<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-Q

                 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

    For the Quarter Ended September 30, 1997 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 NOVEMBER 4, 1997
               -----                       -------------------------------
        Common stock, par value                     6,214,586
          $5 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 
        SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996...........    1

        CONSOLIDATED STATEMENTS OF INCOME FOR THE 
        THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED).....    2

        CONSOLIDATED STATEMENTS OF INCOME FOR THE 
        NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)......    3

        CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 
        NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)......    4

        CONSOLIDATED STATEMENT OF CHANGES IN 
        STOCKHOLDERS' EQUITY FOR THE NINE MONTHS 
        ENDED SEPTEMBER 30, 1997 (UNAUDITED)...........................    6

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).........    7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
        CONDITION AND RESULTS OF OPERATIONS............................   19

PART II. OTHER INFORMATION AND SIGNATURES..............................   25

                                      -i-

<PAGE>

                         PART I--FINANCIAL INFORMATION


                                                    (UNAUDITED)
U.S.B. HOLDING CO., INC.                           SEPTEMBER 30,  DECEMBER 31,
CONSOLIDATED STATEMENTS OF CONDITION                   1997           1996
------------------------------------               -------------  ------------
                                                    (000'S, EXCEPT SHARE DATA)

ASSETS
Cash and due from banks.........................     $  31,471      $  18,821
Federal funds sold..............................        17,800         10,800
                                                     ---------      ---------
Cash and cash equivalents.......................        49,271         29,621
Interest bearing deposits in other banks........          --               99
Securities:
  Available for sale (at fair value)............       229,826        168,756
  Held to maturity (fair value $125,356 
    in 1997 and $83,123 in 1996)................       122,791         81,019
Loans held for sale.............................            89            274
Loans, net of allowance for loan losses
  of $7,285 in 1997 and $5,742 in 1996..........       538,045        497,495
Premises and equipment, net.....................        10,008         10,104
Accrued interest receivable.....................         8,695          5,820
Other real estate owned.........................         1,630            651
Federal Home Loan Bank stock....................        10,054          4,238
Other assets....................................         8,787          5,374
                                                     ---------      ---------
TOTAL ASSETS....................................     $ 979,196      $ 803,451
                                                     ---------      ---------
                                                     ---------      ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits...................     $ 117,261      $  97,251
Interest bearing deposits:
  NOW...........................................        44,955         44,578
  Money Market..................................        45,532         56,284
  Savings.......................................       246,547        217,111
  Time..........................................       343,804        267,056
                                                     ---------      ---------
Total deposits..................................       798,099        682,280
Accrued interest payable........................         2,979          1,895
Accrued expenses and other liabilities..........         3,981          2,718
Securities sold under agreements to repurchase..        59,057         29,425
Federal Home Loan Bank advances.................        34,443         30,267
                                                     ---------      ---------
Total liabilities...............................       898,559        746,585

Corporation-Obligated mandatory redeemable 
  capital securities of subsidiary trust........        20,000           --
Minority interest-junior preferred stock 
  of consolidated subsidiary....................           137           --
Commitments and contingencies (Note 11)
Stockholders' equity:
  Preferred stock, no par value; authorized 
    shares 100,000; outstanding shares: 32,500 
    in 1996.....................................          --            3,250
  Common stock, $5 par value; 20,000,000 shares 
    authorized; issued shares of 6,337,100
    in 1997 and 6,326,808 in 1996...............        31,686         31,634
  Additional paid-in capital....................        11,038         10,783
  Retained earnings.............................        18,418         12,664
  Treasury stock at cost, 132,522 shares in 
    1997 and 143,772 shares in 1996.............          (896)          (895)
  Unrealized gain (loss) on available for sale 
    securities, net of tax......................           254           (570)
                                                     ---------      ---------
Total stockholders' equity......................        60,500         56,866
                                                     ---------      ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......     $ 979,196      $ 803,451
                                                     ---------      ---------
                                                     ---------      ---------

                    See notes to consolidated financial statements.

                                       1

<PAGE>

                                                       THREE MONTHS ENDED
U.S.B. HOLDING CO., INC.                           SEPTEMBER 30,  SEPTEMBER 30,
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)          1997           1996
---------------------------------------------      -------------  -------------
                                                    (000'S, Except Share Data)

INTEREST INCOME:
Interest and fees on loans......................   $    12,155    $    10,497
Interest on federal funds sold..................           105            103
Interest and dividends on securities:
  Mortgage-backed securities....................         2,552          1,718
  U.S. Treasury and government..................         2,620          1,463
  Obligations of states and political 
    subdivisions................................           828            822
  Corporate and other...........................             7            100
  Interest on deposits in banks.................          --                1
Dividends on Federal Home Loan Bank stock.......           166             47
                                                   -----------    -----------
Total interest income...........................        18,433         14,751
                                                   -----------    -----------

INTEREST EXPENSE:
Interest on deposits............................         7,936          6,551
Interest on borrowings..........................         1,466            554
Interest on Corporation--Obligated mandatory 
  redeemable capital securities of 
  subsidiary trust..............................           499           --
                                                   -----------    -----------
Total interest expense..........................         9,901          7,105
                                                   -----------    -----------

NET INTEREST INCOME.............................         8,532          7,646
Provision for loan losses.......................           510            600
                                                   -----------    -----------
Net interest income after provision 
  for loan losses...............................         8,022          7,046
                                                   -----------    -----------

NON-INTEREST INCOME:
Gain on securities transactions--net............           236           --
Gain on loans held for sale.....................             8             10
Service charges and fees........................           550            593
Other income....................................           326            251
                                                   -----------    -----------
Total non-interest income.......................         1,120            854
                                                   -----------    -----------

NON-INTEREST EXPENSE:
Salaries and employee benefits..................         2,875          2,610
Occupancy and equipment expense.................         1,008            837
Advertising and business development............           269            273
Professional fees...............................           317            260
Communications..................................           173            145
Stationery and printing.........................            96             92
FDIC insurance..................................            22              1
Other expenses..................................           615            351
                                                   -----------    -----------
Total non-interest expense......................         5,375          4,569
                                                   -----------    -----------
Income before income taxes......................         3,767          3,331
Provision for income taxes......................         1,075          1,156
                                                   -----------    -----------
NET INCOME......................................   $     2,692    $     2,175
                                                   -----------    -----------
                                                   -----------    -----------

NET INCOME PER COMMON AND COMMON 
  EQUIVALENT SHARE..............................   $       .40    $       .32
                                                   -----------    -----------
                                                   -----------    -----------

WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT 
  SHARES OUTSTANDING............................     6,777,768      6,496,494
                                                   -----------    -----------

                      See notes to consolidated financial statements.

                                       2
<PAGE>
                                                       NINE MONTHS ENDED
U.S.B. HOLDING CO., INC.                           SEPTEMBER 30,  SEPTEMBER 30,
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)          1997           1996
---------------------------------------------      -------------  -------------
                                                    (000'S, EXCEPT SHARE DATA)
INTEREST INCOME:
Interest and fees on loans......................   $    35,430    $    29,424
Interest on federal funds sold..................           446            490
Interest and dividends on securities:
  Mortgage-backed securities....................         6,563          5,194
  U.S. Treasury and government..................         6,924          3,540
  Obligations of states and political 
  subdivisions..................................         2,413          2,373
  Corporate and other...........................            36            470
Interest on deposits in other banks.............          --               37
Dividends on Federal Home Loan Bank stock.......           341            115
                                                   -----------    -----------
Total interest income...........................        52,153         41,643
                                                   -----------    -----------
                                                   -----------    -----------
INTEREST EXPENSE:
Interest on deposits............................        22,219         18,885
Interest on borrowings..........................         3,656          1,031
Interest on Corporation--Obligated mandatory 
  redeemable capital securities of
  subsidiary trust..............................         1,275           --
                                                   -----------    -----------
Total interest expense..........................        27,150         19,916
                                                   -----------    -----------
                                                   -----------    -----------
NET INTEREST INCOME.............................        25,003         21,727
Provision for loan losses.......................         1,970          1,675
                                                   -----------    -----------
Net interest income after provision for loan 
  losses........................................        23,033         20,052
                                                   -----------    -----------
                                                   -----------    -----------

NON-INTEREST INCOME:
Gain on securities transactions--net............           740            592
Gain (loss) on loans held for sale..............            17            (68)
Service charges and fees........................         1,685          1,807
Other income....................................           933            731
                                                   -----------    -----------
Total non-interest income.......................         3,375          3,062
                                                   -----------    -----------
                                                   -----------    -----------
NON-INTEREST EXPENSE:
Salaries and employee benefits..................         8,356          7,462
Occupancy and equipment expense.................         2,920          2,514
Advertising and business development............           725            711
Professional fees...............................         1,004            753
Communications..................................           542            454
Stationery and printing.........................           331            284
FDIC insurance..................................            65              2
Other expenses..................................         1,755            947
                                                   -----------    -----------
Total non-interest expense......................        15,698         13,127
                                                   -----------    -----------
                                                   -----------    -----------
Income before income taxes......................        10,710          9,987
Provision for income taxes......................         3,186          3,437
                                                   -----------    -----------
NET INCOME......................................   $     7,524    $     6,550
                                                   -----------    -----------
                                                   -----------    -----------
NET INCOME PER COMMON AND COMMON 
  EQUIVALENT SHARE..............................   $      1.12    $       .98
                                                   -----------    -----------
                                                   -----------    -----------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT 
  SHARES OUTSTANDING............................     6,702,701      6,484,468
                                                   -----------    -----------
                                                   -----------    -----------
                  See notes to consolidated financial statements.
                                       3
<PAGE>

                                                       NINE MONTHS ENDED
U.S.B. HOLDING CO., INC.                           SEPTEMBER 30,  SEPTEMBER 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)      1997           1996
-------------------------------------------------  -------------  -------------
                                                              (000'S)

OPERATING ACTIVITIES:
Net income......................................   $     7,524    $     6,550
Adjustments to reconcile net income to net 
  cash provided by operating activities:
  Provision for loan losses.....................         1,970          1,675
  Depreciation and amortization.................         1,111            975
  Amortization/accretion of premiums/discounts 
    on securities--net..........................           196            187
  Deferred taxes................................        (1,082)          (901)
  Gain on securities transactions--net..........          (740)          (592)
  (Gain) loss on loans held for sale--net.......           (17)            68
Origination of loans held for sale..............          (914)        (1,628)
Proceeds from sales of loans held for sale......         1,040           --
Increase in accrued interest receivable.........        (2,875)          (881)
Other--net......................................           (24)        (1,765)
                                                   -----------    -----------
Net cash provided by operating activities.......         6,189          3,688
                                                   -----------    -----------

INVESTING ACTIVITIES:
Proceeds from sales of securities available 
  for sale......................................        72,346         47,113
Proceeds from principal paydowns and maturities 
  of securities available for sale..............        22,539         13,619
Proceeds from maturities of securities held 
  to maturity...................................         5,696          5,515
Purchases of securities available for sale......      (153,823)       (67,104)
Purchases of securities held to maturity........       (47,629)       (27,378)
Net decrease in interest bearing deposits 
  in other banks................................            99          1,970
Loans originated, net of principal collections..       (44,200)       (99,739)
Purchases of premises and equipment--net........        (1,003)        (1,316)
Proceeds from sales of OREO.....................         1,390          1,346
Purchase of FHLB stock..........................        (5,816)        (1,016)
                                                   -----------    -----------
Net cash used for investing activities..........      (150,401)      (126,990)
                                                   -----------    -----------
                                                   -----------    -----------

FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits, 
  NOW, money market and savings accounts........        39,071         44,236
Increase in time deposits, net of withdrawals 
  and maturities................................        76,748         49,721
Net increase in Federal Home Loan Bank 
  advances-short-term...........................         5,000           --
Proceeds from Federal Home Loan Bank 
  advances-long-term............................          --           10,797
Repayment of Federal Home Loan Bank 
  advances-long-term............................          (824)          (263)
Net increase in securities sold under 
  agreements to repurchase--short-term..........        19,852         20,020
Proceeds from securities sold under 
  agreements to repurchase--long-term...........         9,780           --
Net proceeds from issuance of Corporation-
  Obligated mandatory redeemable capital
  securities of subsidiary trust................        18,812           --
Redemption of preferred stock...................        (3,250)          (500)
Cash dividends paid.............................        (1,770)        (1,571)
Proceeds from sale of junior preferred stock
  of consolidated subsidiary....................           137           --
Proceeds from issuance of common stock..........            41             15
Proceeds from sale of treasury stock............           370            250
Purchase of treasury stock......................          (105)          --
                                                   -----------    -----------
Net cash provided by financing activities.......       163,862        122,705
                                                   -----------    -----------
                                                   -----------    -----------
      -Continued-

                                       4

<PAGE>


U.S.B. HOLDING CO., INC.                               NINE MONTHS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS              SEPTEMBER 30,  SEPTEMBER 30,
(UNAUDITED)(cont'd)                                     1997           1996
-------------------------------------------------  -------------  -------------
                                                              (000'S)

Increase (Decrease) in Cash and Cash 
  Equivalents...................................   $    19,650    $      (597)
Cash and Cash Equivalents, Beginning 
  of Period.....................................        29,621         37,269
                                                   -----------    -----------
                                                   -----------    -----------
Cash and Cash Equivalents, End of Period........   $    49,271    $    36,672
                                                   -----------    -----------
                                                   -----------    -----------

Supplemental Disclosures:
  Interest paid.................................   $    26,066    $    19,870
                                                   -----------    -----------
  Income tax payments...........................   $     4,094    $     5,755
                                                   -----------    -----------
  Transfer of assets to OREO....................   $     1,756    $       781
                                                   -----------    -----------
  Transfer of loans held for sale to loans held 
    to maturity at lower of cost or fair value..   $        58    $     1,962
                                                   -----------    -----------
  Change in unrealized gain/loss on securities 
    available for sale--net of tax..............   $       824    $    (2,533)
                                                   -----------    -----------

    See notes to consolidated financial statements.

                                       5

<PAGE>

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

                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 
                          (000's, Except Share Data)
<TABLE>
<CAPTION>
                                                                                                                      UNREALIZED
                                            PREFERRED        COMMON STOCK                                             GAIN (LOSS)
                                              STOCK     ----------------------  ADDITIONAL                           ON AVAILABLE
                                             NO PAR       SHARES      $5 PAR      PAID-IN    RETAINED    TREASURY      FOR SALE
                                              VALUE     OUTSTANDING    VALUE      CAPITAL    EARNINGS      STOCK      SECURITIES
                                           -----------  -----------  ---------  -----------  ---------  -----------  -------------
<S>                                        <C>          <C>          <C>        <C>          <C>        <C>          <C>
Balance at January 1, 1997...............   $   3,250    6,183,036   $  31,634   $  10,783   $  12,664   $    (895)    $    (570)
Net income...............................                                                        7,524
Cash dividends:
  Common ($.28 per share)................                                                       (1,736)
  Preferred..............................                                                          (34)
Common Stock Issued:
  Incentive stock options exercised 
  ($2.86 to $10.64 per share)............                   10,292          52         (11)
Purchase of treasury stock...............                   (5,000)                                           (105)
Sale of treasury stock...................                   16,250                     266                     104
Redemption of preferred stock............      (3,250)
Change in unrealized gain (loss) on
  available for sale securities, net of
  tax....................................                                                                                    824
                                           -----------  -----------  ---------  -----------  ---------       -----         -----
Balance at September 30, 1997............   $  --        6,204,578   $  31,686   $  11,038   $  18,418   $    (896)    $     254
                                           -----------  -----------  ---------  -----------  ---------       -----         -----
                                           -----------  -----------  ---------  -----------  ---------       -----         -----
</TABLE>

    See notes to consolidated financial statements.

                                       6

<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"), Union State Bank, including its wholly-owned 
subsidiary, U.S.B. Realty Corp. (the "Bank"), the Company's non-bank 
subsidiary, Ad Con, Inc.

2. RECLASSIFICATIONS

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

3. BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited consolidated 
financial statements include all adjustments (comprising only normal 
recurring accruals) necessary to present fairly the financial position of the 
Company as of September 30, 1997, operations for the three and nine month 
periods ended September 30, 1997 and 1996, cash flows for the nine month 
periods then ended, and changes in stockholders' equity for the nine months 
ended September 30, 1997. A summary of the Company's significant accounting 
policies is set forth in Note 2 to the Consolidated Financial Statements 
included in the Company's 1996 Annual Report to Shareholders.

The consolidated financial statements have been prepared in accordance with 
generally accepted accounting principles and predominant practices used 
within the banking industry. In preparing such financial statements, 
management is required to make estimates and assumptions that affect the 
reported amounts of 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 other 
real estate acquired in connection with foreclosures or in satisfaction of 
loan receivables. In connection with the determination of the allowance for 
loan losses and other real estate owned, management obtains independent 
appraisals for significant properties, where applicable.

4. FORWARD-LOOKING STATEMENTS

The Company has made, and may continue to make, various forward-looking 
statements with respect to earnings, credit quality and other financial and 
business matters for periods subsequent to September 30, 1997. 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. 

                                       7

<PAGE>

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

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; 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.

5. TRANSFERS AND SERVICING OF FINANCIAL ASSETS

Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for 
Transfers and Servicing of Financial Assets and Extinguishments of 
Liabilities," specifies accounting and reporting standards for transfers and 
servicing of financial assets and extinguishments of liabilities and for 
distinguishing whether a transfer of financial assets in exchange for cash or 
other consideration should be accounted for as a sale or as a pledge of 
collateral in a secured borrowing. SFAS No. 125 is effective for transfers 
and servicing of financial assets and extinguishments of liabilities 
occurring after December 31, 1996, except for certain provisions (relating to 
the accounting for secured borrowings and collateral and the accounting for 
transfers and servicing of repurchase agreements, dollar rolls, securities 
lending and similar transactions) which have been deferred until January 1, 
1998 in accordance with SFAS No. 127, "Deferral of the Effective Date of 
Certain Provisions of FASB Statement No. 125." The adoption of these 
standards currently effective did not have a material impact on the Company's 
consolidated financial statements, nor is it anticipated that the adoption of 
those provisions effective January 1, 1998 will have a material impact on the 
Company's consolidated financial statements.

6. EARNINGS PER SHARE

On March 3, 1997, the Financial Accounting Standards Board issued SFAS No. 
128, "Earnings per Share." SFAS No. 128 is effective for financial statements 
issued for periods ending after December 15, 1997, including interim periods. 
Earlier application is not permitted. Restatement of all prior-period 
earnings per share ("EPS") data presented is required when SFAS No. 128 is 
implemented.

SFAS No. 128 establishes standards for computing and presenting "Basic" and 
"Diluted" EPS. SFAS No. 128 states that "Basic EPS" excludes dilution and is 
computed by dividing income available to common stockholders by the 
weighted-average number of common shares outstanding for the period. "Diluted 
EPS" reflects the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into common stock 
or resulted in the issuance of common stock that would then share in 

                                       8

<PAGE>

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

the earnings of the entity. "Diluted EPS" is computed similarly to "Fully 
Diluted EPS" pursuant to Accounting Principles Board ("APB") Opinion No. 15.

On a pro forma basis, the effect of this statement will be to report earnings 
per share as follows:

<TABLE>
<CAPTION>

                                                             THREE MONTHS ENDED
                                                  ---------------------------------------
                                                  SEPTEMBER 30, 1997   SEPTEMBER 30, 1996
                                                  ------------------   ------------------
<S>                                               <C>                  <C>
Earnings per share as currently reported 
  (per APB Opinion No. 15):
Primary earnings per share......................       $    0.40            $    0.32
Fully diluted earnings per share................       $    0.40            $    0.32

Pro forma earnings per share in accordance 
  with SFAS No. 128:
Basic earnings per share........................       $    0.43            $    0.34
Diluted earnings per share......................       $    0.40            $    0.32

</TABLE>

<TABLE>
<CAPTION>

                                                             NINE MONTHS ENDED
                                                  ---------------------------------------
                                                  SEPTEMBER 30, 1997   SEPTEMBER 30, 1996
                                                  ------------------   ------------------
<S>                                               <C>                  <C>
Earnings per share as currently reported 
  (per APB Opinion No. 15):
Primary earnings per share......................       $    1.12            $    0.98
Fully diluted earnings per share................       $    1.12            $    0.98

Pro forma earnings per share in accordance 
  with SFAS No. 128:
Basic earnings per share........................       $    1.21            $    1.03
Diluted earnings per share......................       $    1.12            $    0.98

</TABLE>

7. Reporting Comprehensive Income and Disclosures About Segments of an 
   Enterprise and Related Information

In September 1997, the Financial Accounting Standards Board issued two new 
accounting standards, Statement of Financial Standards No. 130,'Reporting 
Comprehensive Income" ("SFAS No. 130") and Statement of Financial Accounting 
Standards No. 131,'Disclosures About Segments of an Enterprise and Related 
Information" ("SFAS No. 131").

SFAS No. 130 establishes standards for reporting and display of comprehensive 
income and its components in a full set of general purpose financial 
statements. This statement requires that all items that are required to be 
recognized under accounting standards as components of comprehensive income 
be reported in a financial statement that is displayed with the same 
prominence as are the financial statements. Comprehensive income is defined 
as "the change in equity (net assets) of a business enterprise during a 
period from transactions and other events and circumstances from non-owner 
sources. It includes all changes in equity during a period, except those 
resulting from investments by owners and distributions to owners."

                                       9

<PAGE>

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

This statement is effective for financial statements for periods beginning 
after December 15, 1997.

SFAS No. 131 establishes standards for the way public business enterprises 
report information about operating segments in annual financial statements 
and requires that those enterprises report selected information about 
operating segments in interim financial reports issued to shareholders. It 
also establishes standards for related disclosure about products and 
services, geographic areas, and major customers. The statement requires that 
a public business enterprise report financial and descriptive information 
about its reportable operating segments. Operating segments are components of 
an enterprise about which separate financial information is available that is 
evaluated regularly by the chief operating decision maker in deciding how to 
allocate resources and assess performance. The statement requires that public 
business enterprises report a measure of segment profit or loss, certain 
specific revenue and expense items and segment assets. It also requires that 
information be reported about revenues derived from the enterprises' products 
or services, or about the countries in which the enterprises earn revenues 
and holds assets, and about major customers, regardless of whether that 
information is used in making operating decisions. This statement is 
effective for financial statements for periods beginning after December 15, 
1997.

Both of these statements require disclosures that the Company must make in 
its financial statements or notes thereto to the extent applicable. 
Accordingly, implementation of these statements will not have any effect on 
the Company's results of operation or financial condition. However, 
additional information will be provided to users of these financial 
statements as to the operations and financial condition of the Company.

8. LOANS

Nonaccrual loans were $7.6 million at September 30, 1997 and $8.1 million at 
December 31, 1996. Restructured loans were $1.0 million and $2.1 million at 
September 30, 1997 and December 31, 1996, respectively.

Substantially, all of the nonaccruing loans are collateralized by real 
estate, except for certain loans made by the Bank to Bennett Funding Group, 
which are collateralized by cash and lease receivables. At September 30, 
1997, the Company has no commitments to lend additional funds to any 
customers with nonaccrual or restructured loan balances.

At September 30, 1997, there are loans aggregating approximately $.5 million, 
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 September 30, 1997 and December 31, 1996, the recorded investment in loans 
that are considered to be impaired under SFAS No. 114 "Accounting for 
Impairment of a Loan" ("SFAS No. 114") approximated $6.6 million and $7.8 
million, respectively, ($6.2 million and $7.2 million, respectively, of which 
were in nonaccrual status). Included in these loan balances were loans to 
Bennett Funding Group. Each impaired loan has a related allowance for loan 
losses determined in accordance with SFAS No. 114.

                                       10

<PAGE>

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

Restructured loans in the amounts of $.4 million and $.6 million at September 
30, 1997 and December 31, 1996, respectively, that are considered to be 
impaired due to a reduction in the contractual interest rate are on accrual 
status since the collateral securing the loans are 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 not yet collected as of September 30, 1997 is immaterial. The 
total allowance for loan losses related to impaired loans was $2.1 million 
and $1.3 million as of September 30, 1997 and December 31, 1996, 
respectively. The average recorded investment in impaired loans for the nine 
months ended September 30, 1997 and year ended December 31, 1996 was 
approximately $6.8 million and $7.4 million, respectively. For the nine 
months ended September 30, 1997 and year ended December 31, 1996, interest 
income recognized by the Company on impaired loans was not material.

The Bank has approximately $3.3 million of outstanding loans, collateralized 
by cash and lease receivables, to Bennett Funding Group ("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. The Bank has not yet determined the extent of 
losses, if any, that will be sustained on these loans. However, based upon 
Bennett's filing, the loans have been placed on nonaccrual status and a 
specific reserve included in the allowance for loan losses of $1.6 million 
has been established in accordance with SFAS No. 114 as of September 30, 1997.

9. SECURITIES AND LOANS HELD FOR SALE

The Company accounts for securities under SFAS No. 115, "Accounting for 
Certain Investments in Debt and Equity Securities." 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 other similar factors, are classified as available 
for sale and carried at fair value. Securities that the Company has the 
ability and positive intent to hold to maturity are classified as held to 
maturity and carried at amortized cost.

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. Fair values 
for securities are based on quoted market prices, where available. If quoted 
market prices are not available, 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.

Realized gains and losses on the sales of all securities are reported in 
earnings. Unrealized gains and losses on available for sale securities are 
shown, net of taxes, as a separate component of stockholders' equity. At 
September 30, 1997, the effect of SFAS No. 115 resulted in an increase of 
securities available for sale of $441,000, representing the net unrealized 
gain, which, after the applicable tax effect, resulted in an increase to 
stockholders' equity of $254,000. At December 31, 1996, the effect of SFAS 
No. 115 resulted in a decrease of securities available for sale of $987,000 
which, after the applicable tax effect, resulted in a decrease to 
stockholders' equity of $570,000.

                                       11

<PAGE>

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

A summary of the amortized cost and fair value of securities and related 
gross unrealized gains and losses at September 30, 1997 and December 31, 
1996, follows:

<TABLE>
<CAPTION>
                                                                               (000'S)
                                                                        GROSS         GROSS
                                                          AMORTIZED   UNREALIZED    UNREALIZED       FAIR
SEPTEMBER 30, 1997:                                         COST        GAINS        LOSSES        VALUE
-------------------------------------------------------  ----------  -----------  -------------  ----------
<S>                                                      <C>         <C>          <C>            <C>
Available for Sale:
U.S. Treasury and government agencies..................  $  121,221   $     801     $     178    $  121,844
Obligations of states and political subdivisions.......       1,166          49          --           1,215
Mortgage-backed securities.............................     106,884         289           520       106,653
Other..................................................         114        --            --             114
                                                         ----------  -----------    ---------    ----------
Total securities available for sale....................  $  229,385   $   1,139     $     698    $  229,826
                                                         ----------  -----------    ---------    ----------
                                                         ----------  -----------    ---------    ----------
Held to Maturity:
Obligations of states and political subdivisions.......  $   62,993   $   2,576     $       3    $   65,566
Mortgage-backed securities.............................      29,798          27            19        29,806
U.S. government agencies...............................      30,000         169           185        29,984
                                                         ----------  -----------    ---------    ----------
Total securities held to maturity......................  $  122,791   $   2,772     $     207    $  125,356
                                                         ----------  -----------    ---------    ----------
                                                         ----------  -----------    ---------    ----------
</TABLE>

                                       12

<PAGE>

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

<TABLE>
<CAPTION>

                                                                              (000'S)
                                                                        GROSS        GROSS
                                                          AMORTIZED   UNREALIZED   UNREALIZED    FAIR
DECEMBER 31, 1996:                                          COST        GAINS       LOSSES       VALUE
-------------------------------------------------------  ----------  -----------  -----------  ----------
<S>                                                      <C>         <C>          <C>          <C>
Available for Sale:
U.S. Treasury and government agencies..................  $   77,037   $      20    $   1,022   $   76,035
Obligations of states and political subdivisions.......       1,166          29       --            1,195
Mortgage-backed securities.............................      90,543         725          741       90,527
Corporate bonds........................................         897           2       --              899
Other..................................................         100      --           --              100
                                                         ----------  -----------  -----------  ----------
                                                         ----------  -----------  -----------  ----------
Total securities available for sale....................  $  169,743   $     776    $   1,763   $  168,756
                                                         ----------  -----------  -----------  ----------
                                                         ----------  -----------  -----------  ----------
Held to Maturity:
U.S. Treasury and government agencies..................  $   10,000   $       3    $  --       $   10,003
Obligations of states and political subdivisions.......      61,222       2,178           23       63,377
Mortgage-backed securities.............................       9,797          10           64        9,743
                                                         ----------  -----------  -----------  ----------
Total securities held to maturity......................  $   81,019   $   2,191    $      87   $   83,123
                                                         ----------  -----------  -----------  ----------
                                                         ----------  -----------  -----------  ----------

</TABLE>

At September 30, 1997 and December 31, 1996, there are fixed rate residential 
real estate loans and commitments to originate such loans held for sale with 
a cost of $303,000 and $416,000 and fair value of $306,000 and $415,000, 
respectively. During the first quarter of 1996, the Bank transferred fixed 
rate residential real estate loans with an aggregate cost of $2,824,000, 
which included commitments not yet closed of $1,445,000, representing its 
entire held for sale portfolio at that time, to its held to maturity 
portfolio. This transfer resulted in a write-down of $78,000, as the loans 
were transferred at the lower of cost or fair value.

10. BORROWINGS, STOCKHOLDERS' EQUITY AND NET INCOME PER COMMON SHARE DATA

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

                                       13

<PAGE>

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

Short-term securities sold under agreements to repurchase generally mature 
between one and 365 days. The Bank may borrow up to $50 million from two 
primary investment firms under master security sale and repurchase 
agreements. In addition, the Bank also has the ability to borrow under a 
similar master security sale and repurchase agreement with the Federal Home 
Loan Bank of New York. At September 30, 1997, the Bank had $49.3 million of 
such borrowings under sale and repurchase agreements outstanding, with 
original terms of approximately 30 days at interest rates of between 5.60 
percent and 5.65 percent. The borrowings are collateralized by securities 
with an aggregate amortized cost and market value of $50.7 million and $50.0 
million, respectively.

The Bank also has a long-term borrowing of $9.8 million in securities sold 
under agreements to repurchase with an original term of three years at an 
interest rate of 6.08%. The borrowings are collateralized by securities with 
an aggregate amortized cost and market value of $10.0 million and $9.9 
million, respectively.

Federal funds purchased represent overnight funds. The Bank has federal funds 
purchase lines available with three financial institutions for a total of 
$11.0 million. At September 30, 1997 and December 31, 1996, 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 September 30, 1997 and December 31, 1996, the Bank had 
short-term FHLB advances of $10.0 million and $5.0 million outstanding at 
weighted-average interest rates of 5.66 percent and 5.63 percent, 
respectively. Short-term advances and securities sold under agreements to 
repurchase with the FHLB require the purchase of capital stock in the FHLB, 
which is more fully described below.

Additional information with respect to short-term borrowings for the nine 
months ended September 30, 1997 and 1996 is presented in the table below. The 
increase in short-term borrowings is used to fund asset growth and implement 
leverage strategies.


                                             (000'S, EXCEPT PERCENTAGES)
                                                 1997            1996
                                              ---------       ---------
Balance as of September 30..................  $  59,277       $  20,020
Average balance outstanding.................     52,743           5,938
Weighted-average interest rate*
  As of September 30........................       5.70%           5.44%
  Paid during period........................       5.76%           5.53%
                                              ---------       ---------
                                              ---------       ---------


*   The weighted-average interest rates for 1997 have been adjusted to reflect
    the effect of an interest rate swap used to convert a variable rate
    borrowing to a fixed rate.

As of September 30, 1997, long-term FHLB advances totaled $24.4 million, 
compared with $25.3 million as of December 31, 1996. At September 30, 1997, 
long-term FHLB advances 

                                       14

<PAGE>

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

aggregating $19.0 million are single principal payments and are not repayable 
prior to maturity without penalty. Long-term FHLB advances aggregating $5.4 
million are amortizing advances having scheduled payments, but may not be 
repaid in full prior to maturity without penalty.

The Bank has purchased 100,536 shares of capital stock in the FHLB at a cost 
of $10,054,000, which is required in order to borrow under the short and 
long-term advance programs and securities sold under agreements to repurchase 
from the FHLB. The Bank may borrow up to an aggregate of 30% of total assets 
or $293.8 million, excluding securities sold under agreements to repurchase, 
upon the prerequisite purchase of additional shares of FHLB stock. Advances 
made from the FHLB are collateralized with the FHLB stock purchased and 
certain other assets of the Bank.

The following table is a summary of long-term debt which includes FHLB 
advances and securities sold under agreements to repurchase, distributed 
based upon remaining contractual maturity at September 30, 1997 and December 
31, 1996.

                                               (000'S, EXCEPT PERCENTAGES)
                                                   AFTER 1
                                         WITHIN  BUT WITHIN   AFTER
                                        1 YEAR    5 YEARS    5 YEARS   TOTAL
                                       --------  ---------- -------- ---------
As of September 30, 1997
  Fixed rate advances................  $ 5,000   $ 26,691   $ 2,532   $ 34,223
  Weighted-average interest rate.....     6.20%      6.12%     6.72%      6.18%
                                       -------   --------   -------   --------
As of December 31, 1996
  Fixed rate advances................  $  --     $ 22,467   $ 2,800   $ 25,267
  Weighted-average interest rate.....     --         6.14%     6.72%      6.20%
                                       -------   --------   -------   --------

The dividend rate on the Company's Series "A" preferred stock issued which 
was to a single investor was determined quarterly and was subject to certain 
minimum and maximum per annum dividend rates as specified in the agreement. 
For the nine month period ended September 30, 1997 and 1996, the weighted 
average dividend rates were 8.4 percent (the minimum rate) for each period. 
Net income per common and common equivalent share reflects the preferred 
stock dividends declared and accrued totaling $71,000 for the three month 
period ended September 30, 1996, and $34,000 and $226,000 for the nine month 
periods ended September 30, 1997 and 1996, respectively. The Company redeemed 
the remaining outstanding amount of $3,250,000 of preferred stock on 
February 14, 1997.

The Company sold 11,250 and 5,000 shares of its treasury stock in February 
1997 and September 1997, respectively. These shares were purchased by the 
Company's Employee Stock Ownership Plan (With Code Section 401(k) Provisions) 
and the Bank's Supplemental Employees' Investment Plan at fair value. In 
addition, the Company purchased 5,000 common shares at fair value for the 
treasury in March 1997.

                                       15

<PAGE>

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

The Company declared a 10 percent stock dividend on April 24, 1996 to 
shareholders of record May 31, 1996, which was distributed on September 14, 
1996. In addition, the Company issued a two-for-one stock split in the form 
of a 100% stock dividend on December 30, 1996. The weighted average shares 
outstanding and per share amounts for the three and nine months ended 
September 30, 1996 have been adjusted to reflect the stock dividends 
distributed in 1996, as applicable.

The Company and the Bank's ability to pay cash dividends in the future are 
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 September 30, 1997, the Bank could pay dividends to the 
Company of $18.7 million without having to obtain prior regulatory approval.

Net income per common and common equivalent share is based on net income 
after preferred stock dividend requirements, the weighted average number of 
common shares outstanding and common equivalent shares (for the three and 
nine months ended September 30, 1996, adjusted for the common stock dividend 
and stock split distributed in 1996, as applicable). Outstanding stock 
options granted that are dilutive and currently exercisable under the 
Company's stock option plans are considered to be common stock equivalents 
for earnings per share calculations.

11. COMMITMENTS AND CONTINGENCIES

At September 30, 1997, the Bank was committed under an employment agreement 
with a key officer, director and shareholder requiring annual salary and 
other payments of $430,000, increasing annually by $30,000 during the term of 
the contract, annual bonus payments equal to 6% of net income of the Company, 
annual stock option grants of 48,400 shares 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 term of the contract expiring July 1, 1999.

In the normal course of business, various commitments to extend credit are 
made which are not reflected in the accompanying consolidated financial 
statements. At September 30, 1997, formal credit line and loan commitments 
which are primarily loans collateralized by real estate approximated $147.3 
million, and outstanding letters of credit totaled $24.3 million. Such 
amounts represent the maximum risk of loss on these commitments.

In the ordinary course of business, the Company is party to various legal 
proceedings, which in the opinion of management, will not have a material 
effect in the aggregate on the Company's consolidated financial position or 
results of operations.

In connection with its asset and liability management program, during 1994 
the Bank entered into a protected rate agreement ("cap") which has an 
aggregate notional amount of 

                                       16

<PAGE>

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

$3.0 million at September 30, 1997. The premium paid in the amount of $85,000 
was deferred and is being amortized over the five year life of the cap. Under 
the terms of the cap, the Bank will be reimbursed for increases in one-month 
London InterBank Offered Rate ("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 Bank to limit its exposure to 
unfavorable interest rate fluctuations over and above the "capped" rate. The 
purchased cap hedges income payments from an adjustable rate mortgage-backed 
security in which the interest rate adjusts periodically to reflect changes 
in a pre-selected index rate, subject to a cap. The Bank has also entered 
into an interest rate swap contract, which effectively adjusts the short-term 
interest rate on a security sold under agreement to repurchase borrowing to a 
long-term fixed interest rate. Under the terms of the contract, the Bank is 
required to pay a fixed interest rate payment equal to 6.16% of a notional 
amount of $10.0 million, and receive a payment equal to three-month LIBOR. 
The agreement expires on October 2, 1998. These agreements are subject to the 
counterparty's ability to perform in accordance with the terms of the 
agreement. The Bank's risk of loss on the interest rate cap is equal to the 
unamortized premium paid to enter into this agreement, while the risk of loss 
on the interest rate swap is the fair value amount to be paid to terminate 
the contract, which was $37,000 (liability) at September 30, 1997.

12. CORPORATION-OBLIGATED MANDATORY REDEEMABLE CAPITAL SECURITIES OF 
    SUBSIDIARY TRUST

On February 5, 1997, the Company completed its issuance of 
Corporation-Obligated mandatory redeemable capital securities of subsidiary 
trust (the "Capital Securities") that raised $20 million of capital 
(approximately $18.8 million net proceeds after payment of issuance costs). 
The 9.58% Capital Securities, due February 1, 2027, were issued by Union 
State Capital Trust I (the "Trust"), a Delaware business trust that was 
formed by the Company solely to issue the Capital Securities and related 
common stock and advance the proceeds to the Company by purchasing junior 
subordinated debt of the Company. The Capital Securities may not be redeemed 
except under limited circumstances until February 1, 2007, and thereafter at 
a premium which reduces over a ten year period. Dividends are paid 
semi-annually, beginning August 1, 1997.

The Capital Securities qualify as Tier 1 or core capital for the Company 
under the Federal Reserve Board's risk-based capital guidelines. The proceeds 
of the sale of the Capital Securities is available for general corporate 
purposes. In February 1997, the Company made an additional capital 
contribution of $14.5 million to Union State Bank and also redeemed the 
Company's existing outstanding preferred stock in the amount of $3,250,000 
with a portion of the proceeds of the Capital Securities. Payments on the 
junior subordinated debt, which are in turn passed through the Trust to the 
Capital Securities holders, will be serviced through existing liquidity and 
cash flow sources (primarily Bank dividends) of the Company. The Company is 
permitted to deduct payments on the Capital Securities under current federal 
tax law.

As long as no default has occurred and is continuing, the Company has the 
right under the junior subordinated indenture to defer the payment of 
interest at any time or from time to time for a period not exceeding 10 
consecutive semi-annual periods for any one extension (each such period is an 
"Extension Period"); provided, however, that no Extension Period 

                                       17

<PAGE>

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

may extend beyond the stated maturity of the junior subordinated debt 
securities. During any Extension Period, the Company may not (i) declare or 
pay any dividends or distributions on, or redeem, purchase, acquire or make a 
liquidation payment with respect to any of the Company's capital stock (which 
includes common and preferred stock), (ii) make any payment of principal, 
interest or premium, if any, on or repay, repurchase or redeem any debt 
securities of the Company that rank PARI PASSU with or junior in interest to 
the junior subordinated debt securities or (iii) make any guarantee payments 
with respect to any guarantee by the Company of the debt securities of any 
subsidiary of the Company if such guarantee ranks PARI PASSU with or junior 
in interest to the junior subordinated debt securities, in each case subject 
to certain exceptions.

Pursuant to the terms of the documents governing the Company's junior 
subordinated debt and the Capital Securities of the Trust, if the Company or 
its affiliate is in default under such securities, the Company is prohibited 
from repurchasing or making distributions, including dividends, on or with 
respect to its common or preferred stock and from making payments on any debt 
or guarantees which rank PARI PASSU or junior to such securities.

In addition, under the terms of the indenture governing its junior 
subordinated debt, the Company may not merge or consolidate with, or sell 
substantially all of its assets to any other corporation, person or entity 
unless (a) the surviving corporation is a domestic corporation which 
expressly assumes the Company's obligations with respect to the junior 
subordinated debt and the Capital Securities and related documents, (b) there 
is no, and the merger or other transaction would not cause, default under the 
junior subordinated debt, and (c) certain other conditions are met.

                                       18

<PAGE>

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

FINANCIAL CONDITION

At September 30, 1997, the Company had total assets of $979.2 million, an 
increase of 21.9 percent, or $175.7 million from December 31, 1996.

Total deposits increased $115.8 million for the nine month period ended 
September 30, 1997, to $798.1 million, which represented a 17.0 percent 
increase from December 31, 1996. Time deposits increased $76.7 million 
accounting for the greatest component of deposit increases. Retail time 
deposits under $100,000 increased by $14.3 million due primarily to time 
deposit promotions, and other time deposits over $100,000 decreased by $1.2 
million during the nine month period ended September 30, 1997. 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 $61.9 million 
as part of the Bank's overall leveraging strategy. IRA and Keogh time deposit 
accounts increased by $1.7 million due to continued promotion of this 
product. Savings deposits increased by $29.4 million, as the Company's 
"Golden Statement" and "Liquid Gold" accounts, which provide attractive 
yields for high balance accounts, attracted additional deposits. NOW accounts 
and demand deposits increased by $.4 million and $20.0 million, respectively. 
Money market deposits decreased by $10.8 million, as customers generally 
switched money market account balances to higher yielding deposit products.

The securities portfolio of $352.6 million and $249.8 million at September 
30, 1997 and December 31, 1996, respectively, consists of securities held to 
maturity at amortized cost of $122.8 million and $81.0 million, and 
securities available for sale at fair value totaling $229.8 million and 
$168.8 million, respectively.

During the nine months ended September 30, 1997, U.S. Treasury and government 
agency obligations increased $65.8 million due primarily to purchases of $3.0 
million in U.S. Treasury Notes, $57.0 million in callable bonds, $28.2 
million in indexed amortizing notes, and a net increase in the market value 
of available for sale securities of $1.6 million, decreased by sales and 
redemptions of securities totaling $24.0 million. The purchases were funded 
by proceeds received from the Company's issuance of Capital Securities and 
security sales and redemptions, as well as borrowings and increases in 
municipal deposits. Mortgage-backed securities increased by $36.1 million 
primarily due to purchases of $105.6 million which were offset by sales 
totaling $66.6 million and principal amortizations of $2.6 million. The 
mortgage-backed securities sold have low-yields or expectations to prepay in 
the near-term and were also sold to take advantage of favorable market 
conditions. Mortgage-backed securities purchased, totaling $77.9 million, are 
floating-rate obligations whereby on each scheduled adjustment date, the 
coupon rate resets to a spread or margin over the then current LIBOR. These 
purchases were funded by security sales and by deposits or borrowings with 
rates at or similar to LIBOR in terms of cost and adjustment frequency. In 
addition, the Company has purchased $27.7 million of fixed-rate 
mortgage-backed securities having weighted-average lives of less than ten 
years. The Company's investment in obligations of states and political 
subdivisions, or municipal securities, increased by $1.8 million during the 
first nine months of 1997 as purchases of $7.6 million exceeded maturities of 
$5.8 million. 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 

                                       19

<PAGE>

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

FINANCIAL CONDITION (Cont'd)

comparative tax equivalent yield of such securities to other securities of 
comparable credit risk and maturity. The Company currently has no outstanding 
holdings in corporate bonds as all such bonds aggregating $.9 million matured 
during the quarter ended March 31, 1997. Medium-term corporate debt 
securities which are rated investment grade by nationally recognized credit 
rating organizations will continue to be evaluated for investment in the 
future.

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 September 30, 1997, loans were $545.4 million, a net increase of $41.9 
million or 8.3 percent over December 31, 1996. The primary increases of 
outstanding loan balances were $17.2 million in commercial mortgages, $7.6 
million in land acquisitions and construction loans, $11.6 million in real 
estate secured loans, and $4.7 million in residential mortgages and home 
equity loans. The Bank had approximately $147.3 million in formal credit 
lines and loan commitments outstanding. 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 has approximately $3.3 million of loans, collateralized by cash and 
lease receivables, to Bennett Funding Group ("Bennett"), a lease finance 
company, which filed for bankruptcy protection during the first quarter of 
1996. Collection of these loans continue to be delayed by the bankruptcy 
proceedings. The Bank has not yet determined the extent of losses, if any, 
that will be sustained on these loans. However, based upon Bennett's filing, 
the loans have been placed on nonaccrual status. Including the Bennett loans, 
the Bank's nonaccrual loans and other real estate owned were slightly less 
than one percent of total assets at September 30, 1997.

The Bank's allowance for loan losses increased $1.5 million or 26.9 percent 
to $7.3 million at September 30, 1997, from $5.7 million at December 31, 
1996. The allowance for loan losses represented 1.34 percent of gross loans 
outstanding at September 30, 1997, compared to 1.14 percent at December 31, 
1996. The allowance reflects a provision of $1,970,000 and net charge-offs of 
$427,000 recorded thus far in 1997. 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 nine months ended September 30, 1997, the Bank increased the 
amount of outstanding short and long term advances with the Federal Home Loan 
Bank of New York by $4.2 million, while borrowings under repurchase 
agreements increased by $29.6 million. As noted above, municipal time 
deposits increased $61.9 million. These transactions represent funds borrowed 
on a short-to-intermediate-term basis as part of the Bank's overall 
leveraging strategy.

                                       20

<PAGE>

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

FINANCIAL CONDITION (Cont'd)

On February 5, 1997, the Company issued Corporation-Obligated mandatory 
redeemable capital securities of subsidiary trust (the "Capital Securities") 
in an aggregate amount of $20 million. The Capital Securities quality as Tier 
I Capital for regulatory purposes and the payments are deductible for tax 
purposes. The net proceeds of approximately $18.8 million from the issuance of
the Capital Securities were used to redeem existing preferred stock ($3.3 
million), provide additional capital to Union State Bank ($14.5 million) and 
for general corporate purposes. Further information is provided in the Notes 
to Consolidated Financial Statements.

Stockholders' equity increased to $60.5 million at September 30, 1997, from 
the December 31, 1996 balance of $56.9 million. The increase primarily 
results from net income of $7.5 million for the nine month period ended 
September 30, 1997, an increase in the unrealized gain on available for sale 
securities, net of tax of $.8 million, partially offset by the redemption of 
$3.3 million of preferred stock, and dividends paid. During the first nine 
months of 1997, the Company also sold 16,250 shares of treasury stock at fair 
market value in the aggregate amount of $370,000 to its Employee Stock 
Ownership Plan (with code section 401(k) Provisions) and purchased 5,000 
shares of treasury stock for $105,000.

The Company's leverage ratio at September 30, 1997 was 8.27 percent, compared 
to 7.06 percent at December 31, 1996. The Company's Tier I and total capital 
ratios under the risk-based capital guidelines were 12.95 percent and 14.12 
percent at September 30, 1997 and 10.45 percent and 11.50 percent at December 
31, 1996, respectively. In addition, the Bank exceeds all current regulatory 
capital requirements and was in the "well-capitalized" category at September 
30, 1997 and December 31, 1996.


RESULTS OF OPERATIONS

EARNINGS

Net income for the three and nine month periods ended September 30, 1997 
increased $517,000 and $974,000, respectively, or 23.8 and 14.9 percent to 
$2,692,000 and $7,524,000, respectively, compared to the same periods in 
1996. Net income per common and common equivalent share increased to $.40 and 
$1.12 in the three and nine month periods ended September 30, 1997, 
respectively, from $.32 and $.98 in the same periods in 1996, respectively. 
The annualized return on average total assets was 1.11 and 1.10 percent for 
the three and nine month periods ended September 30, 1997, respectively, 
compared to 1.12 and 1.19 percent for the three and nine month periods ended 
September 30, 1996. The annualized return on average common equity was 18.25 
and 17.76 percent for the three and nine months ended September 30, 1997, 
respectively, compared to 17.03 and 17.42 percent for the comparative periods 
in 1996. Although the return on average total assets has declined from 1996, 
return on average common equity has increased in the quarter and nine months 
ended September 30, 1997, compared to the same periods last year, as net 
earnings have increased due to the effective leverage strategies employed by 
the Company. The overall increase in earnings in the 1997 periods primarily 
reflects higher net interest income resulting from increased volume and 
effective leveraging of the balance sheet, higher security gains and other 
income, and a lower effective income tax rate, 

                                       21

<PAGE>

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

offset by lower service fee income, and higher non-interest expenses to 
support increased business. The nine months ended September 30, 1996 was also
negatively impacted by a loss on loans held for sale. A discussion of the 
factors impacting the changes in the various components of net income follows.

NET INTEREST INCOME

Net interest income, the difference between interest income and interest 
expense, is a significant component of the Company's consolidated earnings. 
For the three and nine month periods ended September 30, 1997, net interest 
income increased 11.6 and 15.1 percent to $8.5 and $25.0 million from $7.6 
and $21.7 million, respectively, in the year earlier periods. Net interest 
income increased in the current year periods due to volume increases of 
average earning assets, partially offset by a decrease in the net interest 
spread. For the three and nine months ended September 30, 1997, the interest 
spread (yield on earning assets less cost of interest-bearing funds) was 3.18 
percent and 3.27 percent, respectively, compared to 3.58 percent and 3.57 
percent, respectively, in the same periods of 1996. Yields on interest 
earning assets increased during the three and nine month periods ended 
September 30, 1997, while the cost of funds increased at a higher rate 
compared to the same periods in 1996, resulting in the negative impact on the 
net interest spread. The increase in asset yields is partially as a result of 
achieving higher yields on the investment portfolio due to investing in 
callable agency securities and increasing yields on other investments. 
Although leverage strategies result in a higher cost of funds, they have the 
effect of increasing net interest income while managing interest rate risk.

PROVISION FOR LOAN LOSSES

The provision for loan losses decreased $90,000 to $510,000 and increased 
$295,000 to $1,970,000 for the three and nine month periods ended September 
30, 1997, respectively, compared to the same periods in 1996. Net charge-offs 
in the three and nine month periods ended September 30, 1997 totaled $170,000 
and $427,000, respectively, relating primarily to real estate and credit card 
loans, compared to net chargeoffs (principally real estate loans) of $300,000 
and $355,000, respectively, for the quarter and nine month periods ended 
September 30, 1996. Nonaccrual loans were $7.6 million at both September 30, 
1997 and 1996, compared to $8.1 million at December 31, 1996. The Bank has 
approximately $3.3 million of loans, collateralized by cash and lease 
receivables, to Bennett Funding Group, a lease finance company, which filed 
for bankruptcy during the first quarter of 1996. The Bank does not yet know 
the extent of losses, if any, that will be sustained on these loans. However, 
based upon Bennett's filing, the loans were placed on nonaccrual status in 
March 1996. 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 

                                       22

<PAGE>

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

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 
September 30, 1997 reflects the risk elements inherent in the total loan 
portfolio at this 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 nine months ended September 30, 1997 
increased by $266,000 to $1,120,000 from $854,000, and $313,000 to $3,375,000 
from $3,062,000, respectively, compared to the same periods of 1996. The 
increases are primarily related to higher net gains on securities and loan 
transactions ($234,000 and $233,000, respectively), and higher other income 
in both periods ($75,000 and $202,000, respectively), partially offset by 
lower service charges and fees ($43,000 and $122,000, respectively). The 
decrease in service charges was due to lower insufficient funds charges and 
the impact of increasing competition on the level of fees charged.

Other income, which consists of ATM fees, credit card fees, loan servicing 
income, wire transfer fees, safe deposit, and other fees, increased primarily 
due to growth in ATM fees, credit card revenue and other income.

NON-INTEREST EXPENSES

Non-interest expenses increased $806,000 to $5,375,000 and $2,571,000 to 
$15,698,000 for the three and nine month periods ended September 30, 1997, 
respectively, from the comparable periods in 1996. The primary reasons for 
these increases result from an increase in salaries and other operating costs 
to support the growth of the Bank. The following discusses each component of 
non-interest expense.

Salaries and benefits, the largest component of non-interest expense, 
increased by $265,000 and $894,000, respectively, during the three and nine 
month periods ended September 30, 1997 compared to the previous year, which 
represented an increase of 10.1 and 12.0 percent, respectively. The increases 
occurred due to additional personnel necessary for the Bank to accommodate 
the increases in both 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 1997 
due to the higher salary base and increases in the cost of other employee 
benefit programs such as medical coverage, tuition reimbursement, and 
training.

The changes in the other components of non-interest expenses for the three 
and nine month periods ended September 30, 1997 compared to September 30, 
1996 were due to the following: 

                                       23

<PAGE>

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

-- Increase of $171,000 (20.4%) and $406,000 (16.1%), 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, additional rental 
   expense associated with a new branch opening, the relocation of the 
   Orangeburg Branch and opening of the Westchester Loan Center all of which 
   occurred in mid 1996, and additional rental and other expenses related to 
   three new branches which will be opened in 1997 and 1998. 

--Decrease of $4,000 (1.5%) and an increase of $14,000 (2.0%), respectively, 
   in advertising and business development. The minor increase and decrease 
   is reflective of the controllable nature of these expenses and 
   efficiencies experienced as the Bank increases in size. 

-- Increase of $57,000 (21.9%) and $251,000 (33.3%), respectively, in 
   professional fees. The increase relates to increased accounting and 
   auditing fees, and professional fees primarily associated with loan 
   collections, foreclosures and other litigation. 

-- Increase of $28,000 (19.3%) and $88,000 (19.4%), respectively, in 
   communications is due to an increase in postage and telephone expenses 
   that arose as a result of higher postal volume, upgrading of data lines 
   throughout the Bank, and relocation of the Bank's Data Center to its 
   Corporate Headquarters in November 1996. 

-- Increase of $4,000 (4.4%) and $47,000 (16.6%), respectively, in stationery 
   and printing. The increase occurred due to printing costs and supplies 
   necessitated by increased loan and deposit volume and growth of the credit 
   card operation. 

-- Increase of $21,000 and $63,000, respectively, in FDIC insurance premiums 
   results from new FDIC deposit premium, which became effective in January 
   1997.

-- Increase of $264,000 (75.2%) and $808,000 (85.3%), respectively, in other 
   expenses, results from higher foreclosure related expenses and other costs 
   to support increased volume, higher branch charge-offs, and accruals for a 
   contribution to the U.S.B Foundation, Inc.

INCOME TAXES

The effective tax rates for the three and nine month periods ended September 
30, 1997 and 1996 was 28.5 and 29.8, percent and 34.7 and 34.4 percent, 
respectively. The decrease in the overall effective tax rate in 1997 
primarily reflects lower state income taxes.

                                       24

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibit XI - Statement re: Computation of Earnings Per Share

        (b) Reports on Form 8-K. No reports on Form 8-K were filed by the 
            Company during the quarter ended September 30, 1997.


                                  SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized, on November 12, 1997.

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


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