<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934


      For the Quarter Ended September 30, 2000 Commission File No. 1-12811


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

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


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


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


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

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

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

                  CLASS                     OUTSTANDING AT NOVEMBER 6, 2000
                  -----                     -------------------------------

         Common stock, par value                     16,591,011
            $0.01 per share

<PAGE>

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

                                TABLE OF CONTENTS


                                                                        PAGE NO.
                                                                        --------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         CONDENSED CONSOLIDATED STATEMENTS OF
         CONDITION AS OF SEPTEMBER 30, 2000 (UNAUDITED)
         AND DECEMBER 31, 1999.                                                1

         CONDENSED CONSOLIDATED STATEMENTS OF
         INCOME FOR THE THREE MONTHS ENDED
         SEPTEMBER 30, 2000 AND 1999 (UNAUDITED).                              2

         CONDENSED CONSOLIDATED STATEMENTS OF
         INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30,
         2000 AND 1999 (UNAUDITED).                                            3

         CONDENSED CONSOLIDATED STATEMENTS OF
         CASH FLOWS FOR THE NINE MONTHS ENDED
         SEPTEMBER 30, 2000 AND 1999 (UNAUDITED).                              4

         CONDENSED CONSOLIDATED STATEMENTS OF
         CHANGES IN COMMON STOCKHOLDERS' EQUITY
         FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
         AND 1999 (UNAUDITED).                                                 6

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL
         STATEMENTS (UNAUDITED).                                               8

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK.                                                   28

PART II. OTHER INFORMATION AND SIGNATURES

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                                    29


                                      - i -
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

U.S.B. HOLDING CO., INC.                                     (UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION               SEPTEMBER 30,      DECEMBER 31,
                                                                  2000             1999
                                                              -----------       -----------
                                                                (000'S, EXCEPT SHARE DATA)
<S>                                                           <C>               <C>
ASSETS

Cash and due from banks                                       $    79,907       $    40,111
Federal funds sold                                                 19,300            28,200
                                                              -----------       -----------
Cash and cash equivalents                                          99,207            68,311
Interest bearing deposits in other banks                               23               543
Securities:
    Available for sale (at estimated fair value)                  418,621           398,939
    Held to maturity (estimated fair value
       $192,884 in 2000 and $181,458 in 1999)                     197,925           187,411
Loans, net of allowance for loan losses of
    $11,660 in 2000 and $10,687 in 1999                         1,042,096           916,816
Premises and equipment, net                                        10,889            10,624
Accrued interest receivable                                        13,523            10,194
Other real estate owned (OREO)                                         34                34
Federal Home Loan Bank of New York stock                           34,139            34,139
Other assets                                                       20,009            19,360
                                                              -----------       -----------
TOTAL ASSETS                                                  $ 1,836,466       $ 1,646,371
                                                              ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits                                 $   226,355       $   169,361
Interest bearing deposits:
    NOW accounts                                                  123,809            68,863
    Money market accounts                                          57,742            50,098
    Savings deposits                                              354,332           347,901
    Time deposits                                                 650,880           505,526
                                                              -----------       -----------
TOTAL DEPOSITS                                                  1,413,118         1,141,749
Accrued interest payable                                            6,699             6,166
Accrued expenses and other liabilities                              8,857             8,135
Securities sold under agreements to repurchase                    225,000           285,780
Federal Home Loan Bank of New York advances                        53,729            87,995
                                                              -----------       -----------
TOTAL                                                           1,707,403         1,529,825
Corporation-Obligated mandatory redeemable capital
     securities of subsidiary trust                                20,000            20,000
Minority interest-junior preferred stock of consolidated
     subsidiary                                                       134               135
Commitments and contingencies (Note 10)
Stockholders' equity:
    Common stock, $0.01 par value; authorized shares
    50,000,000; issued shares of 17,464,455 in 2000 and
    16,383,980 in 1999                                                175               164
    Additional paid-in capital                                    111,925            98,926
    Retained earnings                                              13,981            13,875
    Treasury stock at cost, 873,444 shares
       in 2000 and 499,707 shares in 1999                         (11,159)           (6,464)
    Common stock held for benefit plans                            (1,475)           (1,490)
    Deferred compensation obligation                                  859               748
    Accumulated other comprehensive loss                           (5,377)           (9,348)
                                                              -----------       -----------
TOTAL STOCKHOLDERS' EQUITY                                        108,929            96,411
                                                              -----------       -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $ 1,836,466       $ 1,646,371
                                                              ===========       ===========
</TABLE>

See notes to condensed consolidated financial statements.

                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                                2000         1999
                                                               -------      -------
                                                            (000'S, EXCEPT SHARE DATA)
<S>                                                            <C>          <C>
INTEREST INCOME:
Interest and fees on loans                                     $22,883      $17,831
Interest on federal funds sold                                     615          274
Interest and dividends on securities:
         Mortgage-backed securities                              6,340        6,217
         U.S. Treasury and government agencies                   3,659        2,792
         Obligations of states and political subdivisions          782          734
         Corporate and other                                        10           17
Interest on deposits in other banks                                  3            1
Dividends on Federal Home Loan Bank of New York stock              594          463
                                                               -------      -------
TOTAL INTEREST INCOME                                           34,886       28,329
                                                               -------      -------

INTEREST EXPENSE:
Interest on deposits                                            15,715        9,268
Interest on borrowings                                           3,896        4,269
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trust                    488          488
                                                               -------      -------
TOTAL INTEREST EXPENSE                                          20,099       14,025
                                                               -------      -------

NET INTEREST INCOME                                             14,787       14,304
Provision for loan losses                                          275          700
                                                               -------      -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES             14,512       13,604
                                                               -------      -------

NON-INTEREST INCOME:
Service charges and fees                                           871          834
Other income                                                       339          377
Gains on securities transactions - net                               6           --
                                                               -------      -------
TOTAL NON-INTEREST INCOME                                        1,216        1,211
                                                               -------      -------

NON-INTEREST EXPENSE:
Salaries and employee benefits                                   4,842        4,633
Occupancy and equipment expense                                  1,385        1,348
Advertising and business development                               525          407
Professional fees                                                  136          284
Communications                                                     268          217
Stationery and printing                                            145          159
FDIC insurance                                                      64           44
Other expenses                                                     648          650
                                                               -------      -------
TOTAL NON-INTEREST EXPENSE                                       8,013        7,742
                                                               -------      -------
Income before income taxes                                       7,715        7,073
Provision for income taxes                                       2,669        2,645
                                                               -------      -------
NET INCOME                                                     $ 5,046      $ 4,428
                                                               =======      =======

BASIC EARNINGS PER COMMON SHARE                                $  0.30      $  0.27
                                                               =======      =======

DILUTED EARNINGS PER COMMON SHARE                              $  0.30      $  0.26
                                                               =======      =======
</TABLE>

See notes to condensed consolidated financial statements.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                       NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                     2000               1999
                                                                   --------           --------
                                                                    (000'S, EXCEPT SHARE DATA)
<S>                                                                <C>                <C>
INTEREST INCOME:
Interest and fees on loans                                         $ 64,530           $ 49,826
Interest on federal funds sold                                        1,434              1,002
Interest and dividends on securities:
         Mortgage-backed securities                                  19,306             17,461
         U.S. Treasury and government agencies                       10,475              5,501
         Obligations of states and political subdivisions             2,274              2,257
         Corporate and other                                             25                 51
Interest on deposits in other banks                                       8                 30
Dividends on Federal Home Loan Bank of New York stock                 1,739              1,122
                                                                   --------           --------
TOTAL INTEREST INCOME                                                99,791             77,250
                                                                   --------           --------

INTEREST EXPENSE:
Interest on deposits                                                 40,440             26,759
Interest on borrowings                                               13,096             10,422
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trust                       1,464              1,464
                                                                   --------           --------
TOTAL INTEREST EXPENSE                                               55,000             38,645
                                                                   --------           --------

NET INTEREST INCOME                                                  44,791             38,605
Provision for loan losses                                             1,225              1,610
                                                                   --------           --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                  43,566             36,995
                                                                   --------           --------

NON-INTEREST INCOME:
Service charges and fees                                              2,610              2,385
Other income                                                          1,065              1,049
(Losses) gains on securities transactions - net                         (99)               527
                                                                   --------           --------
TOTAL NON-INTEREST INCOME                                             3,576              3,961
                                                                   --------           --------

NON-INTEREST EXPENSE:
Salaries and employee benefits                                       14,235             12,953
Occupancy and equipment expense                                       4,307              3,986
Advertising and business development                                  1,471              1,204
Professional fees                                                       575                728
Communications                                                          773                612
Stationery and printing                                                 494                467
FDIC insurance                                                          183                138
Other expenses                                                        1,886              1,909
                                                                   --------           --------
TOTAL NON-INTEREST EXPENSE                                           23,924             21,997
                                                                   --------           --------
Income before income taxes                                           23,218             18,959
Provision for income taxes                                            8,079              7,073
                                                                   --------           --------
NET INCOME                                                         $ 15,139           $ 11,886
                                                                   ========           ========

BASIC EARNINGS PER COMMON SHARE                                    $   0.91           $   0.71
                                                                   ========           ========

DILUTED EARNINGS PER COMMON SHARE                                  $   0.88           $   0.68
                                                                   ========           ========
</TABLE>

See notes to condensed consolidated financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                                                                       SEPTEMBER 30,
                                                                                 2000                1999
                                                                               ---------           ---------
                                                                                          (000'S)
<S>                                                                            <C>                 <C>
OPERATING ACTIVITIES
Net income                                                                     $  15,139           $  11,886
Adjustments to reconcile net income to net cash provided by operating
   activities:
   Provision for loan losses                                                       1,225               1,610
   Depreciation and amortization                                                   1,483               1,472
   Amortization/accretion of premiums (discounts) on securities - net                723               1,042
   Noncash benefit plan expense                                                      208                 336
   Deferred income taxes                                                            (576)               (499)
   Losses (gains) on securities transactions - net                                    99                (527)
Origination of loans held for sale                                                    --                (481)
Proceeds from sale of loans                                                          352                  --
Increase in accrued interest receivable                                           (3,329)             (3,699)
Other - net                                                                       (1,670)              3,369
                                                                               ---------           ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                         13,654              14,509
                                                                               ---------           ---------

INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                              13,090              40,614
Proceeds from principal paydowns, redemptions and maturities of:
   Securities available for sale                                                  28,103              81,543
   Securities held to maturity                                                     7,877               6,205
Purchases of securities available for sale                                       (54,815)           (160,228)
Purchases of securities held to maturity                                         (18,445)           (134,948)
Net decrease in interest bearing deposits in other banks                             520               1,389
Loans originated, net of principal collections and charge-offs                  (126,870)           (154,024)
Purchases of Federal Home Loan Bank of New York stock                                 --             (10,189)
Purchases of premises and equipment - net                                         (1,740)               (905)
Proceeds from sales of OREO                                                           --                 641
                                                                               ---------           ---------
NET CASH USED FOR INVESTING ACTIVITIES                                          (152,280)           (329,902)
                                                                               ---------           ---------

FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
   NOW, money market and savings accounts                                        126,015              94,036
Increase in time deposits, net of withdrawals and maturities                     145,354             100,158
Net (decrease) increase in securities sold under agreements
   to repurchase -  short-term                                                  (111,000)            111,355
Net decrease in Federal Home Loan Bank of New York
   advances - short-term                                                         (31,355)                 --
Proceeds from securities sold under agreements to
   repurchase - long-term                                                        100,000              50,000
Repayment of securities sold under agreements to
    repurchase - long-term                                                       (49,780)            (10,000)
Repayment of Federal Home Loan Bank of New York
    advances - long-term                                                          (2,911)             (6,751)
Cash dividends paid                                                               (3,751)             (3,204)
(Redemption of) proceeds from sale of junior preferred stock of
    consolidated subsidiary                                                           (1)                137
Proceeds from issuance of common stock and tax benefit of exercised
     stock options                                                                 1,646               1,560
Purchases of treasury stock                                                       (4,695)             (4,203)
                                                                               ---------           ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                        169,522             333,088
                                                                               ---------           ---------
</TABLE>


         -Continued-

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                            SEPTEMBER 30,
                                                                       2000               1999
                                                                     --------           --------
                                                                              (000'S)
<S>                                                                  <C>                <C>
INCREASE  IN CASH AND CASH EQUIVALENTS                               $ 30,896           $ 17,695
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         68,311             69,160
                                                                     --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                             $ 99,207           $ 86,855
                                                                     ========           ========

Supplemental Disclosures:
   Interest paid                                                     $ 54,467           $ 38,459
                                                                     --------           --------
   Income tax payments                                               $  9,637           $  4,556
                                                                     --------           --------
   Transfer of loans to OREO - net                                   $     --           $    175
                                                                     --------           --------
   Transfer of loans held for sale to loans held to
       maturity at the lower of cost or fair value                   $     --           $  3,764
                                                                     --------           --------
   Change in shares held in trust for deferred compensation          $   (111)          $    (48)
                                                                     --------           --------
   Change in deferred compensation obligation                        $    111           $     48
                                                                     --------           --------
   Decrease (increase) in other comprehensive loss                   $  3,971           $ (7,526)
                                                                     --------           --------
</TABLE>

See notes to condensed consolidated financial statements.




                                       5
<PAGE>

<TABLE>
<CAPTION>

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

                                           FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                                                      (000'S, EXCEPT SHARE DATA)

                                                                                             COMMON   DEFERRED  ACCUMULATED  TOTAL
                                                                                              STOCK    COMPEN-    OTHER      COMMON
                                       COMMON STOCK       ADDITIONAL                         HELD FOR  SATION    COMPRE-     STOCK-
                                     SHARES        PAR     PAID-IN     RETAINED   TREASURY   BENEFIT    OBLI-    HENSIVE    HOLDERS'
                                   OUTSTANDING    VALUE    CAPITAL     EARNINGS     STOCK     PLANS    GATION     LOSS       EQUITY
                                    ----------    -----    --------    --------   --------   --------   -----   --------   --------
<S>                                 <C>           <C>      <C>         <C>        <C>        <C>        <C>     <C>        <C>
Balance at January 1, 2000          15,884,273    $ 164    $ 98,926    $ 13,875   $ (6,464)  $ (1,490)  $ 748   $ (9,348)  $ 96,411

Net income                                                               15,139                                              15,139

Other comprehensive income:
  Net unrealized securities
   gain arising during the
   period, net of taxes of $2,817                                                                                  3,916      3,916
  Reclassification adjustment for
   net losses included in net
   income, net of taxes of $39                                                                                        55         55
                                                                                                                --------   --------
Other comprehensive income                                                                                         3,971      3,971
                                                                                                                           --------
Total comprehensive income                                                                                                   19,110

Cash dividends:
   Common $0.23 per share                                                (3,733)                                             (3,733)
   Junior preferred stock                                                   (11)                                                (11)
Five percent stock dividend            819,975        8      11,274     (11,289)                                                 (7)

Common stock options exercised
   and related tax benefit             260,500        3       1,643                                                           1,646

Purchases of treasury stock           (373,737)                                     (4,695)                                  (4,695)

Amortization of RRP awards                                                                         28                            28

ESOP shares committed to
   be released                                                   82                                98                           180

Deferred compensation obligation                                                                 (111)    111                    --
                                    ----------    -----    --------    --------   --------   --------   -----   --------   --------
BALANCE AT SEPTEMBER 30, 2000       16,591,011    $ 175    $111,925    $ 13,981   $(11,159)  $ (1,475)  $ 859   $ (5,377)  $108,929
                                    ==========    =====    ========    ========   ========   ========   =====   ========   ========
</TABLE>

See notes to condensed consolidated financial statements.


                                       6
<PAGE>

<TABLE>
<CAPTION>

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

                                           FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                   (000'S, EXCEPT SHARE DATA)

                                                                                             COMMON   DEFERRED  ACCUMULATED  TOTAL
                                                                                              STOCK    COMPEN-    OTHER      COMMON
                                       COMMON STOCK       ADDITIONAL                         HELD FOR  SATION    COMPRE-     STOCK-
                                     SHARES        PAR     PAID-IN     RETAINED   TREASURY   BENEFIT    OBLI-    HENSIVE    HOLDERS'
                                   OUTSTANDING    VALUE    CAPITAL     EARNINGS     STOCK     PLANS    GATION     LOSS       EQUITY
                                    ----------    -----    --------    --------   --------   --------   -----   --------   --------
<S>                                 <C>           <C>      <C>         <C>        <C>        <C>        <C>     <C>        <C>
Balance at January 1, 1999          15,963,547    $ 162    $ 96,919    $  1,513   $ (2,223)  $ (1,628)  $ 675   $  2,021   $ 97,439

Net income                                                               11,886                                              11,886

Other comprehensive loss:
  Net unrealized securities
   loss arising during the
   period, net of taxes
   of $5,202                                                                                                      (7,229)    (7,229)
   Reclassification adjustment
     for net gain included in
     net income, net of taxes
     of $214                                                                                                        (297)      (297)
                                                                                                                --------   --------
   Other comprehensive loss                                                                                       (7,526)    (7,526)
                                                                                                                           --------
Total comprehensive income                                                                                                    4,360

Cash dividends:
   Common $0.19 per share                                                (3,193)                                             (3,193)
   Junior preferred stock                                                   (11)                                                (11)

Common stock options exercised
    and related tax benefit            206,307        2       1,558                                                           1,560

Purchases of treasury stock           (295,279)                                     (4,203)                                  (4,203)

Amortization  of RRP awards                                                                       133                           133

ESOP shares committed to
   be released                                                  124                                79                           203

Deferred compensation obligation                                                                  (48)     48                    --
                                    ----------    -----    --------    --------   --------   --------   -----   --------   --------
BALANCE AT SEPTEMBER 30, 1999       15,874,575    $ 164    $ 98,601    $ 10,195   $ (6,426)  $ (1,464)  $ 723   $ (5,505)  $ 96,288
                                    ==========    =====    ========    ========   ========   ========   =====   ========   ========
</TABLE>


See notes to condensed consolidated financial statements.


                                       7
<PAGE>

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


1.      PRINCIPLES OF CONSOLIDATION

        The consolidated financial statements include the accounts of U.S.B.
        Holding Co., Inc. and its wholly-owned subsidiaries (the "Company"),
        Union State Bank (the "Bank") [including its wholly-owned subsidiaries,
        Dutch Hill Realty Corp., U.S.B. Financial Services, Inc, and TPNZ
        Preferred Funding Corporation ("TPNZ") (since April 30, 1999)],
        Tarrytowns Bank, FSB ("Tarrytowns") through April 30, 1999, the date of
        its merger with and into the Bank (including its wholly-owned
        subsidiary, TPNZ, through that date), Union State Capital Trust I and Ad
        Con, Inc. Intercompany accounts and transactions are eliminated in
        consolidation.

2.      ACQUISITION OF LA JOLLA BANK BRANCHES

        On May 25, 2000, the Bank and La Jolla Bank, La Jolla, California,
        signed a definitive agreement pursuant to which the Bank will acquire
        the Stamford, Connecticut and Manhattan (New York City) branches of La
        Jolla Bank ("La Jolla"). The two branches to be acquired have
        approximately $100 million in deposits that will be assumed by the Bank
        in the transaction. A premium of 6.8% will be paid by the Bank for the
        assumption of such deposits, and $150,000 will be paid for furniture and
        fixtures. The branch offices will be leased from a company owned by the
        principal stockholder of La Jolla. La Jolla will retain its loan
        portfolio and lending operations in the New York area. Upon completion
        of this transaction, the branches will become Bank branches. The parties
        anticipate that the transaction will be consummated in the fourth
        quarter of 2000.

3.      BASIS OF PRESENTATION

        In the opinion of management, the accompanying unaudited condensed
        consolidated financial statements include all adjustments (comprising of
        only normal recurring accruals) necessary to present fairly the
        financial position of the Company as of September 30, 2000 and December
        31, 1999, and its operations, for the three and nine months ended
        September 30, 2000 and 1999, and its cash flows and changes in common
        stockholders' equity for the nine month periods ended September 30, 2000
        and 1999. 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 1999 Annual Report to Stockholders.

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


                                       8
<PAGE>

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


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

4.      RECLASSIFICATIONS

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

5.      PENDING ACCOUNTING PRONOUNCEMENTS

        REVENUE RECOGNITION IN FINANCIAL STATEMENTS
        In December 1999, the Securities and Exchange Commission ("SEC") issued
        Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
        Financial Statements." SAB 101 summarizes certain of the SEC's views in
        applying generally accepted accounting principles to revenue recognition
        in financial statements. On June 26, 2000, the SEC issued SAB 101B to
        defer the effective date of implementation of SAB 101 until no later
        than the fourth fiscal quarter of fiscal years beginning after December
        31, 1999. The Company is required to adopt SAB 101 by December 31, 2000.
        The Company does not expect the adoption of SAB 101 to have a material
        impact on the consolidated financial statements.

        ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
        In June 1998, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 133,
        "Accounting for Derivative Instruments and Hedging Activities," as
        amended in June 1999 by SFAS No. 137, "Accounting for Derivative
        Instruments and Hedging Activities - Deferral of the Effective Date of
        FASB Statement No. 133" and SFAS No. 138, "Accounting for Derivative
        Instruments and Hedging Activities, an Amendment of FASB Statement No.
        133 (collectively, "SFAS No. 133)." SFAS No. 133 establishes accounting
        and reporting standards for derivative instruments and hedging
        activities. It requires that all derivatives be recognized in the
        statement of condition, either as assets or as liabilities, and measured
        at fair value. This statement requires that changes in a derivative's
        fair value be recognized in current earnings unless specific hedge
        accounting criteria are met. Hedge accounting for qualifying hedges
        permits a derivative's gains and losses to offset the related results on
        the hedged item. An entity that elects to apply hedge accounting is
        required to establish at the inception of the hedge the method it will
        use for assessing the effectiveness of the hedging derivative and the
        measurement approach for determining the ineffective aspect of the
        hedge. Those methods must be consistent with the entity's approach to
        managing risk.


                                       9
<PAGE>

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


        For the Company, SFAS No. 133 is effective January 1, 2001. The Company
        does not anticipate that a transition adjustment will be required upon
        adoption of this statement.

        ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
        EXTINGUISHMENTS OF LIABILITIES
        In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers
        and Servicing of Financial Assets and Extinguishments of Liabilities"
        ("SFAS No. 140") replacing FASB Statement No. 125. SFAS No. 140 revises
        the standard for accounting and reporting for transfers and servicing of
        financial assets and extinguishments of liabilities. The new standard is
        based on consistent application of a financial-components approach that
        recognizes the financial and servicing assets it controls and the
        liabilities it has incurred, derecognizes financial assets when control
        has been surrendered and derecognizes liabilities when extinguished.
        SFAS No. 140 provides consistent guidelines for distinguishing transfers
        of financial assets that are sales from transfers that are secured
        borrowings. The Company is required to adopt SFAS No. 140 by March 31,
        2001. SFAS No. 140 is not expected to have a material impact on the
        Company's consolidated financial statements.

6.      EARNINGS PER COMMON SHARE ("EPS")

        The Company computes EPS based upon the provisions of SFAS No. 128,
        "Earning per Share." SFAS No. 128 establishes standards for computing
        and presenting "Basic" and "Diluted" EPS. Basic EPS excludes dilution
        and is computed by dividing net income available to common stockholders
        (net income after preferred stock dividend requirements) by the
        weighted-average number of common shares outstanding for the period.
        Diluted EPS reflects the potential dilution that could occur if
        securities or other contracts to issue common stock were exercised or
        converted into common stock or resulted in the issuance of common stock
        that would then share in the earnings of the entity, reduced by common
        stock that could be repurchased by the Company with the assumed proceeds
        of such exercise or conversion. Diluted EPS is based on net income
        available to common stockholders divided by the weighted average number
        of common shares outstanding and common equivalent shares ("adjusted
        weighted average shares"). Stock options granted, but not yet exercised
        under the Company's stock option plans and restricted stock issued under
        the Company's recognition and retention stock plans but not yet vested,
        are considered common stock equivalents for Diluted EPS calculations.


                                       10
<PAGE>

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


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

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED               NINE MONTHS ENDED
                                                           SEPTEMBER 30,                     SEPTEMBER 30,
                                                        2000            1999              2000            1999
                                                    -----------      -----------      -----------      -----------
                                                                      (000'S, EXCEPT SHARE DATA)
<S>                                                 <C>              <C>              <C>              <C>
        NUMERATOR:

         Net income                                 $     5,046      $     4,428      $    15,139      $    11,886
         Less preferred stock dividends                      --               --               11               11
                                                    -----------      -----------      -----------      -----------

         Net income for basic and diluted
             earnings per common share - net
             income available to common
             stockholders                           $     5,046      $     4,428      $    15,128      $    11,875
                                                    ===========      ===========      ===========      ===========

        DENOMINATOR:
         Denominator for basic earnings
             per common share - weighted
             average shares                          16,554,569       16,677,557       16,547,145       16,702,521


         Effects of dilutive securities:
             Director and employee
                stock options                           455,930          637,961          552,450          674,444
             Restricted stock not vested                  1,252            5,293            1,283            5,289
                                                    -----------      -----------      -----------      -----------
         Total effects of dilutive securities           457,182          643,254          553,733          679,733
                                                    -----------      -----------      -----------      -----------
         Denominator for diluted earnings
             per common share - adjusted
             weighted average shares                 17,011,751       17,320,811       17,100,878       17,382,254
                                                    ===========      ===========      ===========      ===========

        Basic earnings per common share             $      0.30      $      0.27      $      0.91      $      0.71
                                                    ===========      ===========      ===========      ===========
        Diluted earnings per common share           $      0.30      $      0.26      $      0.88      $      0.68
                                                    ===========      ===========      ===========      ===========
</TABLE>

        Weighted average common shares outstanding and common per share amounts
        for the three and nine months ended September 30, 2000 and 1999 have
        been adjusted to reflect the five percent stock dividend distributed May
        15, 2000.


7.      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


                                       11
<PAGE>

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


        comprehensive income (loss).

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

        For the three months ended September 30, 2000, there were gross gains on
        sales of securities of $6,000. For the nine months ended September 30,
        2000 and 1999, gross gains were $6,000 and $552,000, respectively, and
        gross losses were $105,000 and $25,000, respectively.

        A summary of the amortized cost, estimated fair values, and related
        gross unrealized gains and losses on securities at September 30, 2000
        and December 31, 1999, is as follows:

<TABLE>
<CAPTION>
                                                                  GROSS         GROSS     ESTIMATED
                                                AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                                                     COST         GAINS        LOSSES         VALUE
                                                 --------      --------      --------      --------
                                                                      (000'S)
<S>                                              <C>           <C>           <C>           <C>
        SEPTEMBER 30 , 2000:
        AVAILABLE FOR SALE:
        U.S. government agencies                 $101,447      $    495      $  2,993      $ 98,949
        Mortgage-backed securities                324,272           270         7,154       317,388
        Obligations of states and
            political subdivisions                  1,536            30            --         1,566
        Other                                         613           134            29           718
                                                 --------      --------      --------      --------
        TOTAL SECURITIES AVAILABLE FOR SALE      $427,868      $    929      $ 10,176      $418,621
                                                 ========      ========      ========      ========

        HELD TO MATURITY:
        U.S. government agencies                 $ 95,748      $     --      $  4,346      $ 91,402
        Mortgage-backed securities                 44,358           147         1,711        42,794
        Obligations of states and
            political subdivisions                 57,819           892            23        58,688
                                                 --------      --------      --------      --------
        TOTAL SECURITIES HELD TO MATURITY        $197,925      $  1,039      $  6,080      $192,884
                                                 ========      ========      ========      ========
</TABLE>


                                       12
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  GROSS         GROSS     ESTIMATED
                                                AMORTIZED    UNREALIZED    UNREALIZED          FAIR
                                                     COST         GAINS        LOSSES         VALUE
                                                 --------      --------      --------      --------
                                                                       (000'S)
<S>                                              <C>           <C>           <C>           <C>
        DECEMBER 31, 1999:
        AVAILABLE FOR SALE:
        U.S. Treasury and
            government agencies                  $ 79,459      $     --      $  4,143      $ 75,316
        Mortgage-backed securities                333,202           331        12,299       321,234
        Obligations of states and
            political subdivisions                  1,539            21            --         1,560
        Corporate securities                           93            --            --            93
        Other                                         721            34            19           736
                                                 --------      --------      --------      --------
        TOTAL SECURITIES AVAILABLE FOR SALE      $415,014      $    386      $ 16,461      $398,939
                                                 ========      ========      ========      ========

        HELD TO MATURITY:
        U.S. Treasury and
            government agencies                  $ 85,750      $     --      $  5,784      $ 79,966
        Mortgage-backed securities                 44,543           244         1,262        43,525
        Obligations of states and
            political subdivisions                 57,118           924            75        57,967
                                                 --------      --------      --------      --------
        TOTAL SECURITIES HELD TO MATURITY        $187,411      $  1,168      $  7,121      $181,458
                                                 ========      ========      ========      ========
</TABLE>

8.      LOANS

        Nonaccrual loans were $1.4 million at September 30, 2000 and $2.6
        million at December 31, 1999. Restructured loans were $0.2 million at
        September 30, 2000 and $0.6 million at December 31, 1999.

        Substantially all of the nonaccruing and restructured loans are
        collateralized by real estate or lease receivables. At September 30,
        2000, the Company has no commitments to lend additional funds to any
        customers with nonaccrual or restructured loan balances.

        At September 30, 2000, there were loans aggregating approximately $2.4
        million, which were not on nonaccrual status, that were potential
        problem loans which may result in their being placed on nonaccrual
        status in the future. In addition, as discussed further in Note 12, a
        construction loan totaling $19.6 million was identified as impaired
        subsequent to September 30, 2000 and placed on nonaccrual status on
        November 9, 2000.

        At September 30, 2000 and December 31, 1999, the recorded investment in
        loans that are considered to be impaired under SFAS No. 114, "Accounting
        for Impairment of a Loan" ("SFAS No. 114") approximated $0.7 million and
        $2.1 million, of which $0.6 million and $1.6 million at September 30,
        2000 and December 31, 1999 were in nonaccrual status, respectively.
        Where warranted, each impaired loan has a related allowance for loan
        losses determined in accordance with SFAS No. 114. The total allowance
        for loan losses related to impaired loans was $0.2 million at both
        September 30, 2000 and December 31, 1999. The average recorded
        investment in impaired loans for the nine months ended September 30,
        2000 and year ended December 31, 1999 was approximately $1.1 million and
        $1.5


                                       13
<PAGE>

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


        million, respectively. For the three and nine months ended September 30,
        2000 and 1999, interest income recognized by the Company on impaired
        loans was not material.

        Restructured loans in the amounts of $0.1 million for September 30, 2000
        and $0.5 million for December 31, 1999, respectively, that are
        considered to be impaired due to a reduction in the contractual interest
        rate, are on accrual status because the collateral securing these loans
        is sufficient to protect the contractual principal and interest of the
        restructured loans. These loans have been performing for a reasonable
        period of time. Interest accrued on these loans and not yet collected as
        of September 30, 2000 is immaterial.

        At September 30, 2000, the Bank had $0.3 million of outstanding loans,
        collateralized by cash and lease receivables, to Bennett Funding Group
        ("Bennett") a lease finance company, which filed for bankruptcy
        protection during the first quarter of 1996. Collection of the Bank's
        loans continues to be delayed by the bankruptcy proceedings. However, as
        a result of a favorable ruling in the second quarter of 1998 by the
        Bankruptcy Court with jurisdiction over Bennett, the Bank has collected
        payments of $2.6 million, reducing the original balance of $3.3 million
        to $0.7 million. A total of $0.4 million was charged-off in 1999 and
        1998, further reducing the recorded balance of the loans to $0.3 million
        at September 30, 2000. The ruling by the Bankruptcy Court is subject to
        appeal by the Trustee. The Bennett loans are on nonaccrual status and a
        specific allocation is included in the allowance for loan losses. In
        addition, the Trustee contends that the Bank received payments from
        Bennett under the theory of fraudulent conveyance. If the Trustee is
        successful, the Bank would be liable for loan payments aggregating $9.5
        million received from Bennett for the six year period preceding the
        bankruptcy filing date of March 1996. The Bankruptcy Court recently
        dismissed a significant portion of the Trustee's fraudulent conveyance
        claims. The Company believes, based on advice of legal counsel, that it
        will also prevail with regard to the remaining fraudulent conveyance
        claims.

9.      BORROWINGS AND STOCKHOLDERS' EQUITY

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

        Short-term securities sold under agreements to repurchase generally
        mature between one and 365 days. The Bank may borrow up to $50.0 million
        from two primary investment firms under master security sale and
        repurchase agreements. In addition, the Bank has the ability to borrow
        from the FHLB under similar master security sale and repurchase
        agreements and, to a lesser extent, its customers. At September 30,
        2000, the Bank had no such repurchase agreements outstanding . At
        December 31, 1999, the Bank had $111.0 million of such short-term
        borrowings outstanding at interest rates between 5.38 percent and 6.00
        percent. At December 31, 1999, these borrowings were collateralized by
        securities with an aggregate amortized cost of $117.5 million and
        estimated fair value of $112.7 million.


                                       14
<PAGE>

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


        Federal funds purchased represent overnight funds. The Bank has federal
        funds purchase lines available with five financial institutions for a
        total of $46.0 million. At September 30, 2000 and December 31, 1999, the
        Bank had no federal funds purchased balances outstanding.

        Short-term FHLB advances are borrowings with original maturities between
        one and 365 days. At September 30, 2000 and December 31, 1999, the Bank
        had short-term FHLB advances of $35.0 million at an interest rate of
        6.63 percent and $66.4 million at interest rates ranging from 5.74
        percent to 5.92 percent, respectively. The Bank had collateralized these
        borrowings by pledging to the FHLB a security interest in certain
        mortgage-related assets having an aggregate book value of $41.4 million
        at September 30, 2000 and $91.2 million at December 31, 1999.

        Additional information with respect to short-term borrowings as of and
        for the nine months ended September 30, 2000 and 1999 is presented in
        the table below.

        ---------------------------------------------------------------------
        SHORT-TERM BORROWINGS                       2000         1999
        ---------------------------------------------------------------------
                                               (000's except percentages)
        Balance at September 30                   $ 35,000   $112,355
        Average balance outstanding                118,718     40,239
        Weighted-average interest rate
             As of September 30                       6.63%      5.38%
             Paid during period                       6.08%      5.26%
        =====================================================================

        The Bank had long-term borrowings, which have original maturities of
        over one year, of $225.0 million in securities sold under agreements to
        repurchase as of September 30, 2000, which have original terms of ten
        years at interest rates between 4.52 percent and 6.08 percent that are
        callable on certain dates after an initial noncall period at the option
        of the counterparty to the repurchase agreement. At December 31, 1999,
        the Bank had long-term borrowings under securities sold under agreements
        to repurchase of $174.8 million. As of September 30, 2000 and December
        31, 1999, these borrowings are collateralized by securities with an
        aggregate amortized cost of $260.5 million and $185.0 million,
        respectively, and estimated fair value of $251.4 million and $174.9
        million, respectively.

        At September 30, 2000 and December 31, 1999, long-term FHLB advances
        totaled $18.7 million and $21.6 million, respectively. These borrowings
        are amortizing advances having scheduled payments and may not be repaid
        in full prior to maturity without penalty.

        A summary of long-term, fixed-rate debt distributed based upon remaining
        contractual payment date and expected option call date at September 30,
        2000, with comparative totals for December 31, 1999, is as follows:


                                       15
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                          AFTER 1
                                      WITHIN           BUT WITHIN           AFTER            2000        1999
LONG-TERM DEBT                         1 YEAR             5 YEARS         5 YEARS           TOTAL       TOTAL
----------------------------------------------------------------------------------------------------------------
                                                               (000's, except percentages)
<S>                                   <C>                <C>             <C>             <C>         <C>
Contractual Payment Date:
Total long-term debt                  $ 3,617            $ 13,280        $226,832        $243,729    $196,420
Weighted-average interest rate           5.71%               5.64%           5.50%           5.51%       5.33%
================================================================================================================
Expected Call Date:
Total long-term debt                  $23,617            $198,280        $  21,832       $243,729    $196,420
Weighted-average interest rate           5.46%               5.46%            6.07%          5.51%       5.33%
================================================================================================================
</TABLE>

        At September 30, 2000 and December 31, 1999, the Bank held 341,395
        shares of capital stock of the FHLB with a carrying value of $34.1
        million, which is required in order to borrow under the short- and
        long-term advance and securities sold under agreements to repurchase
        programs from the FHLB. The FHLB generally limits borrowings up to an
        aggregate of 30 percent of total assets, excluding securities sold under
        agreements to repurchase, upon the prerequisite purchase of shares of
        FHLB stock. Any advances made from the FHLB are required to be
        collateralized by the FHLB stock purchased and certain other assets.

        The 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 net income for that year
        and its undistributed net income for the preceding two years, less any
        required transfers to additional paid-in capital. At September 30, 2000,
        the Bank could pay dividends of $30.0 million to the Company without
        having to obtain prior regulatory approval.

        On April 13, 2000, the Company's Board of Directors authorized a five
        percent common stock dividend, which was distributed on May 15, 2000 to
        stockholders of record as of May 1, 2000. The weighted average common
        shares outstanding and per common share amounts for the three and nine
        months ended September 30, 2000 and 1999 have been adjusted to reflect
        the five percent stock dividend.

        On September 27, 2000, the Company's Board of Directors authorized the
        repurchase of up to 300,000 common shares, or approximately 1.8%, of the
        Company's outstanding common stock. Repurchases of common stock are
        authorized to be made from time to time in open-market and private
        transactions throughout the remainder of the year 2000 and into 2001 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.


                                       16
<PAGE>

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


10.     COMMITMENTS AND CONTINGENCIES

        In the normal course of business, various commitments to extend credit
        are made which are not reflected in the accompanying consolidated
        financial statements. At September 30, 2000, formal credit line and loan
        commitments, which are primarily loans collateralized by real estate and
        credit card lines, approximated $340.9 million and outstanding letters
        of credit totaled $27.7 million. Such amounts represent the maximum risk
        of loss on these commitments.

        In connection with the Bank's asset/liability program, the Bank may
        enter into derivative contracts to manage interest rate risk. In
        addition, the Bank, from time to time, enters into forward commitments
        to sell residential first mortgage loans to reduce market risk
        associated with originating and holding loans for sale. No such
        contracts were outstanding at September 30, 2000.

        Commitments regarding employment contracts are described in Note 16 to
        the consolidated financial statements of the Company for the year ended
        December 31, 1999, which is included in the Company's 1999 Annual Report
        on Form 10-K.

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

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

        General information required by SFAS No. 131 is disclosed in the
        consolidated financial statements and accompanying notes. The Company
        operates only in the U.S. domestic market, specifically the lower Hudson
        Valley, which includes the counties of Rockland, Westchester, Orange,
        Putnam and Dutchess, New York, as well as New York City and Long Island,
        New York, northern New Jersey and southern Connecticut. For the nine
        months ended September 30, 2000 and 1999, there is no customer that
        accounted for more than ten percent of the Company's revenue.


                                       17
<PAGE>

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

12.     SUBSEQUENT EVENT

        As discussed in Note 8, on November 9, 2000, the Company classified a
        construction loan of approximately $19.6 million as a non-performing
        asset and placed the loan on nonaccrual status as principal payments
        have not been received in accordance with the terms of the loan
        agreement. Timing of the receipt of past due principal is uncertain.
        Interest earned through November 9, 2000 has been collected. The
        allowance for loan losses was increased by $0.8 million as a result of
        the impairment of this loan. Measurement of the impaired value was based
        on present value of expected future cash flows. The additional provision
        for loan losses was recorded in the fourth quarter 2000 and will result
        in a reduction in net income of approximately $0.4 million.





                                       18
<PAGE>

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

FORWARD-LOOKING STATEMENTS

THE COMPANY HAS MADE, AND MAY CONTINUE TO MAKE, VARIOUS FORWARD-LOOKING
STATEMENTS WITH RESPECT TO EARNINGS, CREDIT QUALITY AND OTHER FINANCIAL AND
BUSINESS MATTERS FOR PERIODS SUBSEQUENT TO SEPTEMBER 30, 2000. THE COMPANY
CAUTIONS THAT THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS
ASSUMPTIONS, RISKS AND UNCERTAINTIES, AND THAT STATEMENTS RELATING TO SUBSEQUENT
PERIODS INCREASINGLY ARE SUBJECT TO GREATER UNCERTAINTY BECAUSE OF THE INCREASED
LIKELIHOOD OF CHANGES IN UNDERLYING FACTORS AND ASSUMPTIONS. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM FORWARD-LOOKING STATEMENTS.

IN ADDITION TO THOSE FACTORS PREVIOUSLY DISCLOSED BY THE COMPANY AND THOSE
FACTORS IDENTIFIED ELSEWHERE HEREIN, THE FOLLOWING FACTORS COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS: COMPETITIVE
PRESSURES ON LOAN AND DEPOSIT PRODUCT PRICING; OTHER ACTIONS OF COMPETITORS;
CHANGES IN ECONOMIC CONDITIONS, INCLUDING CHANGES IN INTEREST RATES AND THE
SHAPE OF THE U.S. TREASURY YIELD CURVE; THE EXTENT AND TIMING OF ACTIONS OF THE
FEDERAL RESERVE BOARD AND OTHER REGULATORY AGENCIES; CUSTOMER DEPOSIT
DISINTERMEDIATION; CHANGES IN CUSTOMERS' ACCEPTANCE OF THE COMPANY'S PRODUCTS
AND SERVICES; INCREASE IN FEDERAL AND STATE INCOME TAXES; AND THE EXTENT AND
TIMING OF LEGISLATIVE AND REGULATORY ACTIONS AND REFORM, INCLUDING THE RECENTLY
ENACTED GRAMM-LEACH BLILEY ACT.

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.

FINANCIAL CONDITION

At September 30, 2000, the Company had total assets of $1,836.5 million, an
increase of $190.1 million or 11.5 percent from December 31, 1999.

The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, of $650.7 million and $620.5 million at September 30, 2000
and December 31, 1999, respectively, consists of securities held to maturity at
amortized cost of $197.9 million and $187.4 million, securities available for
sale at estimated fair value totaling $418.6 million and $398.9 million at
September 30, 2000 and December 31, 1999, respectively, and FHLB stock of $34.1
million at both September 30, 2000 and December 31, 1999.

During the nine months ended September 30, 2000, U.S. Treasury and government
agency obligations increased $33.6 million due primarily to purchases of $45.0
million in callable bonds, sales of $13.0 million in U.S. Treasury notes, and a
net increase in the estimated fair value of available for sale securities of
$1.6 million. Mortgage-backed securities decreased by $4.0 million primarily due
to principal paydowns of $28.3 million and net premium amortization of $0.7
million, partially offset by purchases totaling $19.9 million, and a net
increase in the estimated fair value of available for sale securities of $5.1
million. Mortgage-backed securities purchased are fixed-rate securities having
expected weighted-average lives of less than ten years at the time of purchase.
The Bank's investment in obligations of states and political


                                       19
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)


subdivisions, or municipal securities, increased by $0.7 million principally due
to purchases of $8.4 million that were partially offset by maturities of $7.7
million during the nine month period ended September 30, 2000. Municipal
securities are considered core investments which are high yielding on a tax
equivalent basis and have diversified maturities. Purchases of municipal
securities are dependent upon their availability in the marketplace and the
comparative tax equivalent yield of such securities to other securities of
comparable credit risk and maturity. The Company currently has $0.7 million of
holdings in equity securities. Equity investments of other publicly traded
financial institutions and medium-term corporate debt securities which are rated
investment grade by nationally recognized credit rating organizations will
continue to be evaluated for investment in the future. The Company continues
to exercise its conservative approach to investing by making high quality
investments and controlling interest rate risk by purchasing both fixed and
floating rate securities and through the averaging of investments in
medium-term maturities.

At September 30, 2000, loans outstanding were $1,053.8 million, a net increase
of $126.3 million or 13.6 percent over December 31, 1999. The primary increases
of outstanding loan balances were $34.9 million in commercial mortgages, $55.8
million in land, acquisition and construction loans, $19.7 million in
residential mortgages, $18.7 million in time unsecured loans, $8.7 million in
home equity mortgages, and $1.7 million in other loan categories, partially
offset by reductions in time secured loans of $9.7 million, commercial
installment loans of $2.6 million, credit cards of $0.7 million and other loan
categories of $0.2 million. The Company had approximately $340.9 million in
formal credit lines and loan commitments outstanding. Management considers its
liquid resources to be adequate to fund loans in the foreseeable future,
principally by utilizing excess funds temporarily placed in federal funds sold,
increases in deposits and borrowings, loan repayments and maturing securities.

The Company's allowance for loan losses increased $1.0 million or 9.1 percent to
$11.7 million at September 30, 2000, from $10.7 million at December 31, 1999.
The allowance for loan losses represents 1.11 percent of gross loans outstanding
at September 30, 2000, compared to 1.15 percent at December 31, 1999. The
allowance reflects a provision of $1,225,000 and net charge-offs of $252,000
recorded for the nine months ended September 30, 2000. As discussed in Notes 8
and 12 to the condensed consolidated financial statements, subsequent to
September 30, 2000, the allowance for loan losses was increased by $0.8 million
as a result of the impairment of a construction loan in the amount of $19.6
million. This loan has been classified as non-performing as of November 9, 2000.

Management believes that the allowance for loan losses appropriately reflects
the risk elements inherent in the total loan portfolio. In management's
judgment, the allowance is considered adequate to absorb losses inherent in the
loan portfolio. There is no assurance that the Company will not be required to
make future adjustments to the allowance in response to changing economic
conditions or regulatory examinations.

Total deposits increased $271.4 million for the nine month period ended
September 30, 2000 to $1,413.1 million, which represents a 23.8 percent increase
from December 31, 1999. Of this


                                       20
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)


increase, $93.0 million were in retail and commercial accounts and $178.4
million were in wholesale type accounts. Demand deposits increased $57.0 million
due primarily to the opening of a new branch, increased deposits primarily from
loan related customers, and seasonal municipal deposits of approximately $48.0
million. NOW deposits increased $54.9 million due to normal fluctuations in this
transaction type account and seasonal municipal deposits of approximately $49.0
million. Money market accounts increased $7.7 million due to the introduction of
a more competitive higher rate money market product. Savings deposits increased
$6.4 million due to deposits placed in the higher yielding liquid gold account.
Retail time deposits less than $100,000 and IRA and KEOGH time deposits
increased $39.7 million and $8.6 million, respectively, due to attractive yields
offered to attract additional deposits. Time deposits greater than $100,000 from
local municipalities, which are obtained on a bidding basis with maturities of
30 to 180 days, and personal time deposits over $100,000 increased $69.7 million
and $27.4 million, respectively, during the nine month period ended September
30, 2000. Depending on rate and term, the Bank utilizes municipal, brokered and
large time deposits as an alternative to borrowed funds.

During the three months ended September 30, 2000, the Company decreased the
amount of outstanding short and long-term advances with the Federal Home Loan
Bank of New York by $34.3 million and borrowings under securities sold under
agreements to repurchase by $60.8 million as the Bank replaced such funds,
primarily with municipal deposits.

Stockholders' equity increased to $109.0 million at September 30, 2000 from the
December 31, 1999 balance of $96.4 million. The increase primarily results from:
net income of $15.1 million for the nine month period ended September 30, 2000;
$1.6 million of stock options exercised and related tax benefit; other
comprehensive income of $4.0 million; and other equity transactions of $0.3
million; partially offset by common stock dividends paid of $3.7 million and
treasury stock purchases of $4.7 million.



                                       21
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



The following table summarizes average balances for the Company's three and nine
month periods ended September 30, 2000 and 1999 balance sheet:

<TABLE>
<CAPTION>

                                     THREE MONTHS ENDING            NINE MONTHS ENDING
                                         SEPTEMBER 30,                 SEPTEMBER 30,
                                      2000          1999            2000          1999
                                  ----------     ----------     ----------     ----------
                                           (000'S)                       (000'S)
<S>                               <C>            <C>            <C>            <C>
ASSETS
Federal funds sold                $   37,324     $   21,213     $   30,636     $   27,305
Securities(1)                        666,763        614,128        667,486        550,629
Loans(2)                           1,028,138        837,943        985,018        788,470
                                  ----------     ----------     ----------     ----------
Earning assets                     1,732,225      1,473,284      1,683,140      1,366,404
Total Assets                      $1,798,815     $1,554,733     $1,742,383     $1,434,237
                                  ==========     ==========     ==========     ==========

LIABILITIES AND
STOCKHOLDERS' EQUITY
Non-interest bearing deposits     $  181,669     $  163,647     $  174,970     $  147,699
Interest bearing deposits          1,213,602        928,838      1,129,999        887,366
                                  ----------     ----------     ----------     ----------
Total deposits                     1,395,271      1,092,485      1,304,969      1,035,065
Borrowings                           261,551        317,748        302,271        261,054
Interest bearing liabilities       1,475,153      1,246,586      1,432,270      1,148,420
Corporation-Obligated
   mandatory redeemable
   capital securities of
   subsidiary trust                   20,000         20,000         20,000         20,000
Stockholder's equity              $  105,621     $   95,683     $  100,368     $   97,465
                                  ==========     ==========     ==========     ==========
</TABLE>

----------
        (1)  Securities exclude the mark-to-market adjustment required by SFAS
             No. 115.
        (2)  Loans are net of unearned discount and exclude the allowance for
             loan losses.

The Company's leverage ratio at September 30, 2000 was 7.44 percent, compared to
7.73 percent at December 31, 1999. The Company's Tier I and total capital ratios
under the risk-based capital guidelines were 11.79 percent and 12.82 percent at
September 30, 2000 and 12.49 percent and 13.56 percent at December 31, 1999,
respectively. In addition, the Bank exceeds all current regulatory capital
requirements and was in the "well-capitalized" category at September 30, 2000
and December 31, 1999.

RESULTS OF OPERATIONS

EARNINGS

Net income for the three and nine month periods ended September 30, 2000 was
$5.0 million and $15.1 million, compared to $4.4 million and $11.9 million for
the three and nine month periods ended September 30, 1999, an increase of 14.0
percent and 27.4 percent, respectively. Diluted


                                       22
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



earnings per common share were $0.30 and $0.88 for the three and nine month
periods ended September 30, 2000, compared to $0.26 and $0.68 for the three and
nine month periods ended September 30, 1999, increases of 15.4 percent and 29.4
percent, respectively.

The increase in net income for the three and nine month periods ended September
30, 2000, compared to the prior year periods, reflects higher net interest
income, a lower provision for loan losses, a lower effective income tax rate,
and higher non-interest income for the nine month period ended September 30,
2000. The increases in net income were partially offset by losses on security
sales in the nine month period compared to gains in the prior year period and
higher non-interest expenses for both periods.

As discussed in Notes 8 and 12 to the condensed consolidated financial
statements, net income for the fourth quarter 2000 will be negatively impacted
by the classification as non-performing of a $19.6 million construction loan as
of November 9, 2000. Net income in subsequent periods may also be negatively
impacted. Interest on this loan has been approximately $160,000 per month.

A discussion of the factors impacting the changes in the various components of
net income for the three and nine months ended September 30, 2000 follows.

NET INTEREST INCOME

Net interest income, the difference between interest income and interest
expense, is a significant component of the Company's consolidated earnings. The
increase in net income for the quarter and nine months ended September 30, 2000,
compared to the prior year periods, reflects 3.4 percent and 16.0 percent
increases in net interest income to $14.8 million and $44.8 million,
respectively. The increase in net interest income is primarily a result of an
increase in average earning assets to $1.73 billion and $1.68 billion for the
quarter and nine months ended September 30, 2000, compared to $1.47 billion and
$1.37 billion for the quarter and nine months ended September 30, 1999, an
increase of 17.6 percent and 23.2 percent, respectively. The increases in
average earning assets for the three and nine month periods ended September 30,
2000, compared to the prior year period, results from increased investment in
U.S. government agency securities and origination of residential (first mortgage
and home equity) and commercial mortgages, real estate secured land and
construction loans, and time unsecured loans. Net interest income for the
quarter and nine months ended September 30, 2000 also benefited from increases
in average earning assets over average interest bearing liabilities to $257.1
million and $250.9 million, from $226.7 million and $218.0 million in the prior
year periods, reflecting increases of 13.4 percent and 15.1 percent,
respectively. The net interest income increase was partially offset by a decline
in the net interest margin on a tax equivalent basis which was 3.53 percent for
the quarter ended September 30, 2000 and 3.66 percent for the nine months ended
September 30, 2000, compared to 4.00 percent for the third quarter of 1999 and
3.90 percent for the nine months ended September 30, 1999, due to compression in
the net interest spread as the Federal Reserve Board has raised rates three
times during the year 2000, which has caused the cost of funds to increase at a
faster rate than the yields on earning assets.


                                       23
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



For the three and nine month periods ended September 30, 2000, the net interest
spread (yield on earning assets less cost of funds, including demand deposits)
was 3.26 percent and 3.39 percent, respectively, compared to 3.80 percent and
3.61 percent for the same periods in 1999, respectively. Yields on interest
bearing liabilities increased during the three and nine month periods ended
September 30, 2000 at a faster rate than the yields on interest earning assets
during this period of rising interest rates, as compared to the prior year
periods. The increase in asset yields is primarily as a result of higher yields
on mortgage-backed and government agency securities purchased during the nine
months ended September 30, 2000 and adjustments for floating rate securities, as
well as higher yields on loans due to the general increase in interest rates.
The cost of borrowings, which increased due to a rise in interest rates,
together with higher yields on interest bearing deposits that include brokered
time and municipal deposits, increased the overall yield on interest bearing
liabilities for the three and nine month periods ended September 30, 2000,
compared to the prior period in 1999. The higher yields on interest bearing
liabilities and the Company's continuing leverage strategy of purchasing
government securities funded by borrowings both contributed to tighter spreads
resulting in the decline in the net interest spread. Although leverage
strategies result in decreasing net interest spreads, the strategies have the
effect of increasing net interest income while managing interest rate risk.

PROVISION FOR LOAN LOSSES

The provision for loan losses decreased $425,000 to $275,000 and $385,000 to
$1,225,000 for the three and nine month periods ended September 30, 2000,
respectively, compared to the same periods in 1999. The decrease in the
provision for loan losses reflects the credit quality of the loan portfolio and
a moderation of loan growth in the third quarter 2000. During the three and nine
month periods ended September 30, 2000, net charge-offs totaled $73,000 and
$252,000, compared to net charge-offs of $152,000 and $318,000 for the three
month and nine month periods ended September 30, 1999, respectively. The net
charge-offs in the three and nine month periods ended September 30, 2000
primarily relate to real estate and credit card loans, while the net charge-offs
in both 1999 periods primarily relate to credit card loans. Nonaccrual loans
were $1.4 million and $1.9 million, respectively, at September 30, 2000 and
1999, compared to $2.6 million at December 31, 1999. It is the Company's policy
to discontinue the accrual of interest on loans when, in the opinion of
management, a reasonable doubt exists as to the timely collectibility of the
amounts due. Net income is adversely impacted by the level of non-performing
assets of the Company since, in addition to foregone revenue, the Company must
increase the level of provision for loan losses, and incur other costs
associated with collections of past due balances.

An evaluation of the quality of the loan portfolio is performed by management on
a quarterly basis as an integral part of the credit administration function,
which includes the identification of past due loans, non-performing loans and
impaired loans, assessments of the expected effects of the current economic
environment and industry, geographic and customer concentrations in the loan
portfolio, and review of the historical loan loss experience. Management takes a
prudent and cautious position in evaluating various business and economic
uncertainties in relation to the Company's loan portfolio. In Management's
judgment, the allowance for loan losses at September 30, 2000 reflects the risk
elements identified and inherent in the total loan portfolio


                                       24
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



and is considered adequate to absorb losses inherent in the portfolio at that
time. The amount of the provision charged to income and changes in the allowance
for loan losses reflects the growth of the loan portfolio, net charge-offs and
losses incurred with respect to real estate foreclosures, time and demand loans,
installment, credit card and other loans, and the effect of the real estate
market and general economic conditions of the New York Metropolitan area on the
loan portfolio. There is no assurance that the Company will not be required to
make future adjustments to the allowance in response to changing economic
conditions or regulatory examinations.

NON-INTEREST INCOME

Non-interest income for the three and nine month periods ended September 30,
2000 increased by $5,000 to $1,216,000 and decreased $385,000 (9.7 percent) to
$3,576,000 compared to the same periods in 1999. The increase for the three
month period ended September 30, 2000 reflects gains on security sales of $6,000
and service charges and fees of $871,000, compared to $834,000 in the prior year
period. The increase was partially offset by a decrease in other income to
$339,000, compared to $377,000 in the prior year period. The decrease for the
nine month period ended September 30, 2000 reflects losses on securities
transactions of $99,000 compared to gains of $527,000 in the prior period. These
losses were partially offset by higher service charges and fees and other income
of $2,610,000 and $1,065,000, compared to $2,385,000 and $1,049,000 in the prior
year period, respectively. Service charges and fees increased due to an increase
in the number of deposit accounts, restructuring of fees charged and management
of waived charges. The other income decrease for the three month period ended
September 30, 2000 primarily reflects lower letter of credit fees and mortgage
payoff and prepayment penalty fees. The other income increase for the nine month
period ended September 30, 2000 primarily reflects higher credit card fee income
and U.S.B. Financial Services, Inc. commissions.

NON-INTEREST EXPENSE

Non-interest expense increased $271,000 (3.5 percent) to $8,013,000 and
$1,927,000 (8.8 percent) to $23,924,000 for the three and nine month periods
ended September 30, 2000 from the comparable periods in 1999, respectively. The
primary reason for these increases results from higher levels of salaries and
benefits, occupancy and equipment expense, advertising and business development
expense and communications expense necessary to expand and support increased
business volume and balance sheet growth, partially offset by estimated net
merger related savings of approximately $75,000 and $360,000 for the three and
nine months ended September 30, 2000, respectively, compared to the prior year
periods, resulting from the mergers of Tappan Zee in August 1998 and Tarrytowns
Bank in April 1999.

Salaries and employee benefits, the largest component of non-interest expense,
increased by $209,000 or 4.5 percent and $1,282,000 or 9.9 percent during the
three and nine month periods ended September 30, 2000, respectively, compared to
the prior year periods. The increase occurred due to additional personnel
employed by the Company to accommodate the increases in deposits and loans and
their related services. In addition, salaries and employee benefits increased
because of merit increases, additional expenses related to incentive
compensation


                                       25
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



programs, and increases in the cost of employee benefit programs such as
retirement and profit sharing plans, medical coverage, and tuition
reimbursement. Increases in salaries and employee benefits expense was partially
offset by estimated merger related savings of approximately $50,000 and $160,000
for the three and nine months ended September 30, 2000, respectively, compared
to the prior year period.

Significant changes in the other components of non-interest expense for the
three and nine month periods ended September 30, 2000 compared to the prior
periods, were due to the following:

o       Increase of $37,000 (2.7 percent) and $321,000 (8.1 percent) in
        occupancy and equipment expense. This increase is primarily due to the
        opening of a new branch office in May 2000, higher utility expenses
        relating to the Company's facilities and computer related equipment,
        increased depreciation expense related to additional furniture and
        fixtures for corporate and administrative offices, and a decrease in
        rental income due to more space needed at the corporate headquarters.

o       Increase of $118,000 (29.0 percent) and $267,000 (22.2 percent) in
        advertising and business development. The increase reflects additional
        emphasis on business development efforts, as well as marketing the
        Bank's products and focus on the Bank's ad campaign, "Do business with
        us, do better with us."

o       Decrease of $148,000 (52.1 percent) and $153,000 (21.0 percent) in
        professional fees. The decrease relates to lower auditing and legal fees
        primarily due to estimated merger related savings of approximately
        $50,000 and $140,000 and lower loan collection and foreclosure related
        attorney fees for the three and nine months ended September 30, 2000.

o       Increase of $51,000 (23.5 percent) and $161,000 (26.3 percent) in
        communications expense. The increase relates to greater telephone usage
        as a result of increased employees, office space and data lines.

o       Decrease of $14,000 (8.8 percent) and an increase of $27,000 (5.8
        percent) in stationery and printing. The increase reflects an increase
        in office supplies and equipment necessary to support the continuing
        growth of the Bank's business volume and new branch opening in Spring
        Valley, while the decrease for the quarter reflects better control of
        expenses.

o       Increase of $20,000 (45.5 percent) and $45,000 (32.6 percent) in FDIC
        insurance. The increase is related to the higher level of total deposits
        during 2000 compared to the prior year periods.

o       Decrease of $2,000 and decrease of $23,000 (1.2 percent) in other
        expenses. The decrease for the three month and nine month period is
        primarily due to a higher allocation of costs related to loan fees and
        lower levels of other outside services due to Y2K related expenses in
        1999. The decrease was partially offset by increases in courier fees
        related to an increased number of customer pickups and credit card
        related fees.



                                       26
<PAGE>

U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS (CONT'D)



INCOME TAXES

The effective income tax rates for the three and nine month periods ended
September 30, 2000 were 34.6 percent and 34.8 percent, respectively, compared to
37.4 percent and 37.3 percent, respectively, for the prior periods in 1999. The
lower effective tax rate for the three and nine month periods ended September
30, 2000 primarily reflects lower state income taxes.



                                       27
<PAGE>

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



Quantitative and qualitative disclosures about market risk at December 31, 1999
were reported in the Company's 1999 Annual Report on Form 10-K. There have been
no material changes in the Company's market risk exposures at September 30, 2000
compared to December 31, 1999. Interest rate risk continues to be the Company's
primary market risk exposure since all Company transactions are denominated in
U.S. dollars with no direct foreign currency exchange or changes in commodity
price exposures. All market risk sensitive instruments continue to be held to
maturity or available for sale with no financial instruments entered into for
trading purposes. The Company does not use derivative financial instruments such
as interest rate swaps and caps extensively and has not been party to any
derivative financial instruments during the nine months ended September 30,
2000.

The Company continues to use two methods to evaluate its market risk to changes
in interest rates, a "Static Gap" evaluation and a simulation analysis of the
impact of changes in interest rates on the Company's net interest income and
cash flow. There have been no changes in the Company's policy limit of
acceptable variances to net interest income at September 30, 2000 as compared to
December 31, 1999. The Company's "Static Gap" at September 30, 2000 was a
negative $215.7 million in the one year time frame compared to a negative $302.1
million at December 31, 1999. If interest rates were to gradually ramp up or
down 200 basis points from current rates, the percentage change in estimated net
interest income for the subsequent twelve month measurement period continues to
be within the Company's policy limit of not declining by more than 5.0 percent.



                                       28
<PAGE>

                           PART II - OTHER INFORMATION

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

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(A)  EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT NO.       EXHIBIT
-----------       -------

<S>               <C>
(3)(a)            Amended and Restated Certificate of Incorporation of
                  Registrant (incorporated herein by reference to Registrant's
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  1998, Exhibit (3)(a)).

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

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

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

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

(10)(a)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Thomas E. Hales.*

(10)(b)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Raymond J. Crotty.*

(10)(c)           Agreement of Employment dated as of November 16, 1998, and
                  as amended November 8, 2000, between the Company and the Bank
                  and Steven T. Sabatini.*

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

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

(10)(f)           Registrant's Employee Stock Ownership Plan (With Code Section
                  401(k) Provisions) (incorporated herein by reference from
                  Registrant's Annual Report on Form 10-K for the year ended
                  December 31, 1993, Exhibit (10)(d)).
</TABLE>


                                       29
<PAGE>


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)

(A)   EXHIBITS (CONT'D)

<TABLE>
<CAPTION>

EXHIBIT NO.       EXHIBIT
-----------       -------

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

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

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

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

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

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

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

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

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

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

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


                                       30
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)

(A)   EXHIBITS (CONT'D)

<TABLE>
<CAPTION>

EXHIBIT NO.       EXHIBIT
-----------       -------

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

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

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

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

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

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

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

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

(10)(z)           Loan Agreement to the Employee Stock Ownership Plan Trust
                  of Tappan Zee Financial, Inc. and Certain Affiliates
                  (incorporated herein by reference to the Tappan Zee Financial,
                  Inc.'s Annual Report on Form 10-K for the fiscal year ended
                  March 31, 1996 ("Tappan Zee 1996 10-K"), Exhibit 10.7).

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

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

(10)(cc)          Employment Agreement by and between Tarrytowns Bank, FSB
                  and Harry G. Murphy, dated effective as of August 31, 1998
                  (incorporated herein by reference to the 1998 Third Quarter
                  10-Q, Exhibit (10)(cc)).
</TABLE>


                                       31
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)

(A)   EXHIBITS (CONT'D)

<TABLE>
<CAPTION>

EXHIBIT NO.       EXHIBIT
-----------       -------

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

(10)(ee)          Forms of Restricted Stock Award Notices to award recipients,
                  pursuant to the Employee RRP and the Outside Director RRP
                  (incorporated herein by reference to the Tappan Zee 1997 10-K,
                  Exhibit 10.17).

(10)(ff)          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 (incorporated herein by reference
                  to the Registrant's Quarterly Report on Form 10-Q for the
                  quarter ended June 30, 1999, Exhibit (10)(ll)).

(10)(gg)          Amendment Number 1 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) dated January 27,
                  1995 (incorporated herein by reference to the Registrant's
                  Annual Report on Form 10-K for the year ended December 31,
                  1999 ("1999 10-K"), Exhibit (10)(jj)).

(10)(hh)          Amendment Number 2 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) dated May 17, 1995
                  (incorporated herein by reference to the Registrant's 1999
                  10-K, Exhibit (10)(kk)).

(10)(ii)          Amendment Number 3 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) dated January 1,
                  1996 (incorporated herein by reference to the Registrant's
                  1999 10-K, Exhibit (10)(ll)).

(10)(jj)          Amendment Number 4 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) dated November 20,
                  1996 (incorporated herein by reference to the Registrant's
                  1999 10-K, Exhibit (10)(mm)).

(10)(kk)          Amendment Number 5 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) effective as of
                  September 30, 1999 (incorporated herein by reference to the
                  Registrant's 1999 10-K, Exhibit (10)(nn)).

(10)(ll)          Amendment Number 6 to Registrant's Employee Stock Ownership
                  Plan (with Code Section 401(k) Provisions) dated August 24,
                  1999 (incorporated herein by reference to the Registrant's
                  1999 10-K, Exhibit (10)(oo)).

(10)(mm)          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 six months ended June
                  30, 2000).
</TABLE>


                                       32
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)

(A)   EXHIBITS (CONT'D)

<TABLE>
<CAPTION>

EXHIBIT NO.       EXHIBIT
-----------       -------

<S>               <C>
(11)              Computation of earnings per share.*

(27)              Financial Data Schedule.*
</TABLE>

*Filed Herewith.

(B)     REPORTS ON FORM 8-K

        No reports on Form 8-K were filed by the Company during the quarter
        ended September 30, 2000.


                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on November 10, 2000.

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



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


                                       33