**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**WASHINGTON,**  **D.C.**  **20549**




**FORM**  **10-Q**




(Mark
One)




x
    Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the quarterly period ended March
      31, 2005,
      or





9
    Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
 For the transition period from
      ____________________ to _____________________
 
 Commission file Number 1-12811




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


(Exact
Name of Registrant as Specified in Its Charter)


**DELAWARE**
    
    **36-3197969**(State
      or other jurisdiction of
    
    (I.R.S.
      Employerincorporation
      or organization)
    
    Identification
      No.)**100
      DUTCH HILL ROAD, ORANGEBURG, NEW YORK**
    
    **10962**(Address
      of Principal Executive Offices)
    
    (Zip
      Code)
   **845-365-4600**


(Registrant's
Telephone Number (including area code)




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


YES xNO o


Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).


YES xNO o


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


****
    
    **NUMBER
      OF SHARES****CLASS**
    
    **OUTSTANDING
      AT MAY 2, 2005**Common
      stock, par value
    
    20,573,942$0.01
      per share





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


****


**TABLE
OF CONTENTS**


****
    **PAGE
      NO.****PART
      I. FINANCIAL INFORMATION****ITEM
      1.**
    FINANCIAL
      STATEMENTS (UNAUDITED)CONDENSED
      CONSOLIDATED STATEMENTS OFCONDITION
      AS OF MARCH 31, 2005 ANDDECEMBER
      31, 2004.
    1CONDENSED
      CONSOLIDATED STATEMENTS OFINCOME
      FOR THE THREE MONTHS ENDEDMARCH
      31, 2005 AND 2004.
    2CONDENSED
      CONSOLIDATED STATEMENTS OFCASH
      FLOWS FOR THE THREE MONTHS ENDEDMARCH
      31, 2005 AND 2004.
    3CONDENSED
      CONSOLIDATED STATEMENTS OFCHANGES
      IN STOCKHOLDERS’ EQUITY FORTHE
      THREE MONTHS ENDED MARCH 31, 2005AND
      2004.
    4NOTES
      TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS.
    6**ITEM
      2.**
    MANAGEMENT'S
      DISCUSSION AND ANALYSIS OFFINANCIAL
      CONDITION AND RESULTS OF OPERATIONS.
    18**ITEM
      3.**
    QUANTITATIVE
      AND QUALITATIVE DISCLOSURESABOUT
      MARKET RISK.
    28**ITEM
      4.**
    CONTROLS
      AND PROCEDURES
    29**PART
      II. OTHER INFORMATION****ITEM
      2.**
    UNREGISTERED
      SALES OF EQUITY SECURITIESAND
      USE OF PROCEEDS
    30**ITEM
      6.**
    EXHIBITS
    31SIGNATURES
    
    35
 ****
 -i-
 ****
 **ITEM
1.**  **PART
I - FINANCIAL INFORMATION**
 ****
 **U.S.B.
HOLDING CO., INC.**


**CONDENSED
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)**





**(000’s, except share
      data)****ASSETS**
    
    **March
      31,****2005**
    
    **December
      31,****2004**Cash
      and due from banks
    
    $
    62,634
    
    $
    48,295Federal
      funds sold
    
    
    19,400
    
    
    17,000Cash
      and cash equivalents
    
    
    **82,034**
    
    
    **65,295**Interest
      bearing deposits in other banks
    
    
    109
    
    
    334Securities:Available
      for sale (at estimated fair value)
    
    
    476,168
    
    
    589,572Held
      to maturity (estimated fair value of $600,204 in 2005and
      $507,428 in 2004)
    
    
    608,438
    
    
    502,201Loans,
      net of allowance for loan losses of $15,501 in 2005 and $15,226 in
      2004
    
    
    1,511,286
    
    
    1,492,872Premises
      and equipment, net
    
    
    15,047
    
    
    15,616Accrued
      interest receivable
    
    
    12,608
    
    
    17,312Federal
      Home Loan Bank of New York stock
    
    
    29,864
    
    
    31,135Intangible
      assets, net
    
    
    4,772
    
    
    5,087Goodwill
    
    
    1,380
    
    
    1,380Other
      assets
    
    
    21,010
    
    
    25,466**TOTAL
      ASSETS**
    
    **$**
    **2,762,716**
    
    **$**
    **2,746,270****LIABILITIES
      AND STOCKHOLDERS’ EQUITY****Liabilities:**Non-interest
      bearing deposits
    
    $
    327,501
    
    $
    317,874Interest
      bearing deposits:NOW
      accounts
    
    
    172,044
    
    
    165,809Money
      market accounts
    
    
    191,484
    
    
    200,647Savings
      deposits
    
    
    376,546
    
    
    420,171Time
      deposits
    
    
    729,292
    
    
    753,717**Total
      deposits**
    
    
    **1,796,867**
    
    
    **1,858,218**Accrued
      interest payable
    
    
    6,538
    
    
    6,782Accrued
      expenses and other liabilities
    
    
    13,611
    
    
    12,206Securities
      transactions not yet settled
    
    
    101,366
    
    
    —Securities
      sold under agreements to repurchase
    
    
    515,996
    
    
    542,323Federal
      Home Loan Bank of New York advances
    
    
    82,275
    
    
    82,709Subordinated
      debt issued in connection with Corporation-Obligatedmandatory
      redeemable capital securities of subsidiary trusts
    
    
    61,858
    
    
    61,858**Total
      liabilities**
    
    
    **2,578,511**
    
    
    **2,564,096**Minority-interest
      junior preferred stock of consolidated subsidiary
    
    
    128
    
    
    128Commitments
      and contingencies (Note 12)**Stockholders’
      equity:**Preferred
      stock, no par valueAuthorized
      shares: 10,000,000; no shares outstanding in 2005 and 2004
    
    
    —
    
    
    —Common
      stock, $0.01 par value; authorized shares 50,000,000;issued
      shares of 22,004,701 in 2005 and 2004
    
    
    220
    
    
    220Additional
      paid-in capital
    
    
    184,046
    
    
    184,166Retained
      earnings
    
    
    31,067
    
    
    26,336Treasury
      stock at cost, common shares 1,522,088 in 2005 and 1,657,887 in
      2004
    
    
    (22,034
    )
    
    (22,855
    )Common
      stock held for benefit plans
    
    
    (2,856
    )
    
    (2,780
    )Deferred
      compensation obligation
    
    
    2,854
    
    
    2,746Accumulated
      other comprehensive loss
    
    
    (9,220
    )
    
    (5,787
    )**Total
      stockholders’ equity**
    
    
    **184,077**
    
    
    **182,046****TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY**
    
    **$**
    **2,762,716**
    
    **$**
    **2,746,270**




*See
notes to condensed consolidated financial statements.*





1






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


**(000’s,
      except share data)**
      **Three
      Months Ended**
      **March
      31,****2005**
    
    **2004****INTEREST
      INCOME:**Interest
      and fees on loans
    
    $
    23,631
    
    $
    21,530Interest
      on federal funds sold
    
    
    357
    
    
    85Interest
      and dividends on securities:U.S.
      government agencies
    
    
    7,686
    
    
    8,680Mortgage-backed
      securities
    
    
    4,271
    
    
    2,968Obligations
      of states and political subdivisions
    
    
    926
    
    
    853Corporate
      and other
    
    
    35
    
    
    29Dividends
      on Federal Home Loan Bank of New York stock
    
    
    315
    
    
    111**Total
      interest income**
    
    
    **37,221**
    
    
    **34,256****INTEREST
      EXPENSE:**Interest
      on deposits
    
    
    6,595
    
    
    6,047Interest
      on borrowings
    
    
    6,516
    
    
    7,008Interest
      on subordinated debt issued in connection with
      Corporation
      - Obligated mandatory redeemable
      capital
      securities of subsidiary trusts
    
    
    1,122
    
    
    884**Total
      interest expense**
    
    
    **14,233**
    
    
    **13,939****NET
      INTEREST INCOME**
    
    
    **22,988**
    
    
    **20,317**Provision
      for credit losses
    
    
    391
    
    
    211**Net
      interest income after provision for credit losses**
    
    
    **22,597**
    
    
    **20,106****NON-INTEREST
      INCOME:**Service
      charges and fees
    
    
    904
    
    
    1,096Other
      income
    
    
    923
    
    
    720Gains
      on securities transactions
    
    
    —
    
    
    1,112**Total
      non-interest income**
    
    
    **1,827**
    
    
    **2,928****NON-INTEREST
      EXPENSES:**Salaries
      and employee benefits
    
    
    8,321
    
    
    7,284Occupancy
      and equipment
    
    
    2,050
    
    
    1,873Advertising
      and business development
    
    
    575
    
    
    671Professional
      fees
    
    
    668
    
    
    406Communications
    
    
    341
    
    
    360Stationery
      and printing
    
    
    161
    
    
    203FDIC
      insurance
    
    
    76
    
    
    76Amortization
      of intangibles
    
    
    291
    
    
    266Other
      expense
    
    
    861
    
    
    864**Total
      non-interest expenses**
    
    
    **13,344**
    
    
    **12,003**Income
      before income taxes
    
    
    11,080
    
    
    11,031Provision
      for income taxes
    
    
    3,689
    
    
    3,674**NET
      INCOME**
    
    **$**
    **7,391**
    
    **$**
    **7,357****BASIC
      EARNINGS PER COMMON SHARE**
    
    **$**
    **0.36**
    
    **$**
    **0.36****DILUTED
      EARNINGS PER COMMON SHARE**
    
    **$**
    **0.35**
    
    **$**
    **0.34****WEIGHTED
      AVERAGE COMMON SHARES**
    
    
    **20,416,904**
    
    
    **20,479,545****ADJUSTED
      WEIGHTED AVERAGE COMMON SHAES**
    
    
    **21,356,048**
    
    
    **21,408,930****DIVIDENDS
      PER COMMON SHARE**
    
    **$**
    **0.13**
    
    **$**
    **0.105**





*See
notes to condensed consolidated financial statements.*


2


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


**(000’s)**
      **Three
      Months Ended**
      **March
      31,****2005**
    
    **2004****OPERATING
      ACTIVITIES:**Net
      income
    
    $
    7,391
    
    $
    7,357Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision
      for credit losses
    
    
    391
    
    
    211Depreciation
      and amortization
    
    
    893
    
    
    806Amortization
      of discounts on securities - net
    
    
    (143
    )
    
    (118
    )Deferred
      income tax benefit, net
    
    
    (853
    )
    
    (874
    )Gains
      on securities transactions
    
    
    —
    
    
    (1,112
    )Non-cash
      benefit plan expense
    
    
    131
    
    
    126Decrease
      in accrued interest receivable
    
    
    4,706
    
    
    2,733Decrease
      in accrued interest payable
    
    
    (244
    )
    
    (361
    )Increase
      of accrued income tax payable
    
    
    4,020
    
    
    3,766Other
      - net
    
    
    4,874
    
    
    1,471**Net
      cash provided by operating activities**
    
    
    **21,166**
    
    
    **14,005****INVESTING
      ACTIVITIES:**Proceeds
      from sales of securities available for sale
    
    
    —
    
    
    75,070Proceeds
      from principal repayments, redemptions and maturities of:Securities
      available for sale
    
    
    122,827
    
    
    173,075Securities
      held to maturity
    
    
    917
    
    
    22,071Purchases
      of securities available for sale
    
    
    (14,750
    )
    
    (184,514
    )Purchases
      of securities held to maturity
    
    
    (5,604
    )
    
    (6,945
    )Net
      redemption (purchases) of Federal Home Loan Bank of New York
      stock
    
    
    1,271
    
    
    (6,954
    )Net
      liabilities assumed in Reliance Bank acquisition
    
    
    —
    
    
    10,697Net
      decrease (increase) in interest bearing deposits in other
      banks
    
    
    225
    
    
    (4,266
    )Net
      increase in loans outstanding
    
    
    (18,655
    )
    
    (26,343
    )Purchases
      of premises and equipment - net
    
    
    (33
    )
    
    (923
    )**Net
      cash provided by investing activities**
    
    
    **86,198**
    
    
    **50,968****FINANCING
      ACTIVITIES:**Net
      (decrease) increase in non-interest bearing deposits, NOW, money market
      and savings accounts
    
    
    (36,926
    )
    
    48,615Net
      (decrease) increase in time deposits, net of withdrawals and
      maturities
    
    
    (24,425
    )
    
    30,012Net
      decrease in securities sold under agreements to repurchase -
      short-term
    
    
    (26,327
    )
    
    (205,082
    )Net
      decrease of Federal Home Loan Bank of New York advances -
      short-term
    
    
    —
    
    
    (10,500
    )Proceeds
      from securities sold under agreements to repurchase -
      long-term
    
    
    —
    
    
    75,000Repayment
      of Federal Home Loan Bank of New York advances - long term
    
    
    (434
    )
    
    (407
    )Net
      proceeds from issuance of subordinated debt issued in connection
      with
      Corporation-Obligated
      mandatory redeemable capital securities of subsidiary
    trusts
    
    
    —
    
    
    9,975Cash
      dividends paid
    
    
    (2,660
    )
    
    (2,149
    )Proceeds
      from exercise of common stock options
    
    
    395
    
    
    294Purchases
      of treasury stock
    
    
    (248
    )
    
    —**Net
      cash used for financing activities**
    
    **$**
    **(90,625**
    **)**
    **$**
    **(54,242**
    **)****Increase
      in Cash and Cash Equivalents**
    
    **$**
    **16,739**
    
    **$**
    **10,731****Cash
      and Cash Equivalents, Beginning of Period**
    
    
    **65,295**
    
    
    **67,451****Cash
      and Cash Equivalents, End of Period**
    
    **$**
    **82,034**
    
    **$**
    **78,182****Supplemental
      Disclosures:**Interest
      paid
    
    $
    14,477
    
    $
    (14,300
    )Income
      tax payments
    
    $
    (33
    )
    $
    (745
    )Purchases
      of held to maturity securities not yet settled, including interest
      receivable
    
    $
    101,366
    
    $
    —Purchase
      of available for sale securities not yet settled, including interest
      receivable
    
    $
    —
    
    $
    21,507Payment
      for held to maturity securities not yet settled at beginning of period,
      including interest receivable
    
    $
    —
    
    $
    (924
    )Sales
      of available for sale securities not yet settled, including interest
      receivable
    
    $
    —
    
    $
    (31,666
    )Amortization
      of loss on transfer of available for sale securities to held to maturity
      securities
    
    $
    169
    
    $
    —Loans
      acquired in acquisition of Reliance Bank, including interest
      receivable
    
    $
    —
    
    $
    10,869Deposits
      assumed in acquisition of Reliance Bank, including interest
      payable
    
    $
    —
    
    $
    23,933Other
      assets (including intangibles and goodwill) acquired in acquisition of
      Reliance Bank,
      net
      of other liabilities assumed
    
    $
    —
    
    $
    2,367Change
      in shares held in trust for deferred compensation
    
    $
    108
    
    $
    (22
    )Change
      in deferred compensation obligation
    
    $
    (108
    )
    $
    22Change
      in accumulated other comprehensive (loss) income
    
    $
    (3,433
    )
    $
    4,103Non-cash
      exercise of stock options and related tax benefit
    
    $
    2,996
    
    $
    412Non-cash
      purchases of treasury stock related to the exercise of stock
      options
    
    $
    2,505
    
    $
    (295
    )Issuance
      of treasury stock related to the exercise of stock options
    
    $
    3,574
    
    $
    648


**


*See
notes to condensed consolidated financial statements* *.*





3


****


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


**CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)**




****


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2005**
      **(000’s
      except share data)****Common**
      **Stock**
      **Shares**
      **Outstanding**
    
    **Common**
      **Stock**
      **Par**
      **Value**
    
    **Additional**
      **Paid-in**
      **Capital**
    
    **Retained**
      **Earnings**
    
    **Treasury**
      **Stock**
    
    **Common**
      **Stock**
      **Held
      for**
      **Benefit
      Plans**
    
    **Deferred**
      **Compensation**
      **Obligation**
    
    **Accumulated**
      **Other**
      **Comprehensive**
      **Loss**
    
    **Total**
      **Stockholders’**
      **Equity**Balance
      at January 1, 2005
    
    
    20,346,814
    
    $
    220
    
    $
    184,166
    
    $
    26,336
    
    $
    (22,855
    )
    $
    (2,780
    )
    $
    2,746
    
    $
    (5,787
    )
    $
    182,046Net
      Income
    
    
    
    
    
    
    
    
    
    
    
    7,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,391Other
      comprehensive loss:
      Net
      unrealized securities
      loss
      arising during the
      period,
      net of tax benefit
      of
      $1,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,433
    )
    
    (3,433
    )Other
      comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,433
    )
    
    (3,433
    )Total
      comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,958Cash
      dividends:
      Common
      ($0.13 per share)
    
    
    
    
    
    
    
    
    
    
    
    (2,660
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,660
    )Common
      stock options exercised
      and
      related tax benefit
    
    
    255,079
    
    
    
    
    
    (183
    )
    
    
    
    
    3,574
    
    
    
    
    
    
    
    
    
    
    
    3,391Purchases
      of treasury stock
    
    
    (119,280
    )
    
    
    
    
    
    
    
    
    
    
    (2,753
    )
    
    
    
    
    
    
    
    
    
    
    (2,753
    )ESOP
      shares committed to
      be
      released
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    
    95Deferred
      compensation
      obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108
    )
    
    108
    
    
    
    
    
    ―**Balance
      at March 31, 2005**
    
    
    **20,482,613**
    
    **$**
    **220**
    
    **$**
    **184,046**
    
    **$**
    **31,067**
    
    **$**
    **(22,034**
    **)**
    **$**
    **(2,856**
    **)**
    **$**
    **2,854**
    
    **$**
    **(9,220**
    **)**
    **$**
    **184,077**


**


*See
notes to condensed consolidated financial statements.*




4


****


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


**CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)**




****


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2004**
      **(000’s,
      except share data)****Common**
      **Stock**
      **Shares**
      **Outstanding**
    
    **Common**
      **Stock**
      **Par**
      **Value**
    
    **Additional**
      **Paid-in**
      **Capital**
    
    **Retained**
      **Earnings**
    
    **Treasury**
      **Stock**
    
    **Common**
      **Stock**
      **Held
      for**
      **Benefit
      Plans**
    
    **Deferred**
      **Compensation**
      **Obligation**
    
    **Accumulated**
      **Other**
      **Comprehensive**
      **(Loss)
      Income**
    
    **Total**
      **Stockholders’**
      **Equity**Balance
      at January 1, 2004
    
    19,487,790
    
    $
      209
    
    $
      159,628
    
    $
      31,655
    
    $
      (18,225)
    
    $
      (2,491)
    
    $
      2,327
    
    $
      (4,810)
    
    $
      168,293Net
      Income
    
    
    
    
    
    
    
    
    
    
    
    7,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,357Other
      comprehensive income:
      Net
      unrealized securities
      gain
      arising during the
      period,
      net of tax benefit
      of
      $2,071
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,846
    
    
    3,846Reclassification
      adjustment
      of
      net loss for securities
      sold,
      net of tax benefit of
      $178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    257Other
      comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,103
    
    
    4,103Total
      comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,460Cash
      dividends:
      Common
      ($0.105 per share)
    
    
    
    
    
    
    
    
    
    
    
    (2,149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,149
    )Common
      stock options exercised
      and
      related tax benefit
    
    
    68,634
    
    
    
    
    
    58
    
    
    
    
    
    648
    
    
    
    
    
    
    
    
    
    
    
    706Purchases
      of treasury stock
    
    
    (13,395
    )
    
    
    
    
    
    
    
    
    
    
    (295
    )
    
    
    
    
    
    
    
    
    
    
    (295
    )ESOP
      shares committed to
      be
      released
    
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    93Deferred
      compensation
      Obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    22
    
    
    
    
    
    ―**Balance
      at March 31, 2004**
    
    
    **19,543,029**
    
    **$**
    **209**
    
    **$**
    **159,746**
    
    **$**
    **36,863**
    
    **$**
    **(17,872**
    **)**
    **$**
    **(2,480**
    **)**
    **$**
    **2,349**
    
    **$**
    **(707**
    **)**
    **$**
    **178,108**





*See
notes to condensed consolidated financial statements.*





5




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


**NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED**


**1.**
    **Principles
      of Consolidation**





The
condensed consolidated financial statements include the accounts of U.S.B.
Holding Co., Inc. and its wholly-owned subsidiaries (the “Company”), Union State
Bank (the “Bank”), and Ad Con, Inc. The condensed consolidated financial
statements also include the Bank’s wholly-owned subsidiaries of Dutch Hill
Realty Corp., U.S.B. Financial Services, Inc., and USB Delaware Inc., including
its wholly-owned subsidiary, TPNZ Preferred Funding Corporation (“TPNZ”). All
significant intercompany accounts and transactions are eliminated in
consolidation.





In
addition to the Bank, the Company has four other subsidiary trusts: Union State
Capital Trust I, Union State Statutory Trust II, USB Statutory Trust III, and
Union State Statutory Trust IV (collectively, the “Trusts”), that are not
consolidated with the Company for financial reporting purposes in accordance
with accounting principles generally accepted in the United States of America
(“GAAP). The Trusts were established by the Company in 1997, 2001, 2002, and
2004, respectively, for the purpose of issuing Corporation-Obligated mandatory
redeemable capital securities of subsidiary trusts (“Capital Securities”) and
acquiring junior subordinated debt from the Company. See Note 10 to the
Company’s Consolidated Financial Statements for the year ended December 31, 2004
included in the Company’s 2004 Annual Report to Stockholders for a further
discussion of the Capital Securities and the junior subordinated debt issued by
the Company. The Company owns 100 percent of the voting securities of each of
the Trusts. The Company has fully and unconditionally guaranteed the Capital
Securities along with all obligations of the Trusts under the trust agreements
relating to the Capital Securities. The Company’s ability to make interest
payments on the subordinated debt is primarily dependent on the receipt of
dividends from the Bank. See Note 10 of these notes to condensed consolidated
financial statements for a discussion of the limits on the Bank’s ability to pay
dividends to the Company.





**2.**
    **Basis
      of Presentation**





In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments (comprised of only normal and
recurring adjustments) necessary to present fairly the financial position of the
Company as of March 31, 2005, and its operations, cash flows, and changes in
stockholders’ equity for the three months ended March 31, 2005 and 2004. For
purposes of presenting the condensed consolidated statements of cash flows, cash
and cash equivalents include cash and due from banks, as well as federal funds
sold.





The
Company distributed a five percent common stock dividend on September 24, 2004
to stockholders of record on September 10, 2004. The weighted average common
shares outstanding and per common share amounts for the 2004 period have been
adjusted to reflect the common stock dividend.





The
condensed consolidated financial statements have been prepared in accordance
with GAAP and predominant practices used within the banking industry. 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 2004 Annual Report
to Stockholders. In preparing such financial statements, management is required
to make estimates and assumptions that affect the reported amounts of actual and
contingent assets and liabilities as of the dates of the condensed consolidated
statements of condition and the revenues and expenses for the periods reported.
Actual results could differ significantly from those estimates.





6
 
 **U.S.B.
HOLDING CO., INC.**
**NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED**
 
 Estimates
that are particularly susceptible to significant change relate to the
determination of the allowance for loan losses, the related provision for credit
losses, and the valuation allowance for net deferred tax assets. In connection
with the determination of the allowance for loan losses and provision for credit
losses, management obtains independent appraisals for significant properties
that collateralize loans with real estate.





These
      consolidated financial statements should be read in conjunction with the
      Company’s Consolidated Financial Statements for the year ended December
      31, 2004 and related notes included in the Company’s 2004 Annual Report to
      Stockholders and Form 10-K.





**3.**
    **Pending
      Accounting Pronouncements**


****


**Accounting
for Exchanges of Nonmonetary Assets:** In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 153, “Accounting for
Exchanges of Nonmonetary Assets” (“SFAS No. 153”). SFAS No. 153 amends
Accounting Principles Board (“APB”) Opinion No. 29, “Accounting for Nonmonetary
Transactions.” SFAS No. 153 eliminates the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The Company’s adoption of SFAS No. 153 on January
1, 2006 will not have any impact on its consolidated financial
statements.





**Accounting
for Stock-Based Compensation:** SFAS No.
123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), establishes a
fair value based method of accounting for stock-based compensation plans and
encouraged, but did not require, entities to adopt that method in place of the
intrinsic value method under APB Opinion No. 25, “Accounting for Stock Issued to
Employees” (“APB No. 25”). SFAS No. 123 was revised (SFAS No. 123R) in December
2004 to require accounting for stock based compensation using a fair value based
method in the financial statements. On April 14, 2005, the Securities and
Exchange Commission deferred the required effective date of SFAS No. 123R to the
first fiscal year beginning after June 15, 2005. Under the SFAS No. 123R
transition method, compensation cost is recognized on or after the required
effective date for the portion of outstanding awards for which the requisite
service has not yet been rendered, based on the grant-date fair value of those
awards calculated under SFAS No. 123 for either recognition or pro forma
disclosures. For periods before the required effective date, entities may elect
to apply a modified version of retrospective application under which financial
statements for prior periods are adjusted on a basis consistent with the pro
forma disclosures required for those periods by SFAS No. 123. The effect of
complying with SFAS No. 123R will have a significant effect on the Company’s net
income as disclosed in Note 6 to the condensed consolidated financial
statements.





7


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


**Accounting
for Conditional Asset Retirement Obligations:** FASB
Interpretation No. 47 (“FIN No. 47”) pertains to SFAS No. 143, “Accounting for
Asset Retirement Obligations (“SFAS No. 143”), which applies to legal
obligations associated with the retirement of a tangible long-lived asset that
result from the acquisition, construction, or development and/or the normal
operation of a long-lived asset. An entity shall recognize the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred if a reasonable estimate of fair value can be made. FIN No. 47 is
effective no later than the end of fiscal years ending after December 15, 2005.
The Company’s adoption of FIN No. 47 on January 1, 2006 will not have any impact
on its consolidated financial statements.





**4.**
    **Acquisition
      of Reliance Bank**





As of the
close of business on March 19, 2004, the Bank assumed approximately $23.9
million of deposits and acquired approximately $10.5 million of single-family
residential mortgage loans, $10.7 million of cash and cash equivalents, $2.1
million of other assets, and $0.3 million of other loans in connection with the
acquisition of Reliance Bank. The premium paid for the deposits assumed was $2.2
million, or 9.4 percent, and $0.2 million, or 1.6 percent, for the single-family
residential loans acquired. Reliance Bank was closed by the New York
Superintendent of Banks, which appointed the FDIC as Receiver. Reliance Bank,
which operated as a one branch bank at 1200 Mamaroneck Avenue, White Plains, New
York, became a Union State Bank branch effective immediately after its closing.
During February 2005, the Bank closed the Mamaroneck Avenue branch, and the
deposits were transferred to the Bank’s Martine Avenue, White Plains, New York,
branch.





The
assumption of deposits and acquisition of certain assets of Reliance Bank has
been accounted for as a business combination in accordance with SFAS No.141,
“Accounting for Business Combinations.” Assets, time deposits, and other
liabilities acquired have been recorded at their estimated fair values as of
March 19, 2004, and a core deposit intangible of $0.7 million was recorded based
on a core deposit valuation study. Goodwill of $1.4 million was also recorded.
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the
core deposit intangible is being amortized over its estimated life and the
goodwill component will be tested for impairment annually at year end.





**5.**
    **Intangible
      Assets**





As
      of March 31, 2005 and December 31, 2004, the gross carrying amount and
      accumulated amortization of intangible assets acquired in connection with
      branch and bank acquisitions were $9.0 million and $4.5 million, and $9.0
      million and $4.2 million, respectively. The intangible amortization
      expense for both three month periods ended March 31, 2005 and 2004 was
      $0.3 million. The annual amortization expense for the remaining life of
      all intangibles will vary throughout the amortization periods of which the
      maximum amount of amortization will be $1.1 million during such
      periods.




8


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


**6.**
    **Accounting
      for Stock-Based Compensation**





SFAS No.
148, “Accounting for Stock Based Compensation - Transition and Procedure” (“SFAS
No. 148"), amends SFAS 123 to provide alternate methods of transition for an
entity that voluntarily changes to the fair value based method of accounting for
stock-based employee compensation. It also amends the disclosure provisions of
that statement to require prominent disclosure about the effects on reported net
income of an entity’s accounting policy decisions with respect to stock-based
employee compensation. Finally, this statement amends APB Opinion No. 28,
“Interim Financial Reporting,” to require disclosure about those effects in
interim financial information.





Information
on the Company’s stock option plans can be found in Note 17 to the Company’s
Consolidated Financial Statements for the year ended December 31, 2004, included
in the 2004 Annual Report to Stockholders. The Company has elected to continue
to measure compensation expense for its stock-based compensation plans under the
recognition and measurement principles of APB No. 25 and to provide pro forma
disclosures of compensation expense measured by the fair value based method as
prescribed by SFAS No. 123. No stock-based employee compensation is reflected in
net income, as all options granted under the Company’s plans had an exercise
price at least equal to the market value of the underlying common stock on the
date of grant. Pro forma information regarding the Company’s net income and
basic and diluted earnings per common share, as required by SFAS No. 123, has
been determined as if the Company had accounted for its stock options under the
fair value method of that standard. The fair value for these options was
estimated at the date of grant using a Black-Scholes option-pricing model and is
recognized over the options’ vesting period.





The
following table compares the Company’s net income and basic and diluted earnings
per common share, as reported, to the pro forma results as if the fair value
method of accounting for options prescribed by SFAS No. 123 had been applied for
the three months ended March 31, 2005 and 2004.


**(000’s, except share
      data)****Three****Months
      Ended****March
      31, 2005**
    
    **March
      31, 2004**Net
      income, as reported
    
    $
    7,391
    
    $
    7,357Less:
      total stock-based compensation expense determined under the fair value
      based method for all awards, net of tax
    
    
    180
    
    
    146Pro
      forma net income available to common stockholders
    
    $
    7,211
    
    $
    7,211Earnings
      per common share:Basic
      - as reported
    
    $
    0.36
    
    $
    0.36Basic
      - pro forma
    
    
    0.35
    
    
    0.35Diluted - as
      reported
    
    $
    0.35
    
    $
    0.34Diluted
      - pro forma
    
    
    0.34
    
    
    0.34





The
following weighted average assumptions were used for Director Plan grants for
the three months ended March 31, 2005 and 2004, respectively: dividend yields of
1.93 and 2.52 percent; volatility factors of the expected market price of the
Company’s common stock of 39.57 and 41.33 percent; risk free interest rates of
3.89 and 2.47 percent; and expected lives of 7.63 and 7.62 years,
respectively.





9


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


The
following weighted average assumptions were used for Employee Plan grants for
the three months ended March 31, 2005 and 2004, respectively: dividend yields of
2.60 and 2.43 percent; volatility factors of the expected market price of the
Company’s common stock of 39.01 and 40.94 percent; risk free interest rates of
4.08 and 3.66 percent; and expected lives of 7.52 and 8.48 years.




**7.**
    **Earnings
      Per Common Share (“EPS”)**





The
computation of basic and diluted earnings per common share for the three months
ended March 31, 2005 and 2004 is as follows:


**Three
      Months Ended****March
      31, 2005**
    
    **March
      31, 2004****Numerator:**
      Net
      income for basic and diluted earnings per common
      share
      - net income available to common stockholders
    
    $
    7,391
    
    $
    7,357**Denominator:**Denominator
      for basic earnings per common share -
      weighted
      average shares
    
    
    20,416,904
    
    
    20,479,545Effects
      of dilutive securities: Director and employee -
      stock
      options
    
    
    939,144
    
    
    929,385Denominator
      for diluted earnings per common share -
      adjusted
      weighted average shares
    
    
    21,356,048
    
    
    21,408,930Basic
      earnings per common share
    
    $
    0.36
    
    $
    0.36Diluted
      earnings per common share
    
    $
    0.35
    
    $
    0.34





**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 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 condensed consolidated
statements of condition at estimated fair value and the resulting net unrealized
gains and losses, net of tax, are shown in accumulated other comprehensive
income (loss).





The
decision to sell securities available for sale 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 similar instruments. Securities in an unrealized loss position
are periodically evaluated for other-than-temporary impairment. Management
considers the effect of interest rates, credit ratings and other factors on the
valuation of such securities, as well as the Company’s intent and ability to
hold such securities until a forecasted recovery or maturity occurs. The Company
does not acquire securities for the purpose of engaging in trading
activities.





10


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


The
Company did not have gross realized gains or losses during the three month
period ended March 31, 2005. During the three-month period ended March 31, 2004,
the Company had gross realized gains from sales of securities available for sale
of $1,112,000.





A summary
of the amortized cost, estimated fair values, and related gross unrealized gains
and losses of securities at March 31, 2005 and December 31, 2004 is as
follows:





**(000’s)****March
      31, 2005**
    
    **Amortized**
      **Cost**
    
    **Gross**
      **Unrealized**
      **Gains**
    
    **Gross**
      **Unrealized**
      **Losses**
    
    **Estimated**
      **Fair**
      **Value****Available
      for Sale:**U.S.
      government agencies
    
    $
    72,916
    
    $
    —
    
    $
    2,508
    
    $
    70,408Mortgage-backed
      securities
    
    
    407,416
    
    
    1,669
    
    
    4,429
    
    
    404,656Obligations
      of states and political subdivisions
    
    
    920
    
    
    40
    
    
    ―
    
    
    960Corporate
      securities
    
    
    114
    
    
    30
    
    
    ―
    
    
    144**Total
      securities available for sale**
    
    **$**
    **481,366**
    
    **$**
    **1,739**
    
    **$**
    **6,937**
    
    **$**
    **476,168****Held
      to Maturity:**U.S.
      government agencies
    
    $
    518,525
    
    $
    —
    
    $
    10,014
    
    $
    508,511Obligations
      of states and political subdivisions
    
    
    89,913
    
    
    2,537
    
    
    757
    
    
    91,693**Total
      securities held to maturity**
    
    **$**
    **608,438**
    
    **$**
    **2,537**
    
    **$**
    **10,771**
    
    **$**
    **600,204****(000’s)****December
      31, 2004**
    
    
    **Amortized**
      **Cost**
    
    
    **Gross**
      **Unrealized**
      **Gains**
    
    
    **Gross**
      **Unrealized**
      **Losses**
    
    
    **Estimated**
      **Fair**
      **Value****Available
      for Sale:**U.S.
      government agencies
    
    $
    165,142
    
    $
    99
    
    $
    461
    
    $
    164,780Mortgage-backed
      securities
    
    
    423,143
    
    
    2,103
    
    
    1,575
    
    
    423,671Obligations
      of states and political subdivisions
    
    
    920
    
    
    51
    
    
    ―
    
    
    971Corporate
      securities
    
    
    114
    
    
    36
    
    
    ―
    
    
    150**Total
      securities available for sale**
    
    **$**
    **589,319**
    
    **$**
    **2,289**
    
    **$**
    **2,036**
    
    **$**
    **589,572******
      **Held
      to Maturity:**U.S.
      government agencies
    
    $
    418,371
    
    $
    3,596
    
    $
    1,521
    
    $
    420,446Obligations
      of states and political subdivisions
    
    
    83,830
    
    
    3,503
    
    
    351
    
    
    86,982**Total
      securities held to maturity**
    
    **$**
    **502,201**
    
    **$**
    **7,099**
    
    **$**
    **1,872**
    
    **$**
    **507,428**





Available
      for sale and held to maturity obligations of states and political
      subdivisions are not subject to Federal income tax.





11


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


**9.**
    **Loans**





Nonaccrual
loans were $1.0 million at March 31, 2005 and $1.6 million at December 31, 2004.
Restructured loans were $0.1 million at both March 31, 2005 and December 31,
2004.





Substantially
all of the nonaccruing and restructured loans are collateralized by real estate.
At March 31, 2005, the Company had and continues to have no commitments to lend
additional funds to any customers with nonaccrual or restructured loan balances.
At March 31, 2005, loans that are not on nonaccrual status that management
believes were potential problem loans that may result in their being placed on
nonaccrual status in the near future totaled $8.1 million. One customer
relationship accounts for $7.8 million of such potential problem loans. The
loans related to this relationship are well secured by real estate collateral.
Accruing loans that are contractually past due 90 days or more at March 31, 2005
are immaterial.





At March
31, 2005 and December 31, 2004, the recorded investment in loans that are
considered to be impaired approximated $8.2 million and $1.3 million, of which
$0.5 million and $1.3 million were in nonaccrual status, respectively. The
average recorded investment in impaired loans for the three months ended March
31, 2005 and 2004, and for the year ended December 31, 2004 was $3.3 million,
$5.4 million, and $4.3 million, respectively. Interest income recognized by the
Company on impaired loans for the three months ended March 31, 2005 was $0.1
million. Such interest recognized for the three months ended March 31, 2004 was
insignificant.





As
applicable, each impaired loan has a related allowance for loan losses. The
total allowance for loan losses specifically allocated to one impaired real
estate construction loan with a balance of $1.0 million at December 31, 2004 was
$0.2 million. On November 30, 2004, the Superior Court of New Jersey issued an
unfavorable ruling regarding the foreclosure on other collateral securing this
loan and a related personal guarantee. As a result of the unfavorable ruling,
the Company charged-off $2.9 million of this loan in the fourth quarter of 2004.
The Company is appealing this decision. As of February 3, 2005, all 83
condominium units in the project that secured the real estate construction loan
have been sold and the remaining loan balance has been paid in full. The Company
maintains a specific allocation of the allowance for loan losses for unfunded
letters of credit related to this loan of $0.2 million at March 31,
2005.





**10.**
    **Borrowings
      and Stockholders’ Equity**





The
Company utilizes short-term and long-term borrowings primarily to meet funding
requirements for its asset growth, balance sheet leverage, 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.
Short-term securities sold under agreements to repurchase generally mature
between one and 365 days. The Bank may borrow, when available, under master
security sale and repurchase agreements through four primary investment firms,
the FHLB, and to a lesser extent, its customers. The Bank did not have any FHLB
short-term repurchase agreements outstanding at March 31, 2005. At December 31,
2004, the Bank had short-term repurchase agreements outstanding with the FHLB of
$25.0 million at a weighted average interest rate of 2.10 percent. These
short-term borrowings with the FHLB were collateralized by securities with an
aggregate carrying value and estimated fair value of $29.4 million and $29.7
million, respectively.





12


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


At March
31, 2005 and December 31, 2004, the Bank had short-term repurchase agreements
with customers of $1.0 million and $2.3 million at a weighted average interest
rate of 2.45 percent and 1.93 percent, respectively. These short-term customer
borrowings were collateralized by securities with an aggregate carrying value
and estimated fair value of $1.0 million and $2.4 million at March 31, 2005 and
December 31, 2004, respectively.





Federal
funds purchased represent overnight funds. The Bank has federal funds purchase
lines available with six financial institutions for a total of $75.0 million. At
March 31, 2005 and December 31, 2004, the Bank had no federal funds purchased
balances outstanding.





Short-term
FHLB advances are borrowings with original maturities between one and 365 days.
There were no short-term FHLB advances outstanding at March 31, 2005 and
December 31, 2004.





Additional
information with respect to short-term borrowings as of and for the three months
ended March 31, 2005 and 2004 is presented in the following table.


**(000’s
      except percentages)****Short-Term
      Borrowings**
    
    **2005**
    
    **2004**Balance
      at March 31
    
    $
    996
    
    $
    76,550Average
      balance outstanding
    
    $
    3,539
    
    $
    163,206Weighted-average
      interest rate:As
      of March 31
    
    
    2.45
    %
    
    1.11
    %Paid
      during period
    
    
    2.11
    %
    
    1.13
    %





The Bank
had long-term borrowings, which have original maturities of over one year, of
$515.0 million in securities sold under agreements to repurchase at both March
31, 2005 and December 31, 2004. These borrowings have an original term of
between five and ten years at interest rates of 1.99 percent to 6.08 percent
that are callable on certain dates after an initial noncall period at the option
of the counterparty to the repurchase agreements. The long-term borrowing in
securities sold under agreements to repurchase may not be repaid in full prior
to maturity without penalty. As of March 31, 2005 and December 31, 2004, these
borrowings were collateralized by securities with an aggregate carrying value of
$523.7 million and $518.8 million, and an estimated fair value of $515.6 million
and $520.3 million, respectively.





At March
31, 2005 and December 31, 2004, long-term FHLB advances totaled $82.3 million
and $82.7 million, respectively, at interest rates of between 4.55 percent to
6.05 percent. At March 31, 2005, borrowings totaling $2.3 million are amortizing
advances having scheduled payments and $10.0 million are payable only at
maturity. Other borrowings totaling $70.0 million have an original term of ten
years that are callable on certain dates after an initial noncall period at the
option of the counterparty to the advance. Advances at December 31, 2004 include
$2.7 million of amortizing advances having scheduled periodic payments, $10.0
million that are payable at maturity, and $70.0 million that are callable on
certain dates after an initial noncall period at the option of the insurer. The
long-term FHLB advances may not be repaid in full prior to maturity without
penalty. At March 31, 2005 and December 31, 2004, these borrowings were
collateralized by a pledge to the FHLB of a security interest in certain
mortgage-related assets having an aggregate carrying value of $96.7 million and
$96.5 million, respectively.





13


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


A summary
of long-term, fixed-rate borrowings distributed based upon remaining contractual
payment date and expected option call date at March 31, 2005, with comparative
totals for December 31, 2004, is as follows:





**(000’s
      except percentages)****Long-Term
      Borrowings**
    
    **Within**
      **1
      Year**
    
    **After
      1**
      **But
      Within**
      **5
      Years**
    
    **After**
      **5
      Years**
    
    **2005**
      **Total**
    
    2004
      TotalContractual
      Payment Date:Total
      long-term borrowing
    
    $
    10,453
    
    $
    135,082
    
    $
    451,740
    
    $
    597,275
    
    $
    597,709Weighted-average
      interest rate
    
    
    4.85
    %
    
    5.15
    %
    
    4.07
    %
    
    4.33
    %
    
    4.33
    %Expected
      Call Date:Total
      long-term borrowing
    
    $
    52,452
    
    $
    306,083
    
    $
    238,740
    
    $
    597,275
    
    $
    597,709Weighted-average
      interest rate
    
    
    2.72
    %
    
    4.02
    %
    
    5.08
    %
    
    4.33
    %
    
    4.33
    %




At March
31, 2005 and December 31, 2004, the Bank held 298,638 shares and 311,354 shares
of capital stock of the FHLB with a carrying value of $29.9 million and $31.1
million, respectively, which is required in order to borrow under the short- and
long-term advances 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, or for collateral pledged by TPNZ, 100 percent of net
equity, excluding securities sold under agreements to repurchase, upon the
prerequisite purchase of additional shares of FHLB stock. Any advances made from
the FHLB are required to be collateralized by the FHLB stock and certain other
assets of the Bank.





The
ability of the Company and Bank to pay cash dividends in the future is
restricted by various regulatory requirements. The Company's ability to pay cash
dividends to its stockholders is primarily dependent upon the receipt of
dividends from the Bank. The Bank's dividends to the Company may not exceed the
sum of the Bank's undistributed net income for that year and its undistributed
net income for the preceding two years, less any required transfers to
additional paid-in capital. In addition, the Bank may not declare and pay
dividends more often than quarterly, and no dividends may be declared or paid if
there is any impairment of the Bank’s capital stock. At March 31, 2005, the Bank
could pay dividends of $50.5 million to the Company without having to obtain
prior regulatory approval.





On March
23, 2005, the Company’s Board of Directors authorized the repurchase of up to
300,000 common shares, or approximately 1.5 percent of the Company’s outstanding
common stock at that date. Repurchases of common stock are authorized to be made
from time to time in open-market and private transactions throughout 2005 as, in
the opinion of management, market conditions may warrant. The repurchased common
shares will be held as treasury stock and will be available for general
corporate purposes. The March 23, 2005 stock repurchase plan replaces the
previous December 17, 2003 repurchase plan, which authorized the repurchase of
up to 315,000 common shares (adjusted for common stock dividends). For the three
months ended March 31, 2005, the Company purchased 11,300 shares of common stock
under its repurchase plan at an aggregate cost of approximately $0.2 million.
For the three months ended March 31, 2004, the Company did not purchase any
shares of common stock under its repurchase plan. Purchases of common stock of
107,980 and 14,065 common shares (adjusted for common stock dividends) were
acquired in connection with stock option exercises during the three-month
periods ended March 31, 2005 and 2004, respectively.





14


****U.S.B.
HOLDING CO., INC.**
**NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED****
 **11.**
    **Corporation-Obligated
      Mandatory Redeemable Capital Securities of Subsidiary
      Trusts**





The total
amount of Capital Securities outstanding as of March 31, 2005 is $60 million.
Capital Securities are generally permitted to be included in Tier I regulatory
capital in an amount not in excess of 25 percent of Tier I Capital, with the
remainder included in Total Capital. At March 31, 2005, Tier I Capital totaled
$247.3 million, which included $60.0 million of Capital Securities. The Federal
Reserve Bank has issued a final rule that retains the Tier I Capital treatment
of Capital Securities with certain modifications. The final rule did not affect
the Company’s treatment of the Capital Securities as Tier I
Capital.





**12.**
    **Commitments
      and Contingencies**





In the
normal course of business, various commitments to extend credit are made, which
are not reflected in the accompanying condensed consolidated financial
statements. At March 31, 2005, formal credit lines, loan commitments, which are
primarily loans collateralized by real estate, and credit card loans
approximated $344.8 million, $157.6 million, and $38.3 million, respectively.
Outstanding standby letters of credit totaled $41.2 million. Such amounts
represent the maximum risk of loss on these commitments.





Standby
letters of credit are issued to guarantee financial performance or obligations
of the Bank’s customers. Generally, standby letters of credit are either
partially or fully collateralized by cash, real estate, or other assets, and, in
some cases, are not collateralized. In most cases, personal guarantees are
obtained. Standby letters of credit are considered in the Bank’s evaluation of
its allowance for loan losses.





The
Company is party to employment agreements with the Company’s Chief Executive
Officer, and Senior Executive Vice President - Chief Credit Officer, which are
described in Note 16 to the Company’s Consolidated Financial Statements included
in the 2004 Annual Report to Stockholders.





On April
18, 2005, the Company and the Bank entered into a letter agreement with Steven
T. Sabatini, Senior Executive Vice President, Chief Financial Officer, and
Assistant Secretary of the Company and the Bank, pursuant to which Mr. Sabatini
provided notice of his decision to retire from his positions with the Company
and the Bank, and from all other positions held with any subsidiaries or
affiliates of the Company or the Bank, effective as of the close of business on
January 6, 2006. The letter agreement also provides notice that Mr. Sabatini has
decided not to stand for re-election to the Board of Directors of the Company at
the Annual Meeting of Stockholders of the Company to be held on May 25,
2005.





Pursuant
to the terms of the letter agreement, Mr. Sabatini will continue to serve the
Company and the Bank in his current positions through the close of business on
January 6, 2006. In addition, Mr. Sabatini, the Company, and the Bank have
agreed to terminate Mr. Sabatini’s existing Employment Agreement dated July 28,
2004 (the “Employment Agreement”), which is described in Note 16 to the
Company’s Consolidated Financial Statements included in the 2004 Annual Report
to Stockholders, effective as of April 18, 2005. The letter agreement further
provides, among other things, that, from the date of the letter agreement
through January 6, 2006, Mr. Sabatini will continue to receive the salary and
bonus currently provided for under the terminated Employment Agreement, will
continue to be treated as an employee of the Company and the Bank for the
purposes of participation in employee benefit plans and programs of the Company
and the Bank (other than stock option plans), and will continue to be provided
with certain insurance coverage and indemnification.





15


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


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 “Director Retirement
Plan”). At March 31, 2005 and December 31, 2004, the Company had a recorded
liability of $532,000 and $522,000, respectively, to provide for the present
value of payments expected to be made under the Director Retirement Plan. The
discount rate used to compute the present value obligation is 5.25 percent for
both periods. At March 31, 2005 and December 31, 2004, a net intangible asset of
$230,000 and $255,000, respectively, is recorded, reflecting the unamortized
prior service cost, which is being amortized over the average remaining service
period of the current non-employee Directors. Benefit cost for the Director
Retirement Plan for the three months ended March 31, 2005 and 2004 was
approximately $36,000 and $34,000, of which $25,000 and $24,000 represents
amortization of prior service cost, and $11,000 and $10,000 represents current
service cost.





Other
commitments are also described in Note 16 to the Company’s Consolidated
Financial Statements for the year ended December 31, 2004, included in the
Company’s 2004 Annual Report to Stockholders.





The
Company is party to various legal proceedings arising in the ordinary course of
business. Because litigation is inherently unpredictable, particularly in cases
where claimants seek substantial or indeterminate damages or where
investigations and proceedings are in the early states, the Company cannot
predict with certainty the loss or range of loss related to such matters, how
such matters will be resolved, when they will ultimately be resolved, or what
the eventual settlement, fine, penalty, or other relief might be. Consequently,
the Company cannot estimate losses or ranges of losses for matters where there
is only a reasonable possibility that a loss may have been incurred. Although
the ultimate outcome of these matters cannot be ascertained at this time, it is
the opinion of management, after consultation with counsel, that the resolution
of such matters will not have a material adverse effect on the financial
condition of the Company, taken as a whole; such resolution may, however, have a
material effect on the operating results in any future period, depending on the
level of income for such period.




16
 **U.S.B.
HOLDING CO., INC.**
 **NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED**


The
Company provides reserves in accordance with Statement of Financial Accounting
Standards No. 5, “Accounting for Contingencies,” as required. The ultimate
resolution may differ from the amounts reserved, if any.





**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
deposits and other borrowings and to manage interest rate and credit risk. This
situation is also similar for consumer and residential mortgage lending.
Accordingly, all significant operating decisions are based upon analysis of the
Company as one operating segment or unit.





The
Company operates only in the U.S. domestic market, specifically 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, and
Southern Connecticut. For the three months ended March 31, 2005 and 2004, there
is no customer that accounted for more than ten percent of the Company’s
revenue.






17


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


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


***Forward-Looking
Statements***


*This
Quarterly Report on Form 10-Q contains a number of “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements may be identified by the use of such words as
“believe,” “expect,” “anticipate,” “intend,” “should,” “will,” “would,” “could,”
“may,” “planned,” “estimated,” “potential,” “outlook,” “predict,” “project” and
similar terms and phrases, including references to
assumptions.*





*Forward-looking
statements are based on various assumptions and analyses made by the Company in
light of management's experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors
the Company believes are appropriate under the circumstances. These statements
are not guarantees of future performance and are subject to risks, uncertainties
and other factors (many of which are beyond the Company’s control) that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. These factors include, without
limitation, the following: the timing and occurrence or non-occurrence of events
may be subject to circumstances beyond the Company’s control; there may be
increases in competitive pressure among financial institutions or from
non-financial institutions; changes in the interest rate environment may reduce
interest margins or affect the value of the Company’s investments; changes in
deposit flows, loan demand or real estate values may adversely affect the
Company’s business; changes in accounting principles, policies or guidelines may
cause the Company’s financial condition to be perceived differently; general
economic conditions, either nationally or locally in some or all of the areas in
which the Company does business, or conditions in the securities markets or the
banking industry may be less favorable than the Company currently anticipates;
legislative or regulatory changes may adversely affect the Company’s business;
applicable technological changes may be more difficult or expensive than the
Company anticipates; success or consummation of new business initiatives may be
more difficult or expensive than the Company anticipates; or litigation or
matters before regulatory agencies, whether currently existing or commencing in
the future, may delay the occurrence or non-occurrence of events longer than the
Company anticipates.*





*The
Company's forward-looking statements are only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
these statements.*





**OVERVIEW**





The
Company’s primary business is obtaining deposits through its retail branch
system, and commercial and municipal relationships, and lending to both a retail
and commercial customer base. A substantial amount of loans are secured by real
estate, including construction projects. The Company also acquires triple-A
credit rated securities to invest deposits in excess of loan production and
borrows on a wholesale basis to leverage capital and manage interest rate risk.
The Company operates through its 28 full service branches and its four loan
centers in Rockland, Westchester, and Orange counties, and New York City in New
York, and Stamford, Connecticut.




18


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


The
Company’s primary source of revenue is net interest income, which is the
difference between interest income on earning assets and interest expense on
interest bearing liabilities. The Company also derives income from non-interest
income sources such as service charges on deposit accounts, gains on sales of
securities and other forms of income. Net interest income and non-interest
income support the Company’s operating expenses and provision for credit
losses.




As the
Company’s primary source of income is net interest income, the interest rate
environment has a significant effect on revenue. The market for and credit
quality of loans is also impacted by interest rates, as well as the local
economy. Deposits are also sensitive to interest rates, local economic
conditions, and the attractiveness of alternative investments, such as stocks,
bonds, mutual funds, and annuities.




Currently,
the Company’s balance sheet is in an asset sensitive position in anticipation of
higher rates as the economy continues to expand. If short-term interest rates
continue to rise and the U.S. treasury yield curve widens, the Company’s net
interest income should be positively affected as the balance sheet remains asset
sensitive. However, the Company’s core revenue could be negatively affected if
the U.S. treasury yield curve continues to flatten or becomes inverted resulting
in short-term interest rates at higher levels than medium-to long-term interest
rates, which would cause interest rate spreads to narrow.




Also
significant to the Company’s net income and earnings per common share is the
ability to generate quality interest earning assets in the form of loans and
securities at reasonable interest spreads to maintain and increase net interest
income. Due to the current interest rate environment and the flattening yield
curve, intense competition for loans, and difficulty in obtaining acceptable
yields and structures on security investments, while managing interest rate
risk, increasing the Company’s interest earning assets is proving to be
challenging. In addition, significant loan prepayments, and calls and
accelerated principal payments on securities in this low interest rate
environment are also impacting the Company’s ability to increase interest
earning assets.




**Critical
Accounting Policies**





The
Company’s financial statements are prepared in accordance with accounting
principles generally accepted in the United States. The Company’s significant
accounting policies are more fully described in Note 3 to the Company’s
Consolidated Financial Statements for the year ended December 31, 2004, included
in the Company’s 2004 Annual Report to Stockholders. Certain accounting policies
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. On an
on-going basis, management evaluates its estimates and assumptions, and the
effects of revisions are reflected in the financial statements in the period in
which they are determined to be necessary.





The more
critical policies given the Company’s current business strategy and
asset/liability structure are accounting for non-performing loans, the allowance
for loan losses, reserve for unfunded loan commitments, and provision for credit
losses, the classification of securities as either held to maturity or available
for sale and evaluation of other than temporary impairment of securities, and
the evaluation of valuation reserves for deferred tax assets. These accounting
policies are those that most frequently require management to make estimates and
judgments and, therefore, are critical to understanding the Company’s results of
operations. The Company’s critical accounting policies are described in greater
detail under the heading “Critical Accounting Policies” in the Management’s
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company’s 2004 Annual Report to Stockholders. The Company’s
practice on each of these accounting policies is further described in the
applicable sections of Management’s Discussion and Analysis of Financial
Condition and Results of Operations included in the Company’s 2004 Annual Report
to Stockholders.





19


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


**COMPARISON
OF FINANCIAL CONDITION AS OF MARCH 31, 2005 AND DECEMBER 31,
2004**





At March
31, 2005, the Company had total assets of $2,762.7 million, an increase of $16.4
million from December 31, 2004. The securities portfolio, including investments
in Federal Home Loan Bank of New York (“FHLB”) stock, totaled $1,114.5 million
and $1,122.9 million at March 31, 2005 and December 31, 2004, respectively, a
decrease of $8.4 million during the three months ended March 31, 2005. The
securities portfolio consists of securities held to maturity at amortized cost
of $608.4 million and $502.2 million, securities available for sale at estimated
fair value totaling $476.2 million and $589.6 million, and FHLB stock of $29.9
million and $31.1 million at March 31, 2005 and December 31, 2004,
respectively.





Securities
are selected to provide safety of principal and liquidity, produce income on
excess funds during structural changes in the composition of deposits during
cyclical and seasonal changes in loan demand, and to leverage capital. The
amount of securities purchased and maintained in the investment portfolio is
dependent on the level of deposit growth in excess of loan growth, the ability
to leverage capital, while maintaining adequate capital ratios and managing
interest rate risk, and the ability of the Bank to borrow wholesale funds. In
order to manage liquidity and control interest rate risk, the Company’s
investment strategy focuses on a combination of securities that have short
maturities, adjustable-rate securities or those whose cash flow patterns result
in a lower degree of interest rate risk, and investments in fixed rate
securities with longer-term maturities and call options by the issuer to
maximize yield. Generally, most securities may be used to collateralize
borrowings and public deposits. As a result, the investment portfolio is an
integral part of the Company’s funding strategy. The weighted average yield on a
tax equivalent basis for the three months ended March 31, 2005 and weighted
average life at March 31, 2005 of the investment portfolio was 5.00 percent and
5.55 years, respectively. The Company will continue to utilize the investment
portfolio to invest excess cash flow and leverage capital, while managing
interest rate risk.





During
the three months ended March 31, 2005, U.S. government agency securities
increased $5.8 million due primarily to purchases totaling $100.0 million,
discount accretion of $0.1 million, and $0.2 million of amortization of the loss
on transfer of available for sale securities to held to maturity, partially
offset by redemptions of $92.4 million of callable bonds and a decrease in the
estimated fair value of available for sale securities of $2.1 million.
Mortgage-backed securities decreased by $19.0 million primarily due to principal
paydowns of $30.5 million and a decrease in the estimated fair value of
available for sale securities of $3.3 million, partially offset by purchases of
$14.8 million. The Bank’s investment in obligations of states and political
subdivisions, or municipal securities, increased by $6.1 million, primarily due
to purchases of $7.0 million during the three month period ended March 31, 2005,
partially offset by maturities of $0.9 million. Municipal securities are
considered core investments having favorable tax equivalent yields and
diversified maturities. These obligations are principally of New York State
political subdivisions with diversified maturities, and substantially all are
classified as held to maturity. Purchases of municipal securities are dependent
upon their availability in the marketplace and the comparative tax equivalent
yields of such securities compared to other securities of similar credit risk
and maturity.





20


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


The
Company invests in medium-term corporate debt securities and bank and other
equity securities that are rated investment grade by nationally recognized
credit rating organizations at the time of purchase. The Company had outstanding
balances in bank and other equity securities of $0.1 million and $0.2 million at
March 31, 2005 and December 31, 2004, respectively.





Loans
represent the largest and highest yielding earning asset of the Company. Loan
volume is dependent on the Bank’s ability to originate loans in the competitive
markets in which it operates. Critical factors include the credit worthiness of
borrowers, the economy of the Bank’s markets, and the level of interest rates.
Also impacting net loan growth is the level of loan prepayments, which occur
more frequently in the current interest rate environment. The Company continues
to originate a significant portion of loans collateralized by real estate within
the markets it primarily conducts business. The favorable economic conditions
for both commercial and residential real estate, and the credit worthiness of
new and existing customers, allowed the Bank to increase net loans outstanding
during the 2005 first quarter, despite a high level of loan
prepayments.





At March
31, 2005, loans outstanding were $1,526.8 million, a net increase of $18.7
million or 1.2 percent compared to December 31, 2004. The increase in the
outstanding loan balance reflects increases of: $26.3 million in land
acquisition and construction loans; $5.9 million in time secured loans; $4.6
million in time unsecured loans; $0.5 million in home equity loans, and $0.3
million in commercial installment loans. The increase was partially offset by
decreases of $14.7 million in commercial mortgages, $2.4 in residential
mortgages, $1.4 million in other loans, $0.3 million in credit cards, and $0.1
million in personal installment loans. The Company had approximately $383.1
million in formal credit lines outstanding, $157.6 million in loan commitments
outstanding, which are loans primarily collateralized by real estate, and $41.2
million of standby letters of credit 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
Company's allowance for loan losses increased $0.3 million, or 1.8 percent, to
$15.5 million at March 31, 2005, from $15.2 million at December 31, 2004. The
allowance for loan losses represents 1.02 percent and 1.01 percent of gross
loans outstanding at March 31, 2005 and December 31, 2004, respectively. The
allowance reflects a provision of $0.4 million and net recoveries of $34,000
recorded for the three months ended March 31, 2005. In addition to the allowance
for loan losses (the “allowance”), a reserve for credit losses related to
unfunded loan commitments (the “reserve”) of $0.7 million at March 31, 2005 and
$0.5 million at December 31, 2004, is included in other liabilities. At March
31, 2005, there are loans aggregating approximately $8.1 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. The potential problem
loans primarily consist of $7.8 million related to one customer relationship.
The loans related to this relationship are well secured by real estate
collateral.





As with
any financial institution, poor economic conditions and high inflation, interest
rates or unemployment may lead to increased losses in the loan portfolio.
Conversely, improvements in economic conditions tend to reduce the amounts
charged against the allowance. Management has established various controls, in
addition to Board approved underwriting standards, in order to limit future
losses, such as (1) a “watch list” of possible problem and classified loans, (2)
various loan policies concerning loan administration (loan file documentation,
disclosures, approvals, etc.), and (3) a loan review staff employed by the
Company, as well as outside loan review consultants, to determine compliance
with established controls, and to review the quality and identify anticipated
collectibility issues of the portfolio. Management determines which loans are
uncollectible and makes additional provisions, as necessary, to state the
allowance and the reserve at the appropriate levels.





21


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


An
evaluation of the quality of the loan portfolio is performed by management on a
quarterly basis as an integral part of the credit administration function, which
includes the identification and evaluation of past due loans, non-performing
loans, impaired loans and potential problem loans, assessments of the expected
effects of the current economic environment, applicable industry, geographic,
and customer concentrations within the loan portfolio, and a review of
historical loss experience. Management takes a prudent and cautious position in
evaluating various business and economic uncertainties in relation to the
Company’s loan portfolio. In management’s judgment, the allowance and reserve
are considered adequate to absorb losses inherent in the credit portfolio. The
collectibility of the loan portfolio of the Company is subject to changes in the
real estate market in which the Company operates.




The
provisions for credit losses established for the three months ended March 31,
2005 and 2004 and the related allowance and reserve reflect net charge-offs and
losses incurred with respect to real estate, time and demand, installment,
credit card, and other loans, and the effect of the real estate market and
general economic conditions of the New York Metropolitan area on the loan
portfolio. Management believes the allowance and the reserve at March 31, 2005
appropriately reflect the risk elements inherent in the total credit portfolio
at that time. There is no assurance that the Company will not be required to
make future adjustments to the allowance or the reserve in response to changing
economic conditions or regulatory examinations.




The
Company’s fundamental source of funds supporting interest earning assets
continues to be deposits, consisting of demand deposits (non-interest bearing),
NOW, money market, savings, and various forms of time deposits. Retail deposits
are obtained primarily by mass marketing efforts and are fee and interest rate
sensitive. Commercial deposits are generally obtained through direct marketing
and business relationship development efforts, as well as a result of lending
relationships. The maintenance of a strong deposit base is key to the
development of lending opportunities and creates long-term customer
relationships, which enhance the ability to cross sell services. Depositors
include individuals, small and large businesses, and governmental entities. To
meet the requirements of a diverse customer base, a full range of deposit
instruments are offered, which has allowed the Company to maintain the deposit
base despite intense competition from other banking institutions and non-bank
financial service providers.





Total
deposits decreased $61.4 million, or 3.3 percent, for the three-month period
ended March 31, 2005 to $1,796.9 million from $1,858.2 million at December 31,
2004. The total deposit decrease resulted from net decreases in retail and
commercial deposits of $46.0 million, municipal deposits of $15.3 million, and
brokered deposits of $0.1 million.





As of
March 31, 2005, municipal time deposits decreased $32.9 million, compared to
December 31, 2004, as a result of municipalities’ decisions to place funds in
short-term liquid accounts at competitive rates and an overall reduction in the
Company’s funding needs due to a reduction in investment securities and moderate
loan growth in the 2005 first quarter. The decrease in municipal time deposits
at March 31, 2005 was partially offset by an increase in municipal demand, NOW,
money market, and savings deposits of $3.6 million, $7.4 million, $5.7 million,
and $0.9 million, respectively. The increases in these municipal accounts
reflect higher deposit levels in transaction and short-term accounts and a
greater number of municipal customers.





22


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


The
decrease in retail, commercial, and brokered deposits at March 31, 2005 was due
to decreases in NOW, savings, money market, and brokered deposits of $1.2
million, $44.5 million, $14.9 million, and $0.1 million, respectively, as
compared to December 31, 2004. The decrease was partially offset by an increase
in retail and commercial demand deposits of $6.1 million, and an increase in
time deposits of $8.6 million, as compared to December 31, 2004. The decrease in
retail and commercial NOW, savings, and money market deposits was due to
customers moving deposits to more competitive products to better react to a
rising short-term interest rate environment and increasing competition for such
accounts. The increase in retail and commercial time deposits, which includes
increases in IRA and KEOGH deposits of $2.5 million, time deposits over $100,000
of $5.6 million, and time deposits under $100,000 of $0.5 million, was primarily
the result of customers seeking higher yielding deposits. The increase in retail
and commercial demand deposits was the result of the Bank increasing its
existing core deposit relationships, while adding demand deposit relationships
in its existing and contiguous markets.





During
the three months ended March 31, 2005, the Bank decreased its net borrowings by
$26.8 million. Borrowings, combined with municipal deposits of approximately
$15.3 million, are primarily used to provide funding for the securities
portfolio, including investment in FHLB stock, which decreased $8.4 million
during the three months ended March 31, 2005. As the amounts of municipal
deposits change, the Bank will adjust the funding for the securities portfolio
with short-term borrowings. Short-term borrowings provide management with the
ability to react to changes in levels of earning assets. During April 2005, the
Bank increased short-term borrowings to fund a portion of a $100.0 million
security purchase. Management will continue to evaluate the interest rate
environment in order to determine the most effective combination of borrowings
and deposits.





Stockholders'
equity increased to $184.1 million at March 31, 2005 from the December 31, 2004
balance of $182.0 million, an increase of 1.1 percent. The increase primarily
results from: $7.4 million of net income for the three month period ended March
31, 2005; $3.4 million of stock options exercised; and $0.1 million of shares
committed to be released under benefit plans; partially offset by treasury stock
transactions of $2.8 million, common stock dividends paid of $2.7 million, and
an increase in other comprehensive loss of $3.4 million.





The
Company's leverage ratio at March 31, 2005 was 8.99 percent, compared to 8.15
percent at December 31, 2004. The Company's Tier I and total capital ratios
under applicable risk-based capital guidelines were 14.47 percent and 15.42
percent at March 31, 2005, and 14.15 percent and 15.07 percent at December 31,
2004, respectively. In addition, the Bank exceeds all current regulatory capital
requirements and was in the “well-capitalized” category at March 31, 2005 and
December 31, 2004. The increase in the Company’s capital ratios are due to the
increase in stockholders’ equity, excluding accumulated other comprehensive
loss, for the three months ended March 31, 2005.




23


U.S.B. HOLDING CO.,INC.
 **ITEM
      2.**
    **MANAGEMENT’S
      DISCUSSIONS AND ANALYSIS**
 **OF FINANCIAL CONDITION AND RESULTS
      OF OPERATION**
  **COMPARISON
OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND
2004**





**Earnings**





Net
income for the three months ended March 31, 2005 was $7.39 million compared to
$7.36 million for the three months ended March 31, 2004, an increase of 0.5
percent. Diluted earnings per common share were $0.35 for the three months ended
March 31, 2005, compared to $0.34 per common share in the prior year period, an
increase of 2.9 percent. The Company’s net income for the three months ended
March 31, 2005 resulted in a 16.03 percent return on average common
stockholders’ equity and a 1.07 percent return on average total assets, as
compared to 16.95 percent and 1.02 percent, respectively, for the three months
ended March 31, 2004.





The
increase in the 2005 first quarter net income and diluted earnings per common
share compared to the 2004 period is due to a significant increase in net
interest income. The net interest income increase was substantially offset by
increases in the provision for credit losses related to loan growth,
non-interest expenses from increases in salaries and benefits expenses, legal
fees related to a non-performing real estate construction loan, costs for
compliance with the Sarbanes-Oxley Act of 2002, and a decrease in security
gains. During the 2004 first quarter, $105.5 million of available for sale
mortgage-backed securities were sold resulting in security gains of $1.1 million
($0.6 million after income tax and incentive compensation effect), while no
security gains or losses were realized for the quarter ended March 31,
2005.





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
the most significant component of the Company’s consolidated earnings. Net
interest income is positively impacted by a combination of increases in earning
assets over interest bearing liabilities, and an increase in the net interest
spread between earning assets and interest bearing liabilities, as well as an
increase in the volume of interest earning assets. Net interest income is
adversely impacted by a combination of decreases in earning assets over interest
bearing liabilities, a decrease in the net interest spread between earning
assets and interest bearing liabilities, and a decrease in interest earning
assets. For the three months ended March 31, 2005, net interest income increased
13.1 percent to $23.0 million, compared to $20.3 million for the three months
ended March 31, 2004.





The
increase in net interest income resulted from increases in both the net interest
spread and margin on a tax equivalent basis to 3.41 percent and 3.53 percent for
the March 31, 2005 first quarter from 2.95 percent and 3.02 percent for the 2004
prior year period. The increases in the net interest margin and spread on a tax
equivalent basis were primarily due to a 175 basis point increase in short-term
rates by the Federal Reserve Bank from June 30, 2004 to March 31, 2005. The
short-term rate increases resulted in an increase in the yields on the Company’s
floating rate assets tied to the prime rate and LIBOR. This increase in yields
was greater than the increase in the yield on interest bearing liabilities as a
result of the asset sensitivity of the balance sheet.





For the
three months ended March 31, 2005, tax equivalent yields on interest earning
assets increased to 5.68 percent from 5.03 percent, and yields on interest
bearing liabilities increased to 2.27 percent from 2.08 percent, as compared to
the 2004 prior year period, respectively. The increase in tax equivalent yields
on interest earning assets for the three months ended March 31, 2005 was due to
increases in yields on average securities to 5.00 percent from 4.12 percent,
yields on average federal funds sold to 2.42 percent from 0.93 percent, and
yields on average net loans to 6.31 percent from 5.94 percent, as compared to
the 2004 prior year period, respectively. For the three months ended March 31,
2005, the increase in yields on interest bearing liabilities was due to
increases in yields on borrowings to 4.39 percent from 3.58 percent and yields
on deposits to 1.42 percent from 1.32 percent, as compared to the 2004 prior
year period, respectively.





24


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


The
increase in the net interest income was partially offset by a decrease in
average earning assets of $96.9 million, 3.5 percent, to $2.66 billion for the
three months ended March 31, 2005 from $2.76 billion for the 2004 prior year
period. The decrease was due to a $174.1 million, 13.7 percent, decrease in
average investment securities, primarily as a result of proceeds received from
calls of floating rate U.S. government agency securities that were not
immediately reinvested because of tighter spreads offered on such securities.
The decrease was partially offset by increases in average net loans of $54.6
million, 3.8 percent, and average federal funds sold of $22.7 million, 62.4
percent.





Average
interest bearing liabilities also decreased $172.5 million, 7.2 percent, for the
three months ended March 31, 2005, as compared to the 2004 prior year period.
The decrease in average interest bearing liabilities was in part due to less
funds needed as a result of the decline in earning assets. The decrease in
average interest bearing liabilities was primarily due to decreases in average
borrowings of $183.0 million, 23.3 percent, for the three month period ended
March 31, 2005, as compared to the 2004 period year period.





The net
interest margin is positioned to continue to widen if short-term interest rates
continue to increase and the U.S. treasury yield curve widens. This is due to
the asset sensitivity position of the Company’s balance sheet, primarily from
investments in floating rate securities and commercial loans, which reprice
based on spreads over LIBOR and the prime rate. However, net interest income
could be negatively affected if the U.S. treasury curve continues to flatten or
becomes inverted resulting in short-term interest rates at higher levels than
medium-to long-term interest rates, which would cause interest spreads to narrow
and prepayments of loans and securities to be accelerated.





Management
continues to use its strong capital position to prudently leverage the balance
sheet by purchasing government securities funded by borrowings. Although the
leverage strategy results in narrower net interest spreads, the strategy
increases net interest income without significant credit risk or increase in
operating expenses. Management will continue to evaluate and manage the effect
of the changing interest rate environment on the Company’s present and future
operations, while continuing to competitively price its products and services
throughout the markets it serves.





**Provision
for Credit Losses**





The
provision for credit losses increased $0.2 million to $0.4 million for the three
month period ended March 31, 2005, compared to the same period in 2004. The
increase in the provision for the three month 2005 period was primarily
attributable to an overall loan growth, partially offset by a continued
improvement in the credit quality of the loan portfolio. The Company’s
non-performing assets to total assets decreased to 0.03 percent at March 31,
2005 from 0.17 percent at March 31, 2004. During the three months ended March
31, 2005, net recoveries totaled $34,000 as compared to net charge-offs of
$142,000 for the 2004 prior year period.





25


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


Nonaccrual
loans were $1.0 million and $5.0 million at March 31, 2005 and 2004,
respectively, compared to $1.6 million at December 31, 2004. Total nonaccrual
loans at March 31, 2004 primarily consisted of a real estate construction loan
of $4.1 million that was reduced to $1.0 million at December 31, 2004 as a
result of charge-offs and principal paydowns. As of February 3, 2005, all 83
condominium units in the project that secured the loan have been sold and the
remaining loan balance has been paid in full.





It is the
Company’s policy to discontinue the accrual of interest on loans when, in the
opinion of management, a reasonable doubt exists as to the timely collectibility
of the amounts due. Regulatory requirements generally prohibit the accrual of
interest on certain loans when principal or interest is due and remains unpaid
for 90 days or more (with the exception of credit card loans for which the
criteria is 180 days past due).





Net
income is adversely impacted by the level of non-performing assets caused by the
deterioration of borrowers’ ability to meet scheduled interest and principal
payments. In addition to forgone revenue, the Company must increase the level of
provisions for credit losses, incur collection costs, and other costs associated
with the management and disposition of foreclosed properties. A substantial
portion (87.4 percent at March 31, 2005) of total gross loans of the Company is
collateralized by real estate, primarily located in the New York Metropolitan
area. Accordingly, the collectibility of the loan portfolio of the Company is
subject to changes in the real estate market in which the Company
operates.





**Non-Interest
Income**




Non-interest
income decreased for the three months ended March 31, 2005 to $1.8 million from
$2.9 million for the 2004 prior year period. The decrease was primarily due to
decreases in service charges on deposit accounts of $0.2 million and security
gains of $1.1 million. During the 2004 first quarter, $105.5 million of
available for sale mortgage-backed securities were sold resulting in security
gains of $1.1 million, while no security gains were realized for the quarter
ended March 31, 2005 due to existing market conditions. These decreases were
partially offset by an increase in other income of $0.2 million, which primarily
consisted of increases in letter of credit fees, fee income on investment
product sales, and other miscellaneous income.





**Non-Interest
Expenses**





Non-interest
expenses increased $1.3 million, 11.2 percent, to $13.3 million for the three
month period ended March 31, 2005 from the comparable prior year period in 2004.
The primary reasons for this increase results from higher levels of salaries and
benefits, occupancy expenses and professional fees, partially offset by
decreases in advertising and business development, and stationery and printing
expenses.





Salaries
and employee benefits, the largest component of non-interest expense, increased
by $1.0 million, or 14.2 percent, during the three month period ended March 31,
2005 compared to the prior year 2004 period. The increase occurred due to
additional personnel employed by the Company primarily from the acquisition of
Reliance Bank. In addition, salaries and employee benefits increased due to
additional expenses related to medical plans, deferred compensation plans, and
expenses related to bonus plan compensation. Increases in salaries and employee
benefits expense were partially offset by an increase in the allocation of a
portion of salary and benefit expense to deferred loan origination expense, and
a decrease in overtime expense as compared to prior year periods.





26


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


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





Changes
in the other components of non-interest expense for the three month period ended
March 31, 2005, compared to the prior year 2004 period, were primarily due to
the following:





w
    Increase
      of $177,000 (9.5 percent) in occupancy and equipment expense. The increase
      is primarily due to higher depreciation expense from investments in
      technology, rent expense for the 1200 Mamaroneck Avenue branch, White
      Plains, New York, an increase in real estate taxes due to refunds received
      in 2004, and higher utility costs.





w
    Decrease
      of $96,000 (14.3 percent) in advertising and business development. The
      decrease reflects a reduction in television advertising, as well as less
      expenses related to promotional events.





w
    Increase
      of $262,000 (64.5 percent) in professional fees. The increase is due to
      higher legal fees related to a non-performing real estate construction
      loan and costs related to compliance with the Sarbanes-Oxley Act of
      2002.





w
    Increase
      of $25,000 (9.4 percent) in amortization of intangibles. The increase
      reflects amortization of an additional intangible asset related to the
      acquisition of Reliance Bank in the first quarter of
  2004.





w
    Decrease
      of $42,000 (20.7 percent) in stationery and printing. The decrease was
      primarily due to less computer related equipment purchased in
      2005.





**Income
Taxes**





The
effective income tax rates for both the three month periods ended March 31, 2005
and 2004 was 33.3 percent. The effective income tax rate for both the 2005 and
2004 periods reflects nontaxable income from municipal bonds and lower state
income taxes. As a result of a reduction in taxable income for New York State
tax purposes, the Company has established a valuation allowance at March 31,
2005, December 31, 2004, and March 31, 2004 in the amount of $2.8 million, $2.6
million, and $1.5 million, respectively. The valuation allowance reduces the New
York State deferred tax asset to the amount management believes will more likely
than not be realized. As of March 31, 2005, the New York State deferred tax
asset, net of state deferred tax liabilities, is fully reserved by the valuation
allowance.






27


U.S.B. HOLDING CO.,INC.
 **ITEM
      3.**
    **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Market
risk is the potential for economic losses to be incurred on market risk
sensitive instruments arising from adverse changes in market indices such as
interest rates, foreign currency exchange rates, and commodity prices.
Quantitative and qualitative disclosures about market risk at December 31, 2004
were reported in the Company’s 2004 Annual Report to Stockholders. There have
been no material changes in the Company’s market risk exposures at March 31,
2005 compared to December 31, 2004. Interest rate risk continues to be the
Company’s primary market risk exposure since all Company transactions are
denominated in U.S. dollars with no direct foreign currency exchange or changes
in commodity price exposures. Substantially all market risk sensitive
instruments continue to be held to maturity or available for sale with no
significant financial instruments entered into or acquired for trading purposes.
The Company does not use derivative financial instruments such as interest rate
swaps and caps and has not been party to any derivative financial instruments
during the three months ended March 31, 2005.





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 March 31, 2005 as compared to
December 31, 2004. The Company’s “Static Gap” at March 31, 2005 was a positive
cumulative gap of $173.5 million in the one-year time frame compared to a
positive cumulative gap of $181.2 million at December 31, 2004. If interest
rates were to gradually increase 200 basis points or decrease 100 basis points
(normally 200 basis points during periods of higher interest rates) from current
rates, the percentage change in estimated net interest income for the subsequent
twelve month measurement period continues to be within the Company’s policy
limit of not changing by more than 5.0 percent.







28


******U.S.B. HOLDING CO.,INC.**
**ITEM
      3.**
    ****CONTROLS
      AND PROCEDURES********


The
Company has evaluated the design and operation of its disclosure controls and
procedures to determine whether they are effective in ensuring that the
disclosure of required information is timely made in accordance with the
Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and forms of
the Securities and Exchange Commission. This evaluation was made under the
supervision and with the participation of management, including the Company’s
chief executive officer and chief financial officer, as of March 31, 2005. The
chief executive officer and chief financial officer have each concluded, based
on their review, that as of March 31, 2005, the Company’s disclosure controls
and procedures, as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), are
effective to ensure that information required to be disclosed by the Company in
reports that it files under the Exchange Act is recorded, processed, summarized,
and reported within the time period specified in Securities and Exchange
Commission rules and forms and that such information is accumulated and
communicated to management as appropriate to allow timely decisions regarding
required disclosure. There was no change in the Company’s internal control over
financial reporting that occurred during the fiscal quarter ended March 31, 2005
that has materially affected or is reasonably likely to materially affect the
Company’s internal control over financial reporting.







29




**PART
II - OTHER INFORMATION**





******ITEM
      2.**
    ******UNREGISTERED
      SALES OF EQUITY SECURITIES**
      **AND
      USE OF
      PROCEEDS**********





The
following table sets forth information with respect to purchases made by the
Company of its common stock during the three months ended March 31,
2005.


**2005
      Periods**
    
    **Total
      Number**
      **of
      Shares**
      **Purchased**
    
    **Average**
      **Price
      Paid**
      **Per
      Share**
    
    **Total
      Number**
      **of
      Shares**
      **Purchased
      as**
      **Part
      of Publicly**
      **Announced**
      **Programs**
    
    **Maximum**
      **Number
      of**
      **Shares
      that**
      **may
      yet be**
      **Purchased**
      **Under
      the**
      **Programs****1**January
      1 to January 31
    
    —
    
    $
      —
    
    N/A
    
    N/AFebruary
      1 to February 28
    
    
    84,163
    
    
    23.43
    
    
    N/A
    
    
    N/AMarch
      1 to March 31
    
    
    35,117
    
    
    22.25
    
    
    11,300
    
    
    288,700**Total**
    
    
    119,280
    
    $
    23.08
    
    
    11,300
    
    
    288,700




Common
stock purchased reflected in the above table are the result of purchases of
common stock under the Company’s Treasury Stock Purchase Plan and the purchase
of common stock in connection with the exercise of stock options during the
three months ended March 31, 2005.





1  The
Company authorized a common stock repurchase plan of up to 300,000 shares on
March 23, 2005 to expire on December 31, 2005.





The
Company’s ability to pay cash dividends on its common stock is dependent upon
the receipt of cash dividends from its wholly-owned subsidiary, Union State
Bank. At March 31, 2005, Union State Bank could pay dividends of $50.5 million
to the Company without having to obtain prior regulatory approval. See Note 10
to the condensed consolidated financial statements for the three months ended
March 31, 2005.





30





******ITEM
      6.**
    ******EXHIBITS**********


**Exhibit
      No.**
    **Exhibit**(3)
      (a)
    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, 2002 (“2002 Second Quarter 10-Q”), Exhibit
      (3)(a)).(3)
      (b)
    Bylaws
      of Registrant (incorporated herein by reference to 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 (File No. 001-12811) (“1996 10-K”), Exhibit
  (4)(a)).(4)
      (b)
    Guarantee
      Agreement, dated February 5, 1997, by and between Registrant and The Chase
      Manhattan Bank, as trustee for the holders of 9.58% Capital Securities of
      Union State Capital Trust I (incorporated herein by reference to
      Registrant’s 1996 10-K, Exhibit (4)(b)).(4)
      (c)
    Amended
      and Restated Declaration of Trust of Union State Capital Trust I
      (incorporated herein by reference to Registrant’s 1996 10-K, Exhibit
      (4)(c)).(4)
      (d)
    Junior
      Subordinated Indenture, dated July 31, 2001, between Registrant and State
      Street Bank and Trust Company of Connecticut, National Association, as
      trustee (incorporated herein by reference to Registrant’s Quarterly Report
      on Form 10-Q for the quarter ended September 30, 2001 (“2001 Third Quarter
      10-Q”), Exhibit (4)(d)).(4)
      (e)
    Guarantee
      Agreement, dated July 31, 2001, by and between Registrant and State Street
      Bank and Trust Company of Connecticut, National Association, as trustee
      for the holders of Capital Securities of Union State Statutory Trust II
      (incorporated herein by reference to Registrant’s 2001 Third Quarter 10-Q,
      Exhibit (4)(e)).(4)
      (f)
    Amended
      and Restated Declaration of Trust of Union State Statutory Trust II
      (incorporated herein by reference to Registrant’s 2001 Third Quarter 10-Q,
      Exhibit (4)(f)).(4)
      (g)
    Indenture,
      dated June 26, 2002, between Registrant and State Street Bank and Trust
      Company of Connecticut, National Association, as trustee, (incorporated
      herein by reference to Registrant’s 2002 Second Quarter 10-Q), Exhibit
      (4)(g)).




(4)
      (h)
    Guarantee
      Agreement dated June 26, 2002, by and between Registrant and State Street
      Bank and Trust Company of Connecticut, National Association, as trustee
      for the holders of Capital Securities of USB Statutory Trust III,
      (incorporated herein by reference to Registrant’s 2002 Second Quarter
      10-Q, Exhibit (4)(h)).(4)
      (i)
    Amended
      and Restated Declaration of Trust of USB Statutory Trust III,
      (incorporated herein by reference to Registrant’s 2002 Second Quarter
      10-Q, Exhibit (4)(i)).
  31
 ******ITEM
      6.**
    ******EXHIBITS
      (cont'd)**********
 (4)
      (j)
    Registrant’s
      Dividend Reinvestment and Stock Purchase Plan (incorporated herein by
      reference to Registrant’s Form S-3 Registration Statement filed December
      14, 1993 (file No. 33-72788)).(4)
      (k)
    Amended
      and Restated Declaration of Trust of Union State Statutory Trust IV dated
      March 25, 2004 (incorporated herein by reference to the Registrant’s
      Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (“2004
      First Quarter 10-Q”), Exhibit (10)(ad)).(4)
      (l)
    Indenture
      dated March 25, 2004 between Registrant and Wilmington Trust Company, as
      Trustee (incorporated herein by reference to the Registrant’s 2004 First
      Quarter 10-Q, Exhibit (10)(ae)).(4)
      (m)
    Guarantee
      Agreement dated March 24, 2004 by and between registrant and Wilmington
      Trust Company, as Trustee for the holders of Capital Securities of Union
      State Bank Statutory Trust IV (incorporated herein by reference to the
      Registrant’s 2004 First Quarter 10-Q, Exhibit
(10)(af)).(10)
      (a)
    Agreement
      of Employment dated as of November 16, 2003 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, 2003, Exhibit
      (10)(a)).(10)
      (b)
    Agreement
      of Employment dated as of July 28, 2004 between the Company and the Bank
      and Raymond J. Crotty (incorporated herein by reference to Registrant’s
      Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (“2004
      Second Quarter 10-Q”), Exhibit (10)(b)).(10)
      (c)
    Registrant’s
      1993 Incentive Stock Option Plan (incorporated herein by reference to
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
      30, 1999 (File No. 002-79734), Exhibit (10)(e)).(10)
      (d)
    Registrant’s
      Employee Stock Ownership Plan (With 401(k) Provisions) (incorporated
      herein by reference to Registrant’s Annual Report on Form 10-K for the
      year ended December 31, 2001 (“2001 10-K”), Exhibit
    (10)(g)).(10)
      (e)
    Registrant’s
      Director Stock Option Plan (incorporated herein by reference to
      Registrant’s 1996 10-K, Exhibit (10)(f)).(10)
      (f)
    Registrant’s
      1998 Director Stock Option Plan (incorporated herein by reference to
      Registrant’s Form S-8 Registration Statement, filed June 5, 1998 (File No.
      333-56169), Exhibit (99.1)).(10)
      (g)
    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, (File No.
      001-12811, Exhibit (10)(j)).
  32
 ******ITEM
      6.**
    ******EXHIBITS
      (cont'd)**********
 (10)
      (h)
    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 (File No. 001-12811), Exhibit
      (10)(k)).(10)
      (i)
    Registrant’s
      1997 Employee Stock Option Plan (incorporated herein by reference to
      Exhibit A to Registrant’s Proxy Statement filed April 16, 1997 (File No.
      001-12811)).(10)
      (j)
    Tappan
      Zee Financial, Inc. 1996 Stock Option Plan for Officers and Employees
      (“Employees Stock Option Plan”) (incorporated herein by reference to
      Exhibit A to Tappan Zee Financial, Inc.’s Proxy Statement for use in
      connection with its 1996 Annual Meeting of Shareholders (File No.
      000-26466) (“Tappan Zee 1996 Proxy Statement”)).(10)
      (k)
    Amendment
      No. 1 to the Employees 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 (File No. 000-26466) (“Tappan Zee 1997 10-K”),
      Exhibit 10.1.1).(10)
      (l)
    Amendment
      No. 2 to the Employees Stock Option Plan (incorporated herein by reference
      to Appendix A to Tappan Zee Financial, Inc.’s Proxy Statement for use in
      connection with its 1997 Annual Meeting of Shareholders (File No.
      000-26466) (“Tappan Zee 1997 Proxy Statement”)).(10)
      (m)
    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 1996 Proxy Statement).(10)
      (n)
    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)
      (o)
    Amendment
      No. 2 to the Outside Director Option Plan (incorporated herein by
      reference to Appendix B to the Tappan Zee 1997 Proxy
      Statement).(10)
      (p)
    Loan
      Agreement to the Employee Stock Ownership Plan Trust of Tappan Zee
      Financial, Inc. and Certain Affiliates (incorporated herein by reference
      to Tappan Zee Financial, Inc.’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 1996 (File No. 000-26466), Exhibit
    10.7).(10)
      (q)
    Deferred
      Compensation Plan for Directors of Tarrytowns Bank, FSB (Incorporated
      herein by reference to the Registration Statement on Form S-1 (file No.
      33-94128) filed on June 30, 1995, as amended, Exhibit
    10.7).(10)
      (r)
    Forms
      of Stock Option Agreement by and between Tappan Zee Financial, Inc., and
      recipients of stock options granted pursuant to the Employees Stock Option
      Plan and the Outside Director Option Plan (incorporated herein by
      reference to the Tappan Zee 1997 10-K, Exhibit
10.16).
  33
 ******ITEM
      6.**
    ******EXHIBITS
      (cont'd)**********
 (10)
      (s)
    Registrant’s
      Retirement Plan for Non-Employee Directors of U.S.B. Holding Co., Inc. and
      Certain Affiliates dated effective as of May 19, 1999, and as amended
      March 20, 2002 (incorporated herein by reference to the Registrant’s 2001
      10-K, Exhibit (10)(w)).(10)
      (t)
    Asset
      Purchase and Account Assumption Agreement by and between Union State Bank
      and La Jolla Bank dated May 25, 2000 (incorporated herein by reference to
      the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June
      30, 2000, Exhibit (10)(oo)).(10)
      (u)
    U.S.B.
      Holding Co., Inc. Severance Plan dated January 30, 2002 (incorporated
      herein by reference to Registrant’s 2001 10-K, Exhibit
      (10)(y)).(10)
      (v)
    Asset
      Purchase and Liability Assumption Agreement dated as of June 14, 2002, by
      and between Union State Bank and Fourth Federal Savings Bank (incorporated
      herein by reference to Registrant’s 2002 Second Quarter 10-Q, Exhibit
      (10)(z)).(10)
      (w)
    U.S.B.
      Holding Co., Inc. Executive Incentive Bonus Plan as amended February 24,
      1999 (incorporated herein by reference to Exhibit A to Registrant’s Proxy
      Statement filed April 27, 1999 (File No. 002-79734)).(10)
      (x)
    Amendment
      No. 2 to the Key Employees’ Supplemental Investment Plan dated September
      1, 2003 (incorporated herein by reference to the Registrant’s Quarterly
      Report on Form 10-Q for the quarter ended September 30, 2003 (“2003 Third
      Quarter 10-Q”), Exhibit (10)(ab)).(10)
      (y)
    Amendment
      No. 1 to the Key Employees’ Diversified Investment Plan dated September 1,
      2003 (incorporated herein by reference to the Registrant’s 2003 Third
      Quarter 10-Q, Exhibit (10)(ac)).(10)
      (z)
    Purchase
      and Assumption Agreement among the Federal Deposit Insurance Corporation,
      Receiver of Reliance Bank, White Plains, New York, and Union State Bank,
      Nanuet, New York, dated as of March 19, 2004 (incorporated herein by
      reference to the Registrant’s 2004 First Quarter 10-Q, Exhibit
      (10)(ag)).10)
      (aa)
    Loan
      Sale Agreement by and between the Federal Deposit Insurance Corporation in
      its Receivership Capacity and Union State Bank, Nanuet, New York
      (incorporated herein by reference to the Registrant’s 2004 First Quarter
      10-Q, Exhibit (10)(ah)).(10)
      (ab)
    Letter
      Agreement dated April 18, 2005 between the Registrant and Steven T.
      Sabatini (incorporated by reference to the Registrant’s Report on Form 8-K
      filed April 20, 2005).(31.1)
    Certification
      of Chief Executive Officer Pursuant to Exchange Act Rule
      13a-14(a).*(31.2)
    Certification
      of Chief Financial Officer Pursuant to Exchange Act Rule
      13a-14(a).*(32)
    Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350.*


*Filed
Herewith.




34


****


**SIGNATURES**





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


May 9,
2005.





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





/s/ Thomas E. Hales
    
    
    /s/ Steven T. SabatiniThomas E. HalesChairman of the Board,
      President,Chief Executive Officer and Director
    
    
    Steven T. SabatiniSenior Executive Vice
      President,Chief Financial Officer, Assistant
      Secretary
      and Director
      (Principal
      Financial and
      Accounting
      Officer)




35