.

2.      BASIS OF PRESENTATION
        ---------------------

        In the opinion of management, the accompanying unaudited condensed
        consolidated financial statements include all adjustments (comprised of
        only normal recurring accruals) necessary to present fairly the
        financial position of the Company as of September 30, 2002, and its
        results of operations for the three and nine months ended September 30,
        2002 and 2001, and its cash flow and changes in stockholders' equity for
        the nine months ended September 30, 2002 and 2001. A summary of the
        Company's significant accounting policies is set forth in Note 3 to the
        consolidated financial statements included in the Company's 2001 Annual
        Report to Stockholders.

        The Company's Board of Directors declared a ten percent common stock
        dividend, which was distributed on January 22, 2002 to stockholders of
        record on January 8, 2002. The weighted average common shares
        outstanding and per common share amounts for the three and nine months
        ended September 30, 2001 have been adjusted to reflect the ten percent
        common stock dividend.

        The condensed consolidated financial statements have been prepared in
        accordance with accounting principles generally accepted in the United
        States of America and predominant practices used within the banking
        industry. In preparing such financial statements, management is required
        to make estimates and assumptions that affect the reported amounts of
        actual and contingent assets and liabilities as of the dates of the
        condensed consolidated statements of condition and the revenues and
        expenses for the periods reported. Actual results could differ
        significantly from those estimates.

        Estimates that are particularly susceptible to significant change relate
        to the determination of the allowance for loan losses and the related
        provision for credit losses, and the valuation of other real estate
        acquired in connection with foreclosures or in satisfaction of loan
        receivables ("OREO"). In connection with the determination of the
        allowance for loan losses and the related provision for credit losses
        and OREO, management obtains independent appraisals for significant
        properties.

                                        8

<PAGE>


U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


3.       CORPORATION-OBLIGATED MANDATORY REDEEMABLE CAPITAL SECURITIES OF
         ----------------------------------------------------------------
         SUBSIDIARY TRUSTS
         -----------------

        On June 26, 2002, the Company completed its third issuance of Trust
        Preferred Capital Securities (the "Capital Securities") that raised
        $10.0 million of regulatory capital (approximately $9.7 million net
        proceeds after issuance costs), of which approximately $6.7 million is
        included in Tier I regulatory capital and the remaining amount is
        included in total regulatory capital under regulatory guidelines as of
        September 30, 2002. The previous issuances of Capital Securities include
        $20.0 million of fixed rate Capital Securities issued in February 1997
        at 9.58 percent and $20.0 million of floating rate Capital Securities
        issued in July 2001 (current rate as of September 30, 2002, 5.39
        percent). The aggregate amount of Capital Securities issued by the
        Company totaled $50.0 million at September 30, 2002, of which $46.7
        million is included in Tier I regulatory capital.

        The Capital Securities issued on June 26, 2002 pay interest on a
        floating rate basis, based on three month LIBOR plus 345 basis points
        (current rate as of September 30, 2002 is 5.24 percent), which resets
        September, December, March and June of each calendar year. The Capital
        Securities, which are due June 26, 2032 were issued by USB Statutory
        Trust III, a Connecticut business trust, that was formed by the Company
        solely to issue the Capital Securities and related common stock. The
        Capital Securities may not be redeemed, except under limited
        circumstances, until 2007 at par. The Company may also reduce
        outstanding Capital Securities through open market purchases. Dividends
        are paid quarterly in March, June, September, and December.

        Detailed discussion of the Capital Securities issued in February 1997
        and July 2001 is included in Note 10 to the Company's Consolidated
        Financial Statements for the year ended December 31, 2001, included in
        the 2001 Annual Report to Stockholders.

4.      RECLASSIFICATIONS
        -----------------

        Certain reclassifications have been made to prior period accounts to
        conform to the current period's presentation.

5.      RECENT ACCOUNTING PRONOUNCEMENTS
        --------------------------------

        In April 2002, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 145, Rescission
        of SFAS No. 4, 44 and 64, Amendment of SFAS No. 13, and Technical
        Corrections. This statement clarifies guidance related to the reporting
        of gains and losses from extinguishment of debt and resolves
        inconsistencies related to the required accounting treatment of certain
        lease modifications. The provisions of this statement relating to
        extinguishment of debt become effective for financial statements issued
        for fiscal years beginning after May 15, 2002. The provisions of this
        statement relating to lease modification are effective for transactions
        occurring after May 15, 2002. The adoption of the effective provisions
        of this statement did not have any impact on the Company's condensed
        consolidated financial statements. In addition, the Company does not
        expect that the provisions effective for the year beginning January 1,
        2003 will have any impact on its consolidated financial statements.

                                        9

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


        In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
        Financial Institutions and Amendment of FASB Statements No. 72 and 144
        and FASB Interpretation No. 9." Except for transactions between two or
        more mutual enterprises, this statement removes acquisitions of
        financial institutions from the scope of SFAS No. 72 and FASB
        Interpretation 9 and requires that those transactions be accounted for
        in accordance with SFAS No. 141, "Business Combinations," and SFAS No.
        142 "Goodwill and Other Intangible Assets." Thus, the requirement in
        paragraph 5 of SFAS No. 72 to recognize (and subsequently amortize) any
        excess of the fair value of liabilities assumed over the fair value of
        tangible and identifiable intangible assets acquired as an
        unidentifiable intangible asset no longer applies to acquisitions within
        the scope of this statement. In addition, this statement amends SFAS No.
        144, "Accounting for the Impairment or Disposal of Long Lived Assets,"
        to include in its scope long-term customer relationship intangible
        assets of financial institutions such as depositor and borrower
        relationship intangible assets and credit card holder intangible assets.
        Consequently, those intangible assets are subject to the same
        undiscounted cash flow recoverability test and apparent loss recognition
        and measurement provisions that SFAS No. 144 requires along with assets
        that are held and used. The provisions of SFAS No. 147, which relate to
        the application of the purchase method of accounting and the accounting
        for the impairment or disposal of certain long-term customer
        relationship intangible assets, are effective on October 1, 2002.
        Transitional provisions for previously recognized unidentifiable
        intangible assets are effective on October 1, 2002, with earlier
        application permitted. There was no effect on the Company's condensed
        consolidated financial statements as a result of adopting the provisions
        of this statement on October 1, 2002.

6.      GOODWILL AND OTHER INTANGIBLE ASSETS
        ------------------------------------

        In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
        Intangible Assets" ("SFAS No. 142"), which became effective January 1,
        2002. SFAS No. 142 requires, among other things, the discontinuance of
        goodwill amortization, the reclassification of certain existing
        recognized intangibles as goodwill, the reassessment of useful lives of
        existing recognized intangibles and the identification of reporting
        units for purposes of assessing potential future impairments of
        goodwill. SFAS No. 142 also requires a transitional goodwill impairment
        test six months from the date of adoption. The Company's adoption of
        SFAS No. 142 on January 1, 2002 did not have any impact on its condensed
        consolidated financial statements.

7.      EARNINGS PER COMMON SHARE ("EPS")

        The computation of basic and diluted earnings per common share for the
three and nine months ended September 30 is as follows:


                                       10

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


<TABLE>
<CAPTION>


                                             THREE MONTHS ENDED          NINE MONTHS ENDED
                                          SEPT. 30,     SEPT. 30,     SEPT. 30,     SEPT. 30,
                                            2002          2001          2002          2001
                                         -----------   -----------   -----------   -----------
<S>                                      <C>           <C>           <C>           <C>
        NUMERATOR:                                   (000'S, EXCEPT SHARE DATA)
 Net income                              $     6,509   $     5,156   $    18,624   $    15,394
 Less preferred stock dividends                   --            --            10            11
                                         -----------   -----------   -----------   -----------

  Net income for basic and diluted
     earnings per common share - net
     income available to common
     stockholders                        $     6,509   $     5,156   $    18,614   $    15,383
                                         -----------   -----------   -----------   -----------

DENOMINATOR:
 Denominator for basic earnings
     per common share - weighted
     average shares                       18,430,819    18,383,382    18,395,793    18,299,856

 Effects of dilutive securities:
     Director and employee
        stock options                        628,202       443,310       575,903       423,062
     Restricted stock not vested                  --           425            --         2,774
                                         -----------   -----------   -----------   -----------
  Total effects of dilutive securities       628,202       443,735       575,903       425,836
                                         -----------   -----------   -----------   -----------

 Denominator for diluted earnings
     per common share - adjusted
     weighted average shares              19,059,021    18,827,117    18,971,696    18,725,692
                                         ===========   ===========   ===========   ===========

Basic earnings per common share          $      0.35   $      0.28   $      1.01   $      0.84
                                         ===========   ===========   ===========   ===========
Diluted earnings per common share        $      0.34   $      0.27   $      0.98   $      0.82
                                         ===========   ===========   ===========   ===========

</TABLE>

8.      SECURITIES
        ----------

        During the three and nine month periods ended September 30, 2002, the
        Company had gross realized gains from sales of securities available for
        sale of $335,000 and $1,703,000, respectively. The Company did not have
        gross losses during the 2002 periods. During the nine months ended
        September 30, 2001, gross gains were $1,536,000 and gross losses were
        $3,000. There were no gross gains or losses for the three months ended
        September 30, 2001.

        A summary of the amortized cost, estimated fair values, and related
        gross unrealized gains and losses of securities at September 30, 2002
        and December 31, 2001 is as follows:


                                       11

<PAGE>


U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                GROSS             GROSS         ESTIMATED
                                                          AMORTIZED        UNREALIZED        UNREALIZED              FAIR
        SEPTEMBER 30, 2002:                                    COST             GAINS            LOSSES             VALUE
                                                          ---------        ----------        ----------         ---------
        <S>                                                <C>               <C>               <C>               <C>
        AVAILABLE FOR SALE:                                                           (000'S)
        U.S. government agencies                           $104,927          $  1,043          $    239          $105,731
        Mortgage-backed securities                          394,620             5,517                28           400,109
        Obligations of states and
            political subdivisions                            1,530               101                --             1,631
        Corporate securities                                 15,136               409                20            15,525
                                                           --------          --------          --------          --------
        TOTAL SECURITIES AVAILABLE FOR SALE                $516,213          $  7,070          $    287          $522,996
                                                           ========          ========          ========          ========

        Held to Maturity:
        U.S. government agencies                           $184,791          $  1,075          $    307          $185,559
        Mortgage-backed securities                           83,840               117                75            83,882
        Obligations of states and
            political subdivisions                           71,805             4,644                --            76,449
                                                           --------          --------          --------          --------
        TOTAL SECURITIES HELD TO MATURITY                  $340,436          $  5,836          $    382          $345,890
                                                           ========          ========          ========          ========

</TABLE>

<TABLE>
<CAPTION>

                                                                                GROSS             GROSS         ESTIMATED
                                                          AMORTIZED        UNREALIZED        UNREALIZED              FAIR
        DECEMBER 31, 2001:                                     COST             GAINS            LOSSES             VALUE
                                                          ---------        ----------        ----------         ---------
        <S>                                                <C>               <C>               <C>               <C>
        AVAILABLE FOR SALE:                                                           (000'S)

        U.S. government agencies                           $106,953          $  1,884          $    513          $108,324
        Mortgage-backed securities                          325,753             3,947               517           329,183
        Obligations of states and
            political subdivisions                            1,532                74                --             1,606
        Corporate securities                                 15,102                36               250            14,888
                                                           --------          --------          --------          --------
        TOTAL SECURITIES AVAILABLE FOR SALE                $449,340          $  5,941          $  1,280          $454,001
                                                           ========          ========          ========          ========

        Held to Maturity:
        U.S. government agencies                           $124,926          $    149          $  2,035          $123,040
        Mortgage-backed securities                          104,306               435               453           104,288
        Obligations of states and
            political subdivisions                           69,651             1,976               526            71,101
                                                           --------          --------          --------          --------
        TOTAL SECURITIES HELD TO MATURITY                  $298,883          $  2,560          $  3,014          $298,429
                                                           ========          ========          ========          ========

</TABLE>


9.      LOANS
        -----

        Nonaccrual loans were $16.0 million at September 30, 2002 and $20.7
        million at December 31, 2001. Restructured loans were $0.1 million and
        $0.2 million at September 30, 2002 and December 31, 2001, respectively.

        Substantially all of the nonaccruing and restructured loans are
        collateralized by real estate. At September 30, 2002, the Company had
        and continues to have no commitments to lend additional funds to any
        customers with nonaccrual or restructured loan balances, except as
        further described below with respect to a real estate construction loan
        in the amount of $15.8 million.

                                       12

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


        At September 30, 2002, there were approximately $100,000 of loans not on
        nonaccrual status, that were potential problem loans which may result in
        their being placed on nonaccrual status in the future. Accruing loans
        that are contractually past due 90 days or more at September 30, 2002
        are immaterial.

        At September 30, 2002 and December 31, 2001, the recorded investment in
        loans that are considered to be impaired under SFAS No. 114, "Accounting
        for Impairment of a Loan" ("SFAS No. 114"), approximated $16.1 million
        and $20.6 million, of which $16.0 million and $20.4 million were in
        nonaccrual status, respectively. The average recorded investment in
        impaired loans for the nine months ended September 30, 2002 and 2001,
        and year ended December 31, 2001 was $19.7 million, $19.4 million and
        $20.0 million, respectively. Interest income recognized by the Company
        on impaired loans for the September 30, 2002 and 2001 three and nine
        month periods was not material. As applicable, each impaired loan at
        September 30, 2002 and December 31, 2001 has a related allowance for
        loan losses determined in accordance with SFAS No. 114. The total
        allowance for loan losses specifically allocated to impaired loans was
        $1.9 million and $1.6 million as of September 30, 2002 and December 31,
        2001, respectively.

        A restructured loan in the amount of $0.1 million and $0.2 million at
        September 30, 2002 and December 31, 2001, respectively, that is
        considered to be impaired due to a reduction in the contractual interest
        rate, is on accrual status because the collateral securing this loan is
        sufficient to protect the contractual principal and interest. The loan
        has been performing for a reasonable period of time. Interest accrued on
        the restructured loan as of September 30, 2002 is immaterial.

        At December 31, 2001, the Bank had $0.3 million of outstanding loans,
        collateralized by cash and lease receivables, to Bennett Funding Group
        ("Bennett"), which filed for bankruptcy protection during the first
        quarter of 1996. As a result of a favorable ruling in the second quarter
        of 1998 by the Bankruptcy Court, the Bank has collected payments of $2.6
        million, reducing the original balance of $3.3 million to $0.7 million.
        A total of $0.4 million was charged-off in 1999 and 1998, further
        reducing the recorded balance of the loans to $0.3 million. During the
        2002 first quarter, the Bank reached a settlement agreement with the
        Bankruptcy Trustee for the Bennett loan, which settled all claims
        against the Bankruptcy Estate and the Bank, including dismissal of the
        remaining fraudulent conveyance claims against the Bank. As a result,
        the Bank charged off the remaining $0.3 million of the Bennett loan
        during the 2002 first quarter, and in addition, agreed to make a
        settlement payment of $0.3 million to the Bankruptcy Estate.

        In November 2000, the Company reclassified a real estate construction
        loan with 35 remaining unsold condominium units, of the original 83
        total units, in the amount of $19.7 million as a non-performing asset
        and placed the loan on nonaccrual status. As a result of the impairment
        of this loan, $2.2 million was charged-off in 2000 reducing the loan
        balance to $17.5 million. During the year ended December 31, 2001,
        "protective advances" of $0.6 million were made in connection with
        payments of real estate taxes and common charges, which increased the
        recorded loan balance to $18.1 million. During

                                       13

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

        2001 and the nine month period ended September 30, 2002, through an
        agreement with the borrower, the Bank also advanced $1.8 million and
        $3.4 million, respectively, to be used for completion of the project. As
        of November 12, 2002, the Bank has loan commitments of approximately
        $250,000 to fund real estate taxes, common charges, and other
        miscellaneous expenses. Proceeds from sales of units are being used to
        reduce the Bank's loan.

        During the 2002 first quarter, the specific allocation of the allowance
        for loan losses for this non-performing real estate loan was increased
        to $2.3 million, and during the second quarter of 2002, $1.3 million of
        the loan balance was charged off reducing the reserve to $1.0 million.
        During the 2002 third quarter, the specific allocation of the allowance
        for loan losses was increased to $1.9 million. As of September 30, 2002
        and December 31, 2001, the balance of the non-performing real estate
        loan, net of paydowns and charge-offs, was $15.8 million and $19.5
        million, respectively.

        As of September 30, 2002, there were 20 remaining units, of which four
        were sold and closed as of November 12, 2002. Construction of the
        remaining 16 units is substantially complete, with two units under
        contract of sale as of November 12, 2002. Pending sales of all units and
        repayment of the loan from the primary collateral, the Bank continues to
        proceed with foreclosure action on other real estate, which also
        collateralizes the loan. The loan is also personally guaranteed by the
        principals, and such guarantees will be pursued to recover losses
        incurred in connection with the loan. The personal guarantees have not
        been considered in determining the amount of the charge-offs or
        allowance for loan losses applicable to this loan.

10.     BORROWINGS AND STOCKHOLDERS' EQUITY
        -----------------------------------

        The Company utilizes borrowings primarily to meet the funding
        requirements for its asset growth and to manage its interest rate risk.
        Borrowings include securities sold under agreements to repurchase,
        federal funds purchased, and Federal Home Loan Bank of New York ("FHLB")
        advances.

        Short-term securities sold under agreements to repurchase generally
        mature between one and 365 days. The Bank may borrow up to $175.0
        million from two primary investment firms under master security sale and
        repurchase agreements. There were no outstanding borrowings under these
        agreements at September 30, 2002. In addition, the Bank has the ability
        to borrow from the FHLB under similar master security sale and
        repurchase agreements and, to a lesser extent, its customers. At
        September 30, 2002 and December 31, 2001, the Bank had short-term
        repurchase agreements outstanding of $2.0 million at an interest rate of
        1.62 percent and $1.3 million at a weighted average interest rate of
        1.68 percent, respectively. At September 30, 2002 and December 31, 2001,
        these borrowings were collateralized by securities with an aggregate
        carrying value and estimated fair value of $2.0 million and $1.3
        million, respectively.

                                       14

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

        Federal funds purchased represent overnight funds. The Bank has federal
        funds purchase lines available with six financial institutions for a
        total of $73.0 million. At September 30, 2002 and December 31, 2001, the
        Bank had no federal funds purchased balances outstanding.

        Short-term FHLB advances are borrowings with original maturities between
        one and 365 days. At September 30, 2002 and December 31, 2001, the Bank
        had no such short-term FHLB advances outstanding.

        Additional information with respect to short-term borrowings as of and
        for the nine months ended September 30, 2002 and 2001 is presented in
        the table below.

        SHORT-TERM BORROWINGS                            2002          2001
        ------------------------------------------------------------------------
                                                      (000's except percentages)

        Balance at September 30                         $ 2,005      $   266
        Average balance outstanding                     $ 1,501      $ 3,389
        Weighted-average interest rate
             As of September 30                            1.62%        3.47%
             Paid during period                            1.64%        5.36%
        ========================================================================

        The Bank had long-term borrowings, which have original maturities of
        over one year, of $342.0 million and $302.0 million in securities sold
        under agreements to repurchase at September 30, 2002 and December 31,
        2001, respectively. At September 30, 2002 and December 31, 2001, these
        borrowings have an original term of between five and ten years at
        interest rates between 3.53 percent and 6.08 percent, and 4.33 percent
        and 6.08 percent, respectively, that are callable on certain dates after
        an initial noncall period at the option of the counterparty to the
        repurchase agreements. As of September 30, 2002 and December 31, 2001,
        these borrowings are collateralized by securities with an aggregate
        carrying value of $350.8 million and $306.3 million and an estimated
        fair value of $352.0 million and $305.7 million, respectively.

        At September 30, 2002 and December 31, 2001, long-term FHLB advances
        totaled $111.8 million and $114.3 million, respectively, at interest
        rates of between 3.49 percent to 6.72 percent. At September 30, 2002,
        borrowings totaling $11.8 million are amortizing advances having
        scheduled payments and $30.0 million are payable only at maturity. Other
        borrowings totaling $70.0 million have an original term of ten years
        that are callable on certain dates after an initial noncall period at
        the option of the counterparty to the advance. These borrowings may not
        be repaid in full prior to maturity without penalty. At September 30,
        2002 and December 31, 2001, these borrowings were collateralized by a
        pledge to the FHLB of a security interest in certain mortgage-related
        assets having an aggregate carrying value of $133.9 million and $138.2
        million, respectively.

                                       15

<PAGE>


U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

        A summary of long-term, fixed-rate borrowings distributed based upon
        remaining contractual payment date and expected option call date at
        September 30, 2002, with comparative totals for December 31, 2001, is as
        follows:

<TABLE>
<CAPTION>

                                                 AFTER 1
                                    WITHIN    BUT WITHIN         AFTER           2002          2001
LONG-TERM BORROWINGS                1 YEAR       5 YEARS       5 YEARS          TOTAL         TOTAL
-----------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>            <C>           <C>
Contractual Payment/Expected                        (000's, except percentages)
        Call Date:
Total long-term borrowing           $3,372       $56,592      $393,794       $453,758      $416,291
Weighted-average interest rate        5.71%         4.48%         4.98%          4.92%         5.05%
=====================================================================================================

</TABLE>


        At September 30, 2002 and December 31, 2001, the Bank held 227,023
        shares and 208,146 shares of capital stock of the FHLB with a carrying
        value of $22.7 million and $20.8 million, respectively, which is
        required in order to borrow under the short- and long-term advance and
        securities sold under agreements to repurchase programs from the FHLB.
        The FHLB generally limits borrowings up to an aggregate of 30 percent of
        total assets, excluding securities sold under agreements to repurchase,
        upon the prerequisite purchase of additional shares of FHLB stock. Any
        advances made from the FHLB are required to be collateralized by the
        FHLB stock and certain other assets of the Bank.

        The ability of the Company and Bank to pay cash dividends in the future
        is restricted by various regulatory requirements. The Company's ability
        to pay cash dividends to its stockholders is primarily dependent upon
        the receipt of dividends from the Bank. The Bank's dividends to the
        Company may not exceed the sum of the Bank's undistributed net income
        for that year and its undistributed net income for the preceding two
        years, less any required transfers to additional paid-in capital. At
        September 30, 2002, the Bank could pay dividends of $39.8 million to the
        Company without having to obtain prior regulatory approval.

        On May 23, 2002, the Company's stockholders approved an amendment to the
        certificate of Incorporation (the "Amendment") to increase the number of
        authorized shares of preferred stock, with no par value, from 100,000 to
        10,000,000. The Amendment was filed with the State of Delaware and
        became effective on July 25, 2002. The increase in the authorized shares
        of preferred stock will benefit the Company by improving its flexibility
        in responding to future business needs and opportunities. The additional
        authorized shares will be available for issuance from time to time in
        connection with raising capital that would qualify as Tier I or total
        capital for regulatory purposes to support growth of the Company and
        common stock repurchase programs, provide capital for possible
        acquisitions and for other corporate purposes.

        On December 18, 2001, the Company's Board of Directors authorized the
        repurchase of up to 330,000 common shares (adjusted for the ten percent
        common stock dividend), or approximately 1.8%, of the Company's
        outstanding common stock at that date. Repurchases of common stock are
        authorized to be made from time to time in open-market

                                       16

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------


        and private transactions throughout 2002 as, in the opinion of
        management, market conditions may warrant. During the nine month period
        ended September 30, 2002, the purchases of 61,700 common shares were
        made under the authorized repurchase plan at an average price of $15.44.
        Common shares repurchased will be held as treasury stock and will be
        available for general corporate purposes.

11.     COMMITMENTS AND CONTINGENCIES
        -----------------------------

        In the normal course of business, various commitments to extend credit
        are made which are not reflected in the accompanying condensed
        consolidated financial statements. At September 30, 2002, formal credit
        lines, and commercial and residential loan commitments, which are
        primarily loans collateralized by real estate, approximated $386.6
        million, $62.2 million and $20.1 million, respectively. Outstanding
        standby letters of credit totaled $43.6 million. Such commitment amounts
        represent the maximum risk of loss on these commitments.

        Other commitments are described in Note 16 to the consolidated financial
        statements of the Company for the year ended December 31, 2001, which is
        included in the Company's 2001 Annual Report to Stockholders.

        In the ordinary course of business, the Company is party to various
        legal proceedings arising in the ordinary course of business, none of
        which, in the opinion of management, based on advise from legal counsel,
        will have a material adverse effect on the Company's consolidated
        financial position or results of operations.

12.     SEGMENT INFORMATION
        -------------------

        The Company has one reportable segment, "Community Banking." All of the
        Company's activities are interrelated, and each activity is dependent
        and assessed based on how each of the activities of the Company supports
        the others. For example, commercial lending is dependent upon the
        ability of the Bank to fund itself with deposits and other borrowings
        and to manage interest rate and credit risk. This situation is also
        similar for consumer and residential mortgage lending. Accordingly, all
        significant operating decisions are based upon analysis of the Company
        as one operating segment or unit.

        The Company operates only in the U.S. domestic market, specifically in
        the lower Hudson Valley area, which includes the counties of Rockland,
        Westchester, Orange, Putnam and Dutchess, New York, as well as New York
        City and Long Island, New York, Northern New Jersey and Southern
        Connecticut. For the nine months ended September 30, 2002 and 2001,
        there is no customer that accounted for more than ten percent of the
        Company's revenue.

13.     BRANCH ACQUISITION AND PLANNED DE NOVO BRANCHES
        -----------------------------------------------

        On June 18, 2002, the Bank signed a definitive agreement to acquire the
        Yonkers branch of Fourth Federal Savings Bank ("Fourth Federal"). The
        Bank completed the acquisition on

                                       17

<PAGE>

U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------



        October 31, 2002 at which time the branch became the Bank's second
        branch in Yonkers. The branch had approximately $15.3 million in
        deposits, which were assumed by the Bank. The Bank paid a premium of
        approximately $0.9 million for such deposits. The premium represents a
        core deposit intangible, which will be amortized over an estimated life
        of eight years. Deposits assumed excluded brokered deposits, loan hold
        bank accounts, overdrawn accounts, dormant accounts, other wholesale
        deposits and affiliated deposits owned by related entities of Fourth
        Federal.

        The Bank is in the process of establishing de novo branch locations in
        Eastchester (Westchester County) and Goshen (Orange County), New York.
        The Goshen branch is anticipated to be open in the fourth quarter of
        2002, while the Eastchester branch is planned for the first quarter
        2003.

14.     SUBSEQUENT EVENT
        ----------------

        On October 25, 2002, the Company sold available for sale investment
        securities totaling approximately $100.0 million. The sale, which is
        scheduled to settle in November 2002, resulted in realized gains of
        approximately $3.2 million before income taxes and approximately $1.9
        million after income taxes.




                                       18

<PAGE>



U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION
        ----------------------------------

FORWARD-LOOKING STATEMENTS
--------------------------

The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to September 30, 2002. The Company
cautions that these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, and that statements relating to subsequent
periods increasingly are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.

In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: competitive
pressures on loan and deposit product pricing; other actions of competitors;
changes in economic conditions, including changes in interest rates and the
shape of the U.S. Treasury yield curve and the credit quality of borrowers;
wartime events or terrorist activity; the extent and timing of actions of the
Federal Reserve Board; customer deposit disintermediation; changes in customers'
acceptance of the Company's products and services; increase in Federal and state
income taxes and/or the Company's effective income tax rate; and the extent and
timing of legislative and regulatory actions and reform.

The Company's forward-looking statements are only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances.

CRITICAL ACCOUNTING POLICIES
----------------------------

The Company's accounting policies are disclosed in Note 3 to the consolidated
financial statements included in the Company's 2001 Annual Report to
Stockholders. The more critical policies given the Company's current business
strategy and asset/liability structure are accounting for non-performing loans,
the allowance for loan losses and provision for credit losses, and the
classification of securities as either held to maturity or available for sale.
In addition to Note 3 to the 2001 consolidated financial statements, the
Company's practice on each of these accounting policies is further described in
the applicable sections of Management's Discussion and Analysis of Financial
Condition and Results of Operations, also included in the 2001 Annual Report to
Stockholders.

FINANCIAL CONDITION
-------------------

At September 30, 2002, the Company had total assets of $2,383.4 million, an
increase of $343.3 million or 16.8 percent from December 31, 2001.

The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, totaled $886.1 million and $773.7 million at September 30,
2002 and December 31, 2001, respectively, an increase of $112.4 million during
the nine months ended

                                       19

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------


September 30, 2002. The securities portfolio consists of securities held to
maturity at amortized cost of $340.4 million and $298.9 million, securities
available for sale at estimated fair value totaling $523.0 million and $454.0
million, and FHLB stock of $22.7 million and $20.8 million at September 30, 2002
and December 31, 2001, respectively. Proceeds from sales and redemption of the
securities not otherwise reinvested in securities are used to fund the loan
portfolio, invested in Federal funds sold pending evaluation of alternative
investments, or used to repay liabilities.

During the nine months ended September 30, 2002, U.S. government agency
securities increased $57.3 million due primarily to purchases totaling $239.8
million, partially offset by sales and redemptions of $181.9 million in callable
bonds, and a net decrease in the estimated fair value of available for sale
securities of $0.6 million. Mortgage-backed securities increased by $50.5
million primarily due to purchases totaling $199.6 million and an increase in
the estimated fair value of available for sale securities of $2.1 million,
partially offset by principal paydowns of $139.3 million, sales of $10.7
million, and net premium amortizations of $1.2 million. The Bank's investment in
obligations of states and political subdivisions, or municipal securities,
increased by $2.2 million primarily due to purchases of $9.0 million that were
partially offset by maturities of $6.8 million during the nine month period
ended September 30, 2002. Municipal securities are considered core investments
having favorable tax equivalent yields and diversified maturities. Purchases of
municipal securities are dependent upon their availability in the marketplace
and the comparative tax equivalent yields of such securities compared to other
securities of similar credit risk and maturity.

The Company also invests in medium-term corporate debt securities and other debt
securities that are rated investment grade by nationally recognized credit
rating organizations at the time of purchase and equity securities. The Company
had outstanding balances in corporate securities of $15.5 million and $14.9
million consisting of Federal Home Loan Mortgage Corp. ("FHLMC") preferred stock
of $15.4 million and $14.8 million at September 30, 2002 and December 31, 2002,
respectively, and other equity securities of $0.1 million for both periods. The
preferred stock is issued by the FHLMC and has a favorable tax equivalent yield.
The total investment in FHLB stock was $22.7 million and $20.8 million at
September 30, 2002 and December 31, 2001, respectively.

The Company continues to exercise its conservative approach to investing by
purchasing high credit quality investments, and controlling interest rate risk
by purchasing both fixed and floating rate securities through the averaging of
investments in medium-term maturities.

At September 30, 2002, loans outstanding were $1,294.0 million, a net increase
of $123.1 million or 10.5 percent compared to $1,170.9 million at December 31,
2001. The increase in outstanding loan balances reflects increases of: $61.7
million in land, acquisition and construction loans; $41.3 million in commercial
mortgages; $14.8 million in residential mortgages; $7.9 million in time secured
loans; $4.1 million in home equity loans; $0.1 million in commercial installment
loans, and $0.6 million in other loans. The increase was partially offset by
decreases of $3.7 million in time unsecured loans; $2.4 million in personal
installment loans;

                                       20

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------


$0.7 million in credit card loans; and $0.6 million in other loans. The Company
had approximately $386.6 million in formal credit lines, $82.3 million in loan
commitments outstanding, which are loans primarily collateralized by real
estate, and $43.6 million in standby letters of credit outstanding as of
September 30, 2002. Management considers its liquid resources to be adequate to
fund loans in the foreseeable future, principally by utilizing excess funds
temporarily placed in federal funds sold, increases in deposits and borrowings,
loan repayments and maturing securities.

The Company's allowance for loan losses increased $0.9 million or 7.4 percent to
$13.3 million at September 30, 2002, from $12.4 million at December 31, 2001.
The allowance for loan losses represents 1.03 percent and 1.06 percent of gross
loans outstanding at September 30, 2002 and December 31, 2001, respectively. The
September 30, 2002 allowance reflects a provision for credit losses of $3.2
million and net charge-offs of $2.1 million recorded for the nine months ended
September 30, 2002.

Management believes the allowance for loan losses at September 30, 2002 is
appropriate based on its evaluation of the risk elements and resulting estimated
losses inherent in the total loan portfolio at that time. The Company may be
required to make future adjustments to the allowance in response to changing
economic conditions or regulatory examinations.

Total deposits increased $225.1 million for the nine month period ended
September 30, 2002 to $1,651.1 million from $1,426.0 million at December 31,
2001. The total deposit increase resulted from net increases in municipal
deposits of $116.2 million and $108.9 in retail and commercial deposits. As of
September 30, 2002, seasonal NOW and demand municipal tax deposits increased
$76.8 million and $74.9 million, respectively, as compared to December 31, 2001.
Municipal money market deposits also increased $2.7 million, compared to
December 31, 2001, due to increased activity with municipal relationships. The
increase in municipal deposits was partially offset by decreases in municipal
time deposits over $100,000 and savings deposits of $36.8 million and $1.4
million, respectively, compared to year end 2001. Municipal time deposits
greater than $100,000 are obtained on a bidding basis with maturities of 30 to
180 days and are used in conjunction with liquidity management. As a result of
the low interest rate environment, the Bank replaced many of these time deposits
with longer-term FHLB borrowings. Management will continue to evaluate the
interest rate environment in order to determine the most effective combination
of borrowings and deposits.

The increase in retail and commercial deposits was due to increases in demand
deposits, time deposits over and under $100,000, NOW, money markets accounts,
and IRA/Keogh retail deposits, which was partially offset by a decrease in
retail and commercial savings deposits. Retail and commercial demand deposits
increased $41.6 million, as compared to December 31, 2001, due to increased
marketing of competitive checking account products. Retail and commercial time
deposits over and under $100,000 increased $39.2 million and $24.0 million,
respectively, compared to year end 2001 due to the Bank offering competitive
longer-term rates in the low interest rate environment. NOW and money market
retail and commercial deposits increased $7.6 million and $2.9 million,
respectively, compared to December 31, 2001, as the

                                       21

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

Bank continued to direct its efforts to attract lower cost core deposits.
IRA/Keogh retail deposits increased $6.6 million compared to year end 2001 due
to greater emphasis on these products and allocation of specialized personnel to
administer and sell long-term retirement products. These increases were
partially offset by a $13.0 million decrease in retail and commercial savings
deposits compared to December 31, 2001 as customers sought higher interest
bearing deposit accounts.

Stockholders' equity increased to $149.8 million at September 30, 2002 from the
December 31, 2001 balance of $135.2 million, an increase of 10.8 percent. The
increase primarily results from: $18.6 million of net income for the nine month
period ended September 30, 2002; $2.0 million of stock options exercised; $1.3
million in other comprehensive income; and $0.2 million of shares committed to
be released under benefit plans; partially offset by cash dividends paid on
common stock of $5.0 million and treasury stock purchase transactions of $2.5
million.

The Company's leverage ratio at September 30, 2002 was 8.50 percent, compared to
8.19 percent at December 31, 2001. The Company's Tier I and Total Capital ratios
under the risk-based capital guidelines were 12.78 percent and 13.95 percent at
September 30, 2002, and 13.03 percent and 14.03 percent at December 31, 2001,
respectively. In addition, the Bank exceeds all current regulatory capital
requirements and was in the "well-capitalized" category at September 30, 2002
and December 31, 2001.

On June 26, 2002, the Company issued $10 million of additional Capital
Securities. The Capital Securities qualify for Tier I (up to certain limits) and
Total Capital for regulatory purposes and also provide additional liquidity (See
Note 3 to the Notes to Condensed Consolidated Financial Statements (Unaudited)).

RESULTS OF OPERATIONS
---------------------

EARNINGS
--------

Net income for the three and nine month periods ended September 30, 2002 was
$6.5 million and $18.6 million compared to $5.2 million and $15.4 million for
the three and nine month periods ended September 30, 2001, an increase of 26.2
percent and 21.0 percent, respectively. Diluted earnings per common share were
$0.34 and $0.98 for the three and nine month periods ended September 30, 2002,
compared to $0.27 and $0.82 for the three and nine month periods ended September
30, 2001, increases of 25.9 percent and 19.5 percent, respectively.

The increase in net income for the three and nine month periods ended September
30, 2002 compared to the prior year reflects increases in net interest income,
non-interest income including, net security gains, and a lower effective income
tax rate. These increases were partially offset by higher non-interest expenses
and provision for credit losses. The increase in diluted earnings per common
share for both the 2002 periods as compared to 2001 reflects the higher net
income, partially offset by higher adjusted weighted average shares.


                                       22

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

A discussion of the factors impacting the changes in the various components of
net income follows.

NET INTEREST INCOME
-------------------

Net interest income, the difference between interest income and interest
expense, is a significant component of the Company's consolidated earnings. For
the three and nine month periods ended September 30, 2002, net interest income
increased 17.3 percent and 20.4 percent to $18.5 million and $54.3 million from
$15.8 million and $45.1 million for the three and nine month periods ended
September 30, 2001, respectively. Net interest income increased in the current
periods primarily due to increases in the volume of earning assets, as well as
an increase in both the net interest spread and margin, funded by increases in
average interest bearing liabilities, demand accounts and higher levels of
equity.

For the three and nine months ended September 30, 2002, the net interest spread
on a tax equivalent basis (yield on earning assets less cost of funds, including
demand deposits) was 3.62 percent and 3.61 percent, as compared to 3.31 percent
and 3.21 percent for the prior year periods, respectively. The net interest
margin on a tax equivalent basis (net interest income on a tax equivalent basis
divided by average interest earning assets) for the three and nine months ended
September 30, 2002, was 3.70 percent and 3.72 percent, as compared to 3.44
percent and 3.37 percent for the prior periods, respectively.

The increase in the net interest spread and margin reflects the more significant
decrease in cost of funds as compared to the decline in yields on interest
earning assets for the three and nine months ended September 30, 2002 compared
to the prior year periods. The more significant decline in cost of funds during
the 2002 periods reflects management's strategies to lower interest expense,
while extending the maturities of liabilities during the lower interest rate
environment. The net interest margin also benefited from a $34.7 million (12.3
percent) increase and $43.3 million (16.9 percent) increase in average earning
assets over interest bearing liabilities and Capital Securities for the three
and nine months ended September 30, 2002 compared to the 2001 periods.

The decrease in yield on average interest earning assets on a tax equivalent
basis from 7.06 percent and 7.38 percent for the three and nine month periods
ended September 30, 2001 to 6.27 percent and 6.34 percent for the same periods
in 2002 resulted from decreases in yields on average net loans, average gross
securities, and average federal funds sold. The interest yield on average net
loans on a tax equivalent basis decreased from 7.61 percent and 7.97 percent for
the three and nine months ended September 30, 2001 to 6.83 percent and 6.86
percent for the comparable 2002 periods. The interest yield on average gross
securities on a tax equivalent basis decreased to 5.71 percent and 5.80 percent
for the three and nine months ended September 30, 2002 from 6.47 percent and
6.68 percent for the comparable 2001 periods. The interest yield on average
federal funds sold decreased from 3.38 percent and 4.34 percent for the three
and nine months ended September 30, 2001 to 1.67 percent and 1.66 percent for
the comparable 2002 periods.



                                       23

<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

The decrease in yields resulting in a reduction of interest income was partially
offset by volume increases of average interest earning assets. For the 2002
third quarter, average interest earning assets increased $177.4 million (9.4
percent) compared to the 2001 period. The increase consisted of increases in
average net loans of $148.8 million, average gross securities of $15.0 million,
and average federal funds sold of $13.6 million for the three months ended
September 30, 2002 compared to the 2001 period. For the nine months ended
September 30, 2002, average interest earning assets increased $169.7 million
(9.2 percent) compared to the 2001 period. The increase primarily consisted of
increase in average net loans of $139.4 million and average gross securities of
$25.9 million for the nine months ended September 30, 2002 compared to the 2001
period, respectively. The increase in average interest earning assets during
both 2002 periods were primarily from net increases in real estate secured land
acquisition and construction loans, commercial mortgages, residential mortgages
and investment securities.

Cost of interest bearing liabilities decreased during the three and nine month
periods ended September 30, 2002, as compared to the same periods in the prior
year. The costs of average deposits, borrowings, and Capital Securities,
including demand deposits, decreased from 3.75 percent and 4.17 percent for the
three and nine months ended September 30, 2001 to 2.65 percent and 2.73 percent
for the 2002 comparable periods. The decrease in yields consisted primarily of a
decrease in yields on interest bearing deposits to 2.19 percent and 2.27 percent
for the three and nine months ended September 30, 2002 from 3.82 percent and
4.40 percent as compared to the 2001 periods, respectively. The decrease in
yields on deposits, borrowings, and Capital Securities was partially offset by a
net increase in the average balances, including demand deposits, of $184.8
million (10.2 percent) and $165.5 million (9.3 percent) for the three and nine
months ended September 20, 2002 compared to the 2001 period.

The Company continues a leverage strategy of purchasing government securities
funded by borrowings. Although the leverage strategy results in tighter net
interest spreads, the strategy increases net interest income while managing
interest rate risk. The Company has also taken advantage of opportunities during
the three and nine months ended September 30, 2002 to realize gains on
available-for-sale securities that management believes would most likely would
have been called or prepaid at par value. Net security gains of $0.3 million and
$1.7 million were realized for the three and nine months ended September 30,
2002 periods as compared to $1.5 million for the 2001 nine month period. There
were no security gains realized during the 2001 third quarter.

The Company has increased its core revenue, net interest income, by prudently
managing interest risk and increasing average earning assets as discussed above.
However, net interest income may be affected by the low interest rate
environment, and maturities and sales of assets and re-investment at lower
rates, which could cause the net interest margin to decrease due to the asset
sensitivity of the Company's balance sheet during the short term period.
Management will continue to evaluate and mitigate the effect of the changing
interest rate environment of the Company's operations, while continuing to
competitively price its products and services throughout the markets it serves.

                                       24

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

PROVISION FOR CREDIT LOSSES
---------------------------

The provision for credit losses increased $0.2 million to $0.6 million and $2.3
million to $3.2 million for the three and nine month periods ended September 30,
2002, respectively, compared to the same periods in 2001. The increase in the
provision for the three month 2002 period was primarily attributable to an
increase in loans of $42.9 million for the quarter, as well as the continual
re-evaluation of existing credits within the loan portfolio. During the three
months ended September 30, 2002, net charge-offs totaled $89,000 as compared to
$80,000 for the 2001 period. The increase in the provision for credit losses for
the nine months ended September 30, 2002 was primarily due to a $123.1 million
increase in loans outstanding as of September 30, 2002 compared to year end 2001
and continual re-evaluation of existing credits within the loan portfolio. Net
charge-offs totaled $2.1 million and $0.2 million for the nine months September
30, 2002 and 2001 periods, respectively. The net charge-off increase for the
nine month September 30, 2002 period was primarily due to a $0.6 million
charge-off related to the settlement of the Bennett loan and related litigation,
and the $1.3 million partial charge-off of a real estate construction loan.

Nonaccrual loans were $16.0 million and $19.2 million at September 30, 2002 and
2001 compared to $20.7 million at December 31, 2001. Total nonaccrual loans at
September 30, 2002 primarily consisted of a real estate construction loan that
was reduced from $19.5 million at December 31, 2001 to $15.8 million at
September 30, 2002 due to a $1.3 million partial charge-off and principal
paydowns, partially offset by advances to complete the project.

It is the Company's policy to discontinue the accrual of interest on loans when,
in the opinion of management, a reasonable doubt exists as to the timely
collectibility of the amounts due. Regulatory requirements generally prohibit
the accrual of interest on certain loans when principal or interest is due and
remains unpaid for 90 days or more (with the exception of credit card loans for
which the criteria is 180 days past due). Net income is adversely impacted by
the level of non-performing assets caused by the deterioration of borrowers'
ability to meet scheduled interest and principal payments. In addition to
forgone revenue, the Company must increase the level of provisions for credit
losses, incur collection costs, and other costs associated with the management
and disposition of foreclosed properties.

An evaluation of the quality of the loan portfolio is performed by management on
a quarterly basis as an integral part of the credit administration function,
which includes the identification of past due loans, non-performing loans and
impaired loans, assessments of the expected effects of the current economic
environment and industry, geographic and customer concentrations in the loan
portfolio, and review of the historical loan loss experience. Management takes a
prudent and cautious position in evaluating various business and economic
uncertainties in relation to the Company's loan portfolio. In management's
judgment, the allowance is considered appropriate based on its evaluation of the
risk elements and resulting estimated losses inherent in the credit portfolio.

A substantial portion (88.7 percent at September 30, 2002) of total gross loans
of the Company is collateralized by real estate, primarily located in the New
York Metropolitan area. Accordingly, the collectibility of the loan portfolio of
the Company is subject to changes in the real estate


                                       25

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

market in which the Company operates. The provisions for credit losses
established in 2002 and 2001 and the related allowance for loan losses reflects
net charge-offs and losses incurred with respect to real estate, time and
demand, installment, credit card and other loans, and the effect of the real
estate market and general economic conditions of the New York Metropolitan area
on the loan portfolio. There is no assurance that the Company will not be
required to make future adjustments to the allowance in response to changing
economic conditions or regulatory examinations.

NON-INTEREST INCOME
-------------------

Non-interest income increased for the three months ended September 30, 2002 by
$0.4 million to $2.0 million, an increase of 26.8 percent. The increase
primarily reflects net security gains of $0.3 million and an increase in loan
prepayment fees of $0.2 million, partially offset by a decrease in letter of
credit fees of $0.1 million. For the nine month period ended September 30, 2002,
non-interest income increased by $0.7 million to $6.5 million, a 12.8 percent
increase. The increase is primarily due to an increase in loan prepayment fees
($709,000), loans and deposit related fees ($104,000), and net security gains
($170,000), partially offset by a decrease in letter of credit fees ($169,000),
and service charges and fees ($134,000).

NON-INTEREST EXPENSES
---------------------

Non-interest expenses increased $1.0 million (11.4 percent) to $10.1 million and
$2.8 million (10.6 percent) to $29.3 million for the three and nine month
periods ended September 30, 2002 from the comparable periods in 2001,
respectively. The primary reason for these increases results from higher levels
of salaries and benefits, professional fees and other expense categories related
to increases in business volume.

Salaries and employee benefits, the largest component of non-interest expense,
increased by $737,000, or 13.8 percent, and $2,046,000, or 13.1 percent, during
the three and nine month periods ended September 30, 2002 compared to the prior
year periods. The increase occurred due to additional personnel employed by the
Company primarily to support deposit and loan growth. In addition, salaries and
employee benefits increased because of additional expenses related to incentive
compensation and bonus plans and payroll taxes. Increases in salaries and
employee benefits expense were partially offset by a decrease in medical
expenses related to the Bank's health care plan and an increase in the deferral
of FASB No. 91 loan allocation expenses for the 2002 periods as compared to
prior year periods.

Significant changes in the other components of non-interest expenses for the
three and nine month periods ended September 30, 2002, respectively, compared to
the prior year periods, were due to the following:

o       Increase of $27,000 (1.8 percent) and $40,000 (0.9 percent) in occupancy
        and equipment expense. The increase in both periods is primarily due to
        an increase in building maintenance and other maintenance contracts,
        partially offset by a reduction in utility expense from more competitive
        rates and less severe weather.

                                       26

<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
        CONDITION AND RESULTS OF OPERATION (cont'd)
        -------------------------------------------

o       Increase of $4,000 (0.8 percent) and $85,000 (6.3 percent) in
        advertising and business development. The increases reflect the hiring
        of a public relations firm in 2002 and more emphasis on marketing and
        business development programs to attract retail deposits during a period
        of higher net loan growth in 2002 as compared to 2001.

o       Increase of $95,000 (37.3 percent) and $198,000 (29.4 percent) in
        professional fees. The increases reflect higher Director fees and
        consulting fees in 2002, partially offset by a decline in legal fees
        related to nonaccrual loans for the nine month period.

o       Increase of $39,000 (17.1 percent) and $53,000 (7.2 percent) in
        communications expense. The increases for both periods reflects an
        increase in costs related to data communication lines.

o       Decrease of $26,000 (11.7 percent) and $47,000 (7.3 percent) in
        stationery and printing. The decreases primarily reflect a decrease in
        printing special purpose letters in 2002 compared to 2001.

o       Decrease of $5,000 (7.1 percent) and $6,000 (2.8 percent) in FDIC
        insurance. The decreases are related to a reduction in FDIC insurance
        rates for 2002, partially offset by an increase in insured deposits.

o       Increase of $157,000 (24.0 percent) and $452,000 (22.9 percent) in other
        expenses. The increases are primarily due to increases in branch related
        expenses, credit card expenses, corporate filing fees, courier fees, and
        Internet related expenses.

INCOME TAXES
------------

The effective income tax rates for the three and nine month periods ended
September 30, 2002 were 33.7 percent and 34.2 percent, compared to 34.5 percent
and 34.6 percent, respectively, for the prior periods in 2001. The lower
effective income tax rate for both periods, as compared to the Federal Statutory
tax rate, primarily reflects benefits associated with tax exempt obligations of
states and political subdivisions, partially offset by state income taxes, net
of Federal tax benefits.




                                       27

<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
------------------------------------------------------
        MARKET RISK
        -----------

Quantitative and qualitative disclosures about market risk at December 31, 2001
were reported in the Company's 2001 Annual Report to Stockholders. There have
been no material changes in the Company's market risk exposures at September 30,
2002 compared to December 31, 2001. Interest rate risk continues to be the
Company's primary market risk exposure since all Company transactions are
denominated in U.S. dollars with no direct foreign currency exchange or changes
in commodity price exposures. All market risk sensitive instruments continue to
be held to maturity or available for sale with no financial instruments entered
into for trading purposes. The Company does not use derivative financial
instruments such as interest rate swaps and caps extensively and has not been
party to any derivative financial instruments during the nine months ended
September 30, 2002.

The Company continues to use two methods to evaluate its market risk to changes
in interest rates, a "Static Gap" evaluation and a simulation analysis of the
impact of changes in interest rates on the Company's net interest income and
cash flow. There have been no changes in the Company's policy limit of
acceptable variances to net interest income at September 30, 2002 as compared to
December 31, 2001. The Company's "Static Gap" at September 30, 2002 was a
positive cumulative $351.3 million in the one year time frame compared to a
negative cumulative $31.4 million at December 31, 2001. The change in the Static
Gap at September 30, 2002 compared to December 31, 2001, reflects an increase in
maturities and acceleration of call dates for securities due to the lower
interest rate environment, an increase in federal funds sold, and an extension
of maturities of time deposits and borrowings. If interest rates were to
gradually ramp up 200 basis points or down 150 basis points from current rates,
the percentage change in estimated net interest income for the subsequent twelve
month measurement period continues to be within the Company's policy limit of
not declining by more than 5.0 percent.


                                       28


<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------------

The Company has evaluated the design and operation of its disclosure controls
and procedures to determine whether they are effective in ensuring that the
disclosure of required information is timely made in accordance with the
Securities Exchange Act of 1934 and the rules and forms of the Securities and
Exchange Commission. This evaluation was made under the supervision and with the
participation of management, including the Company's principal executive officer
and principal financial officer within the 90-day period prior to the filing of
this Quarterly Report on Form 10-Q. The principal executive officer and
principal financial officer have concluded, based on their review, that the
Company's disclosure controls and procedures, as defined by Exchange Act Rules
13a-14(c) and 15d-14(c), are effective to ensure that information required to be
disclosed by the Company in reports that it files under the Exchange Act is
recorded, processed, summarized, and reported within the time period specified
in Securities and Exchange Commission rules and forms. There were no significant
changes to the Company's internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation.





                                       29

<PAGE>




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------


(A)     EXHIBITS

Exhibit No.       Exhibit
-----------       -------

(3)(a)            Restated Certificate of Incorporation dated July 25, 2002
                  (incorporated herein by reference to Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended June 30, 2002 ("2002
                  Second Quarter Form 10-Q"), Exhibit (3)(a)).

(3)(b)            Bylaws of Registrant (incorporated herein by reference
                  from Registrant's Registration Statement on Form S-14 (file
                  no. 2-79734), Exhibit 3(b)).

(4)(a)            Junior Subordinated Indenture, dated February 5, 1997,
                  between Registrant and The Chase Manhattan Bank, as trustee
                  (incorporated herein by reference to Registrant's Annual
                  Report on Form 10-K for the year ended December 31, 1996
                  ("1996 10-K"), Exhibit (4)(a)).

(4)(b)            Guarantee Agreement, dated February 5, 1997, by and
                  between Registrant and The Chase Manhattan Bank, as trustee
                  for the holders of 9.58% Capital Securities of Union State
                  Capital Trust I (incorporated herein by reference to
                  Registrant's 1996 10-K, Exhibit (4)(b)).

(4)(c)            Amended and Restated Declaration of Trust of Union State
                  Capital Trust I (incorporated herein by reference to
                  Registrant's 1996 10-K, Exhibit (4)(c)).

(4)(d)            Junior Subordinated Indenture, dated July 31, 2001,
                  between Registrant and State Street Bank and Trust Company of
                  Connecticut, National Association, as trustee (incorporated
                  herein by reference to Registrant's Quarterly report on Form
                  10-Q for the quarter ended September 30, 2001 ("2001 Third
                  Quarter 10-Q"), Exhibit (4)(d)).

(4)(e)            Guarantee Agreement, dated July 31, 2001, by and between
                  Registrant and State Street Bank and Trust Company of
                  Connecticut, National Association, as trustee for the holders
                  of Capital Securities of Union State Statutory Trust II
                  (incorporated herein by reference to Registrant's 2001 Third
                  Quarter 10-Q, Exhibit (4)(e)).

(4)(f)            Amended and Restated Declaration of Trust of Union State
                  Statutory Trust II (incorporated herein by reference to
                  Registrant's 2001 Third Quarter 10-Q, Exhibit (4)(f)).

(4)(g)            Indenture, dated June 26, 2002, between Registrant and
                  State Street Bank and Trust Company of Connecticut, National
                  Association, as Trustee, (incorporated herein by reference to
                  Registrant's 2002 Second Quarter Form 10-Q, Exhibit (4) (g)).


                                       30

<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
--------------------------------------------------


(4)(h)            Guarantee Agreement, dated June 26, 2002, by and between
                  Registrant and State Street Bank and Trust Company of
                  Connecticut, National Association, as Trustee for the holders
                  of Capital Securities of USB Statutory Trust III,
                  (incorporated herein by reference to Registrant's 2002 Second
                  Quarter Form 10-Q, Exhibit (4) (h)).

(4)(i)            Amended and Restated Declaration of Trust of USB Statutory
                  Trust III, (incorporated herein by reference to Registrant's
                  2002 Second Quarter Form 10-Q, Exhibit (4) (i)).

(10)(a)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Thomas E. Hales (incorporated herein by reference to
                  Registrant's Annual Report on Form 10-Q for the quarter ended
                  September 30, 2000 ("2000 Third Quarter 10-Q"), Exhibit
                  (10)(a)).

(10)(b)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Raymond J. Crotty (incorporated herein by reference to
                  Registrant's 2000 Third Quarter 10-Q, Exhibit (10)(b)).

(10)(c)           Amendment to Employment Agreement as of October 25, 2001
                  between the Company and the Bank and Raymond J. Crotty
                  (incorporated herein by reference to Registrant's 2001 Third
                  Quarter 10-Q, Exhibit (10)(c)).

(10)(d)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Steven T. Sabatini (incorporated herein by reference to
                  Registrant's 2000 Third Quarter 10-Q, Exhibit (10)(c)).

(10)(e)           Amendment to Employment Agreement as of October 25, 2001
                  between the Company and the Bank and Steven T. Sabatini
                  (incorporated herein by reference to Registrant's 2001 Third
                  Quarter 10-Q, Exhibit (10)(e)).

(10)(f)           Registrant's 1993 Incentive Stock Option Plan
                  (incorporated herein by reference from Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 1999,
                  Exhibit (10)(e)).

(10)(g)           Registrant's U.S.B. Holding Co., Inc. Employee Stock Ownership
                  Plan (With Code Section 401(k) Provisions) (incorporated
                  herein by reference from Registrant's Annual Report on Form
                  10-K for the year ended December 31, 2001, Exhibit (10)(g )).

(10)(h)           Registrant's Dividend Reinvestment and Stock Purchase Plan
                  (incorporated herein by reference from Registrant's Form S-3
                  Registration Statement (file No. 33-72788).



                                       31

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
--------------------------------------------------

(10)(i)  Registrant's Director Stock Option Plan (incorporated herein by
         reference to Registrant's 1996 10-K, Exhibit (10)(f)).

(10)(j)  Registrant's 1998 Director Stock Option Plan (incorporated
         herein by reference to Registrant's Form S-8 Registration
         Statement, filed June 5, 1998, Exhibit (10)(d)).

(10)(k)  Registrant's Key Employees' Supplemental Investment Plan,
         as amended July 1, 1997 and September 1, 1998 (incorporated
         herein by reference to the Plan's Annual Report on Form 11-K
         for the year ended December 31, 1998, Exhibit (10)(j)).

(10)(l)  Registrant's Key Employees' Supplemental Diversified Investment Plan
         dated September 1, 1998 (incorporated herein by reference to the Plan's
         Annual Report on Form 11-K for the year ended December 31, 1998,
         Exhibit (10)(k)).

(10)(m)  Registrant's 1997 Employee Stock Option Plan (incorporated
         herein by reference to Registrant's Proxy Statement filed
         April 18, 1997).

(10)(n)  Tappan Zee Financial, Inc. 1996 Stock Option Plan for Officers and
         Employees ("Employee Stock Option Plan") (incorporated herein by
         reference to Exhibit B to Tappan Zee Financial, Inc.'s Proxy Statement
         for use in connection with its 1996 Annual Meeting of Shareholders).

(10)(o)  Amendment No. 1 to the Employee Stock Option Plan (incorporated herein
         by reference to Tappan Zee Financial, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended March 31, 1997 ("Tappan Zee 1997 10-K"),
         Exhibit 10.1.1).

(10)(p)  Amendment No. 2 to the Employee Stock Option Plan (incorporated herein
         by reference to Exhibit A to Tappan Zee Financial, Inc.'s Proxy
         Statement for use in connection with its 1997 Annual Meeting of
         Shareholders ("Tappan Zee 1997 Proxy Statement")).

(10)(q)  Tappan Zee Financial, Inc. 1996 Stock Option Plan for Outside Directors
         ("Outside Director Option Plan") (incorporated herein by reference to
         Exhibit B to the Tappan Zee 1997 Proxy Statement).

(10)(r)  Amendment No. 1 to the Outside Director Option Plan (incorporated
         herein by reference to the Tappan Zee 1997 10-K, Exhibit 10.2.1).

(10)(s)  Amendment No. 2 to the Outside Director Option Plan (incorporated
         herein by reference to Exhibit B to the Tappan Zee 1997 Proxy
         Statement).

(10)(t)  Loan Agreement to the Employee Stock Ownership Plan Trust of Tappan Zee
         Financial, Inc. and Certain Affiliates (incorporated herein by
         reference to the Tappan Zee Financial, Inc.'s Annual Report on Form
         10-K for the fiscal year ended March 31, 1996, Exhibit 10.7).




                                       32

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
--------------------------------------------------


(10)(u)           Deferred Compensation Plan for Directors of Tarrytowns
                  Bank, FSB (Incorporated herein by reference to the
                  Registration Statement on Form S-1 (file No. 33-94128), filed
                  on June 30, 1995, as amended, Exhibit 10.7).

(10)(v)           Forms of Stock Option Agreement by and between Tappan Zee
                  Financial, Inc. and recipients of stock options granted
                  pursuant to the Employee Option Plan and the Outside Director
                  Option Plan (incorporated herein by reference to the Tappan
                  Zee 1997 10-K, Exhibit 10.16).

(10)(w)           Registrant's Retirement Plan for Non-Employee Directors of
                  U.S.B. Holding Co., Inc. and Certain Affiliates dated
                  effective as of May 19, 1999 and as amended March 20, 2002
                  (incorporated herein by reference to the Registrant's Annual
                  Report on Form 10-K for the year ended December 31, 2001,
                  (Exhibit (10)(w)).

(10)(x)           U.S.B. Holding Co., Inc. Severance Plan dated January 30, 2002
                  (incorporated herein by reference from Registrant's Annual
                  Report on Form 10-K for the year ended December 31, 2001,
                  Exhibit (10)(y)).

(10)(y)           U.S.B. Holding Co., Inc. Executive Incentive Bonus Plan as
                  amended February 24, 1999 (incorporated herein by reference to
                  Registrant's Proxy Statement filed April 27, 1999).

(10)(z)           Asset Purchase and Liability Assumptions Agreement dated
                  as of June 14, 2002, by and between Union State Bank and
                  Fourth Federal Savings Bank, (incorporated herein by reference
                  to Registrant's 2002 Second Quarter Form 10-Q, Exhibit (10)
                  (z)).

(11)              Computation of earnings per share.*

(99.1)            Certification of Chief Executive Officer and Chief Financial
                  Officer Pursuant to 18 U.S.C. Section 1350, As Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*Filed Herewith.

(B)     REPORTS ON FORM 8-K

        No reports on Form 8-K were filed during the quarter ended September 30,
2002.




                                       33

<PAGE>






                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on November 12, 2002.



                            U.S.B. HOLDING CO., INC.



/s/ Thomas E. Hales                           /s/ Steven T. Sabatini
------------------------------------          ----------------------------------
Thomas E. Hales                               Steven T. Sabatini
Chairman of the Board, President,             Senior Executive Vice President,
Chief Executive Officer and Director          Chief Financial Officer, Assistant
                                              Secretary and Director
                                              (Principal Financial and
                                              Accounting Officer)




                                       34

<PAGE>





                                  CERTIFICATION



I, Thomas E. Hales, Chairman, President and Chief Executive Officer, certify
that:

1.    I have reviewed this Quarterly Report on Form 10-Q of U.S.B. Holding Co.,
      Inc. (the "Company").

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

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

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

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

      b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

      c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the Registrant's auditors and the Audit
      Committee of registrant's Board of Directors (or persons performing the
      equivalent function):

      a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrants ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

      b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.



Date: November 12, 2002                       /s/ Thomas E. Hales
      -----------------                       ----------------------------------
                                              Thomas E. Hales
                                              Chairman of the Board, President &
                                              Chief Executive Officer


                                       35

<PAGE>




                                  CERTIFICATION



I, Steven T. Sabatini, Senior Executive Vice President and Chief Financial
Officer, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of U.S.B. Holding Co.,
      Inc. (the "Company").

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

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

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

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

      b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

      c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the Audit
      Committee of registrant's Board of Directors (or persons performing the
      equivalent function):

      a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrants ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

      b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.



Date: November 12, 2002                        /s/ Steven T. Sabatini
      -----------------                        ---------------------------------
                                               Steven T. Sabatini
                                               Senior Executive Vice President &
                                               Chief Financial Officer



                                       36