SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934


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


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

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


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

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


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

                                    YES X   NO
                                       ---    ---


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

                  CLASS                     OUTSTANDING AT AUGUST 5, 2002
                  -----                     -----------------------------

         Common stock, par value                     18,480,787
            $0.01 per share
<PAGE>


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

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

                                                                        PAGE NO.
                                                                        --------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

         CONDENSED CONSOLIDATED STATEMENTS OF                              4
         CASH FLOW FOR THE SIX MONTHS ENDED
         JUNE 30, 2002 AND 2001.

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

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL                         8
         STATEMENTS.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF                          17
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES                         25
         ABOUT MARKET RISK.

PART II. OTHER INFORMATION AND SIGNATURES

ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY                     26
         HOLDERS.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                                26


                                      - i -
<PAGE>


ITEM 1.  PART I - FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
(000'S, EXCEPT SHARE DATA)                                                 JUNE 30,        DECEMBER 31,
                                                                             2002              2001
                                                                         -----------       -----------
<S>                                                                      <C>               <C>
ASSETS
------
Cash and due from banks                                                  $    58,751       $    48,721
Federal funds sold                                                            85,600            21,100
                                                                         -----------       -----------
Cash and cash equivalents                                                    144,351            69,821
Interest bearing deposits in other banks                                          21               290
Securities:
    Available for sale (at estimated fair value)                             401,826           454,001
    Held to maturity (estimated fair value of
       $293,862 in 2002 and $298,429 in 2001)                                289,729           298,883
Loans, net of allowance for loan losses of
    $12,879 in 2002 and $12,412 in 2001                                    1,238,254         1,158,534
Premises and equipment, net                                                   11,152            11,343
Accrued interest receivable                                                   10,657            10,087
Other real estate owned (OREO)                                                    34                34
Federal Home Loan Bank of New York stock                                      20,759            20,815
Other assets                                                                  13,700            16,318
                                                                         -----------       -----------
TOTAL ASSETS                                                             $ 2,130,483       $ 2,040,126
                                                                         ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Non-interest bearing deposits                                            $   233,620       $   210,811
Interest bearing deposits:
    NOW accounts                                                              94,614            84,136
    Money market accounts                                                     92,017            82,381
    Savings deposits                                                         429,349           431,893
    Time deposits                                                            649,513           616,737
                                                                         -----------       -----------
TOTAL DEPOSITS                                                             1,499,113         1,425,958
Accrued interest payable                                                       5,735             7,244
Accrued expenses and other liabilities                                        15,302            14,024
Securities sold under agreements to repurchase                               303,628           303,279
Federal Home Loan Bank of New York advances                                  112,614           114,291
                                                                         -----------       -----------
TOTAL                                                                      1,936,392         1,864,796
Corporation-Obligated mandatory redeemable capital
     securities of subsidiary trusts                                          50,000            40,000
Minority interest-junior preferred stock of consolidated subsidiary              130               130
Commitments and contingencies (Note 11)

STOCKHOLDERS' EQUITY:
     Preferred stock, no par value
          Authorized shares: 100,000; no shares outstanding                       --                --
    Common stock, $0.01 par value; authorized shares - 50,000,000;
     issued shares - 19,709,359 in 2002 and 19,531,188 in 2001                   197               195
    Additional paid-in capital                                               138,748           137,627
    Retained earnings                                                         17,252             8,457
    Treasury stock, at cost; common shares 1,255,298 in 2002 and
       1,151,842 in 2001                                                     (14,987)          (13,381)
    Common stock held for benefit plans                                       (1,774)           (1,601)
    Deferred compensation obligation                                           1,416             1,178
    Accumulated other comprehensive income                                     3,109             2,725
                                                                         -----------       -----------
TOTAL STOCKHOLDERS' EQUITY                                                   143,961           135,200
                                                                         -----------       -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $ 2,130,483       $ 2,040,126
                                                                         ===========       ===========
</TABLE>


See notes to condensed consolidated financial statements.


                                       1
<PAGE>


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

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                           JUNE 30,
                                                                    2002             2001
                                                                   -------          -------
                                                                  (000'S, EXCEPT SHARE DATA)
<S>                                                                <C>              <C>
INTEREST INCOME:
Interest and fees on loans                                         $21,326          $21,532
Interest on federal funds sold                                         195              497
Interest and dividends on securities:
         Mortgage-backed securities                                  4,487            6,494
         U.S. Treasury and government agencies                       4,216            3,471
         Obligations of states and political subdivisions              902              822
         Corporate securities and other                                213                4
Interest on deposits in other banks                                      3                3
Dividends on Federal Home Loan Bank of New York stock                  231              571
                                                                   -------          -------
TOTAL INTEREST INCOME                                               31,573           33,394
                                                                   -------          -------

INTEREST EXPENSE:
Interest on deposits                                                 7,028           13,825
Interest on borrowings                                               5,302            4,252
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trusts                       779              488
                                                                   -------          -------
TOTAL INTEREST EXPENSE                                              13,109           18,565
                                                                   -------          -------

NET INTEREST INCOME                                                 18,464           14,829
Provision for credit losses                                          1,365              220
                                                                   -------          -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES               17,099           14,609
                                                                   -------          -------

NON-INTEREST INCOME:
Service charges and fees                                               820              878
Other income                                                           850              427
Gain on securities transactions - net                                  293              851
                                                                   -------          -------
TOTAL NON-INTEREST INCOME                                            1,963            2,156
                                                                   -------          -------

NON-INTEREST EXPENSES:
Salaries and employee benefits                                       5,859            5,155
Occupancy and equipment                                              1,604            1,597
Advertising and business development                                   486              474
Professional fees                                                      256              236
Communications                                                         239              247
Stationery and printing                                                199              199
FDIC insurance                                                          68               71
Amortization of intangibles                                            225              226
Other expense                                                          820              631
                                                                   -------          -------
TOTAL NON-INTEREST EXPENSES                                          9,756            8,836
                                                                   -------          -------
Income before income taxes                                           9,306            7,929
Provision for income taxes                                           3,200            2,762
                                                                   -------          -------
NET INCOME                                                         $ 6,106          $ 5,167
                                                                   =======          =======

BASIC EARNINGS PER COMMON SHARE                                    $  0.33          $  0.28
                                                                   =======          =======

DILUTED EARNINGS PER COMMON SHARE                                  $  0.32          $  0.28
                                                                   =======          =======
</TABLE>


See notes to condensed consolidated financial statements.


                                       2
<PAGE>


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

<TABLE>
<CAPTION>
                                                                       SIX MONTHS ENDED
                                                                           JUNE 30,
                                                                     2002             2001
                                                                   -------          -------
                                                                  (000'S, EXCEPT SHARE DATA)
<S>                                                                <C>              <C>

INTEREST INCOME:
Interest and fees on loans                                         $41,592          $43,933
Interest on federal funds sold                                         374            1,104
Interest and dividends on securities:
         Mortgage-backed securities                                  9,374           12,732
         U.S. Treasury and government agencies                       8,034            7,112
         Obligations of states and political subdivisions            1,795            1,632
         Corporate securities and other                                427                3
Interest on deposits in other banks                                      5                5
Dividends on Federal Home Loan Bank of New York stock                  446            1,199
                                                                   -------          -------
TOTAL INTEREST INCOME                                               62,047           67,720
                                                                   -------          -------

INTEREST EXPENSE:
Interest on deposits                                                14,160           29,639
Interest on borrowings                                              10,575            7,812
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trusts                     1,555              976
                                                                   -------          -------
TOTAL INTEREST EXPENSE                                              26,290           38,427
                                                                   -------          -------

NET INTEREST INCOME                                                 35,757           29,293
Provision for credit losses                                          2,597              420
                                                                   -------          -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES               33,160           28,873
                                                                   -------          -------

NON-INTEREST INCOME:
Service charges and fees                                             1,627            1,716
Other income                                                         1,545              971
Gains on securities transactions - net                               1,368            1,533
                                                                   -------          -------
TOTAL NON-INTEREST INCOME                                            4,540            4,220
                                                                   -------          -------

NON-INTEREST EXPENSES:
Salaries and employee benefits                                      11,510           10,201
Occupancy and equipment                                              3,153            3,140
Advertising and business development                                   909              828
Professional fees                                                      522              419
Communications                                                         523              509
Stationery and printing                                                401              422
FDIC insurance                                                         140              141
Amortization of intangibles                                            451              452
Other expense                                                        1,611            1,316
                                                                   -------          -------
TOTAL NON-INTEREST EXPENSES                                         19,220           17,428
                                                                   -------          -------
Income before income taxes                                          18,480           15,665
Provision for income taxes                                           6,365            5,427
                                                                   -------          -------
NET INCOME                                                         $12,115          $10,238
                                                                   =======          =======

BASIC EARNINGS PER COMMON SHARE                                    $  0.66          $  0.56
                                                                   =======          =======

DILUTED EARNINGS PER COMMON SHARE                                  $  0.64          $  0.55
                                                                   =======          =======
</TABLE>


See notes to condensed consolidated financial statements.


                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED
                                                                                          JUNE 30,
                                                                                    2002            2001
                                                                                 ---------       ---------
OPERATING ACTIVITIES:                                                                     (000'S)
<S>                                                                              <C>             <C>
Net income                                                                       $  12,115       $  10,238
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Provision for credit losses                                                       2,597             420
   Depreciation and amortization                                                     1,339           1,420
   Amortization of premiums on securities - net                                        744             562
   Deferred income tax (benefit) provision - net                                    (1,965)          5,480
   Gains on securities transactions - net                                           (1,368)         (1,533)
Noncash benefit plan expense                                                           134             126
(Increase) decrease in accrued interest receivable                                    (570)          2,883
Decrease in accrued interest payable                                                (1,509)         (1,379)
Other - net                                                                          5,578           1,435
                                                                                 ---------       ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                           17,095          19,652
                                                                                 ---------       ---------
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                                33,344         162,380
Proceeds from principal paydowns, redemptions and maturities of:
   Securities available for sale                                                   133,753          44,739
   Securities held to maturity                                                      26,517         106,432
Purchases of securities available for sale                                         (88,675)       (275,977)
Purchases of securities held to maturity                                           (42,359)        (91,099)
Net redemptions of Federal Home Loan Bank of New York stock                             56              --
Net decrease (increase) in interest bearing deposits in other banks                    269              (9)
Increase in loans outstanding                                                      (82,317)        (10,134)
Purchases of premises and equipment - net                                             (697)           (868)
                                                                                 ---------       ---------
NET CASH USED FOR INVESTING ACTIVITIES                                             (20,109)        (64,536)
                                                                                 ---------       ---------
FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
   NOW, money market and savings accounts                                           40,379          43,045
Net increase (decrease) in time deposits, net of withdrawals and maturities         32,776         (92,204)
Net increase (decrease) in securities sold under agreements
   to repurchase -  short-term                                                         349            (116)
Proceeds from securities sold under agreements to
   repurchase - long-term                                                               --          30,000
Proceeds from Federal Home Loan Bank of New York
   advances - long-term                                                                 --          70,000
Repayment of Federal Home Loan Bank of New York
    advances - long-term                                                            (1,677)         (1,810)
Net proceeds from issuance of Corporation-Obligated mandatory
   redeemable capital securities of subsidiary trust                                 9,699              --
Cash dividends paid                                                                 (3,320)         (2,687)
Proceeds from exercise of common stock options                                         230              46
Purchases of treasury stock                                                           (892)           (276)
                                                                                 ---------       ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                        $  77,544       $  45,998
                                                                                 =========       =========
</TABLE>

         (Continued)


                                       4
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED
                                                                                            JUNE 30,
                                                                                   2002             2001
                                                                                 ---------       ---------
                                                                                           (000'S)
<S>                                                                              <C>             <C>
INCREASE IN CASH AND CASH EQUIVALENTS                                            $  74,530       $   1,114
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      69,821          74,891
                                                                                 ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $ 144,351       $  76,005
                                                                                 =========       =========

Supplemental Disclosures:
   Interest paid                                                                 $  27,799       $  39,806
                                                                                 ---------       ---------
   Income tax payments                                                           $   4,755       $      90
                                                                                 ---------       ---------
   Transfer of held to maturity securities to available for sale securities      $      --       $     592
                                                                                 ---------       ---------
   Change in shares held in trust for deferred compensation                      $    (238)      $    (246)
                                                                                 ---------       ---------
   Change in deferred compensation obligation                                    $     238       $     246
                                                                                 ---------       ---------
   Change in accumulated other comprehensive income                              $     384       $     132
                                                                                 ---------       ---------
   Purchases of treasury stock related to exercise of stock options              $    (796)      $  (1,049)
                                                                                 ---------       ---------
   Non cash exercise of stock options and related tax benefit                    $   1,003       $   1,699
                                                                                 ---------       ---------
   Purchases of securities not yet settled:
         Available for sale                                                      $      --       $   2,032
                                                                                 ---------       ---------
         Held to maturity                                                        $      --       $   9,994
                                                                                 ---------       ---------
   Exchange of Tappan Zee Financial, Inc. common
         shares to treasury stock                                                $     (97)      $      --
                                                                                 ---------       ---------
</TABLE>


See notes to condensed consolidated financial statements.


                                       5
<PAGE>


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

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED JUNE 30, 2002
                                                     (000'S, EXCEPT SHARE DATA)
                                                                                                          ACCUMULATED
                                  COMMON STOCK   ADDITIONAL                    COMMON STOCK    DEFERRED      OTHER        TOTAL
                                 SHARES     PAR   PAID-IN   RETAINED TREASURY   HELD FOR    COMPENSATION COMPREHENSIVE STOCKHOLDERS'
                               OUTSTANDING VALUE  CAPITAL   EARNINGS  STOCK   BENEFIT PLANS  OBLIGATION     INCOME        EQUITY
                               ----------- -----  -------   --------  -----   -------------  ----------     ------        ------
<S>                            <C>         <C>   <C>        <C>      <C>         <C>           <C>          <C>         <C>
Balance at January 1, 2002     18,379,346  $195   $137,627  $ 8,457  $(13,381)   $(1,601)      $1,178       $2,725      $135,200

Net income                                                   12,115                                                       12,115

Other comprehensive income:
 Net unrealized securities
  gains arising during the
  period, net of taxes of $825                                                                               1,179         1,179
 Reclassification adjustment
  of net gains for securities
  sold net of taxes of $558                                                                                   (795)         (795)
                                                                                                            ------      --------
   Other comprehensive income                                                                                  384           384
                                                                                                                        --------
Total comprehensive income                                                                                                12,499

Cash dividends:
   Common ($0.18 per share)                                  (3,310)                                                      (3,310)

   Junior Preferred stock                                       (10)                                                         (10)

Common stock options exercised
   and related tax benefit        193,549     2      1,052                179                                              1,233

Purchases of treasury stock      (118,834)                            (1,785)                                             (1,785)

ESOP shares committed to
   be released                                          69                            65                                     134

Deferred compensation
   obligation                                                                       (238)         238                         --
                               ----------  ----   --------  -------  --------    -------       ------       ------      --------
BALANCE AT JUNE 30, 2002       18,454,061  $197   $138,748  $17,252  $(14,987)   $(1,774)      $1,416       $3,109      $143,961
                               ==========  ====   ========  =======  ========    =======       ======       ======      ========
</TABLE>


See notes to condensed consolidated financial statements.


                                       6
<PAGE>


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

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED JUNE 30, 2001
                                                     (000'S, EXCEPT SHARE DATA)
                                                                                                          ACCUMULATED
                                  COMMON STOCK   ADDITIONAL                    COMMON STOCK    DEFERRED      OTHER        TOTAL
                                 SHARES     PAR   PAID-IN   RETAINED TREASURY   HELD FOR    COMPENSATION COMPREHENSIVE STOCKHOLDERS'
                               OUTSTANDING VALUE  CAPITAL   EARNINGS  STOCK   BENEFIT PLANS  OBLIGATION     INCOME        EQUITY
                               ----------- -----  -------   --------  -----   -------------  ----------     ------        ------
<S>                            <C>         <C>   <C>        <C>      <C>         <C>           <C>          <C>         <C>
Balance at  January 1, 2001    16,591,111  $175   $111,942  $17,116  $(11,158)   $(1,431)      $  856       $  377      $117,877

Net income                                                   10,238                                                       10,238

Other comprehensive income:
 Net unrealized securities
  gains arising during the
  period, net of taxes of $629                                                                                 886           886
 Reclassification adjustment
  of net gains for securities
  sold, net of taxes of $536                                                                                  (754)         (754)
                                                                                                            ------      --------
Other comprehensive income                                                                                     132           132
                                                                                                                        --------
Total comprehensive income                                                                                                10,370

Cash dividends:
 Common ($0.15 per share)                                    (2,676)                                                      (2,676)
 Junior preferred stock                                         (11)                                                         (11)

Common stock options exercised
 and related tax benefit          251,761     2      1,556                187                                              1,745

Purchases of treasury stock      (111,468)                             (1,325)                                            (1,325)

Amortization of RRP awards                                                            18                                      18

ESOP shares committed to
 be released                                            42                            66                                     108

Deferred compensation
 obligation                                                                         (246)         246                        --
                               ----------  ----   --------  -------  --------    -------       ------       ------      --------
BALANCE AT JUNE 30, 2001       16,731,404  $177   $113,540  $24,667  $(12,296)   $(1,593)      $1,102       $  509      $126,106
                               ==========  ====   ========  =======  ========    =======       ======       ======      ========
</TABLE>


See notes to condensed consolidated financial statements.


                                       7
<PAGE>


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

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

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

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

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

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

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

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

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

         On June 26, 2002, the Company completed its third issuance of Trust
         Preferred Capital Securities (the "Capital Securities") that raised
         $10.0 million of regulatory capital (approximately $9.7 million net
         proceeds after issuance costs), of which approximately $5.0 million is
         included in Tier I regulatory capital and the remaining amount is
         included in total regulatory capital under regulatory guidelines as of
         June 30, 2002. The previous issuances of Capital Securities include
         $20.0 million of fixed rate Capital Securities


                                       8
<PAGE>


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

         issued in February 1997 at 9.58 percent and $20.0 million of floating
         rate Capital Securities issued in July 2001 (current rate as of June
         30, 2002, 5.50 percent). The aggregate amount of Capital Securities
         issued by the Company totaled $50.0 million at June 30, 2002, of which
         $45.0 million is included in Tier I regulatory capital.

         The Capital Securities issued on June 26, 2002 pay interest on a
         floating rate basis, based on three month LIBOR plus 345 basis points,
         with the initial rate set at 5.34 percent, which resets September,
         December, March and June of each calendar year. The Capital Securities,
         which are due June 26, 2032 were issued by USB Statutory Trust III, a
         Connecticut business trust, that was formed by the Company solely to
         issue the Capital Securities and related common stock. The Capital
         Securities may not be redeemed, except under limited circumstances,
         until 2007 at par. The Company may also reduce outstanding Capital
         Securities through open market purchases. Dividends are paid quarterly
         in September, December, March and June.

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

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

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

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

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

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

         In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
         Intangible Assets" ("SFAS No. 142"), which became effective January 1,
         2002. SFAS No. 142 requires, among other things, the discontinuance of
         goodwill amortization, the reclassification of certain existing
         recognized intangibles as goodwill, the reassessment of useful lives of
         existing recognized intangibles and the identification of reporting
         units for purposes of assessing potential future impairments of
         goodwill. SFAS No. 142 also requires a transitional goodwill impairment
         test six months from the date of adoption. The


                                       9
<PAGE>


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

         Company's adoption of SFAS No. 142 on January 1, 2002 did not have any
         impact on its condensed consolidated financial statements.

7.       EARNINGS PER COMMON SHARE ("EPS")
         ---------------------------------

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

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED                SIX MONTHS ENDED
                                                     JUNE 30,        JUNE 30,        JUNE 30,        JUNE 30,
                                                       2002            2001            2002            2001
                                                   -----------     -----------     -----------     -----------
         NUMERATOR:                                                (000'S, EXCEPT SHARE DATA)
<S>                                                <C>             <C>             <C>             <C>
           Net income                              $     6,106     $     5,167     $    12,115     $    10,238
           Less preferred stock dividends                   10              11              10              11
                                                   -----------     -----------     -----------     -----------

           Net income for basic and diluted
             earnings per common share - net
             income available to common
             stockholders                          $     6,096     $     5,156     $    12,105     $    10,227
                                                   ===========     ===========     ===========     ===========

         DENOMINATOR:
           Denominator for basic earnings
             per common share - weighted
             average shares                         18,403,822      18,329,430      18,377,990      18,267,285

           Effects of dilutive securities:
             Director and employee
             stock options                             579,211         398,147         558,778         412,100

           Restricted stock not vested                      --           3,703              --           3,749
                                                   -----------     -----------     -----------     -----------
           Total effects of dilutive securities        579,211         401,850         558,778         415,849
                                                   -----------     -----------     -----------     -----------

           Denominator for diluted earnings
             per common share - adjusted
             weighted average shares                18,983,033      18,731,280      18,936,768      18,683,134
                                                   ===========     ===========     ===========     ===========

           Basic earnings per common share         $      0.33     $      0.28     $      0.66     $      0.56
                                                   ===========     ===========     ===========     ===========
           Diluted earnings per common share       $      0.32     $      0.28     $      0.64     $      0.55
                                                   ===========     ===========     ===========     ===========
</TABLE>

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

         In accordance with SFAS No. 115, "Accounting for Certain Investments in
         Debt and Equity Securities," the Company's investment policies include
         a determination of the appropriate classification of securities at the
         time of purchase. Securities that may be sold as part of the Company's
         asset/liability or liquidity management, or in response to or in
         anticipation of changes in interest rates and resulting prepayment
         risk, or for similar factors, are classified as available for sale.
         Securities that the Company has the ability and positive intent to hold
         to maturity are classified as held to maturity and carried at amortized
         cost. Realized gains and losses on the sales of all securities,
         determined by using the specific identification method, are reported in
         earnings. Securities available for sale are shown in the condensed
         consolidated statements of condition at estimated fair value and the
         resulting net unrealized gains and losses, net of tax, are shown in
         accumulated other comprehensive income.


                                       10
<PAGE>


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

         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 trading activities.

         During the three and six month periods ended June 30, 2002, the Company
         had gross realized gains from sales of securities available for sale of
         $293,000 and $1,368,000, respectively. The Company did not have gross
         losses during the 2002 periods.

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

<TABLE>
<CAPTION>
                                                                  GROSS         GROSS      ESTIMATED
                                                  AMORTIZED    UNREALIZED    UNREALIZED       FAIR
                                                    COST          GAINS        LOSSES        VALUE
                                                  ---------    ----------    ----------    ----------
         JUNE 30, 2002:
         AVAILABLE FOR SALE:                                            (000'S)
<S>                                               <C>           <C>           <C>           <C>
         U.S. government agencies                 $104,926      $  1,036      $    146      $105,816
         Mortgage-backed securities                274,948         4,147            87       279,008
         Obligations of states and
             political subdivisions                  1,530            89            --         1,619
         Corporate securities                       15,134           257             8        15,383
                                                  --------      --------      --------      --------
         TOTAL SECURITIES AVAILABLE FOR SALE      $396,538      $  5,529      $    241      $401,826
                                                  ========      ========      ========      ========

         HELD TO MATURITY:
         U.S. government agencies                 $124,914      $    234      $     93      $125,055
         Mortgage-backed securities                 93,130         1,038           114        94,054
         Obligations of states and
             political subdivisions                 71,685         3,068            --        74,753
                                                  --------      --------      --------      --------
         TOTAL SECURITIES HELD TO MATURITY        $289,729      $  4,340      $    207      $293,862
                                                  ========      ========      ========      ========
<CAPTION>
                                                                  GROSS         GROSS      ESTIMATED
                                                  AMORTIZED    UNREALIZED    UNREALIZED       FAIR
                                                    COST          GAINS        LOSSES        VALUE
                                                  ---------    ----------    ----------    ----------
         DECEMBER 31, 2001:
         AVAILABLE FOR SALE:                                            (000'S)
<S>                                               <C>           <C>           <C>           <C>
         U.S. government agencies                 $106,953      $  1,884      $    513      $108,324
         Mortgage-backed securities                325,753         3,947           517       329,183
         Obligations of states and
             political subdivisions                  1,532            74            --         1,606
         Corporate securities                       15,102            36           250        14,888
                                                  --------      --------      --------      --------
         TOTAL SECURITIES AVAILABLE FOR SALE      $449,340      $  5,941      $  1,280      $454,001
                                                  ========      ========      ========      ========

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


                                       11
<PAGE>


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


9.       LOANS
         -----

         Nonaccrual loans were $19.3 million at June 30, 2002 and $20.7 million
         at December 31, 2001. Restructured loans were $0.2 million at both June
         30, 2002 and December 31, 2001.

         Substantially all of the nonaccruing and restructured loans are
         collateralized by real estate. At June 30, 2002, the Company had and
         continues to have no commitments to lend additional funds to any
         customers with nonaccrual or restructured loan balances, except as
         further described below with respect to a real estate construction loan
         in the amount of $17.8 million.

         At June 30, 2002, there were no loans on nonaccrual status, that were
         potential problem loans which may result in their being placed on
         nonaccrual status in the future. Accruing loans that are contractually
         past due 90 days or more at June 30, 2002 are immaterial.

         At June 30, 2002 and December 31, 2001, the recorded investment in
         loans that are considered to be impaired under SFAS No. 114,
         "Accounting for Impairment of a Loan" ("SFAS No. 114"), approximated
         $19.5 million and $20.6 million, of which $19.3 million and $20.4
         million were in nonaccrual status, respectively. The average recorded
         investment of impaired loans for the six months ended June 30, 2002 and
         2001, and year ended December 31, 2001 was $20.9 million, $19.4 million
         and $20.0 million, respectively. Interest income recognized by the
         Company on impaired loans for the June 30, 2002 and 2001 three and six
         month periods was not material. As applicable, each impaired loan at
         June 30, 2002 and December 31, 2001 has a related allowance for loan
         losses determined in accordance with SFAS No. 114. The total allowance
         for loan losses specifically allocated to impaired loans was $1.8
         million and $1.6 million as of June 30, 2002 and December 31, 2001,
         respectively.

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

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


                                       12
<PAGE>


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

         On November 9, 2000, the Company reclassified a real estate
         construction loan with 35 remaining condominium units in the amount of
         $19.7 million as a non-performing asset and placed the loan on
         nonaccrual status. As a result of the impairment of this loan, $2.2
         million was charged-off in 2000 reducing the loan balance to $17.5
         million. During the year ended December 31, 2001, "protective advances"
         of $0.6 million were made in connection with payments of real estate
         taxes and common charges, which increased the recorded loan balance to
         $18.1 million. During 2001 and the six month period ended June 30,
         2002, the Bank also advanced $1.8 million and $2.2 million,
         respectively, through an agreement with the borrower to be used for
         completion of the project. As of August 12, 2002, the Bank intends to
         lend up to an additional $1.0 million to fund the completion of the
         project and facilitate sales, which proceeds are being used to reduce
         the Bank's loan. During the 2002 first quarter, the specific allocation
         of the allowance for loan losses was increased to $2.3 million, and
         during the second quarter of 2002, $1.3 million was charged off
         reducing the reserve to $1.0 million. As of June 30, 2002 and December
         31, 2001, the balance of the loan, net of paydowns and charge-offs, was
         $17.8 million and $19.5 million, respectively.

         Construction of the condominium units is substantially complete, and
         eleven units have been sold and closed as of July 25, 2002. Also, as of
         July 25, 2002, there were six additional units under contract of sale.
         Pending sales of the units and repayment of the loan, the Bank
         continues to proceed with foreclosure on other real estate, which also
         collateralizes the loan. The loan is also personally guaranteed by the
         principals, and such guarantees will be pursued to recover losses
         incurred in connection with the loan. The personal guarantees have not
         been considered in determining the amount of the charge-offs or
         allowance for loan losses applicable to this loan.

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

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

         Short-term securities sold under agreements to repurchase generally
         mature between one and 365 days. The Bank may borrow up to $175.0
         million from two primary investment firms under master security sale
         and repurchase agreements. There were no outstanding borrowings under
         these agreements at June 30, 2002. In addition, the Bank has the
         ability to borrow from the FHLB under similar master security sale and
         repurchase agreements and, to a lesser extent, its customers. At June
         30, 2002 and December 31, 2001, the Bank had short-term repurchase
         agreements outstanding of $1.6 million at an interest rate of 1.65
         percent and $1.3 million at a weighted average interest rate of 1.68
         percent, respectively. At June 30, 2002 and December 31, 2001, these
         borrowings were collateralized by securities with an aggregate carrying
         value and estimated fair value of $1.7 million and $1.3 million,
         respectively.


                                       13
<PAGE>


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

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

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

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

         SHORT-TERM BORROWINGS                          2002         2001
         -----------------------------------------------------------------------
                                                   (000's except percentages)
         Balance at June 30                           $ 1,627      $   398
         Average balance outstanding                    1,278        4,889
         Weighted-average interest rate
             As of June 30                               1.65%        3.47%
             Paid during period                          1.65         5.44
         =======================================================================

         The Bank had long-term borrowings, which have original maturities of
         over one year, of $302.0 million in securities sold under agreements to
         repurchase at both June 30, 2002 and December 31, 2001. At June 30,
         2002 and December 31, 2001, these borrowings have an original term of
         between five and ten years at interest rates between 4.33 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
         agreements. As of June 30, 2002 and December 31, 2001, these borrowings
         are collateralized by securities with an aggregate carrying value of
         $303.4 million and $306.3 million and an estimated fair value of $304.3
         million and $305.7 million, respectively.

         At June 30, 2002 and December 31, 2001, long-term FHLB advances totaled
         $112.6 million and $114.3 million, respectively, at interest rates of
         between 3.49 percent to 6.72 percent. At June 30, 2002, borrowings
         totaling $12.6 million are amortizing advances having scheduled
         payments and $30.0 million are payable only at maturity. Other
         borrowings totaling $70.0 million have an original term of ten years
         that are callable on certain dates after an initial noncall period at
         the option of the counterparty to the advance. These borrowings may not
         be repaid in full prior to maturity without penalty. At June 30, 2002
         and December 31, 2001, these borrowings were collateralized by a pledge
         to the FHLB of a security interest in certain mortgage-related assets
         having an aggregate carrying value of $135.4 million and $138.2
         million, respectively.

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


                                       14
<PAGE>


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

<TABLE>
<CAPTION>
         -----------------------------------------------------------------------------------------------------
                                                            AFTER 1
                                              WITHIN       BUT WITHIN       AFTER        2002          2001
         LONG-TERM BORROWINGS                 1 YEAR        5 YEARS        5 YEARS       TOTAL         Total
         -----------------------------------------------------------------------------------------------------
         Contractual Payment/Expected                          (000's, except percentages)
<S>                                          <C>           <C>            <C>           <C>          <C>
               Call Date:
         Total long-term borrowing           $   3,457     $   57,358     $ 353,799     $414,614     $ 416,291
         Weighted-average interest rate           5.75%          4.50%         5.13%        5.05%         5.05%
         =====================================================================================================
</TABLE>

         At June 30, 2002 and December 31, 2001, the Bank held 207,590 shares
         and 208,146 shares of capital stock of the FHLB with a carrying value
         of $20.8 million for both periods, which is required in order to borrow
         under the short- and long-term advance and securities sold under
         agreements to repurchase programs from the FHLB. The FHLB generally
         limits borrowings up to an aggregate of 30 percent of total assets,
         excluding securities sold under agreements to repurchase, upon the
         prerequisite purchase of additional shares of FHLB stock. Any advances
         made from the FHLB are required to be collateralized by the FHLB stock
         and certain other assets of the Bank.

         The ability of the Company and Bank to pay cash dividends in the future
         is restricted by various regulatory requirements. The Company's ability
         to pay cash dividends to its stockholders is primarily dependent upon
         the receipt of dividends from the Bank. The Bank's dividends to the
         Company may not exceed the sum of the Bank's undistributed net income
         for that year and its undistributed net income for the preceding two
         years, less any required transfers to additional paid-in capital. At
         June 30, 2002, the Bank could pay dividends of $32.5 million to the
         Company without having to obtain prior regulatory approval.

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

         On December 18, 2001, the Company's Board of Directors authorized the
         repurchase of up to 330,000 common shares (adjusted for the ten percent
         common stock dividend), or approximately 1.8%, of the Company's
         outstanding common stock at that date. Repurchases of common stock are
         authorized to be made from time to time in open-market and private
         transactions throughout 2002 as, in the opinion of management, market
         conditions may warrant. During the six month period ended June 30,
         2002, the purchases of 58,000 common shares were made under the
         authorized repurchase plan at an average price of $15.37. Common shares
         repurchased will be held as treasury stock and will be available for
         general corporate purposes.


                                       15
<PAGE>


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

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

         In the normal course of business, various commitments to extend credit
         are made which are not reflected in the accompanying condensed
         consolidated financial statements. At June 30, 2002, formal credit
         lines, and commercial and residential loan commitments, which are
         primarily loans collateralized by real estate, approximated $367.2
         million, $140.9 million and $23.4 million, respectively. Outstanding
         standby letters of credit totaled $41.2 million. Such commitment
         amounts represent the maximum risk of loss on these commitments.

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

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

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

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

         The Company operates only in the U.S. domestic market, specifically 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 six months ended June 30, 2002 and 2001, there is
         no customer that accounted for more than ten percent of the Company's
         revenue.

13.      BRANCH ACQUISITIONS
         -------------------

         On June 18, 2002, the Bank signed a definitive agreement to acquire the
         Yonkers branch of Fourth Federal Savings Bank ("Fourth Federal") of
         White Plains, New York. The branch has approximately $18.6 million in
         deposits, which will be assumed by the Bank in this transaction. The
         Bank will pay a premium of six percent for deposit accounts maintained
         at the branch, except for certain large deposit accounts for which the
         premium will be three percent. Deposits to be assumed will exclude
         brokered deposits, loan hold bank accounts, overdrawn accounts, dormant
         accounts, other wholesale deposits and affiliated deposits owned by
         related entities of the Fourth Federal. The transaction is subject to
         regulatory approval. Upon completion of the transaction, the branch
         will become the Bank's second branch in Yonkers.


                                       16
<PAGE>


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

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

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

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

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

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

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

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

At June 30, 2002, the Company had total assets of $2,130.5 million, an increase
of $90.4 million or 4.4 percent from December 31, 2001.

The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, totaled $712.3 million and $773.7 million at June 30, 2002
and December 31, 2001, respectively, a decrease of $61.4 million during the six
months ended June 30, 2002. The securities portfolio consists of securities held
to maturity at amortized cost of $289.7 million and $298.9 million, securities
available for sale at estimated fair value totaling $401.8 million and $454.0
million, respectively, and FHLB stock of $20.8 million for both periods.
Proceeds from


                                       17
<PAGE>


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

sales and redemption of the securities not otherwise reinvested in securities
were used to fund the loan portfolio or invested in Federal funds sold pending
evaluation of alternative investments.

During the six months ended June 30, 2002, U.S. government agency securities
decreased $2.5 million due primarily to sales and redemptions of $97.0 million
in callable bonds, and a net decrease in the estimated fair value of available
for sale securities of $0.5 million, offset by purchases totaling $95.0 million.
Mortgage-backed securities decreased by $61.4 million primarily due to principal
paydowns of $90.0 million, net premium amortizations of $0.7 million, partially
offset by purchases totaling $28.7 million, an increase in the estimated fair
value of available for sale securities of $0.6 million. The Bank's investment in
obligations of states and political subdivisions, or municipal securities,
increased by $2.0 million primarily due to purchases of $7.3 million that were
partially offset by maturities of $5.3 million during the six month period ended
June 30, 2002. Municipal securities are considered core investments having
favorable tax equivalent yields and diversified maturities. Purchases of
municipal securities are dependent upon their availability in the marketplace
and the comparative tax equivalent yields of such securities compared to other
securities of similar credit risk and maturity.

The Company invests in medium-term corporate debt securities and other
securities that are rated investment grade by nationally recognized credit
rating organizations at the time of purchase and bank equity securities. The
Company had outstanding balances in corporate securities of $15.4 million and
$14.9 million at June 30, 2002 and December 31, 2001, respectively, consisting
of Federal Home Loan Mortgage Corp. ("FHLMC") preferred stock of $15.2 million
and $14.8 million and bank equities of $0.2 million and $0.1 million at June 30,
2002 and December 31, 2001, respectively. The preferred stock is issued by the
FHLMC and has a favorable tax equivalent yield. The total investment in FHLB
stock was $20.8 million for both periods.

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

At June 30, 2002, loans outstanding were $1,251.1 million, a net increase of
$80.2 million or 6.8 percent compared to $1,170.9 at December 31, 2001. The
increase in outstanding loan balances reflects increases of: $32.1 million in
commercial mortgages; $20.4 million in land, acquisition and construction loans;
$17.1 million in residential mortgages; $9.5 million in time unsecured loans;
$2.2 million in time secured loans; $1.9 million in home equity loans; and $0.5
million in commercial installment loans. The increase was partially offset by
decreases in $1.8 million in personal installment loans; $0.6 million in credit
card loans; and $1.1 million in other loans. The Company had approximately
$367.2 million in formal credit lines, $164.3 million in loan commitments
outstanding, which are loans primarily collateralized by real estate, and $41.2
million in standby letters of credit outstanding. Management considers its
liquid resources to be adequate to fund loans in the foreseeable future,
principally by utilizing excess funds temporarily placed in federal funds sold,
increases in deposits and borrowings, loan repayments and maturing securities.

The Company's allowance for loan losses increased $0.5 million or 3.8 percent to
$12.9 million at June 30, 2002, from $12.4 million at December 31, 2001. The
allowance for loan losses

                                       18
<PAGE>


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

represents 1.03 percent and 1.06 percent of gross loans outstanding at June 30,
2002 and December 31, 2001, respectively. The allowance reflects a provision of
$2.6 million and net charge-offs of $2.0 million recorded for the six month 2002
period.

Management believes the allowance for loan losses at June 30, 2002 is
appropriate based on its evaluation of the risk elements and resulting estimated
losses inherent in the total loan portfolio at that time. 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 $73.2 million for the six month period ended June 30,
2002 to $1,499.1 million from $1,426.0 at December 31, 2001. Time deposits under
$100,000, demand, NOW and money market deposits increased $33.2 million, $22.8
million, $10.5 million and $9.6 million, which was partially offset by decreases
in savings deposits and other time deposits of $2.5 million and $0.4 million,
respectively. Time deposits under $100,000 increased due to the Bank attracting
longer term deposits with competitive rates during a low interest rate period.
Demand deposits benefitted from an increase in retail and commercial demand
deposits from competitive account products and an increase in loan growth. NOW
and money market deposits increased as customers moved funds into more liquid,
short-term deposit accounts because of the uncertainty associated with the
current interest rate environment. The increase in NOW and money market deposits
was also due to municipal deposit increases of $2.4 million and $7.5 million,
respectively. Savings deposits decreased due to customers seeking more
competitive products as a result of lower yields offered during this period of
lower interest rates. Time deposits greater than $100,000 from local
municipalities and retail customers, which are obtained on a bidding basis,
decreased $4.5 million during the six month period ended June 30, 2002.
Depending on rate and term, the Bank utilizes municipal and large time deposits
as an alternative to borrowed funds. The decrease in time deposits was partially
offset by an increase in IRA and KEOGH time deposits of $4.1 million.

During the six months ended June 30, 2002, the Bank utilized cash flow from its
investment portfolio, which decreased $61.4 million, to fund the increase in
loans outstanding of $80.2 million, as well as invest in Federal funds sold
pending evaluation of alternative investments. The low interest rate environment
also influenced the Bank's strategy to attract longer-term time deposits,
securing low interest rates for an extended period of time. Management will
continue to evaluate the interest rate environment in order to determine the
most effective combination of borrowings and deposits.

Stockholders' equity increased to $144.0 million at June 30, 2002 from the
December 31, 2001 balance of $135.2 million, an increase of 6.5 percent. The
increase primarily results from: $12.1 million of net income for the six month
period ended June 30, 2002; $1.2 million of stock options exercised; $0.4
million in other comprehensive income; and $0.1 million of shares committed to
be released under benefit plans; partially offset by common stock dividends paid
of $3.3 million and treasury stock purchase transactions of $1.8 million.

The Company's leverage ratio at June 30, 2002 was 8.60 percent, compared to 8.19
percent at December 31, 2001. The Company's Tier I and Total Capital ratios
under the risk-based capital


                                       19
<PAGE>

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

guidelines were 13.22 percent and 14.57 percent at June 30, 2002, and 14.03
percent and 13.03 percent at December 31, 2001, respectively. In addition, the
Bank exceeds all current regulatory capital requirements and was in the
"well-capitalized" category at June 30, 2002 and December 31, 2001.

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

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

EARNINGS
--------

Net income for the three and six month periods ended June 30, 2002 was $6.1
million and $12.1 million compared to $5.2 million and $10.2 million for the
three and six month periods ended June 30, 2001, an increase of 18.2 percent and
18.3 percent, respectively. Diluted earnings per common share were $0.32 and
$0.64 for the three and six month periods ended June 30, 2002, compared to 0.28
and $0.55 for the three and six month periods ended June 30, 2001, increases of
14.3 percent and 16.4 percent, respectively.

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

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

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

Net interest income, the difference between interest income and interest
expense, is a significant component of the Company's consolidated earnings. For
the three and six month periods ended June 30, 2002, net interest income
increased 24.5 percent and 22.1 percent to $18.5 million and $35.8 million from
$14.8 million and $29.3 million for the three and six month periods ended June
30, 2001, respectively. Net interest income increased in the current periods
primarily due to increases in the volume of earning assets, as well as an
increase in both the net interest spread and margin, partially offset by
increases in average interest bearing liabilities.

For the three and six months ended June 30, 2002, the net interest spread on a
tax equivalent basis (yield on earning assets less cost of funds, including
demand deposits) was 3.71 percent and 3.63 percent, as compared to 3.14 percent
and 3.18 percent for the prior year periods, respectively. The net interest
margin on a tax equivalent basis (net interest income on a tax


                                       20
<PAGE>


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

equivalent basis divided by average interest earning assets) for the three and
six months ended June 30, 2002, was 3.80 percent and 3.73 percent, as compared
to 3.33 percent for both the prior periods, respectively.

The increase in the net interest spread and margin reflects the more significant
decrease in cost of funds as compared to the decline in yields on interest
earning assets for the three and six months ended June 30, 2002 compared to the
prior year periods. The more significant decline in cost of funds during the
2002 periods reflects management's strategies to lower interest expense, while
extending the maturities of liabilities during the lower interest rate
environment. The net interest margin also benefited from a $47.9 million (19.7
percent) increase and $45.8 million (18.1 percent) increase in average earning
assets over interest bearing liabilities and Capital Securities for the three
and six months ended June 30, 2002 compared to the 2001 periods.

The decrease in yield on average interest earning assets on a tax equivalent
basis from 7.29 and 7.56 percent for the three and six month periods ended June
30, 2001 to 6.41 percent and 6.38 percent for the same periods in 2002 consisted
of decreases in yields on average net loans, average gross securities, and
average federal funds sold. The interest yield on average net loans decreased
from 7.92 percent and 8.14 percent for the three and six months ended June 30,
2001 to 6.85 percent and 6.86 percent for the comparable 2002 periods. The
interest yield on average gross securities decreased to 5.61 percent and 5.54
percent for the second quarter and six months ended 2002 from 6.37 percent and
6.54 percent for the comparable 2001 periods. The interest yield on average
federal funds sold decreased from 4.29 percent and 4.88 percent for the three
and six months ended June 30, 2001 to 1.70 percent and 1.67 percent for the
comparable 2002 periods.

The decrease in yields resulting in a reduction of interest income was partially
offset by volume increases of average interest earning assets. For the 2002
second quarter, average interest earning assets increased $161.6 million (8.8
percent) compared to the 2001 period. The increase primarily consisted of
increases in average net loans of $158.2 million for the three months ended June
30, 2002 compared to the 2001 period. For the six months ended June 30, 2002,
average interest earning assets increased $165.9 million (9.1 percent) compared
to the 2001 period. The increase consisted of increase in average net loans of
$134.6 million and average gross securities of $31.7 million, partially offset
by a decrease in federal funds sold of $0.4 million for the six months ended
June 30, 2002 compared to the 2001 period, respectively. The increase in average
interest earning assets during both 2002 periods were primarily from net
increases in real estate secured land acquisition and construction loans,
commercial mortgages, residential mortgages and investment securities.

Cost of interest bearing liabilities decreased during the three and six month
periods ended June 30, 2002, as compared to the same periods in the prior year.
The costs of average interest bearing liabilities (including demand deposits and
Capital Securities) decreased from 4.15 percent and 4.38 percent for the three
and six months ended June 30, 2001 to 2.70 percent and 2.75 percent for the 2002
comparable periods. The decrease in yields on interest bearing liabilities
consisted primarily of a decrease in yields on interest bearing deposits to 2.25
percent and 2.31 percent for the three and six months ended June 30, 2002 from
4.40 percent and 4.69 percent as compared to the 2001 periods, respectively. The
decrease in yields on interest bearing liabilities was partially


                                       21
<PAGE>


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

offset by a net increase in the average balances of $115.8 million (7.3 percent)
and $118.0 million (7.5 percent) for the three and six months ended June 20,
2002 compared to the 2001 period.

The Company continues a leverage strategy of purchasing government securities
funded by borrowings. Although the leverage strategy results in tighter net
interest spreads, the strategy increases net interest income while managing
interest rate risk. The Company has also taken advantage of opportunities during
the six months ended June 30, 2002 to realize gains on available-for-sale
securities that most likely would have been called or prepaid at par value while
the reinvestment of the sales proceeds minimally affected the yield on the
security portfolio. Net security gains of $0.3 million and $1.4 million were
realized for the three and six months ended June 30, 2002 periods as compared to
$0.9 million and $1.5 million for the 2001 periods, respectively.

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

The provision for credit losses increased $1.1 million to $1.4 million and $2.2
million to $2.6 million for the three and six month periods ended June 30, 2002,
respectively, compared to the same periods in 2001. The increase in the
provision for the three month 2002 period was primarily attributable to an
increase in loans of $21.4 million for the quarter, as well as the on going
reevaluation of existing credits. During the three months ended June 30, 2002,
net charge-offs totaled $1.4 million as compared to $41,000 for the 2001 period.
The increase in net charge-offs for the three month 2002 period was primarily
due to a $1.3 million partial charge-off of a real estate construction loan on
nonaccrual status. The increase in the provision for credit losses for the six
months ended June 30, 2002 was primarily due to an $80.2 million increase in
loans outstanding as of June 30, 2002 compared to year end 2001 and reevaluation
of existing credits. Net charge-offs totaled $2.0 million and $0.1 million for
the six month June 30, 2002 and 2001 periods, respectively. The net charge-off
increase for the six month June 30, 2002 period was primarily due to a $0.6
million charge-off related to the settlement of the Bennett loan and related
litigation, and the $1.3 million partial charge-off of a real estate
construction loan.

Nonaccrual loans were $19.3 million and $19.4 million at June 30, 2002 and 2001
compared to $20.7 million at December 31, 2001. Total nonaccrual loans at June
30, 2002 primarily consisted of a real estate construction loan that was reduced
from $19.5 million at December 31, 2001 to $17.8 million at June 30, 2002 due to
the $1.3 million partial charge-off and principle paydowns, partially offset by
advances to complete the project.

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


                                       22
<PAGE>


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

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

A substantial portion (87.8 percent at June 30, 2002) of total gross loans of
the Company is collateralized by real estate, primarily located in the New York
Metropolitan area. Accordingly, the collectibility of the loan portfolio of the
Company is subject to changes in the real estate market in which the Company
operates. The provisions for credit losses established in 2002 and 2001 and the
related allowance for loan losses reflects net charge-offs and losses incurred
with respect to real estate, time and demand, installment, credit card and other
loans, and the effect of the real estate market and general economic conditions
of the New York Metropolitan area on the loan portfolio. There is no assurance
that the Company will not be required to make future adjustments to the
allowance in response to changing economic conditions or regulatory
examinations.

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

Non-interest income decreased for the three months ended June 30, 2002 by $0.2
million to $2.0 million, a decrease of 9.0 percent. The decrease reflects net
security gains of $0.3 million for the 2002 period compared to $0.9 million for
2001. The decrease was also primarily attributed to a decline in service charges
on deposit accounts ($54,000) and fee income on nontraditional products
($42,000), partially offset by an increase in loan prepayment fees ($336,000).
For the six month period ended June 30, 2002, non-interest income increased by
$0.3 million to $4.5 million, a 7.6 percent increase. The increase is primarily
due to an increase in loan prepayment fees ($545,000), partially offset by a
decrease in net security gains ($165,000) and service charges on deposit
accounts ($85,000) and fee income on nontraditional products ($84,000).

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

Non-interest expense increased $0.9 million (10.4 percent) to $9.8 million and
$1.8 million (10.3 percent) to $19.2 million for the three and six month periods
ended June 30, 2002 from the comparable periods in 2001, respectively. The
primary reason for these increases results from higher levels of salaries and
benefits, professional fees and other expense categories related to credit cards
and corporate filings.

Salaries and employee benefits, the largest component of non-interest expense,
increased by $704,000, or 13.7 percent, and $1,309,000, or 12.8 percent, during
the three and six month periods ended June 30, 2002 compared to the prior year
periods. The increase occurred due to additional personnel employed by the
Company primarily to support deposit and loan growth. In addition, salaries and
employee benefits increased because of additional expenses related to incentive
compensation and bonus plans and payroll taxes. Increases in salaries and
employee


                                       23
<PAGE>


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

benefits expense were partially offset by an increase in the deferral of FASB
No. 91 loan allocation expenses for the 2002 periods as compared to prior year
periods.

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

o        Increase of $7,000 (0.4 percent) and $13,000 (0.4 percent) in occupancy
         and equipment expense. The slight increase in both periods is primarily
         due to an increase in building maintenance and maintenance contracts,
         partially offset by a reduction in utility expense from more
         competitive rates and less severe weather.

o        Increase of $12,000 (2.5 percent) and $81,000 (9.8 percent) in
         advertising and business development. The increases reflect the hiring
         of a public relations firm in 2002 and more emphasis on marketing
         programs to attract retail deposits during a period of higher net loan
         growth in 2002 as compared to 2001.

o        Increase of $20,000 (8.5 percent) and decrease of $103,000 (24.6
         percent) in professional fees. The increases reflect higher Director
         fees and consulting fees in 2002, partially offset by a decline in
         legal fees related to nonaccrual loans.

o        Decrease of $8,000 (3.2 percent) and increase of $14,000 (2.8 percent)
         in communications expense. The decrease for the three month period
         relates to closer management control of such expenses. The increase for
         the six month period relates to an increase in customer mailings
         compared to the prior year.

o        Decrease of $21,000 (5.0 percent) in stationery and printing for the
         six month period. The decrease primarily reflects a decrease in
         printing special purpose letters in 2002 compared to 2001. There was no
         change for the three month periods.

o        Decrease of $3,000 (4.2 percent) and $1,000 (0.7 percent) in FDIC
         insurance. The decreases are related to a reduction in FDIC insurance
         rates for 2002, partially offset by an increase in insured deposits.

o        Increase of $189,000 (30.0 percent) and increase of $295,000 (22.4
         percent) in other expenses. The increases are primarily due to
         increases in branch related expenses, Internet fees and corporate
         filing fees, partially offset by decreases in courier fees.

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

The effective income tax rates for the three and six month periods ended June
30, 2002 were 34.4 percent for both periods, compared to 34.8 percent and 34.6
percent, respectively, for the prior periods in 2001. The lower effective income
tax rate for both periods, as compared to the Federal Statutory tax rate,
primarily reflects benefits associated with tax exempt obligations of states and
political subdivisions, partially offset by state income taxes, net of Federal
tax benefits.


                                       24
<PAGE>


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

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

The Company continues to use two methods to evaluate its market risk to changes
in interest rates, a "Static Gap" evaluation and a simulation analysis of the
impact of changes in interest rates on the Company's net interest income and
cash flow. There have been no changes in the Company's policy limit of
acceptable variances to net interest income at June 30, 2002 as compared to
December 31, 2001. The Company's "Static Gap" at June 30, 2002 was a positive
cumulative $333.7 million in the one year time frame compared to a negative
cumulative $31.4 million at December 31, 2001. The change in the Static Gap at
June 30, 2002 compared to December 31, 2001, reflects an increase in maturities
and acceleration of call dates for securities due to the lower interest rate
environment, an increase in federal funds sold, and an extension of maturities
of time deposits. 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.


                                       25
<PAGE>


                           PART II - OTHER INFORMATION

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

The Annual Meeting of Stockholders of the Company was held on May 23, 2002 for
the purpose of considering and voting upon the following matters:

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

         The results of votes for each of the items above were as follows:

                                                    ITEM I
                                ------------------------------------------------
                                K.J. TORSOE      K.J. PLUNKETT    S.T. SABATINI
                                -----------      -------------    -------------
         Votes:
         ------
         For                    15,791,242         15,792,939       15,745,804
         Withheld                  350,001            348,304          395,439


II.      Approval of an amendment to the Certificate of Incorporation to
         increase the number of authorized shares of preferred stock, with no
         par value, from 100,000 to 10,000,000.

         The results of votes for the item above are as follows:

                                                    ITEM II
                                ------------------------------------------------
         Votes:
         ------
         For                                       12,376,425
         Against                                    1,272,888
         Abstentions                                   60,533

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

(A)      EXHIBITS

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

(3)(a)          Restated Certificate of Incorporation dated July 25, 2002.*

(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)).


                                       26
<PAGE>


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

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

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

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

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

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

(4)(g)          Indenture, dated June 26, 2002, between Registrant and State
                Street Bank and Trust Company of Connecticut, National
                Association, as Trustee.*

(4)(h)          Guarantee Agreement, dated June 26, 2002, by and between
                Registrant and State Street Bank and Trust Company of
                Connecticut, National Association, as Trustee for the holders of
                Capital Securities of USB Statutory Trust III.*

(4)(i)          Amended and Restated Declaration of Trust of USB Statutory Trust
                III.*

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

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

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


                                       27
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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


                                       28
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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


                                       29
<PAGE>


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

(10)(z)         Asset Purchase and Liability Assumptions Agreement dated as of
                June 14, 2002, by and between Union State Bank and Fourth
                Federal Savings Bank.*

(11)            Computation of earnings per share.*

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

----------
*Filed Herewith.

(B)      REPORTS ON FORM 8-K

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

                                   SIGNATURES

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


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

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


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