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 June 30, 1999

                           Commission File No. 010950

                            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)

                                  914-365-4600
              (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 AUGUST 4, 1999
              -----                        -----------------------------

      Common stock, par value                       16,022,121
          $0.01 per share

<PAGE>

                            U.S.B. HOLDING CO., INC.
                                TABLE OF CONTENTS

                                                                       PAGE NO.
                                                                       --------

PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

            CONSOLIDATED STATEMENTS OF CONDITION AS OF
            JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998.              1

            CONSOLIDATED STATEMENTS OF INCOME FOR THE
            THREE MONTHS ENDED JUNE 30, 1999 AND 1998
            (UNAUDITED).                                                  2

            CONSOLIDATED STATEMENTS OF INCOME FOR THE
            SIX MONTHS ENDED JUNE 30, 1999 AND 1998
            (UNAUDITED).                                                  3

            CONSOLIDATED STATEMENTS OF COMPREHENSIVE
            INCOME (LOSS) FOR THE THREE AND SIX MONTHS
            ENDED JUNE 30, 1999 AND 1998 (UNAUDITED).                     4

            CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
            THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
            (UNAUDITED).                                                  5

            CONSOLIDATED STATEMENTS OF CHANGES IN
            STOCKHOLDERS' EQUITY FOR THE SIX MONTHS
            ENDED JUNE 30, 1999 AND 1998 (UNAUDITED).                     7

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (UNAUDITED).                                                  9

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS.               23

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
            ABOUT MARKET RISK.                                           31

PART II.  OTHER INFORMATION AND SIGNATURES

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY
            HOLDERS.                                                     32

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.                            32


                                      - i -
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
U.S.B. HOLDING CO., INC.                                        (Unaudited)
CONSOLIDATED STATEMENTS OF CONDITION                              June 30,     December 31,
                                                                    1999           1998
                                                                -----------    -----------
ASSETS                                                            (000's, except share data)
<S>                                                             <C>            <C>
Cash and due from banks                                         $    19,668    $    23,660
Federal funds sold                                                   31,700         45,500
                                                                -----------    -----------
Cash and cash equivalents                                            51,368         69,160
Interest bearing deposits in other banks                                397          1,877
Securities:
    Available for sale (at estimated fair value)                    410,400        379,514
    Held to maturity (estimated fair value
       $175,576 in 1999 and $70,284 in 1998)                        176,200         67,019
Loans held for sale                                                      --          3,283
Loans, net of allowance for loan losses of
    $9,633 in 1999 and $8,889 in 1998                               809,973        719,196
Premises and equipment, net                                          10,846         11,210
Accrued interest receivable                                           9,089          7,161
Other real estate owned (OREO)                                          192            415
Federal Home Loan Bank of New York stock                             25,742         17,849
Other assets                                                         17,096         12,128
                                                                -----------    -----------
TOTAL ASSETS                                                    $ 1,511,303    $ 1,288,812
                                                                ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits                                   $   156,362    $   137,270
Interest bearing deposits:
    NOW accounts                                                     68,502         66,304
    Money market accounts                                            46,691         44,326
    Savings deposits                                                361,148        331,448
    Time deposits                                                   431,118        379,292
                                                                -----------    -----------
Total deposits                                                    1,063,821        958,640
Accrued interest payable                                              4,752          4,529
Accrued expenses and other liabilities                                9,170          8,089
Securities sold under agreements to repurchase                      288,780        165,780
Federal Home Loan Bank of New York  advances                         28,514         34,335
                                                                -----------    -----------
Total                                                             1,395,037      1,171,373
Corporation-Obligated mandatory redeemable capital
     securities of subsidiary trust                                  20,000         20,000
Minority interest-junior preferred stock of consolidated
     subsidiary                                                         137             --
Commitments and contingencies (Note 12)
Stockholders' equity:
    Common stock, $0.01 par value; authorized shares
    50,000,000 in 1999 and 30,000,000 in 1998; issued
     shares of 16,325,928 in 1999 and 16,165,175 in 1998                163            162
    Additional paid-in capital                                       97,891         96,919
    Retained earnings                                                 6,878          1,513
    Treasury stock at cost, 304,107 shares
       in 1999 and 201,628 shares in 1998                            (3,682)        (2,223)
    Common stock held for benefit plans                              (1,539)        (1,628)
    Deferred compensation obligation                                    695            675
    Accumulated other comprehensive income (loss)                    (4,277)         2,021
                                                                -----------    -----------
Total stockholders' equity                                           96,129         97,439
                                                                ===========    ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $ 1,511,303    $ 1,288,812
                                                                ===========    ===========
</TABLE>

See notes to consolidated financial statements.


                                       1
<PAGE>

U.S.B. HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                             June 30,     June 30,
                                                               1999         1998
                                                             --------     --------
                                                           (000's, except share data)
<S>                                                          <C>          <C>
INTEREST INCOME:
Interest and fees on loans                                   $ 16,363     $ 14,540
Interest on federal funds sold                                    344          295
Interest and dividends on securities:
      Mortgage-backed securities                                6,012        5,541
      U.S. Treasury and government agencies                     1,793        1,095
      Obligations of states and political subdivisions            754          800
      Corporate and other                                          21           18
Interest on deposits in other banks                                10           14
Dividends on Federal Home Loan Bank of New York stock             363          273
                                                             --------     --------
Total interest income                                          25,660       22,576
                                                             ========     ========

INTEREST EXPENSE:
Interest on deposits                                            8,997       10,047
Interest on borrowings                                          3,469        1,412
Interest on Corporation - Obligated mandatory redeemable
      capital securities of subsidiary trust                      488          488
                                                             --------     --------
Total interest expense                                         12,954       11,947
                                                             --------     --------

NET INTEREST INCOME                                            12,706       10,629
Provision for loan losses                                         302          310
                                                             --------     --------
Net interest income after provision for loan losses            12,404       10,319
                                                             --------     --------

NON-INTEREST INCOME:
Service charges and fees                                          766          677
Gain on securities transactions - net                             201          686
Other income                                                      306          249
                                                             --------     --------
Total non-interest income                                       1,273        1,612
                                                             ========     ========

NON-INTEREST EXPENSE:
Salaries and employee benefits                                  4,275        4,080
Occupancy and equipment expense                                 1,340        1,168
Advertising and business development                              463          368
Professional fees                                                 247          479
Communications                                                    187          199
Stationery and printing                                           146          168
FDIC insurance                                                     44           41
Other expenses                                                    601          756
                                                             --------     --------
Total non-interest expense                                      7,303        7,259
                                                             ========     ========
Income before income taxes                                      6,374        4,672
Provision (benefit) for income taxes                            2,391         (582)
                                                             --------     --------
NET INCOME                                                   $  3,983     $  5,254
                                                             ========     ========

BASIC EARNINGS PER COMMON SHARE                              $   0.25     $   0.34
                                                             ========     ========

DILUTED EARNINGS PER COMMON SHARE                            $   0.24     $   0.31
                                                             ========     ========
</TABLE>

See notes to consolidated financial statements.


                                       2
<PAGE>

U.S.B. HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Six Months Ended
                                                              June 30,     June 30,
                                                                1999        1998
                                                              -------      -------
                                                           (000's, except share data)
<S>                                                           <C>          <C>
INTEREST INCOME:
Interest and fees on loans                                    $31,995      $28,593
Interest on federal funds sold                                    728          656
Interest and dividends on securities:
      Mortgage-backed securities                               11,244        8,945
      U.S. Treasury and government agencies                     2,709        3,937
      Obligations of states and political subdivisions          1,523        1,622
      Corporate and other                                          34           28
Interest on deposits in other banks                                29           27
Dividends on Federal Home Loan Bank of New York stock             659          538
                                                              -------      -------
Total interest income                                          48,921       44,346
                                                              -------      -------

INTEREST EXPENSE:
Interest on deposits                                           17,491       19,594
Interest on borrowings                                          6,153        2,896
Interest on Corporation - Obligated mandatory redeemable
      capital securities of subsidiary trust                      976          976
                                                              -------      -------
Total interest expense                                         24,620       23,466
                                                              -------      -------

NET INTEREST INCOME                                            24,301       20,880
Provision for loan losses                                         910          620
                                                              -------      -------
Net interest income after provision for loan losses            23,391       20,260
                                                              -------      -------

NON-INTEREST INCOME:
Service charges and fees                                        1,551        1,331
Gain on securities transactions - net                             527        1,059
Other income                                                      672          525
                                                              -------      -------
Total non-interest income                                       2,750        2,915
                                                              -------      -------

NON-INTEREST EXPENSE:
Salaries and employee benefits                                  8,320        7,653
Occupancy and equipment expense                                 2,638        2,325
Advertising and business development                              797          656
Professional fees                                                 444          849
Communications                                                    395          407
Stationery and printing                                           308          337
FDIC insurance                                                     94           83
Other expenses                                                  1,259        1,410
                                                              -------      -------
Total non-interest expense                                     14,255       13,720
                                                              -------      -------
Income before income taxes                                     11,886        9,455
Provision for income taxes                                      4,428          916
                                                              -------      -------
NET INCOME                                                    $ 7,458      $ 8,539
                                                              =======      =======

BASIC EARNINGS PER COMMON SHARE                               $  0.47      $  0.56
                                                              =======      =======

DILUTED EARNINGS PER COMMON SHARE                             $  0.45      $  0.51
                                                              =======      =======
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

U.S.B. HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

<TABLE>
<CAPTION>
                                                         Three Months Ended         Six Months Ended
                                                       June 30,    June 30,       June 30,    June 30,
                                                         1999        1998           1999        1998
                                                       --------    --------       --------    --------
                                                                            (000's)
<S>                                                    <C>         <C>            <C>         <C>
NET INCOME                                             $  3,983    $  5,254       $  7,458    $  8,539
                                                       --------    --------       --------    --------
Other comprehensive income (loss), net of tax:
Net unrealized holding gain (loss) on
    securities available for sale arising
    during the period                                    (8,714)      1,250        (10,163)        542
      Income tax effect                                   3,573        (512)         4,167        (222)
                                                       --------    --------       --------    --------
                                                         (5,141)        738         (5,996)        320
                                                       --------    --------       --------    --------
Reclassification adjustment for net gain
    realized on securities available for sale
    that were held at the beginning of the period          (154)       (521)          (512)       (914)
      Income tax effect                                      63         214            210         376
                                                       --------    --------       --------    --------
                                                            (91)       (307)          (302)       (538)
                                                       --------    --------       --------    --------

Other comprehensive income (loss)                        (5,232)        431         (6,298)       (218)
                                                       --------    --------       --------    --------

COMPREHENSIVE INCOME (LOSS)                            $ (1,249)   $  5,685       $  1,160    $  8,321
                                                       ========    ========       ========    ========
</TABLE>

See notes to consolidated financial statements


                                       4
<PAGE>

U.S.B. HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                            June 30,       June 30,
                                                                              1999           1998
                                                                           ---------       ---------
OPERATING ACTIVITIES                                                                (000's)
<S>                                                                        <C>             <C>
Net income                                                                 $   7,458       $   8,539
Adjustments to reconcile net income to net cash provided by operating
   activities:
   Provision for loan losses                                                     910             610
   Depreciation and amortization                                                 967             836
   Amortization/accretion of premiums (discounts) on securities - net            780             293
   Tappan Zee Financial, Inc. fiscal year conversion                              --            (334)
   Noncash ESOP and RRP expense                                                  148             106
   Deferred income taxes                                                        (600)           (389)
   Gain on securities transactions - net                                        (527)         (1,004)
 Origination of loans held for sale                                             (481)             --
(Increase) decrease in accrued interest receivable                            (1,928)            289
Net increase in income taxes receivable                                           --          (3,242)
Other - net                                                                    1,325          (3,032)
                                                                           ---------       ---------
Net cash provided by operating activities                                      8,052           2,672
                                                                           ---------       ---------

INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                          38,291          54,377
Proceeds from principal paydowns and redemptions of:
   Securities available for sale                                              69,537          45,550
   Securities held to maturity                                                 4,782          73,094
Purchases of securities available for sale                                  (149,736)       (216,074)
Purchases of securities held to maturity                                    (113,994)        (10,990)
Net decrease in interest bearing deposits in other banks                       1,480           1,106
Loans originated, net of principal collections                               (88,098)        (50,472)
Purchases of premises and equipment - net                                       (597)         (1,001)
Proceeds from sales of OREO                                                      505             267
Purchase of Federal Home Loan Bank of New York stock                          (7,893)             --
                                                                           ---------       ---------
Net cash used for investing activities                                      (245,723)       (104,143)
                                                                           ---------       ---------

FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
   NOW, money market and savings accounts                                     53,355          60,783
Increase in time deposits, net of withdrawals and maturities                  51,826          42,422
Net increase (decrease) in securities sold under agreements
   to repurchase -  short-term                                                73,000         (12,863)
Net decrease in Federal Home Loan Bank of New York
   advances - short-term                                                          --         (34,000)
Proceeds from securities sold under agreements to
   repurchase - long-term                                                     50,000          20,000
Proceeds from Federal Home Loan Bank of New York
    advances - long-term                                                          --          10,000
Repayment of Federal Home Loan Bank of New York
    advances - long-term                                                      (5,821)         (5,578)
Cash dividends paid                                                           (2,093)         (1,532)
Proceeds from sale of junior preferred stock of
    consolidated subsidiary                                                      137              --
Proceeds from issuance of common stock and tax benefit of
    exercised stock options                                                      934           1,413
Proceeds from sale of treasury stock                                              --               1
Purchase of treasury stock                                                    (1,459)           (748)
                                                                           ---------       ---------
Net cash provided by financing activities                                    219,879          79,898
                                                                           ---------       ---------
</TABLE>

      -Continued-


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                           Six Months Ended
                                                                        June 30,       June 30,
                                                                          1999           1998
                                                                        --------      --------
                                                                                (000's)
<S>                                                                     <C>           <C>
Decrease  in Cash and Cash Equivalents                                  $(17,792)     $(21,573)
Cash and Cash Equivalents, Beginning of Period                            69,160        52,405
                                                                        --------      --------
Cash and Cash Equivalents, End of Period                                $ 51,368      $ 30,832
                                                                        ========      ========
Supplemental Disclosures:
   Interest paid                                                        $ 24,397      $ 21,787
                                                                        --------      --------
   Income tax payments                                                  $  2,030      $  3,992
                                                                        --------      --------
   Transfer of assets to OREO - net                                     $    175      $     --
                                                                        --------      --------
   Transfer of loans held for sale to loans held to
       maturity at lower of cost or fair value                          $  3,764      $    338
                                                                        --------      --------
   Change in shares held in trust for deferred compensation             $     20      $    105
                                                                        --------      --------
   Accumulated other comprehensive (loss)                               $ (6,298)     $   (218)
                                                                        --------      --------
   Increase in due from brokers due to unsettled sale of securities
       available for sale                                               $     --      $ 22,100
                                                                        --------      --------
</TABLE>

See notes to consolidated financial statements


                                       6
<PAGE>

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

                     FOR THE SIX MONTHS ENDED JUNE 30, 1999
                           (000's, except share data)

<TABLE>
<CAPTION>
                                                                                                                   Common
                                                COMMON STOCK          Additional                                    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, 1999                15,963,547    $      162    $   96,919    $    1,513    $   (2,223)    $   (1,628)

Net income                                                                               7,458

Cash dividends:
 Common ($0.13 per share)                                                               (2,082)
 Junior preferred stock of
  consolidated subsidiary                                                                  (11)

Common Stock Issued:
  Employee stock options exercised
  ($2.02 to $6.20 per share)                  37,025                          88

 Director stock options exercised
 ($2.22 to $6.41 per share)                  123,728             1           603

Tax benefit of exercised stock options                                       242

Purchases of treasury stock                 (102,479)                                                 (1,459)

ESOP shares committed to be released                                          39                                         70

Amortization of  RRP awards                                                                                              39

Change in deferred compensation
 obligation                                                                                                             (20)

Other comprehensive loss
                                          ----------    ----------    ----------    ----------    ----------     ----------

Balance at June 30, 1999                  16,021,821    $      163    $   97,891    $    6,878    $   (3,682)    $   (1,539)
                                          ==========    ==========    ==========    ==========    ==========     ==========

<CAPTION>
                                                         Accumulated
                                            Deferred       Other
                                          Compensation  Comprehensive
                                           Obligation   Income (Loss)
                                           ----------   -------------

<S>                                       <C>           <C>
Balance at January 1, 1999                $      675    $    2,021

Net income

Cash dividends:
 Common ($0.13 per share)
 Junior preferred stock of
  consolidated subsidiary

Common Stock Issued:
  Employee stock options exercised
  ($2.02 to $6.20 per share)

 Director stock options exercised
 ($2.22 to $6.41 per share)

Tax benefit of exercised stock options

Purchases of treasury stock

ESOP shares committed to be released

Amortization of  RRP awards

Change in deferred compensation
 obligation                                       20

Other comprehensive loss                                    (6,298)
                                          ----------    ----------
Balance at June 30, 1999                  $      695    $   (4,277)
                                          ==========    ==========
</TABLE>

See notes to consolidated financial statements.


                                       7
<PAGE>

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

                     FOR THE SIX MONTHS ENDED JUNE 30, 1998
                           (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, 1998                14,085,191    $   71,067    $    4,975    $   10,619    $     (866)   $   (2,746)
Net income                                                                               8,539
Cash dividends:
 Common ($0.108 per share)                                                              (1,532)

Common Stock Issued:
 Employee stock options exercised
 ($2.15 to $16.688 per share)                105,153           106           714

Director stock options exercised
 ($2.25 per share)                             8,836            44           (24)

Tax benefit of exercised stock options                                       573

Reduction of par value of common
 stock from $5.00 per share to
 $0.01 per share                                           (71,074)       71,074

Purchases of treasury stock                  (35,649)                                                   (748)

Sale of treasury stock                           100                                                       1

ESOP shares committed to be released                                          38                                        37

Amortization of RRP awards                                                                                              31

Change in deferred compensation
 obligation                                                                                                            105

Other comprehensive loss

Adjustment for pooling of Company
 with different fiscal year end                                                           (334)
                                          ----------    ----------    ----------    ----------    ----------    ----------

Balance at June 30, 1998                  14,163,631    $      143    $   77,350    $   17,292    $   (1,613)   $   (2,573)
                                          ==========    ==========    ==========    ==========    ==========    ==========

<CAPTION>
                                                           Accumulated
                                               Deferred       Other
                                             Compensation  Comprehensive
                                              Obligation   Income (Loss)
                                              ----------   -------------

<S>                                        <C>           <C>
Balance at January 1, 1998                 $    1,441    $    1,388

Net income
Cash dividends:
 Common ($0.108 per share)

Common Stock Issued:
 Employee stock options exercised
 ($2.15 to $16.688 per share)

Director stock options exercised
 ($2.25 per share)

Tax benefit of exercised stock options

Reduction of par value of common
 stock from $5.00 per share to
 $0.01 per share

Purchases of treasury stock

Sale of treasury stock

ESOP shares committed to be released

Amortization of RRP awards

Change in deferred compensation
 obligation                                      (105)

Other comprehensive loss                                        (218)

Adjustment for pooling of Company
 with different fiscal year end
                                           ----------    ----------
Balance at June 30, 1998                   $    1,336    $    1,170
                                           ==========    ==========
</TABLE>

See notes to consolidated financial statements.


                                       8
<PAGE>

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

1.    Principles of Consolidation

      The consolidated financial statements include the accounts of U.S.B.
      Holding Co., Inc. (the "Company" ), its wholly-owned bank subsidiaries,
      Union State Bank (including its wholly-owned subsidiaries, U.S.B. Realty
      Corp. through October 29, 1998, the date of its dissolution, U.S.B.
      Financial Services, Inc., Dutch Hill Realty Corp. and TPNZ Preferred
      Funding Corporation ("TPNZ") from April 30, 1999) (the "Bank"), and
      Tarrytowns Bank, FSB, through April 30, 1999, the date of its merger with
      and into the Bank (including its wholly-owned subsidiary, TPNZ, through
      that date) ("Tarrytowns"), and the Company's wholly-owned non-bank
      subsidiaries, Ad Con, Inc. and Union State Capital Trust I.

2.    Acquisition of Tappan Zee Financial, Inc.

      On August 31, 1998, the Company completed its acquisition of Tappan Zee
      Financial, Inc. ("Tappan Zee"), the parent company of Tarrytowns and TPNZ,
      pursuant to a definitive agreement signed on March 6, 1998. As of August
      31, 1998, Tappan Zee had approximately $140 million in assets. The
      transaction was structured as a tax free exchange of common shares and has
      been accounted for as a pooling-of-interests. Accordingly, prior year
      financial statements have been restated to reflect the Company and Tappan
      Zee on a combined basis as of the earliest period presented. Tappan Zee
      was merged into the Company, and Tarrytowns and TPNZ (subsequently
      transferred to Tarrytowns) operated as wholly-owned subsidiaries of the
      Company and Tarrytowns, respectively, until April 30, 1999, when
      Tarrytowns was merged with and into the Bank.

      Under the terms of the acquisition, each Tappan Zee shareholder received
      Company common stock that had a value of $20.00 per share (adjusted for
      the 10% stock dividend in December 1998) for each share of Tappan Zee
      common stock. The exchange ratio, which was determined based on the
      average of the last reported sale prices for a share of Company stock for
      the 20 consecutive full trading days on the American Stock Exchange ended
      on the date (August 19, 1998) on which the last of the regulatory
      approvals required for consummation of the acquisition was obtained, was
      1.12 Company shares for each Tappan Zee share (the "exchange ratio"). The
      total value of the transaction based on the average Company stock price as
      calculated for purposes of determining the exchange ratio was
      approximately $32.5 million, which represented 1.47 times Tappan Zee's
      book value as of June 30, 1998.

      Prior to the acquisition, the Company and Tappan Zee had different fiscal
      periods for financial reporting purposes. The consolidated financial
      information as of and for the year ended December 31, 1997 and prior,
      therefore, reflects U.S.B. Holding Co., Inc. and its wholly-owned
      subsidiaries, Union State Bank, Ad Con, Inc., and Union State Capital
      Trust I ("Company Information"), as of and for the year ended for the
      applicable calendar year end, combined with Tappan Zee's financial
      information as of and for the fiscal year ended for the subsequent March
      31st. An adjustment of $334,000 is recorded to combined retained earnings
      to eliminate the resulting duplication of recording Tappan Zee net income
      for the three month period ended March 31, 1998, that would otherwise have
      occurred as a result of preparing the consolidated financial information
      in this manner.


                                       9
<PAGE>

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

      As of the close of business on April 30, 1999, Tarrytowns was merged with
      and into the Bank, with its offices continuing to operate and do business
      following the merger. Having completed the merger, the Company currently
      operates its commercial banking subsidiary, Union State Bank, at 24
      locations in Rockland and Westchester Counties.

3.    Basis of Presentation

      In the opinion of management, the accompanying unaudited condensed
      consolidated financial statements include all adjustments (comprising only
      normal recurring accruals) necessary to present fairly the financial
      position of the Company as of June 30, 1999 and December 31, 1998, and its
      operations and comprehensive income for the three and six month periods
      ended June 30, 1999 and 1998, and its cash flows and changes in
      stockholders' equity for the six month periods ended June 30, 1999 and
      1998. 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 1998 Annual Report to Shareholders.

      The results of operations for the three and six month periods ended June
      30, 1999 may not necessarily be indicative of the results of operations to
      be expected for the remainder of the year. Certain information and note
      disclosures normally included in financial statements prepared in
      accordance with generally accepted accounting principles have been omitted
      pursuant to the rules and regulations of the Securities and Exchange
      Commission.

      The consolidated financial statements have been prepared in accordance
      with generally accepted accounting principles. 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 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 valuation of
      OREO acquired in connection with foreclosures or in satisfaction of loan
      receivables. In connection with the determination of the allowance for
      loan losses and OREO, Management obtains independent appraisals for
      significant properties.

4.    Reclassifications

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


                                       10
<PAGE>

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

5.    Recent Accounting Pronouncements

      Accounting for Derivative Instruments and Hedging Activities

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
      Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting
      for Derivative Instruments and Hedging Activities" as amended in June 1999
      by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
      Activities Deferral of the Effective Date of FASB Statement No. 133." This
      statement establishes accounting and reporting standards for derivative
      instruments and hedging activities. It requires that all derivatives be
      recognized in the statement of condition, either as assets or as
      liabilities, and measured at fair value. This statement requires that
      changes in a derivative's fair value be recognized in current earnings
      unless specific hedge accounting criteria are met. Hedge accounting for
      qualifying hedges permits a derivative's gains and losses to offset the
      related results on the hedged item. An entity that elects to apply hedge
      accounting is required to establish at the inception of the hedge the
      method it will use for assessing the effectiveness of the hedging
      derivative and the measurement approach for determining the ineffective
      aspect of the hedge. Those methods must be consistent with the entity's
      approach to managing risk.

      For the Company, SFAS No. 133 is effective January 1, 2001. A company may
      also implement this statement as of the beginning of any fiscal quarter
      after issuance but cannot apply the statement retroactively. The Company
      does not anticipate that the statement will have a material impact on its
      consolidated financial position or results of operations.

      Accounting for Mortgage-Backed Securities Retained After the
      Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
      Enterprise

      In October 1998, the FASB issued SFAS No. 134, "Accounting for
      Mortgage-backed Securities Retained after the Securitization of Mortgage
      Loans Held for Sale by a Mortgage Banking Enterprise, an amendment of FASB
      Statement No. 65." This statement amends SFAS No. 65, "Accounting for
      Certain Mortgage Banking Activities," to conform the subsequent accounting
      to that required (under SFAS No. 115) for securities retained after the
      securitization of mortgage loans by a mortgage banking enterprise to the
      accounting applicable to non-mortgage banking enterprises. The statement
      allows a mortgage banking enterprise to classify securities retained after
      a securitization of mortgage loans held for sale based on its ability and
      intent to sell or hold those investments. However, such securities must be
      classified as trading for any securities that a company commits to sell
      before or during the securitization process. On the date of initial
      application, a mortgage banking enterprise may reclassify mortgage-backed
      securities and other beneficial interests retained after securitization of
      mortgage loans held for sale from the trading category, except for those
      with sales commitments in place.

      The Company adopted this statement effective January 1, 1999 with no
      material impact on its financial position or results of operations.


                                       11
<PAGE>

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

6.    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 June 30, 1999. 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; 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;
      ability to achieve cost savings, estimates of merger related costs, and
      other assumptions related to the acquisition of Tappan Zee; degree of
      expected compliance with the Year 2000 issues that are more fully
      discussed in Management's Discussions and Analysis of Financial Condition
      and Results of Operations; changes 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 speak 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.


                                       12
<PAGE>

7.    Earnings Per Share ("EPS")

      The following table sets forth the computation of Basic and Diluted
      earnings per common share:

<TABLE>
<CAPTION>
      -------------------------------------------------------------------------------------------------
                                                               (000's, except share data)
                                                    Three Months Ended            Six Months Ended
                                                 June 30,        June30,       June 30,      June 30,
                                                   1999           1998           1999          1998
                                               -----------    -----------    -----------    -----------
      <S>                                      <C>            <C>            <C>            <C>
      Numerator:
       Net income                              $     3,983    $     5,254    $     7,458    $     8,539
       Less preferred stock dividends                   11             --             11             --
                                               -----------    -----------    -----------    -----------
        Net income  available to common
         stockholders for basic and diluted
         earnings per common share             $     3,972    $     5,254    $     7,447    $     8,539
                                               ===========    ===========    ===========    ===========
      Denominator:
       Denominator for basic earnings
        per common share - weighted
        average shares                          15,938,073     15,399,950     15,913,102     15,384,846

      Effects of dilutive securities:
       Director and employee
       stock options                               666,407      1,416,117        675,296      1,426,801
       Restricted stock not vested                  12,031         20,472         12,085         20,234
                                               -----------    -----------    -----------    -----------
      Total effects of dilutive securities         678,438      1,436,589        687,381      1,447,035
                                               -----------    -----------    -----------    -----------

      Denominator for diluted earnings
       per common share - adjusted
       weighted average shares                  16,616,511     16,836,539     16,600,483     16,831,881
                                               ===========    ===========    ===========    ===========

      Basic earnings per common share          $      0.25    $      0.34    $      0.47    $      0.56
                                               ===========    ===========    ===========    ===========
      Diluted earnings per common share        $      0.24    $      0.31    $      0.45    $      0.51
                                               ===========    ===========    ===========    ===========
</TABLE>

8.    Securities

      In accordance with SFAS No. 115, "Accounting for Certain Investments in
      Debt and Equity Securities," the Company's investment policies include a
      determination of the appropriate classification of securities at the time
      of purchase. Securities that may be sold as part of the Company's
      asset/liability or liquidity management, or in response to or in
      anticipation of changes in interest rates and resulting prepayment risk,
      or for similar factors, are classified as available for sale. Securities
      that the Company has the ability and positive intent to hold to maturity
      are classified as held to maturity and carried at amortized


                                       13
<PAGE>

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

      cost. Realized gains and losses on the sales of all securities, determined
      by using the specific identification method, are reported in earnings.
      Securities available for sale are shown in the consolidated statements of
      condition at estimated fair value and the resulting net unrealized gains
      and losses, net of tax, are shown as a separate component of accumulated
      other comprehensive income (loss).

      The decision to sell available for sale securities is based on
      management's assessment of changes in economic or financial market
      conditions, interest rate risk, and the Company's financial position and
      liquidity. Estimated fair values for securities are based on quoted market
      prices, where available. If quoted market prices are not available,
      estimated fair values are based on quoted market prices of comparable
      instruments. The Company does not acquire securities for the purpose of
      engaging in trading activities.

      Sales of securities include gross gains of $226,000 and $688,000 and gross
      losses of $25,000 and $2,000 for the three months ended June 30, 1999 and
      1998, respectively. For the six months ended June 30, 1999 and 1998, sales
      of securities include gross gains of $552,000 and $1,073,000, and gross
      losses of $25,000 and $14,000, respectively.


                                       14
<PAGE>

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

      A summary of the amortized cost and estimated fair values of securities
      and related gross unrealized gains and losses at June 30, 1999 and
      December 31, 1998, follows:

<TABLE>
<CAPTION>
                                                           Gross      Gross     Estimated
                                            Amortized   Unrealized  Unrealized    Fair
                                               Cost        Gains      Losses      Value
      June 30, 1999:                         ========    ========    ========    ========
      Available for Sale:                                       (000's)
      <S>                                    <C>         <C>         <C>         <C>
      U.S. Treasury and
          government agencies                $ 69,450    $     42    $    982    $ 68,510
      Mortgage-backed securities              343,986         476       6,928     337,534
      Obligations of states and
          political subdivisions                1,539          46          --       1,585
      Corporate securities                      2,300          --          --       2,300
      Other                                       471          --          --         471
                                             --------    --------    --------    --------

      Total securities available for sale    $417,746    $    564    $  7,910    $410,400
                                             ========    ========    ========    ========

      Held to Maturity:
      U.S. Treasury and
          government agencies                $ 75,736    $     --    $  1,537    $ 74,199
      Mortgage-backed securities               45,579         339       1,017      44,901
      Obligations of states and
          political subdivisions               54,885       1,604          13      56,476
                                             --------    --------    --------    --------
      Total securities held to maturity      $176,200    $  1,943    $  2,567    $175,576
                                             ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                           Gross      Gross     Estimated
                                            Amortized   Unrealized  Unrealized    Fair
                                               Cost        Gains      Losses      Value
      December 31, 1998:                     ========    ========    ========    ========
      Available for Sale:                                       (000's)
      <S>                                    <C>         <C>         <C>         <C>
      U.S. Treasury and
          government agencies                $ 54,532    $  1,110    $      4    $ 55,638
      Mortgage-backed securities              319,345       2,277          30     321,592
      Obligations of states and
          political subdivisions                1,539         101          --       1,640
      Corporate securities                        472          --          --         472
      Other                                       172          --          --         172
                                             --------    --------    --------    --------
      Total securities available for sale    $376,060    $  3,488    $     34    $379,514
                                             ========    ========    ========    ========
      Held to Maturity:
      Mortgage-backed securities             $  9,774    $    118    $      7    $  9,885
      Obligations of states and
          political subdivisions               57,245       3,154          --      60,399
                                             --------    --------    --------    --------

      Total securities held to maturity      $ 67,019    $  3,272    $      7    $ 70,284
                                             ========    ========    ========    ========
</TABLE>


                                       15
<PAGE>

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

9.    Loans

      Nonaccrual loans were $1.3 million at June 30, 1999 and $2.3 million at
      December 31, 1998. Restructured loans were $0.4 million and $0.7 million
      at June 30, 1999 and December 31, 1998, respectively.

      Substantially all of the nonaccruing and restructured loans are
      collateralized by real estate, except for certain loans made by the Bank
      to Bennett Funding Group ("Bennett") which are collateralized by cash and
      lease receivables. At June 30, 1999, the Company has no commitments to
      lend additional funds to any customers with nonaccrual or restructured
      loan balances.

      At June 30, 1999, there are loans aggregating approximately $7,000, which
      are not on nonaccrual status, that were potential problem loans which may
      result in their being placed on nonaccrual status in the future.

      At June 30, 1999 and December 31, 1998, the recorded investment in loans
      that are considered to be impaired under SFAS No. 114, "Accounting by
      Creditors for Impairment of a Loan," approximated $1.2 million and $1.6
      million, of which $0.9 million and $1.2 million at June 30, 1999 and
      December 31, 1998 were in nonaccrual status, respectively. Where
      warranted, each impaired loan has a related allowance for loan losses
      determined in accordance with SFAS No. 114. The total allowance for loan
      losses related to impaired loans was $0.4 million and $0.5 million as of
      June 30, 1999 and December 31, 1998, respectively. The average recorded
      investment in impaired loans for the six months ended June 30, 1999 and
      year ended December 31, 1998 was approximately $1.2 million and $3.4
      million, respectively. For the three and six months ended June 30, 1999
      and 1998, interest income recognized by the Company on impaired loans was
      not material.

      Restructured loans in the amounts of $0.4 million at both June 30, 1999
      and December 31, 1998, that are considered to be impaired due to a
      reduction in the contractual interest rate, are on accrual status because
      the collateral securing these loans is sufficient to protect the
      contractual principal and interest of the restructured loans. These loans
      have been performing for a reasonable period of time. Interest accrued on
      these loans and not yet collected as of June 30, 1999 is immaterial.

      At June 30, 1999, the Bank had $0.6 million of outstanding loans,
      collateralized by cash and lease receivables, to Bennett, a lease finance
      company, which filed for bankruptcy protection during the first quarter of
      1996. Collection of the Bank's loans continues to be delayed by the
      bankruptcy proceedings. However, as a result of a favorable ruling in the
      second quarter of 1998 by the Bankruptcy Court with jurisdiction over
      Bennett, the Bank collected an initial payment of $1.4 million, reducing
      the original balance of $3.3 million to $1.9 million. Additional
      collections of $1.0 million were received through June 30, 1999, and $0.3
      million was charged off during 1998, reducing the balance of the loans to
      $0.6 million. Further collections are anticipated. The ruling by the
      Bankruptcy Court is subject to appeal by the Trustee.


                                       16
<PAGE>

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

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 $50.0 million from two
      primary investment firms under master security sale and repurchase
      agreements (of which $9.8 million was long term and outstanding at June
      30, 1999). In addition, the Bank also has the ability to borrow under
      similar master security sale and repurchase agreements from the FHLB and,
      to a lesser extent, its customers. At June 30, 1999 and December 31, 1998,
      the Company had $74.0 million and $1.0 million of such short-term
      borrowings outstanding with terms of between 30 days and 365 days, and at
      interest rates of between 4.95 percent and 5.88 percent, respectively. At
      June 30, 1999 and December 31, 1998, the borrowings were collateralized by
      securities with an aggregate amortized cost of $80.0 million and $1.0
      million and estimated fair value of $78.2 million and $1.0 million,
      respectively.

      Federal funds purchased represent overnight funds. The Bank has federal
      funds purchase lines available with six financial institutions totaling
      $46.0 million. At June 30, 1999 and December 31, 1998, the Bank had no
      federal funds purchased balances outstanding.

      Short-term FHLB advances are borrowings with original maturities of
      between one and 365 days. At June 30, 1999 and December 31, 1998, the
      Company had no such borrowings outstanding.

      Additional information with respect to short-term borrowings as of and for
      the six months ended June 30, 1999 and 1998 is presented in the table
      below.

      --------------------------------------------------------------------------

      Short-Term Borrowings                       1999           1998
      --------------------------------------------------------------------------
                                              (000's except percentages)
      Balance at June 30                      $   74,000      $   23,000
      Average balance outstanding                 18,685          17,698
      Weighted-average interest rate
        As of June 30                               5.20%           5.64%*
        Paid during period                          5.14%           5.92%*
      --------------------------------------------------------------------------
      *The weighted-average interest rates have been adjusted to reflect the
      effect of an interest rate swap used to convert a variable rate borrowing
      to a fixed rate.

      At June 30, 1999 and December 31, 1998, long-term FHLB advances totaled
      $28.5 million and $34.3 million, respectively. At June 30, 1999, long-term
      FHLB advances aggregating $5.0 million were single principal payments and
      are not repayable prior to maturity without penalty. Long-term FHLB
      advances aggregating $23.5 million were amortizing advances having
      scheduled payments, but may not be repaid in full prior to maturity
      without penalty.


                                       17
<PAGE>

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

      The Bank also had long-term borrowings of $214.8 million and $164.8
      million in securities sold under agreements to repurchase as of June 30,
      1999 and December 31, 1998, respectively. At June 30, 1999, these
      borrowings included $9.8 million having an original term of three years at
      an interest rate of 6.08 percent, and $205.0 million having original terms
      of between five and ten years at interest rates between 4.13 percent and
      5.67 percent that are callable on certain dates after an initial noncall
      period at the option of the counter party to the repurchase agreement. As
      of June 30, 1999 and December 31, 1998, these borrowings were
      collateralized by securities with an aggregate amortized cost of $205.3
      million and $147.9 million and estimated fair value of $201.0 million and
      $149.5 million, and certain mortgage related assets having an outstanding
      balance of $27.5 million and $24.4 million and an estimated fair value of
      $24.8 million and $22.0 million, respectively.

      At June 30, 1999 and December 31, 1998, the Company held 257,419 shares
      and 178,485 shares of capital stock in the FHLB with a carrying value of
      $25.7 million and $17.9 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 purchased and
      certain other assets.

      The following tables are a summary of long-term debt, all of which are
      fixed rate, distributed based upon remaining contractual maturity and
      estimated expected option call date or principal payment date at June 30,
      1999, with a comparative total for December 31, 1998:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                               After 1
                                     Within   But Within       After          1999           1998
      Contractual Maturity           1 Year     5 Years       5 Years         Total          Total
------------------------------------------------------------------------------------------------------
                                                     (000's, except percentages)
<S>                              <C>          <C>           <C>            <C>            <C>
Total long-term debt             $     5,000  $    32,552   $   205,742    $   243,294    $   199,115

Weighted-average interest rate          6.28%        5.56%         5.17%          5.24%          5.30%

------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                               After 1
                                     Within   But Within       After          1999           1998
      Estimated Call Date            1 Year    5 Years        5 Years         Total          Total
------------------------------------------------------------------------------------------------------
                                                (000's, except percentages)
<S>                              <C>          <C>           <C>            <C>            <C>
Total long-term debt             $    58,801  $   120,940   $    63,553    $   243,294    $   199,115

Weighted-average interest rate          4.92%        5.23%         5.56%          5.24%          5.30%

------------------------------------------------------------------------------------------------------
</TABLE>


                                       18
<PAGE>

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

      On December 21, 1998, the Company distributed a ten percent stock dividend
      to shareholders of record on December 7, 1998. The weighted average shares
      outstanding and per share amounts for the three and six months ended June
      30, 1998 have been adjusted to reflect the stock dividend declared in the
      fourth quarter of 1998.

      At the Company's annual meeting of shareholders held on May 19, 1999, an
      amendment to the Company's Certificate of Incorporation was approved by
      the shareholders of the Company. This amendment increased the authorized
      number of shares of common stock from 30,000,000 to 50,000,000.

      In accordance with regulatory requirements, Tarrytowns established a
      liquidation account at the time of its conversion to a stock company
      ("Conversion") in the amount of $7.8 million, equal to its equity at March
      31, 1995. The liquidation account is maintained for the benefit of
      eligible account holders who continue to maintain their accounts at
      Tarrytowns (or its successor) after the Conversion. The liquidation
      account is reduced annually to the extent that eligible account holders
      have reduced their qualifying deposits as of each anniversary date.
      Subsequent increases do not restore an eligible account holder's interest
      in the liquidation account. In the event of a complete liquidation of
      Tarrytowns (or its successor) each eligible account holder and
      supplemental eligible account holder will be entitled to receive a
      distribution from the liquidation account in an amount proportionate to
      the current adjusted qualifying balances for accounts then held.

      The ability of the Company and the Bank to pay cash dividends in the
      future is restricted by various regulatory requirements. The Company's
      ability to pay cash dividends to its shareholders 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
      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 June 30, 1999, the Bank could pay dividends of $27.0 million
      to the Company without having to obtain prior regulatory approval.

      On April 21, 1999, the Company's Board of Directors authorized the
      repurchase of up to 350,000 shares, or approximately 2.2%, of the
      Company's outstanding common stock. Repurchases of common stock are
      authorized to be made from time to time in open-market and private
      transactions throughout 1999 as, in the opinion of management, market
      conditions may warrant. The Board of Directors approved the common stock
      repurchase program in view of the strong capital position of the Company
      and its bank subsidiary, Union State Bank, and to effectively manage and
      utilize its capital. Through June 30, 1999, the Company purchased 97,800
      shares of treasury stock under the repurchase plan at an aggregate price
      of $1,393,200.

11.   Income Taxes

      Tarrytowns, as a thrift institution, was subject to special provisions in
      the Federal and New York State tax laws regarding its allowable tax bad
      debt deductions and related tax bad debt reserves. These deductions
      historically have been determined using methods based on


                                       19
<PAGE>

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

      loss experience or a percentage of taxable income. Tax bad debt reserves
      represent the excess of allowable deductions over actual bad debt losses
      and other reserve reductions. These reserves consist of a defined
      base-year amount, plus additional amounts accumulated after the base year.
      Under the tax law, as amended, events that would result in taxation of
      these reserves include (i) redemptions of Tarrytowns' stock or certain
      excess distributions, (ii) failure of Tarrytowns to maintain a specified
      qualifying assets ratio or meet other thrift definition tests for New York
      State tax purposes, and (iii) a change in the tax law. As a result of the
      merger of Tarrytowns with and into the Bank that occurred on April 30,
      1999, the reserves for New York State tax purposes are taxable.
      Accordingly, a tax liability of $0.6 million was recorded during 1998 as
      part of the merger related expenses.

12    Commitments and Contingencies

      At June 30, 1999, the Company and Bank are committed under employment
      agreements with the Chairman, President and Chief Executive Officer
      ("CEO"), Senior Executive Vice President and Chief Credit Officer, and
      Senior Executive Vice President and Chief Financial Officer requiring an
      annual salary of $560,000, $160,000 and $160,000, respectively, annual
      bonus payments equal to six, one and one percent of net income (as
      defined) of the Company, respectively, under the Executive Incentive Bonus
      Plan; and annual stock option grants of 106,480 shares, 39,930 shares and
      39,930 shares, respectively, issued at fair value (110 percent of fair
      value for incentive stock options if the key officer's ownership of the
      Company equals or exceeds 10 percent at the date of grant); and other
      benefits for the terms of the respective agreements. The CEO's employment
      agreement is for a five year term, expiring November 16, 2003, while the
      Senior Executive Vice Presidents' agreements are for three year terms,
      expiring November 16, 2001.

      The CEO's contract also requires minimum annual salary increases of
      $30,000. All of the agreements include change in control provisions,
      requiring certain payments, including three times annual salary and
      average bonus payments (as defined), in the event of a voluntary or
      involuntary termination connected with a change in control.

      At June 30, 1999, the Bank is committed under an employment agreement and
      consulting agreement with a Senior Vice President of the Bank and former
      Executive Vice President of Tarrytowns, and the former President of
      Tarrytowns, respectively. Under the employment agreement, the Bank will
      make payments of $165,000 per year for services to be performed for a
      period of three years. Under the consulting agreement, payments of $77,000
      per year for services to be performed will be made for a period of three
      years. Both agreements were effective as of August 31, 1998. Payments
      under these agreements accelerate in the event of a change in control of
      the Company. The Bank is also committed under employment agreements with
      three other employees. Under the terms of the agreements, payments
      aggregating approximately $140,000 are required for the remaining term of
      employment.

      Effective May 19, 1999, the Company adopted the Retirement Plan for
      Non-Employee Directors of U.S.B. Holding Co., Inc. and Certain Affiliates
      (the "Plan"). A Board member who has served for a period of fifteen years
      is eligible to receive benefits. The retiree shall


                                       20
<PAGE>

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

      be paid $2,000 per month for a period not to exceed ten years. In the
      event of death, after commencement of retirement payments but prior to the
      conclusion of the ten year payment period, the payments shall be paid to
      his or her spouse at a rate of 50% of the retirement payment over the
      remaining term of the retirement payment period, or through the date of
      the spouse's' death if it occurs prior to completion of his/her payment
      period. Alternatively, the retiree may choose a lump sum payment
      equivalent to the present value of $200,000, discounted based on an
      interest rate equal to the average ten-year advance rate from the Federal
      Home Loan Bank, for the thirty days prior to the said election. The
      Company has recorded a liability to provide the actuarial present value of
      payments expected to be made under the Plan. As of June 30, 1999,
      substantially all of the recorded liability relates to unamortized prior
      service cost, which is being amortized over the average remaining service
      period of the current directors. Benefit cost for the Plan for the period
      May 19, 1999 through June 30, 1999 was approximately $20,000.

      In the normal course of business, various commitments to extend credit are
      made which are not reflected in the accompanying consolidated financial
      statements. At June 30, 1999, formal credit line and loan commitments,
      which are primarily loans collateralized by real estate and credit card
      lines, approximated $261.7 million and outstanding letters of credit
      totaled $24.1 million. Such amounts represent the maximum risk of loss on
      these commitments.

      In connection with its asset and liability management program, the Bank
      entered into a protected rate agreement ("cap") which has a remaining
      aggregate notional amount of $2.0 million at June 30, 1999. The premium
      paid in the amount of $85,000 was deferred and is being amortized over the
      five year life of the cap which expires in October 1999. Under the terms
      of the cap, the Bank will be reimbursed for increases in one-month LIBOR
      for any month during the term of the agreement in which such rate exceeds
      the "strike level" of 8.1875 percent. Interest rate cap agreements allow
      the Company to limit its exposure to unfavorable interest rate
      fluctuations over and above the "capped" rate. The purchased cap hedges
      income payments on floating rate mortgage-backed securities that have
      maximum lifetime interest rate caps. The Bank's risk of loss on the
      interest rate cap is equal to the unamortized premium paid to enter into
      this agreement.

      The Company also has the ability to enter into forward commitments to sell
      residential first mortgage loans to reduce market risk associated with
      originating and holding loans for sale. A risk associated with these
      commitments arises from the Company's potential inability to generate
      loans to fulfill the contracts. To control the risk associated with
      changes in interest rates, the Company may also use options to hedge loans
      closed and expected to close. No such contracts were outstanding at June
      30, 1999.

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


                                       21
<PAGE>

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

13.   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 retail 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.

      General information required by SFAS No. 131, "Disclosures about Segments
      of an Enterprise and Related Information," is disclosed in the
      Consolidated Financial Statements and accompanying notes. The Company
      operates only in the U.S. domestic market, specifically the lower Hudson
      Valley, 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 three and
      six months ended June 30, 1999 and 1998, there is no customer that
      accounted for more than ten percent of the Company's revenue.


                                       22
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION

FINANCIAL CONDITION

At June 30, 1999 the Company had total assets of $1,511.3 million, an increase
of $222.5 million from December 31, 1998.

Total deposits increased $105.2 million for the six month period ended June 30,
1999 to $1,063.8 million, which represents an 11.0 percent increase from
December 31, 1998. Time deposits increased $51.8 million accounting for the
greatest component of deposit increases. Retail time deposits under $100,000
increased by $2.6 million, other time deposits over $100,000 decreased by $19.9
million and IRA and Keogh time deposit accounts decreased by $0.8 million. Time
deposits greater than $100,000 from local municipalities, which are obtained on
a bidding basis with maturities of 30 to 180 days, increased by $69.9 million as
part of the Bank's overall leveraging strategy. Savings deposits increased by
$29.7 million, as the Company's "Golden Statement" and "Liquid Gold" accounts,
which provide attractive yields for high balance accounts, continued to attract
additional deposits. Demand deposits, NOW accounts and money market accounts
increased by $19.1 million, $2.2 million and $2.4 million, respectively, due to
increasing commercial relationships and advertising and promotions for retail
business.

The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, of $612.3 million and $464.4 million at June 30, 1999 and
December 31, 1998, respectively, consists of securities held to maturity at
amortized cost of $176.2 million and $67.0 million, securities available for
sale at estimated fair value totaling $410.4 million and $379.5 million, and
FHLB stock of $25.7 million and $17.9 million at June 30, 1999 and December 31,
1998, respectively.

During the six months ended June 30, 1999, U.S. Treasury and government agency
obligations increased $88.6 million primarily due to purchases of U.S. Treasury
notes of $13.0 million and $102.7 million in callable bonds, partially offset by
sales and redemptions of securities totaling $25.0 million and a net decrease in
the fair value of available for sale securities of $2.1 million. Mortgage-backed
securities increased by $51.7 million primarily due to purchases of $107.6
million in fixed-rate and $36.8 million in floating-rate securities, which were
partially offset by sales totaling $15.7 million, principal paydowns of $67.6
million, a net decrease in fair value of available for sale securities of $8.7
million and net premium amortization and discount accretion of $0.7 million.
Mortgage-backed securities that are fixed-rate securities have expected
weighted-average lives of less than ten years at the time of purchase. The
Company's investment in obligations of states and political subdivisions, or
municipal securities, decreased by $2.4 million principally due to maturities of
$3.8 million that were partially offset by purchases of $1.4 million during the
six month period ended June 30, 1999. Municipal securities are considered core
investments which are high yielding on a tax equivalent basis and have
diversified maturities. Purchases of municipal securities are dependent upon
their availability in the marketplace and the comparative tax equivalent yield
of such securities to other securities of comparable credit risk and maturity.
The Company currently has $2.3 million in short-term corporate money market
mutual funds. Short-term to medium-term corporate debt securities, which are
rated investment grade by nationally recognized credit rating organizations,
have been and will continue to be evaluated for investment in the future.


                                       23
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

FINANCIAL CONDITION (Cont'd)

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

At June 30, 1999, loans were $819.6 million, a net increase of $88.2 million or
12.1 percent over December 31, 1998. The primary increases of outstanding loan
balances were $5.2 million in time secured loans, $19.6 million in time
unsecured loans, $11.0 million in land acquisition and construction loans, $53.4
million in commercial mortgages, and $5.4 million in residential mortgages,
offset by a net reduction of $6.4 million in all other loan categories. The Bank
has approximately $261.7 million in formal credit lines and loan commitments
outstanding at June 30, 1999. 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 Bank's allowance for loan losses increased $0.7 million or 8.4 percent to
$9.6 million at June 30, 1999, from $8.9 million at December 31, 1998. The
allowance for loan losses represents 1.18 percent of gross loans outstanding at
June 30, 1999, compared to 1.22 percent at December 31, 1998. The allowance
reflects a provision of $910,000 and net charge-offs of $166,000 recorded thus
far in 1999. Management takes a prudent and cautious position in evaluating
various business and economic uncertainties in relation to the Bank's loan
portfolio. In management's judgment, the allowance is considered adequate to
absorb potential losses inherent in the loan portfolio.

During the six months ended June 30, 1999, the Bank decreased the amount of
outstanding short- and long-term advances with the Federal Home Loan Bank of New
York by $5.8 million, while borrowings under repurchase agreements increased by
$123.0 million. Overall, borrowings, as well as municipal deposits, increased to
fund loan growth in excess of retail deposit growth and to fund leveraging
strategies.

Stockholders' equity decreased to $96.1 million at June 30, 1999 from the
December 31, 1998 balance of $97.4 million. The decrease primarily results from
a reduction in accumulated other comprehensive income (loss) of $6.3 million,
treasury stock purchases of $1.5 million, and common stock cash dividends of
$2.1 million. The decrease was primarily offset by net income of $7.5 million
for the six month period ended June 30, 1999, a tax benefit from the exercise of
non-qualified stock options of $0.3 million, issuance of common stock in
connection with the exercise of stock options of $0.7 million, and a decrease in
common stock held for benefit plans of $0.1 million. During the six months ended
June 30, 1999, the Company repurchased 102,479 shares of treasury stock, of
which 97,800 shares were purchased under a repurchase plan authorized by the
Company's Board of Directors on April 21, 1999.

The Company's leverage ratio at June 30, 1999 was 8.35 percent, compared to 9.13
percent at December 31, 1998. The Company's Tier I and total capital ratios
under the risk-based capital


                                       24
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

FINANCIAL CONDITION (Cont'd)

guidelines were 13.43 percent and 14.50 percent at June 30, 1999 and 14.97
percent and 16.12 percent at December 31, 1998, respectively. In addition, the
Bank exceeds all current regulatory capital requirements and was in the
"well-capitalized" category at June 30, 1999 and December 31, 1998.

RESULTS OF OPERATIONS

Earnings

Net income for the three and six month periods ended June 30, 1999 was
$3,983,000 and $7,458,000, or $0.24 and $0.45 per diluted common share,
respectively. This compares to $5,254,000, or $0.31 per diluted common share,
and $8,539,000, or $0.51 per diluted common share, for the three and six month
periods ended June 30, 1998, respectively. The 1998 periods include a tax
benefit, net of associated expenses, of $2.0 million ("non-recurring tax
benefit") as a result of the decision to liquidate U.S.B. Realty Corp., the
Bank's real estate investment trust, in the second quarter of 1998. Excluding
the effects of the non-recurring tax benefit in 1998, net income for the three
and six month periods ended June 30, 1999 increased $0.7 million or 21.2 percent
and $0.9 million or 13.5 percent, respectively. On this basis, diluted earnings
per common share increased $0.04 or 20.0 percent and $0.06 or 15.4 percent,
respectively. The overall increase in earnings excluding the non-recurring tax
benefit in 1998, primarily reflects an increase in net interest income and other
income, partially offset by higher non-interest expenses, lower security gains,
and for the six months ended June 30, 1999 compared to June 30, 1998, a higher
provision for loan losses. A discussion of the impact in 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 six month periods ended June 30, 1999, net interest income
increased 19.5 percent to $12.7 million from $10.6 million, and 16.4 percent to
$24.3 million from $20.9 million, respectively, compared to the prior year
periods. Net interest income increased in the current year period due to volume
increases of average earning assets, while the net interest spread declined
slightly. For the three and six months ended June 30, 1999, the interest spread
(yield on earning assets less cost of funds) was 3.55 percent for each period,
compared to 3.59 and 3.57 percent in the same periods of 1998, respectively. On
a tax equivalent basis, the interest spread was 3.67 percent and 3.68 percent
for the three and six month periods ended June 30, 1999, compared to 3.74
percent and 3.73 percent for the comparable periods in 1998, respectively.
Yields on interest earning assets decreased during the three and six month
periods ended June 30, 1999, as compared to the respective periods in 1998,
while the cost of funds decreased at a slightly slower rate, resulting in a
slight narrowing of the net interest spread. The decrease in asset yields is
partially as a result of lower yields available on security investments and
redemptions of callable agency and other securities at higher yields, as well as
declining yields on loans due to increased competition and a general


                                       25
<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

decline in interest rates during the 1999 periods, as compared to respective
periods in 1998. The cost of funds decreased due to the cost of deposits
decreasing in both periods, while interest rates on borrowings declined for the
six month period ended June 30, 1999 and remained stable for the three month
period ended June 30, 1999, compared to the respective periods in 1998. The net
interest margin remained stable at 3.69 percent for each of the three month
periods ended June 30, 1999 and 1998, and was 3.70 percent and 3.71 percent for
the six months ended June 30, 1999 and 1998, respectively, as the decrease in
the spread was substantially offset by an increase in the excess of interest
arning assets over interest bearing liabilities. On a tax equivalent basis, the
net interest margin was 3.80 percent and 3.83 percent for the three and six
months ended June 30, 1999, and 3.84 percent and 3.87 percent for the comparable
periods in 1998, respectively. The decline in the net interest margin on a tax
equivalent basis reflects a lower proportion of tax exempt securities.

Provision for Loan Losses

The provision for loan losses decreased $8,000 to $302,000 and increased
$290,000 to $910,000 for the three and six month periods ended June 30, 1999,
respectively, compared to the same periods in 1998. Net charge-offs in the three
and six month periods ended June 30, 1999 totaled $65,000 and $166,000,
respectively, compared to net charge-offs of $45,000 and $70,000 for the three
and six month periods ended June 30, 1998. The net charge-offs in all periods
primarily relate to credit card loans. Nonaccrual loans were $1.3 million and
$5.2 million, respectively, at June 30, 1999 and 1998, compared to $2.3 million
at December 31, 1998. The reduction in the provision for loan losses in the
second quarter of 1999 reflects improving credit quality and a decline in
non-performing assets, while the higher provision for the first half of 1999
reflects the increasing loan portfolio. 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.
Net income is adversely impacted by the level of non-performing assets of the
Company since, in addition to foregone revenue, the Company must increase the
level of provision for loan losses, and incur other costs associated with
collections of past due balances.

An evaluation of the quality of the loan portfolio is performed by management on
an ongoing basis as an integral part of the loan function, which includes the
identification of past due loans, the recognition of the current economic
environment and the review of the historical loan loss experience. Management
has taken a prudent and cautious position in evaluating various business and
economic uncertainties in relation to the Company's loan portfolio and believes
that the allowance for loan losses at June 30, 1999 reflects the risk elements
inherent in the total loan portfolio at that time. The changes in the provision
charged to income and the allowance for loan losses reflects such uncertainties
on an increasing 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 for the three and six months ended June 30, 1999 decreased
by $339,000 to $1,273,000 and $165,000 to $2,750,000, respectively, compared to
the same periods of 1998.


                                       26
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

The decreases are primarily related to lower net gains on securities
transactions ($485,000 and $532,000, respectively), offset by increases in
service charges and fees ($89,000 and $220,000, respectively) due to increasing
deposit accounts and revisions to the fee structure, and other income ($57,000
and $147,000, respectively). Other income consists primarily of credit card
fees, loan servicing income, letter of credit fees, loan prepayment penalties,
wire transfer fees, safe deposit, and other fees.

Non-Interest Expenses

Non-interest expenses increased $44,000 to $7,303,000 and $535,000 to
$14,255,000 for the three and six month periods ended June 30, 1999,
respectively, from the comparable periods in 1998. The primary reason for this
increase results from an increase in the cost of salaries and benefits and other
operating costs to support the Bank's growth, partially offset by approximately
$300,000 and $600,000 for the quarter and six months ended June 30, 1999,
respectively, in estimated savings achieved in connection with the acquisition
of Tappan Zee Financial, Inc. on August 31, 1998 and the merger of Tarrytowns
Bank, FSB on April 30, 1999 ("merger related savings"). The following discusses
each component of non-interest expense.

Salaries and benefits, the largest component of non-interest expense, increased
by $195,000, or 4.8 percent and $667,000 or 8.7 percent during the three and six
month periods ended June 30, 1999, compared to the previous year periods. The
increases, net of estimated merger related savings of $200,000 and $400,000,
respectively, occurred due to additional personnel employed by the Bank to
accommodate the increases in deposits and loans and their related services, and
annual merit increases. In addition, employee benefits increased because of
higher incentive compensation programs which are based upon the Company's net
income and overall financial performance, higher payroll taxes during 1999 due
to the higher salary base and increases in the cost of other employee benefit
programs such as medical coverage, tuition reimbursement, and training.

Significant changes (in excess of 5 percent) in the other components of
non-interest expense for the three and six month period ended June 30, 1999
compared to June 30, 1998, were due to the following:

o     Increase of $172,000 (14.7%), and $313,000 (13.5%), respectively, in
      occupancy and equipment expense. This increase is due principally to
      higher maintenance expenses relating to the Bank's branch and computer
      related equipment due to increased business volume, and additional rental
      and depreciation expense associated with a new branch opening, as well as
      additional space for corporate and administrative offices.

o     Increase of $95,000 (25.8%), and $141,000 (21.5%), respectively, in
      advertising and business development. The increase reflects increased
      emphasis on marketing, and the introduction of the Bank's new ad campaign,
      "Do business with us, do better with us," as well as increased advertising
      expense for deposit and loan products and new branch promotions and other
      business development efforts.

o     Decrease of $232,000 (48.4%), and $405,000 (47.7%), respectively, in
      professional fees. The decrease results partially from merger related
      savings, as well as a reduction in


                                       27
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

      professional fees of $166,000 associated with the liquidation of U.S.B.
      Realty Corp. in 1998 for both periods, and decreases in legal fees
      associated with loan collections, foreclosures and other litigation.

o     Decrease of $12,000 (6.0%), and $12,000 (2.9%), respectively, in
      communications is due to a decrease in telephone expenses resulting from
      reduction of redundant lines and more efficient usage.

o     Decrease of $22,000 (13.1%) and $29,000 (8.6%), respectively, in
      stationery and printing. The decrease occurred due to a increased control
      over printing costs and supplies, as well as reductions due to
      efficiencies resulting from the Tappan Zee merger.

o     Increase of $3,000 and $11,000, respectively, in FDIC insurance premiums
      results from higher deposit balances.

o     Decrease of $155,000 (20.5%) and $151,000 (10.7%), respectively, in other
      expenses, primarily results from lower foreclosure related expenses and
      branch charge-offs, as well as reductions due to efficiencies resulting
      from the Tappan Zee merger.

Income Taxes

The effective tax rates for the three and six month periods ended June 30, 1999
and 1998 were 37.5 and 37.3 percent, and (12.5) and 9.7 percent, respectively.
The increase in the overall effective tax rate in 1999, primarily reflects the
tax benefit associated with the liquidation of U.S.B. Realty Corp. that occurred
in the comparable 1998 periods.

Year 2000 Issue

The Company continues to monitor the Year 2000 ("Y2K") issue. The Company has
identified all information technology ("IT") systems and non-IT systems
(primarily telephone, vault and security systems that include micro-processes)
and evaluated their status as to Y2K readiness. The Company's Y2K Committee
reports progress to the Company's Board of Directors on at least a quarterly
basis.

All significant IT and non-IT systems are vendor supported. Vendors have
represented to the Company that all significant systems are or will be Y2K
compliant. In particular, the Company's major core system software vendor has
certified that its software is Y2K compliant. The Company has further determined
which systems are mission critical, i.e., those systems that are critical to the
Company's ability to operate and provide service to its customers without any
interruption to the Company's normal business operations. Each of these systems
have been certified or represented by its vendor that they are or will be Y2K
compliant. These systems include the IBM AS-400 computer, Kirchman D-3000 (core
banking) system, ATM systems, Automated Clearing House (ACH) system, and CR
(communications) system. The Company has completed a successful test of each
mission critical system according to an overall Y2K testing plan. An additional
IBM AS-400 computer has been leased to facilitate testing in a controlled
production environment. As of June 30, 1999, all mission critical systems are
Y2K compliant.


                                       28
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

Testing of systems identified as significant but not mission critical, i.e.
systems for which alternative processes are available but provide a significant
level of efficiency have also been tested successfully for Y2K compliance.

The Company has also evaluated significant customers' Y2K readiness and/or
progress toward Y2K compliance to evaluate the potential impact on the Company
for their failure to remediate their Y2K issues. In this connection, the Company
has designed a Y2K risk assessment process. Customers with potential Y2K issues
have been identified and the Company has taken steps to mitigate the impact of
such issues to the Company. In addition, the Company has implemented a loan
policy which requires an evaluation of the Y2K status for each loan customer
prior to approving a new loan or renewal of an existing loan. To the extent that
these processes identified customers with potential Year 2000 issues, the
Company estimated a range of appropriate reserves. As a result, the Company has
allocated $500,000 to $1,000,000 of the allowance for loan losses at June 30,
1999 to provide for any loan losses that may occur as a consequence of the Y2K
issue. The Company will continue to evaluate the impact of loan customers' Y2K
status on the allowance for loan losses.

The Company has also evaluated the potential impact of the Y2K readiness of
other significant vendors, particularly utility companies. To the Company's
knowledge, the major utility companies serving the Company have made
representations in their public documents that they believe the possibility of
significant Y2K problems will be significantly reduced with the implementation
of their Y2K plans.

The worst case Y2K scenario would involve no utility service, mission critical
system failure and Federal Reserve, Clearing House and ACH failure. In this
circumstance, the Company would be required to significantly curtail its
operations. Preparation of paper reports prior to year end 1999 will allow the
Company to monitor limited business activity. However, processing of accruals,
customer statements and the like would not be practical. It is expected that
mission critical systems will be compliant or are not date sensitive, based on
completed Y2K remediation, Y2K testing and the vendors' certification and
representations regarding Y2K compliance. A contingency plan has been prepared
to guide operations in the event that a mission critical system is not Y2K
compliant in the Company's operating environment and cannot be immediately
remediated or for Federal Reserve, Clearing House, ACH and major vendor and/or
utility service failure. For other significant systems, an alternative process
exists and such process will be utilized as a contingent process if such a
system fails to be Y2K compliant. The Company is also monitoring liquidity needs
in the event of increased deposit withdrawals or loan commitment usage and a
liquidity contingency plan has been prepared.

There can be no guarantee that the systems of other entities on which the
Company's systems rely will be timely converted, or that a failure to convert by
another entity, or a conversion that is incompatible with the Company's systems,
would not have a material adverse effect on the Company.

Excluding the allocation of the allowance for loan losses at June 30, 1999 for
the potential impact of Y2K related issues on the loan portfolio, the Company's
Y2K project costs expensed have been approximately $220,000 to date. The
estimate of total expenditures for the Y2K


                                       29
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION (Cont'd)

project is approximately $460,000, including approximately $75,000 of costs that
are part of the Company's IT Capital budget. Other than capital expenditures,
costs are expensed as incurred. Y2K project costs will be funded through normal
operating cash flow. The cost of the project and the date on which the Company
plans to complete the Y2K modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those plans. No
major IT projects have been deferred due to the Company's Y2K efforts.

The Company will continue to evaluate all issues with respect to the Y2K problem
to minimize the impact on its operations and financial condition.


                                       30
<PAGE>

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
            ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk at December 31, 1998
were previously reported in the Company's 1998 Annual Report and Form 10-K.
There have been no material changes in the Company's market risk exposures at
June 30, 1999 compared to December 31, 1998. Interest rate risk continues to be
the Company's primary market risk exposure since substantially 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. However, as disclosed in the Notes to Consolidated Financial
Statements (Unaudited), an interest rate contract is in place to manage the
Company's interest rate exposure. The Company has not entered into any new
derivative financial instruments during the six months ended June 30, 1999.

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 June 30, 1999 as compared to
December 31, 1998. The changes in the composition of the Company's assets and
liabilities for the six months ended June 30, 1999 as reported in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations have not materially affected the Company's overall interest rate risk
profile at June 30, 1999 as compared to December 31, 1998. The Company's "Static
Gap" at June 30, 1999 has not changed materially from December 31, 1998. If
interest rates were to gradually ramp up or down 200 basis points from current
rates, the percentage change in estimated net interest income for the subsequent
12 month measurement period continues to be within the Company's policy limit of
not declining by more than 5.0 percent.


                                       31
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders of the Company was held on May 19, 1999 for
the purpose of considering and voting upon the following matters:

I.    Election of two directors, Messrs. Kenneth J. Torsoe and Kevin J.
      Plunkett, constituting Class II members of the Board of Directors, to a
      three-year term of office.

II.   Approval of an amendment to the Certificate of Incorporation to increase
      the authorized number of shares of common stock, $0.01 par value per
      share, from 30,000,000 to 50,000,000.

III.  Approval of the Executive Incentive Bonus Plan. The results of votes for
      each of the items above were as follows:

<TABLE>
<CAPTION>
                                    ITEM I                ITEM II       ITEM III
                           --------------------------     -------       --------
                           K.J. Torsoe  K.J. Plunkett
                           -----------  -------------
<S>                          <C>           <C>           <C>           <C>
Votes:
      For                    11,127,112    11,115,589    10,256,732    10,448,787
      Against or Withheld       120,515       132,038       924,925       670,000
      Abstentions                    --            --        65,969       128,838
      Broker Non-Votes               --            --            --            --
</TABLE>

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

Exhibit No.  Exhibit
-----------  --------
(3)(a)       Amended and Restated Certificate of Incorporation of Registrant
             (incorporated herein by reference to Registrant's Quarterly Report
             on Form 10-Q for the quarter ended June 30, 1998, 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)).


                                       32
<PAGE>

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

(A) Exhibits (cont'd)

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

(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)).

(10)(a)      Agreement of Employment dated as of November 16, 1998 between the
             Company and the Bank and Thomas E. Hales (incorporated herein by
             reference to Registrant's Annual Report on Form 10-K for the year
             ended December 31, 1998 ("1998 10-K"), Exhibit (10)(a)).

(10)(b)      Agreement of Employment dated as of November 16, 1998 between the
             Company and the Bank and Raymond J. Crotty (incorporated herein by
             reference to Registrant's 199810-K, Exhibit (10)(b)).

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

(10)(d)      Registrant's 1984 Incentive Stock Option Plan (incorporated herein
             by reference from Form S-8 Registration Statement, file No.
             2-90674, Exhibit 28 (b)).

(10)(e)      Registrant's 1993 Incentive Stock Option Plan (incorporated herein
             by reference from Registrant's Annual Report on Form 10-K for the
             year ended December 31, 1993 ("1993 10-K"), Exhibit (10)(c)).

(10)(f)      Registrant's Employee Stock Ownership Plan (With Code Section
             401(k) Provisions) (incorporated herein by reference from
             Registrant's 1993 10-K, Exhibit (10)(d )).

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


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

(10)(i)      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)).


                                       33
<PAGE>

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

(A) Exhibits (cont'd)

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

(10)(j)      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).

(10)(k)      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).

(10)(l)      Registrant's 1997 Employee Stock Option Plan (incorporated herein
             by reference to Registrant's proxy statement filed April 18, 1997).

(10)(m)      Agreement and Plan of Merger, dated as of March 6, 1998, between
             U.S.B. Holding Co., Inc. and Tappan Zee Financial, Inc.
             (incorporated herein by reference to Registrant's Current Report on
             Form 8-K dated as of March 6, 1998).

(10)(n)      Stock Option Agreement, dated as of March 6, 1998, between U.S.B.
             Holding Co., Inc. and Tappan Zee Financial, Inc. (incorporated
             herein by reference to Registrant's Current Report on Form 8-K
             dated as of March 6, 1998).

(10)(o)      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 (the
             "Tappan Zee 1996 Proxy Statement").

(10)(p)      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 (the "Tappan
             Zee 1997 10-K"), Exhibit 10.1.1).

(10)(q)      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 (the " Tappan Zee 1997 Proxy Statement").

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


                                       34
<PAGE>

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

(A) Exhibits (cont'd)

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

(10)(u)      Tappan Zee Financial, Inc. 1996 Recognition and Retention Plan for
             Officers and Employees ("Employee RRP") (incorporated herein by
             reference to Exhibit B to the Tappan Zee 1996 Proxy Statement).

(10)(v)      Amendment No. 1 to the Employee RRP (incorporated herein by
             reference to the Tappan Zee 1997 10-K, Exhibit 10.3.1 ).

(10)(w)      Amendment No. 2 to the Employee RRP (incorporated herein by
             reference to Exhibit C to the Tappan Zee 1997 Proxy Statement).

(10)(x)      Tappan Zee Financial, Inc. 1996 Recognition and Retention Plan for
             Outside Directors ("Outside Director RRP") (incorporated herein by
             reference to Exhibit D to the Tappan Zee 1997 Proxy Statement).

(10)(y)      Amendment No. 1 to the Outside Director RRP (incorporated herein by
             reference to the Tappan Zee 1997 10-K, Exhibit 10.4.1).

(10)(z)      Amendment No. 2 to the Outside Director RRP (incorporated herein by
             reference to Exhibit D to the Tappan Zee 1997 Proxy Statement).

(10)(aa)     Employee Stock Ownership Plan of Tappan Zee Financial, Inc. and
             Certain Affiliates, as amended (incorporated herein by reference to
             Tappan Zee Financial Inc.'s Annual Report on Form 10-K for the
             fiscal year ended March 31, 1996 (the "Tappan Zee 1996 10-K"),
             Exhibit 10.6).

(10)(bb)     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 (the "Tappan Zee 1996
             10-K") Exhibit 10.7).

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

(10)(dd)     Retirement Plan for Board Members of Tappan Zee Financial, Inc. and
             Certain Affiliates, adopted effective as of October 5, 1995
             (incorporated herein by reference to the Tappan Zee 1996 10-K,
             Exhibit 10.9).

(10)(ee)     Consulting Agreement by and between Tarrytowns Bank, FSB and
             Stephen C. Byelick, dated effective as of August 31, 1998
             (incorporated herein by reference to the Registrant's Quarterly
             Report on Form 10-Q for the quarter ended September 30, 1998 (the
             "September 30, 1998 10-Q"), Exhibit (10)(dd)).


                                       35
<PAGE>

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

(A) Exhibits (cont'd)

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

(10)(ff)     Employment Agreement by and between Tarrytowns Bank, FSB and Harry
             G. Murphy, dated effective as of August 31, 1998 (incorporated
             herein by reference to the September 30, 1998 10-Q, Exhibit
             (10)(cc)).

(10)(gg)     Employee Retention Agreement by and among Tappan Zee Financial,
             Inc. Tarrytowns Bank, FSB and Christina Vidal, effective as of
             October 5, 1995 (incorporated herein by reference to the Tappan Zee
             1996 10-K, Exhibit 10.15).

(10)(hh)     Employee Retention Agreement by and among Tappan Zee Financial,
             Inc., Tarrytowns Bank, FSB and Margaret E. Sampson, effective as of
             October 5, 1995 (incorporated herein by reference to the Tappan Zee
             1996 10-K, Exhibit 10.16).

(10)(ii)     Employee Retention Agreement by and among Tappan Zee Financial,
             Inc., Tarrytowns Bank, FSB and James D. Haralambie, effective as of
             June 23, 1997 (incorporated herein by reference to the U.S.B.
             Holding Co., Inc. 1998 10-K, Exhibit (10)(l7)).

(10)(jj)     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)(kk)     Forms of Restricted Stock Award Notices to award recipients,
             pursuant to the Employee RRP and the Outside Director RRP
             (incorporated herein by reference to the Tappan Zee 1997 10-K,
             Exhibit 10.16).

(10)(ll)     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.*

(11)         Computation of earnings per share.*

(27)         Financial Data Schedule.*

*Filed Herewith.


                                       36
<PAGE>

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

(B) Reports on Form 8-K

      No reports on Form 8-K were filed by the Company during the quarter ended
      June 30, 1999.

                                   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 August 13, 1999.

                            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 Finance,
Chief Executive Officer                 Chief Financial Officer and
and Director                            Assistant Secretary
                                        (Principal Financial and
                                         Accounting Officer)



                                       37