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, 2001 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 4, 2001
              -------------------------------------------------------
         Common stock, par value                   16,731,404
             $0.01 per share



<PAGE>


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

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

                                                                       PAGE NO.
--------------------------------------------------------------------------------

PART I.  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

           CONDENSED CONSOLIDATED STATEMENTS OF
           CONDITION AS OF JUNE 30, 2001 AND
           DECEMBER 31, 2000 (UNAUDITED)                                   1

           CONDENSED CONSOLIDATED STATEMENTS OF
           INCOME FOR THE THREE MONTHS ENDED
           JUNE 30, 2001 AND 2000 (UNAUDITED).                             2

           CONDENSED CONSOLIDATED STATEMENTS OF
           INCOME FOR THE SIX MONTHS ENDED JUNE 30,
           2001 AND 2000 (UNAUDITED).                                      3

           CONDENSED CONSOLIDATED STATEMENTS OF
           CASH FLOWS FOR THE SIX MONTHS ENDED
           JUNE 30, 2001 AND 2000 (UNAUDITED).                             4

           CONDENSED CONSOLIDATED STATEMENTS OF
           CHANGES IN STOCKHOLDERS' EQUITY FOR THE
           SIX MONTHS ENDED JUNE 30, 2001 AND 2000
           (UNAUDITED).                                                    6

           NOTES TO CONDENSED CONSOLIDATED FINANCIAL
           STATEMENTS (UNAUDITED).                                         8

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                 20

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
          ABOUT MARKET RISK.                                              29

PART II. OTHER INFORMATION AND SIGNATURES

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
          HOLDERS.                                                        30

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.                               30


                                      - i -

<PAGE>


ITEM 1.  PART I - FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
                                                                                   JUNE 30,            DECEMBER 31,
                                                                                     2001                  2000
                                                                                 -----------           ------------
                                                                                     (000's, EXCEPT SHARE DATA)
<S>                                                                              <C>                   <C>
ASSETS
Cash and due from banks                                                          $    34,605           $    37,691
Federal funds sold                                                                    41,400                37,200
                                                                                 -----------           -----------
Cash and cash equivalents                                                             76,005                74,891
Interest bearing deposits in other banks                                                  30                    21
Securities:
    Available for sale (at estimated fair value)                                     498,600               426,909
    Held to maturity (estimated fair value of
       $220,670 in 2001 and $225,088 in 2000)                                        220,648               225,590
Loans, net of allowance for loan losses of
    $11,625 in 2001 and $11,338 in 2000                                            1,085,157             1,075,443
Premises and equipment, net                                                           11,899                11,999
Accrued interest receivable                                                           11,159                14,042
Other real estate owned (OREO)                                                            34                    34
Federal Home Loan Bank of New York stock                                              34,139                34,139
Other assets                                                                          18,034                23,197
                                                                                 -----------           -----------
TOTAL ASSETS                                                                     $ 1,955,705           $ 1,886,265
                                                                                 ===========           ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits                                                    $   197,929           $   189,417
Interest bearing deposits:
    NOW accounts                                                                      73,229                85,761
    Money market accounts                                                             74,324                69,924
    Savings deposits                                                                 423,204               380,539
    Time deposits                                                                    671,642               763,846
                                                                                 -----------           -----------
TOTAL DEPOSITS                                                                     1,440,328             1,489,487
Accrued interest payable                                                               6,331                 7,710
Accrued expenses and other liabilities                                                21,490                 7,815
Securities sold under agreements to repurchase                                       255,398               225,514
Federal Home Loan Bank of New York advances                                           85,920                17,730
                                                                                 -----------           -----------
TOTAL                                                                              1,809,467             1,748,256
Corporation-Obligated mandatory redeemable capital
     securities of subsidiary trust                                                   20,000                20,000
Minority interest-junior preferred stock of consolidated subsidiary                      132                   132
Commitments and contingencies (Note 12)
STOCKHOLDERS' EQUITY:
    Common stock, $0.01 par value; authorized shares 50,000,000;
     issued shares of 17,701,516 in 2001 and 17,464,455 in 2000                          177                   175
    Additional paid-in capital                                                       113,540               111,942
    Retained earnings                                                                 24,667                17,116
    Treasury stock at cost; 970,112 common shares in 2001 and
       873,344 in 2000                                                               (12,296)              (11,158)
    Common stock held for benefit plans                                               (1,593)               (1,431)
    Deferred compensation obligation                                                   1,102                   856
    Accumulated other comprehensive income                                               509                   377
                                                                                 -----------           -----------
TOTAL STOCKHOLDERS' EQUITY                                                           126,106               117,877
                                                                                 -----------           -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $ 1,955,705           $ 1,886,265
                                                                                 ===========           ===========

</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,             JUNE 30,
                                                                                 2001                 2000
                                                                               -----------------------------
                                                                                 (000'S, EXCEPT SHARE DATA)
<S>                                                                          <C>                   <C>
INTEREST INCOME:
Interest and fees on loans                                                   $    21,532           $    21,732
Interest on federal funds sold                                                       497                   474
Interest and dividends on securities:
         Mortgage-backed securities                                                6,485                 6,487
         U.S. Treasury and government agencies                                     3,471                 3,557
         Obligations of states and political subdivisions                            822                   735
         Corporate and other                                                          13                     8
Interest on deposits in other banks                                                    3                     3
Dividends on Federal Home Loan Bank of New York stock                                571                   572
                                                                             -----------           -----------
TOTAL INTEREST INCOME                                                             33,394                33,568
                                                                             -----------           -----------

INTEREST EXPENSE:
Interest on deposits                                                              13,825                13,646
Interest on borrowings                                                             4,252                 4,317
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trust                                      488                   488
                                                                             -----------           -----------
TOTAL INTEREST EXPENSE                                                            18,565                18,451
                                                                             -----------           -----------

NET INTEREST INCOME                                                               14,829                15,117
Provision for loan losses                                                            220                   500
                                                                             -----------           -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                               14,609                14,617
                                                                             -----------           -----------

NON-INTEREST INCOME:
Service charges and fees                                                             878                   842
Other income                                                                         427                   334
Gains (losses) on securities transactions - net                                      851                  (105)
                                                                             -----------           -----------
TOTAL NON-INTEREST INCOME                                                          2,156                 1,071
                                                                             -----------           -----------

NON-INTEREST EXPENSE:
Salaries and employee benefits                                                     5,155                 4,697
Occupancy and equipment expense                                                    1,597                 1,444
Advertising and business development                                                 474                   559
Professional fees                                                                    236                   169
Communications                                                                       247                   259
Stationery and printing                                                              199                   159
FDIC insurance                                                                        71                    59
Amortization of intangibles                                                          226                     3
Other expenses                                                                       631                   621
                                                                             -----------           -----------
TOTAL NON-INTEREST EXPENSE                                                         8,836                 7,970
                                                                             -----------           -----------
Income before income taxes                                                         7,929                 7,718
Provision for income taxes                                                         2,762                 2,685
                                                                             -----------           -----------
NET INCOME                                                                   $     5,167           $     5,033
                                                                             ===========           ===========

BASIC EARNINGS PER COMMON SHARE                                              $      0.31           $      0.30
                                                                             ===========           ===========

DILUTED EARNINGS PER COMMON SHARE                                            $      0.30           $      0.29
                                                                             ===========           ===========

</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,              JUNE 30,
                                                                          2001                  2000
                                                                        --------              --------
                                                                          (000'S, EXCEPT SHARE DATA)
<S>                                                                     <C>                  <C>
INTEREST INCOME:
Interest and fees on loans                                              $ 43,933              $ 41,647
Interest on federal funds sold                                             1,104                   819
Interest and dividends on securities:
         Mortgage-backed securities                                       12,714                12,966
         U.S. Treasury and government agencies                             7,112                 6,816
         Obligations of states and political subdivisions                  1,632                 1,492
         Corporate and other                                                  21                    15
Interest on deposits in other banks                                            5                     5
Dividends on Federal Home Loan Bank of New York stock                      1,199                 1,145
                                                                        --------              --------
TOTAL INTEREST INCOME                                                     67,720                64,905
                                                                        --------              --------

INTEREST EXPENSE:
Interest on deposits                                                      29,639                24,725
Interest on borrowings                                                     7,812                 9,200
Interest on Corporation - Obligated mandatory redeemable
         capital securities of subsidiary trust                              976                   976
                                                                        --------              --------
TOTAL INTEREST EXPENSE                                                    38,427                34,901
                                                                        --------              --------

NET INTEREST INCOME                                                       29,293                30,004
Provision for loan losses                                                    420                   950
                                                                        --------              --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                       28,873                29,054
                                                                        --------              --------

NON-INTEREST INCOME:
Service charges and fees                                                   1,716                 1,739
Other income                                                                 971                   726
Gains (losses) on securities transactions - net                            1,533                  (105)
                                                                        --------              --------
TOTAL NON-INTEREST INCOME                                                  4,220                 2,360
                                                                        --------              --------

NON-INTEREST EXPENSE:
Salaries and employee benefits                                            10,201                 9,393
Occupancy and equipment expense                                            3,140                 2,922
Advertising and business development                                         828                   946
Professional fees                                                            419                   439
Communications                                                               509                   505
Stationery and printing                                                      422                   349
FDIC insurance                                                               141                   119
Amortization of intangibles                                                  452                     6
Other expenses                                                             1,316                 1,232
                                                                        --------              --------
TOTAL NON-INTEREST EXPENSE                                                17,428                15,911
                                                                        --------              --------
Income before income taxes                                                15,665                15,503
Provision for income taxes                                                 5,427                 5,410
                                                                        --------              --------
NET INCOME                                                              $ 10,238              $ 10,093
                                                                        ========              ========

BASIC EARNINGS PER COMMON SHARE                                         $   0.62              $   0.61
                                                                        ========              ========

DILUTED EARNINGS PER COMMON SHARE                                       $   0.60              $   0.59
                                                                        ========              ========
</TABLE>


See notes to condensed consolidated financial statements.

                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED
                                                                                 JUNE 30,             JUNE 30,
                                                                                    2001                 2000
                                                                                 ---------            ---------
OPERATING ACTIVITIES                                                                         (000's)
<S>                                                                              <C>                  <C>
Net income                                                                       $  10,238            $  10,093
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses                                                              420                  950
Depreciation and amortization                                                        1,420                  995
Amortization of premiums on securities - net                                           562                  484
Noncash benefit plan expense                                                           126                  134
Deferred income tax provision (benefit) - net                                        5,480                 (406)
(Gains) losses on securities transactions - net                                     (1,533)                 105
Losses on sale of loans                                                                 --                   13
Proceeds from sale of loans                                                             --                  352
Decrease (increase) in accrued interest receivable                                   2,883               (2,089)
(Decrease) increase in accrued interest payable                                     (1,379)                 535
Other - net                                                                            785               (1,530)
                                                                                 ---------            ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                           19,002                9,636
                                                                                 ---------            ---------

INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                               162,380               12,976
Proceeds from principal paydowns, redemptions and maturities of:
   Securities available for sale                                                    44,739               17,250
   Securities held to maturity                                                     106,432                5,930
Purchases of securities available for sale                                        (275,977)             (54,752)
Purchases of securities held to maturity                                           (91,099)             (16,168)
Net increase in interest bearing deposits in other banks                                (9)                (100)
Increase in loans outstanding                                                      (10,134)            (108,169)
Purchases of premises and equipment - net                                             (868)              (1,634)
                                                                                 ---------            ---------
NET CASH USED FOR INVESTING ACTIVITIES                                             (64,536)            (144,667)
                                                                                 ---------            ---------

FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
   NOW, money market and savings accounts                                           43,045                9,748
Net (decrease) increase in time deposits, net of
   withdrawals and maturities                                                      (92,204)             243,640
Net decrease in securities sold under agreements
   to repurchase -  short-term                                                        (116)             (78,000)
Net decrease in Federal Home Loan Bank of New York
   advances - short-term                                                                --               (7,355)
Proceeds from securities sold under agreements to
   repurchase - long-term                                                           30,000                   --
Repayment of 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                                                            (1,810)              (1,927)
Cash dividends paid                                                                 (2,687)              (2,421)
Proceeds from redemption of junior preferred stock of
    consolidated subsidiary, net                                                        --                   (1)
Proceeds from issuance of common stock and related tax benefit of
      stock options                                                                  1,745                1,467
Purchases of treasury stock                                                         (1,325)              (3,413)
                                                                                 ---------            ---------
NET CASH  PROVIDED BY FINANCING ACTIVITIES                                          46,648              131,738
                                                                                 ---------            ---------
</TABLE>

         -Continued-

                                       4
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                              SIX MONTHS ENDED
                                                                                          JUNE 30,           JUNE 30,
                                                                                            2001               2000
                                                                                          --------           --------
                                                                                                    (000's)
<S>                                                                                       <C>                <C>

INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                                         $  1,114           $ (3,293)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                              74,891             68,311
                                                                                          --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                  $ 76,005           $ 65,018
                                                                                          ========           ========

Supplemental Disclosures:
   Interest paid                                                                          $ 39,806           $ 34,366
                                                                                          --------           --------
   Income tax payments                                                                    $     90           $  6,877
                                                                                          --------           --------
   Transfer of held to maturity securities to available for sale securities               $  9,592           $     --
                                                                                          --------           --------
   Change in shares held in trust for deferred compensation                               $   (246)          $    (70)
                                                                                          --------           --------
   Change in deferred compensation obligation                                             $    246           $     70
                                                                                          --------           --------
   Change in accumulated other comprehensive income                                       $    132           $    706
                                                                                          --------           --------
   Purchase of securities not yet settled:
      Available for sale                                                                  $  2,032           $     --
                                                                                          --------           --------
      Held to maturity                                                                    $  9,994           $     --
                                                                                          --------           --------

</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, 2001
                                                                (000'S, EXCEPT SHARE DATA)

                                         COMMON STOCK      ADDITIONAL                              COMMON STOCK        DEFERRED
                                         SHARES    PAR        PAID-IN    RETAINED     TREASURY         HELD FOR    CONPENSATION
<S>                                  <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

Net income                                                                 10,238

Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $629
   Reclassification adjustment of
      net gains for securities sold,
      net of taxes of $536

Other comprehensive income

Total comprehensive income

Cash dividends:
   Common $0.16 per share                                                  (2,676)
   Junior preferred stock                                                     (11)

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

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

Amortization of RRP awards                                                                                   18

ESOP shares committed to
   be released                                                     42                                        66

Deferred compensation obligation                                                                           (246)            246

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

<TABLE>
<CAPTION>
                                       ACCUMULATED
                                            OTHER            TOTAL
                                     COMPREHENSIVE    STOCKHOLDERS'
<S>                                         <C>            <C>
Balance at January 1, 2001                  $ 377          $117,877

Net income                                                   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 $0.16 per share                                    (2,676)
   Junior preferred stock                                       (11)

Common stock options exercised
   and related tax benefit                                    1,745

Purchases of treasury stock                                  (1,325)

Amortization of RRP awards                                       18

ESOP shares committed to
   be released                                                  108

Deferred compensation obligation                                 --

                                            -----          --------
BALANCE AT JUNE 30, 2001                    $ 509          $126,106
                                            =====          ========
</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, 2000
                           (000'S, EXCEPT SHARE DATA)

                                         COMMON STOCK      ADDITIONAL                              COMMON STOCK        DEFERRED
                                         SHARES    PAR        PAID-IN    RETAINED     TREASURY         HELD FOR    CONPENSATION
<S>                                  <C>          <C>        <C>          <C>         <C>               <C>              <C>

Balance at January 1, 2000           15,884,273   $164       $ 98,926     $13,875      $(6,464)         $(1,490)           $748

Net income                                                                 10,093

Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $469
   Reclassification adjustment
     of net losses for securities
     sold, net of taxes of $39

   Other comprehensive income

Total comprehensive income

Cash dividends:
   Common $0.15 per share                                                  (2,403)
   Junior preferred stock                                                     (11)

Five percent stock dividend             819,975      8         11,274     (11,289)

Common stock options exercised
    and related tax benefit             240,934      2          1,465

Purchases of treasury stock            (273,301)                                        (3,413)

Amortization of RRP awards                                                                                   19

ESOP shares committed to
   be released                                                     50                                        65

Deferred compensation obligation                                                                            (70)             70

                                     ----------   ----       --------    --------      -------          -------            ----
Balance at June 30, 2000             16,671,881   $174       $111,715    $ 10,265      $(9,877)         $(1,476)           $818
                                     ==========   ====       ========    ========      =======          =======            ====
</TABLE>

<TABLE>
<CAPTION>
                                       ACCUMULATED
                                            OTHER            TOTAL
                                     COMPREHENSIVE    STOCKHOLDERS'
<S>                                       <C>         <C>
Balance at January 1, 2000                $(9,348)    $ 96,411

Net income                                              10,093

Other comprehensive income:
   Net unrealized securities
     gains arising during the
     period, net of taxes of $469             652          652
   Reclassification adjustment
     of net losses for securities
     sold, net of taxes of $39                 54           54
                                          -------     --------
   Other comprehensive income                 706          706
                                                      --------
Total comprehensive income                              10,799

Cash dividends:
   Common $0.15 per share                               (2,403)
   Junior preferred stock                                  (11)

Five percent stock dividend                                 (7)

Common stock options exercised
    and related tax benefit                              1,467

Purchases of treasury stock                             (3,413)

Amortization of RRP awards                                  19

ESOP shares committed to
   be released                                             115

Deferred compensation obligation                            --

                                           -------     --------
Balance at June 30, 2000                   $(8,642)    $102,977
                                           =======     ========
</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 and Ad Con, Inc. All significant intercompany accounts and
        transactions are eliminated in consolidation.

2.      ACQUISITION OF LA JOLLA BANK BRANCHES
        -------------------------------------

        On December 1, 2000, the Bank completed the acquisition of the Stamford,
        Connecticut, and Manhattan, New York City, branches of La Jolla Bank
        ("La Jolla"). The two branches acquired had approximately $108.6 million
        in deposits that were assumed by the Bank. The Bank paid a premium of
        $7.1 million for the deposits assumed, which was recorded as an
        intangible asset. The premium is being amortized on a straight-line
        basis over an eight year period, which is the estimated average life of
        the core deposits assumed in the transaction. The Bank also acquired
        premises and equipment for $0.2 million and certain other assets
        totaling $0.1 million, and leased the branch offices from a related
        party of La Jolla. La Jolla retained its loan portfolio and lending
        operations in the New York area. Upon completion of the transaction,
        both branches began operating as Bank branches.

3.      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, 2001 and its operations
        for the three and six month periods ended June 30, 2001 and 2000, and
        cash flows and changes in stockholders' equity for the six month periods
        ended June 30, 2001 and 2000. A summary of the Company's significant
        accounting policies is set forth in Note 4 to the consolidated financial
        statements included in the Company's 2000 Annual Report to Stockholders.

        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.


                                       8

<PAGE>


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

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

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

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

5.      ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
        ------------------------------------------------------------

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

        The Company adopted SFAS No. 133 on January 1, 2001. The Company was not
        required to record a transition adjustment upon adoption of this
        statement, or a fair value adjustment as of June 30, 2001, because no
        derivative financial instruments were outstanding as of these dates.

6.      ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
        --------------------------------------------------------------
        EXTINGUISHMENTS OF LIABILITIES
        ------------------------------

        In September 2000, the FASB issued SFAS No. 140, "Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities," ("SFAS No. 140") replacing SFAS No. 125. SFAS No. 140
        provides consistent application of a financial-components approach that
        recognizes the financial and servicing assets it controls and the
        liabilities it has incurred, derecognizes financial assets when control
        has been surrendered and derecognizes liabilities when extinguished.
        SFAS No. 140 provides consistent guidelines for distinguishing transfers
        of financial assets that are sales from transfers that are secured
        borrowings. SFAS No. 140 is effective for transfers, servicing, or
        extinguishments occurring after March 31, 2001, except for certain
        provisions relating to the accounting and disclosure for secured
        borrowings and collateral for which the effective date was December 15,
        2000. The adoption of the effective provisions of this statement as of
        December 15, 2000 and the remaining provisions effective as of April 1,
        2001 did not have a material impact on the Company's consolidated
        financial statements.

                                       9
<PAGE>

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


7.      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
        -----------------------------------------

        In July 2001, the FASB issued SFAS No. 141, "Business Combinations"
        ("SFAS No. 141"). SFAS No. 141 requires the purchase method of
        accounting for business combinations initiated after June 30, 2001 and
        eliminates the pooling-of-interests method. The Company does not believe
        that the adoption of SFA No. 141 will have a significant impact on its
        financial statements.

        In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
        Intangible Assets" ("SFAS No. 142"), which is 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 Company is currently
        assessing the impact of SFAS No. 142 on its financial statements.

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

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

                                       10
<PAGE>

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


        The computations of basic and diluted earnings per common share for the
        three and six months ended June 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                       2001              2000               2001               2000
----------------------------------------------------------------------------------------------------------------------
NUMERATOR:                                                             (000'S, EXCEPT SHARE DATA)
<S>                                               <C>                <C>                <C>                <C>
 Net income                                       $     5,167        $     5,033        $    10,238        $    10,093
 Less preferred stock dividends                            11                 11                 11                 11
                                                  --------------------------------------------------------------------


  Net income for basic and diluted
     earnings per common share - net
     income available to common
     stockholders                                 $     5,156        $     5,022        $    10,227        $    10,082
                                                  ====================================================================

DENOMINATOR:
 Denominator for basic earnings
     per common share - weighted
     average shares                                16,663,118         16,516,349         16,606,623         16,543,393

 Effects of dilutive securities:
     Director and employee
        stock options                                 361,952            559,669            374,636            610,312
     Restricted stock not vested                        3,366              4,193              3,408              4,223
                                                  --------------------------------------------------------------------
  Total effects of dilutive securities                365,318            563,862            378,044            614,535
                                                  --------------------------------------------------------------------

 Denominator for diluted earnings
     per common share - adjusted
     weighted average shares                       17,028,436         17,080,211         16,984,667         17,157,928
                                                  ====================================================================

Basic earnings per common share                   $      0.31        $      0.30        $      0.62        $      0.61
                                                  ====================================================================
Diluted earnings per common share                 $      0.30        $      0.29        $      0.60        $      0.59
                                                  ====================================================================
</TABLE>


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


9.      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.

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

                                       11
<PAGE>

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


        For the three and six month periods ended June 30, 2001, there were
        gross gains on sales of securities of $851,000 and $1,536,000,
        respectively, and gross losses of $3,000 for the six month period. For
        both the three and six month periods ended June 30, 2000, there were
        gross losses of $105,000.

        Upon adoption of SFAS No. 133 on January 1, 2001, the Company classified
        certain held to maturity securities with a carrying value and fair value
        of approximately $9.6 million to available for sale securities. There
        was no effect on accumulated other comprehensive income as a result of
        the reclassification.

        A summary of the amortized cost, estimated fair values, and related
        gross unrealized gains and losses of securities at June 30, 2001 and
        December 31, 2000 is as follows:



<TABLE>
<CAPTION>
        ===============================================================================================================
                                                                            GROSS              GROSS          ESTIMATED
                                                     AMORTIZED         UNREALIZED         UNREALIZED               FAIR
        JUNE 30, 2001:                                    COST              GAINS             LOSSES              VALUE
                                                     ------------------------------------------------------------------
        AVAILABLE FOR SALE:                                                       (000'S)
        <S>                                           <C>               <C>                 <C>                <C>
        U.S. government agencies                      $116,467           $  1,304           $    893           $116,878
        Mortgage-backed securities                     379,366              1,605              1,315            379,656
        Obligations of states and
          political subdivisions                         1,532                 77                 --              1,609
        Corporate and other                                361                 97                  1                457
                                                      --------           --------           --------           --------
        TOTAL SECURITIES AVAILABLE FOR SALE           $497,726           $  3,083           $  2,209           $498,600
                                                      ========           ========           ========           ========

        HELD TO MATURITY:
        U.S. government agencies                      $119,479           $     --           $  1,816           $117,663
        Mortgage-backed securities                      34,765                 --                437             34,328
        Obligations of states and
          political subdivisions                        66,404              2,329                 54             68,679
                                                      --------           --------           --------           --------
        TOTAL SECURITIES HELD TO MATURITY             $220,648           $  2,329           $  2,307           $220,670
                                                      ========           ========           ========           ========
</TABLE>

                                       12

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                GROSS             GROSS         ESTIMATED
                                                          AMORTIZED        UNREALIZED        UNREALIZED              FAIR
        DECEMBER 31, 2000:                                     COST             GAINS            LOSSES             VALUE
                                                           --------          --------          --------          --------
        AVAILABLE FOR SALE:                                                            (000'S)
        <S>                                                <C>               <C>               <C>               <C>
        U.S. government agencies                           $101,451          $  2,031          $    752          $102,730
        Mortgage-backed securities                          322,712             1,097             1,845           321,964
        Obligations of states and
            political subdivisions                            1,535                55                --             1,590
        Corporate and other                                     564                75                14               625
                                                           --------          --------          --------          --------
        TOTAL SECURITIES AVAILABLE FOR SALE                $426,262          $  3,258          $  2,611          $426,909
                                                           ========          ========          ========          ========

        HELD TO MATURITY:
        U.S. government agencies                           $120,743          $      9          $  1,273          $119,479
        Mortgage-backed securities                           44,358                50             1,081            43,327
        Obligations of states and
            political subdivisions                           60,489             1,800                 7            62,282
                                                           --------          --------          --------          --------
        TOTAL SECURITIES HELD TO MATURITY                  $225,590          $  1,859          $  2,361          $225,088
                                                           ========          ========          ========          ========
</TABLE>


10.     LOANS

        Nonaccrual loans were $19.4 million at June 30, 2001 and $19.7 million
        at December 31, 2000. Restructured loans were $0.2 million at both June
        30, 2001 and December 31, 2000.

        Substantially all of the nonaccruing and restructured loans are
        collateralized by real estate. At June 30, 2001, the Company has no
        commitments to lend additional funds to any customers with nonaccrual or
        restructured loan balances. However, as further described below, in
        order to facilitate the completion of a real estate project for which
        the Bank has a construction loan in nonaccrual status, the Bank may lend
        additional funds to the borrower.

        At June 30, 2001, there are loans aggregating approximately $13,000,
        which are not on nonaccrual status, that were potential problem loans
        which may result in their being placed on nonaccrual status in the
        future.

        At June 30, 2001 and December 31, 2000, 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 $19.3 million and
        $19.7 million, respectively, of which $19.1 million and $19.5 million at
        June 30, 2001 and December 31, 2000, respectively, were in nonaccrual
        status. Where warranted, each impaired loan has a related allowance for
        loan losses determined in accordance with SFAS No. 114. The total
        allowance for loan losses related to impaired loans was $1.5 million and
        $1.4 million at June 30, 2001 and December 31, 2000, respectively. The
        average recorded investment in impaired loans for the six months ended
        June 30, 2001 and year ended December 31, 2000 was approximately $19.4
        million and $5.8 million, respectively. For the three and six months
        ended June 30, 2001 and 2000, interest income recognized by the Company
        on impaired loans was not material.

                                       13

<PAGE>

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

        Restructured loans in the amounts of $0.2 million for both June 30, 2001
        and December 31, 2000 that are considered to be impaired due to a
        reduction in the contractual interest rate, are on accrual status
        because the collateral securing these loans is sufficient to protect the
        contractual principal and interest of the restructured loans. These
        loans have been performing for a reasonable period of time. Interest
        accrued on these loans as of June 30, 2001 is immaterial.

        At June 30, 2001, the Bank had $0.3 million of outstanding loans,
        collateralized by cash and lease receivables, to Bennett Funding Group
        ("Bennett"), which filed for bankruptcy protection during the first
        quarter of 1996. Collection of the Bank's loans continues to be delayed
        by the bankruptcy proceedings. However, as a result of a favorable
        ruling in the second quarter of 1998 by the Bankruptcy Court, 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 as of June 30, 2001. The ruling by the Bankruptcy Court was
        appealed by the Trustee, and in November 2000, the District Court
        reaffirmed the lower Court ruling. The Trustee has appealed the decision
        further to the U.S. Circuit Court of Appeals for the Second Circuit. The
        Bennett loans are on nonaccrual status and a specific allocation is
        included in the allowance for loan losses of $0.3 million. In addition,
        the Trustee contends that the Bank received payments from Bennett under
        the theory of fraudulent conveyance. If the Trustee is successful, the
        Bank would be liable for loan payments aggregating $9.5 million received
        from Bennett for the six year period preceding the bankruptcy filing
        date of March 1996. The Bankruptcy Court dismissed a significant portion
        of the Trustee's fraudulent conveyance claims. The Company believes,
        based on advice of legal counsel, that it will prevail with regard to
        the remaining fraudulent conveyance claims.

        On November 9, 2000, the Company reclassified a real estate construction
        loan 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 the fourth quarter of 2000,
        reducing the loan balance to $17.5 million. During the six month period
        ended June 30, 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 as of June 30,
        2001. In accordance with SFAS No. 114, the Company has provided a
        specific allocation of the allowance for loan losses of $1.3 million for
        this loan as of June 30, 2001. The Bank is currently proceeding with a
        foreclosure action on 35 unsold condominium units and other real estate,
        which collateralizes the loan. The loan is also personally guaranteed by
        the principals, and such guarantees will be pursued to recover any
        losses that may be incurred in connection with the loan. The personal
        guarantees have not been considered in determining the amount of the
        charge-off or allowance for loan losses applicable to this loan. The
        Bank may lend up to approximately $4.5 million to fund the completion of
        the project.

                                       14

<PAGE>

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

11.     BORROWINGS AND STOCKHOLDERS' EQUITY

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

        Short-term securities sold under agreements to repurchase generally
        mature between one and 365 days. The Bank may borrow up to $50.0 million
        from two primary investment firms under master security sale and
        repurchase agreements. There were no outstanding borrowings under these
        agreements at June 30, 2001. 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, 2001 and
        December 31, 2000, the Bank had short-term repurchase agreements of $0.4
        million at an interest rate of 3.47 percent and $0.5 million at an
        interest rate of 6.02 percent, respectively. At both June 30, 2001 and
        December 31, 2000, these borrowings were collateralized by securities
        with an aggregate amortized cost and estimated fair value of $0.4
        million and $0.5 million, respectively.

        Federal funds purchased represent overnight funds. The Bank has federal
        funds purchase lines available with five financial institutions for a
        total of $48.0 million. At June 30, 2001 and December 31, 2000, 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, 2001 and December 31, 2000, 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, 2001 and 2000 is presented in the
        table below.

        --------------------------------------------------------------
        SHORT-TERM BORROWINGS                    2001         2000
        --------------------------------------------------------------
                                           (000's, except percentages)
        Balance at June 30                    $  398   $  92,000
        Average balance outstanding            4,889     142,492
        Weighted-average interest rate
             As of June 30                      3.47%       6.64%
             Paid during period                 5.44        5.96
        ==============================================================


        The Bank had long-term borrowings, which have original maturities of
        over one year, of $255.0 million and $225.0 million in securities sold
        under agreements to repurchase as of June 30, 2001 and December 31,
        2000, respectively. At June 30, 2001 and December 31, 2000, these
        borrowings have an original term of ten years at interest rates between
        4.33 percent and 6.08 percent and 4.52 percent and 6.08 percent,
        respectively, that are callable on certain dates after an initial
        noncall period at the option of the counter party to the repurchase
        agreement. As of June 30, 2001 and December 31, 2000, these borrowings
        are collateralized by securities with an aggregate amortized cost of
        $280.0 million and $257.1 million and estimated fair value of $278.7
        million and $254.8 million, respectively.

                                       15

<PAGE>

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


        At June 30, 2001 and December 31, 2000, long-term FHLB advances totaled
        $85.9 million and $17.7 million, respectively, at interest rates of
        between 4.55 percent and 6.72 percent and 5.12 percent to 6.72 percent
        for June 30, 2001 and December 31, 2000, respectively. At June 30, 2001,
        borrowings totaling $15.9 million are amortizing advances having
        scheduled payments and may not be repaid in full prior to maturity
        without penalty. 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 counter party to the
        advance. At June 30, 2001 and December 31, 2000, these borrowings were
        collateralized by a pledge to the FHLB of a security interest in certain
        mortgage-related assets having an aggregate book value of $96.1 million
        and $19.8 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, 2001, with comparative totals for December 31, 2000, is as follows:

<TABLE>
<CAPTION>
                                                       AFTER 1
                                     WITHIN           BUT WITHIN          AFTER       2001           2000
LONG-TERM DEBT                       1 YEAR             5 YEARS          5 YEARS      TOTAL         TOTAL
------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>              <C>           <C>           <C>
Contractual Payment Date:                            (000's, except percentages)
Total long-term debt                $  3,306          $  30,796        $306,818      $340,920      $242,730
Weighted-average interest rate          5.76%              4.93%           5.29%         5.26%         5.51%
==================================================================================================================
Expected Call Date:
Total long-term debt                $ 13,306          $  40,796        $286,818      $340,920      $242,730
Weighted-average interest rate          5.53%              4.86%           5.31%         5.26%         5.51%
==================================================================================================================
</TABLE>


        At June 30, 2001 and December 31, 2000, the Bank held 341,395 shares of
        capital stock of the FHLB with a carrying value of $34.1 million, which
        is required in order to borrow under the short- and long-term advance
        and securities sold under agreements to repurchase programs from the
        FHLB. The FHLB generally limits borrowings up to an aggregate of 30
        percent of total assets, excluding securities sold under agreements to
        repurchase, upon the prerequisite purchase of shares of FHLB stock. Any
        advances made from the FHLB are required to be collateralized by the
        FHLB stock and certain other assets of the Bank.

                                       16

<PAGE>

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



        The ability of the Company and Bank to pay cash dividends in the future
        is restricted by various regulatory requirements. The Company's ability
        to pay cash dividends to its stockholders is primarily dependent upon
        the receipt of dividends from the Bank. The Bank's dividends to the
        Company may not exceed the sum of the Bank's net income for that year
        and its undistributed net income for the preceding two years, less any
        required transfers to additional paid-in capital. At June 30, 2001, the
        Bank could pay dividends of $29.7 million to the Company without having
        to obtain prior regulatory approval.


        On September 27, 2000, the Company's Board of Directors authorized the
        repurchase of up to 300,000 common shares, or approximately 1.8%, of the
        Company's outstanding common stock at that date. Repurchases of common
        stock are authorized to be made from time to time in open-market and
        private transactions throughout 2001 as, in the opinion of management,
        market conditions may warrant. During the six month period ended June
        30, 2001, the Company purchased 23,100 shares under the repurchase plan
        at an aggregate cost of approximately $276,000. The repurchased common
        shares will be held as treasury stock and will be available for general
        corporate purposes.

12.     COMMITMENTS AND CONTINGENCIES
        -----------------------------

        In the normal course of business, various commitments to extend credit
        are made which are not reflected in the accompanying condensed
        consolidated financial statements. At June 30, 2001, formal credit line
        and loan commitments, which are primarily loans collateralized by real
        estate and credit card lines, approximated $381.5 million and
        outstanding letters of credit totaled $38.3 million. Such amounts
        represent the maximum risk of loss on these commitments.

        Other commitments are described in Note 17 to the consolidated financial
        statements of the Company for the year ended December 31, 2000, which is
        included in the Company's 2000 Annual Report on Form 10-K.

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

13.     SEGMENT INFORMATION

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

                                       17
<PAGE>

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


        Accordingly, all significant operating decisions are based upon
        analysis of the Company as one operating segment or unit.



        General information required by SFAS No. 131, "Disclosure about Segments
        of an Enterprise and Related Information" ("SFAS No. 131") is disclosed
        in the consolidated financial statements and accompanying notes. The
        Company operates only in the U.S. domestic market, specifically the
        lower Hudson Valley, which includes the counties of Rockland,
        Westchester, Orange, Putnam and Dutchess, New York, as well as New York
        City and Long Island, New York, northern New Jersey and southern
        Connecticut. For the three and six months ended June 30, 2001 and 2000,
        there is no customer that accounted for more than ten percent of the
        Company's revenue.

14.     SUBSEQUENT EVENT

        CORPORATION-OBLIGATED MANDATORY REDEEMABLE CAPITAL SECURITIES OF
        SUBSIDIARY TRUST:

        On July 31, 2001, the Company completed its second issuance of trust
        capital securities (the "Capital Securities") that raised $20 million of
        regulatory capital (approximately $19.3 million net proceeds after
        issuance costs). The Company previously issued $20 million of 9.58
        percent trust capital securities in 1997. The aggregate amount of trust
        capital securities issued by the Company totals $40 million at July 31,
        2001.

        The Capital Securities issued on July 31, 2001 will pay interest on a
        floating rate basis, based on the three month LIBOR rate plus 358 basis
        points, with the initial rate set at 7.29 percent. The Capital
        Securities, which are due July 31, 2031 were issued by Union State
        Statutory Trust II, a Connecticut business trust (the "Trust"), that was
        formed by the Company solely to issue the Capital Securities and related
        common stock, and the Trust advanced the proceeds to the Company by
        purchasing $20,619,000 principal amount of junior subordinated debt of
        the Company. The Capital Securities may not be redeemed, except under
        limited circumstances, until 2006, and thereafter at a premium which
        reduces over a five year period. The Company may also reduce outstanding
        Capital Securities through open market purchases. Dividends will be paid
        quarterly in October, January, April and July.

        Capital Securities qualify as Tier I or core capital for the Company
        under the Federal Reserve Board's risk based capital guidelines to the
        extent such securities equal 25 percent or less of Tier I Capital.
        Amounts in excess of the foregoing amount will qualify as Tier II or
        Total Capital. At July 31, 2001, all Capital Securities of the Company
        qualify as Tier I Capital. The proceeds from the sale of the Capital
        Securities will be used for general corporate purposes, including
        additional capital contributions to the Bank. Payments on the junior
        subordinated debt, which are in turn passed through the Trust to the
        Capital Securities holders, will be serviced through existing liquidity
        and cash flow sources of the Company. The Company is permitted to deduct
        interest payments on the Capital Securities under current Federal tax
        law.

                                       18

<PAGE>

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

        As long as no default has occurred and is continuing, the Company has
        the right under the junior subordinated indenture to defer the payment
        of interest at any time or from time to time for a period not exceeding
        20 consecutive quarterly periods for any one extension (each such period
        an "Extension Period"); provided, however, that no Extension Period may
        extend beyond the stated maturity of the junior subordinated debt
        securities. During any Extension Period, the Company may not (i) declare
        or pay any dividends or distributions on, or redeem, purchase, acquire
        or make a liquidation payment with respect to, any of the Company's
        capital stock (which includes common and preferred stock), (ii) make any
        payment of principal, interest or premium, if any, on, or repay,
        repurchase or redeem any debt securities of the Company that rank equal
        with or junior in interest to the junior subordinated debt securities,
        or (iii) make any guarantee payments with respect to any guarantee by
        the Company of the debt securities of any subsidiary of the Company if
        such guarantee ranks equal with or junior in interest to the junior
        subordinated debt securities, in each case subject to certain
        exceptions.

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

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

                                       19

<PAGE>

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


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, 2001. 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 and other yield curves; changes in the credit quality
of borrowers; the extent and timing of actions of the Federal Reserve Board and
other regulatory agencies; customer deposit disintermediation; changes in
customers' acceptance of the Company's products and services; increase in
Federal and state income taxes and/or the Company's effective income tax rate;
and the extent and timing of legislative and regulatory actions and reform,
including the Gramm-Leach Bliley act.

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

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

At June 30, 2001, the Company had total assets of $1,955.7 million, an increase
of $69.4 million or 3.7 percent from December 31, 2000.

The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, of $753.4 million and $686.6 million at June 30, 2001 and
December 31, 2000, respectively, consists of securities held to maturity at
amortized cost of $220.6 million and $225.6 million, securities available for
sale at estimated fair value totaling $498.6 million and $426.9 million at June
30, 2001 and December 31, 2000, respectively, and FHLB stock of $34.1 million at
both June 30, 2001 and December 31, 2000.

During the six months ended June 30, 2001, U.S. Treasury and government agencies
increased $12.9 million due primarily to purchases of $135.0 million in callable
bonds and $9.0 million in discount notes, partially offset by sales of $20.0
million in callable bonds, redemptions and maturities of $110.2 million, and a
net decrease in the estimated fair value of available for sale securities of
$0.9 million. Mortgage-backed securities increased by $48.1 million primarily
due to purchases totaling $224.1 million, and a net increase in the estimated

                                       20
<PAGE>

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


fair value of available for sale securities of $1.0 million, partially offset by
sales of $140.7 million, principal paydowns of $35.7 million and net premium
amortization of $0.6 million. Mortgage-backed securities purchased have fixed or
variable interest rates. The fixed-rate securities have expected
weighted-average lives of less than ten years at the time of purchase. The
Bank's investment in obligations of states and political subdivisions, or
municipal securities, increased by $5.9 million principally due to purchases of
$11.1 million that were partially offset by maturities of $5.2 million during
the six month period ended June 30, 2001. Municipal securities are considered
core investments which are high yielding on a tax equivalent basis and have
diversified maturities. Purchases of municipal securities are dependent upon
their availability in the marketplace and the comparative tax equivalent yield
of such securities to other securities of comparable credit risk and maturity.
The Company currently has $0.5 million of holdings in equity securities. Equity
investments of other publicly traded financial institutions and medium-term
corporate debt securities which are rated investment grade by nationally
recognized credit

                                       21
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------

rating organizations will continue to be evaluated for investment in the future.
The Company continues to exercise its conservative approach to investing by
making high quality investments and controlling interest rate risk by purchasing
both fixed and floating rate securities and through the averaging of investments
in medium-term maturities.

At June 30, 2001, loans outstanding were $1,096.8 million, a net increase of
$10.0 million or 0.9 percent over December 31, 2000. The primary increases of
outstanding loan balances were $20.6 million in commercial mortgages, $8.3
million in residential mortgages, $1.9 million in home equity mortgages, $1.7
million in time secured loans, and $0.7 million in other loan categories,
partially offset by reductions in land acquisition and construction loans of
$17.7 million, time unsecured loans of $2.1 million, personal installment loans
of $1.8 million, credit card loans of $0.7 million and other loan categories of
$0.9 million. The Company had approximately $381.5 million in formal credit
lines and loan commitments outstanding. Management considers its liquid
resources to be adequate to fund loans in the foreseeable future, principally by
utilizing excess funds temporarily placed in federal funds sold, increases in
deposits and borrowings, loan repayments and maturing securities.

The Company's allowance for loan losses increased $0.3 million or 2.5 percent to
$11.6 million at June 30, 2001, from $11.3 million at December 31, 2000. The
allowance for loan losses represents 1.06 percent of gross loans outstanding at
June 30, 2001, compared to 1.04 percent at December 31, 2000. The allowance
reflects a provision of $420,000 and net charge-offs of $133,000 recorded for
the six months ended June 30, 2001.

Management believes that allowance for loan losses at June 30, 2001 reflects the
risk elements inherent in the total loan portfolio at that time. In management's
judgment, the allowance is considered adequate to absorb losses inherent in the
loan portfolio. There is no assurance that the Company will not be required to
make future adjustments to the allowance in response to changing economic
conditions or regulatory examinations.

Total deposits decreased $49.2 million for the six month period ended June 30,
2001 to $1,440.3 million, which represents a 3.3 percent decrease from December
31, 2000. The decrease, as described further below, primarily results from a
decrease in municipal time deposits of $96.7 million, which are used in
conjunction with liquidity management. Excluding municipal time deposits,
deposits increased $47.5 million, or 3.2 percent. Money market and demand
deposits increased $4.4 million and $8.5 million due to the Bank's focus on
attracting low rate deposits, while retail time deposits less than $100,000 and
NOW accounts decreased $1.5 million and $12.6 million, respectively. IRA and
KEOGH time deposits, retail time deposits over $100,000 and savings deposits
increased $3.5 million, $2.5 million and $42.7 million, respectively, primarily
due to customers transferring balances into higher yielding accounts. As noted
above, time deposits greater than $100,000 from local municipalities, which are
obtained on a bidding basis with maturities of 30 to 180 days decreased $96.7
million during the six month period ended June 30, 2001. Depending on rate and
term, the Bank utilizes municipal and large time deposits as an alternative to
borrowed funds.

                                       22
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------

During the six months ended June 30, 2001, the Company increased the amount of
outstanding short and long-term advances with the Federal Home Loan Bank of New
York by $68.2 million and increased borrowings under repurchase agreements by
$29.9 million, as the Bank replaced municipal time deposits greater than
$100,000 with Federal Home Loan Bank borrowings at attractive rates with longer
terms.

Stockholders' equity increased to $126.1 million at June 30, 2001 from the
December 31, 2000 balance of $117.9 million, an increase of 7.0 percent. The
increase primarily results from: $10.2 million of net income for the six month
period ended June 30, 2001; $1.8 million of stock options exercised and the
related tax benefit; an increase of $0.1 million in accumulated other
comprehensive income; and an increase of $0.1 million in other stockholders'
equity categories; partially offset by common stock dividends paid of $2.7
million and treasury stock purchases of $1.3 million.

The Company's leverage ratio at June 30, 2001 was 7.24 percent, compared to 7.12
percent at December 31, 2000. The Company's Tier I and total capital ratios
under the risk-based capital guidelines were 11.52 percent and 12.49 percent at
June 30, 2001, and 10.97 percent and 11.93 percent at December 31, 2000,
respectively. In addition, the Bank exceeds all current regulatory capital
requirements and was in the "well-capitalized" category at June 30, 2001 and
December 31, 2000.

On July 31, 2001, the Company raised $20 million of additional regulatory
capital through its issuance of Capital Securities. This capital qualifies for
Tier I or core capital for regulatory purposes and also provides additional
liquidity (See Note 14 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, 2001 was $5.2
million and $10.2 million compared to $5.0 million and $10.1 million for the
three and six month periods ended June 30, 2000, an increase of 2.7 percent and
1.4 percent, respectively. Diluted earnings per common share were $0.30 and
$0.60 for the three and six month periods ended June 30, 2001, compared to $0.29
and $0.59 for the three and six month periods ended June 30, 2000, increases of
3.4 percent and 1.7 percent, respectively. The increase in net income for the
three and six month periods ended June 30, 2001, compared to the prior year
periods, reflects a lower provision for loan losses, higher non-interest income,
and net security gains, as compared to a net security loss in the prior year
period. These increases to net income were partially offset by lower net
interest income and higher non-interest expenses.

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

                                       23
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------


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, 2001, net interest income
decreased 1.9 percent and 2.4 percent to $14.8 million and $29.3 million from
$15.1 million and $30.0 million for the three and six month periods ended June
30, 2000, respectively. Net interest income decreased in the current periods
primarily due to decreases in the net interest spread and margin, partially
offset by increases in average interest earning assets.

For the three and six months ended June 30, 2001, the net interest spread on a
tax equivalent basis (yield on earning assets less cost of funds, including
demand deposits) was 3.14 percent and 3.18 percent, as compared to 3.53 percent
and 3.58 percent for the prior year periods, respectively. The net interest
margin on a tax equivalent basis (net interest income on a tax equivalent basis
divided by average interest earning assets) for both the three and six months
ended June 30, 2001 was 3.33 percent, as compared to 3.67 percent and 3.72
percent for the prior periods, respectively. The decline in the net interest
spread and margin reflects a decline in yields on interest earning assets
compared to the prior year, which reflects the 275 basis point reduction in
short-term interest rates by the Federal Reserve Board during the first six
months of 2001, while the rates on interest bearing liabilities did not decline
to the same extent, primarily as a result of certificate of deposits and other
accounts which were impacted by the higher rate environment in 2000 and have not
yet repriced, as well as the assumption of higher rate deposits from La Jolla
Bank in December 2000.

Yields on interest earning assets on a tax equivalent basis decreased from 8.02
percent and 7.93 percent for the three and six month periods ended June 30, 2000
to 7.29 percent and 7.56 percent for the three and six month period ended June
30, 2001, respectively. The decreases for both the three and six month periods
ended June 30, 2001, as compared to the prior year periods, consisted of a
decrease in the yield on average net loans from 8.74 percent to 7.92 percent and
from 8.64 percent to 8.14 percent, a decrease in the yield on investments from
6.77 percent to 6.37 percent and from 6.72 percent to 6.54 percent, and a
decrease in the yield on federal funds sold from 6.24 percent to 4.29 percent
and from 5.98 percent to 4.88 percent, respectively.

The decrease in interest income due to the decrease in yields on interest
earning assets was partially offset by an increase in average balances. Average
balances of net loans, investments and federal funds sold for the three and six
month periods ended June 30, 2001, as compared to the prior year periods
increased $91.9 million (9.3 percent) and $117.1 million (12.1 percent), $42.4
million (6.3 percent) and $26.0 million (3.9 percent), and $15.5 million (51.6
percent) and $17.8 million (65.1 percent), respectively. Total earning assets
for the three and six month periods ended June 30, 2001 increased $149.8 million
(8.8 percent) and $160.9 million (9.7 percent), as compared to the prior year
periods, respectively.

Yields on interest bearing liabilities decreased during the three month period
ended June 30, 2001, and increased slightly for the six months ended June 30,
2001, as compared to

                                       24
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------


the prior year periods. The decrease in yield on interest bearing liabilities
(including demand deposits) from 4.49 percent to 4.15 percent for the three
months ended June 30, 2001, as compared to the 2000 period, was primarily due to
a decrease in yield on interest bearing deposits from 4.75 percent to 4.40
percent during a period of declining rates. The decrease in yield on interest
bearing deposits for the three month period ended June 30, 2001 is also due to
the repricing to lower current market rates of higher yielding deposits assumed
in December 2000 from the two La Jolla branches acquired. The decrease in
interest expense due to the decrease in yields on interest bearing liabilities
was partially offset by an increase in average interest bearing liabilities of
$145.6 million (8.9 percent) for the three month period ended June 30, 2001, as
compared to the prior year period. The increase in interest bearing liabilities
primarily consists of an increase in average total deposits of $126.9 million
(9.6 percent).

The repricing of deposits has had less of an effect on the yield on interest
bearing liabilities for the six month period ended June 30, 2001. The yield on
interest bearing liabilities increased from 4.35 percent to 4.38 percent for the
six month period ended June 30, 2001, as compared to the prior year period. The
increase in yield was primarily due to an increase in yield on total deposits
from 3.93 percent for the June 30, 2000 period to 4.08 percent for the current
period. The increase reflects the impact of the high rate environment in 2000 on
certificates of deposits and other accounts that have not yet repriced, as well
as the assumption of La Jolla deposits discussed above.

The Company's leverage strategy of purchasing government securities funded by
borrowings also impacts net interest income and net interest margins. Although
the leverage strategy results in tighter spreads, the strategy increases net
interest income while managing interest rate risk.

The Company has taken advantage of opportunities to restructure the investment
portfolio during the first half of 2001, which will impact net interest income.
Sales and subsequent repurchases of certain securities were transacted as
opportunities became available to restructure the "available for sale" security
portfolio resulting in increased yields in certain cases, while slightly
increasing the weighted average life of the portfolio, and simultaneously
generating net security gains of $1,533,000 (approximately $900,000 after tax).
Increased yields occurred in over 85 percent of the sales transactions, which
partially offset a reduction in the overall portfolio yield resulting from the
repayment of higher yielding callable U.S. government agency securities (which
were called during the first six months of 2001) and decreased interest rates in
floating rate securities. The proceeds from the called securities were invested
in floating rate securities to manage interest rate risk, as well as other
callable agency securities.


PROVISION FOR LOAN LOSSES
-------------------------

The provision for loan losses decreased $280,000 to $220,000 and $530,000 to
$420,000 for the three and six month periods ended June 30, 2001, respectively,
compared to the same periods in 2000. During the three and six month periods
ended June 30, 2001, net

                                       25
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------

charge-offs totaled $41,000 and $133,000, compared to net charge-offs of
$139,000 and $179,000 for the three month and six month periods ended June 30,
2000, respectively. The net charge-offs in the three and six month periods ended
June 30, 2001 and 2000 primarily relate to real estate and credit card loans.
Nonaccrual loans were $19.4 million and $1.6 million at June 30, 2001 and 2000,
respectively, compared to $19.7 million at December 31, 2000. It is the
Company's policy to discontinue the accrual of interest on loans when, in the
opinion of management, a reasonable doubt exists as to the timely collectibility
of the amounts due. Net income is adversely impacted by the level of
non-performing assets of the Company since, in addition to foregone revenue, the
Company must increase the level of provision for loan losses, and incur other
costs associated with collections of past due balances.

An evaluation of the quality of the loan portfolio is performed by management on
a quarterly basis as an integral part of the credit administration function,
which includes the identification of past due loans, non-performing loans and
impaired loans, assessments of the expected effects of the current economic
environment and industry, geographic and customer concentrations in the loan
portfolio, and review of the historical loan loss experience. Management takes a
prudent and cautious position in evaluating various business and economic
conditions in relation to the Company's loan portfolio. In Management's
judgment, the allowance for loan losses at June 30, 2001 reflects the risk
elements inherent in the total loan portfolio and is considered adequate to
absorb losses inherent in the portfolio at that time. The amount of the
provision charged to income and changes in the allowance for loan losses
reflects the growth of the loan portfolio, net charge-offs and losses incurred,
and the effect of the real estate market and general economic conditions of the
New York Metropolitan area on the loan portfolio. There is no assurance that the
Company will not be required to make future adjustments to the allowance in
response to changing economic conditions or regulatory examinations.

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

Non-interest income for the three and six month periods ended June 30, 2001
increased by $1,085,000 (101.3 percent) to $2,156,000, and increased $1,860,000
(78.8 percent) to $4,220,000 compared to the same periods in 2000, respectively.
The increase for the three and six month periods ended June 30, 2001 primarily
reflects net gains on security sales of $851,000 and $1,533,000, respectively,
as compared to net losses of $105,000 for both periods in 2000. The increase for
the three month period also reflects an increase in service charges and fees of
$36,000, U.S.B. Financial Services, Inc. revenue of $25,000 and other fee
income. The increase for the six month period reflects an increase in letter of
credit fees of $167,000, wire transfer fees of $27,000, and other fee income,
partially offset by a decrease in service charges and fees of $24,000. The other
income increases primarily reflects higher credit card fee income and
commissions on ancillary products.

NON-INTEREST EXPENSE
--------------------

Non-interest expense increased $866,000 (10.9 percent) to $8,836,000 and
$1,517,000 (9.5 percent) to $17,428,000 for the three and six month periods
ended June 30, 2001

                                       26
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------

from the comparable periods in 2000, respectively. The primary reason for these
increases results from higher levels of salaries and benefits, occupancy and
equipment expense, stationery and printing expense and other expense categories
related to the La Jolla branch acquisition, as well as increases in expenses
necessary to expand and support increased business volume and balance sheet
growth. These increases were partially offset by a decrease in advertising and
business development expense.

Salaries and employee benefits, the largest component of non-interest expense,
increased by $458,000, or 9.8 percent and $808,000 or 8.6 percent during the
three and six month periods ended June 30, 2001 compared to the prior year
periods. The increase occurred due to additional personnel employed by the
Company primarily from the acquisition of the two La Jolla branches in December
2000. In addition, salaries and employee benefits increased because of
additional expenses related to the cost of employee benefit programs such as
retirement and stock plans, medical coverage, and tuition reimbursement.
Increases in salaries and employee benefits expense were partially offset by an
increase in the deferral of FASB No. 91 loan allocation expenses of $58,000 and
$98,000 for the three and six month periods ended June 30, 2001, respectively,
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, 2001 compared to the prior year
periods, were due to the following:

        Increase of $153,000 (10.6 percent) and $218,000 (7.5 percent) in
        occupancy and equipment expense. This increase is primarily due to an
        increase in rent, building maintenance and utilities expense for the two
        additional locations in New York City and Stamford, Connecticut, and
        higher equipment maintenance and repair expenses relating to the
        Company's other facilities and computer related equipment.

        Decrease of $85,000 (15.2 percent) and $118,000 (12.5 percent) in
        advertising and business development. The decrease reflects less
        emphasis on marketing programs in the 2001 periods as compared to
        aggressive advertising programs in 2000 to attract retail deposits
        during a period of higher loan growth.

        Increase of $67,000 (39.6 percent) and decrease of $20,000 (4.6 percent)
        in professional fees. The increase for the three month period reflects
        additional legal fees with respect to foreclosure and other litigation
        costs related to a nonaccrual real estate construction loan. The
        decrease for the six month period primarily reflects lower examination
        fees for 2001, partially offset by an increase in the foreclosure and
        collection litigation costs referred to above.

        Decrease of $12,000 (4.6 percent) and increase of $4,000 (0.8 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 additional mailings of privacy brochures
        in June 2001.

                                       27
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------


        Increase of $40,000 (25.2 percent) and $73,000 (20.9 percent) in
        stationery and printing. The increase primarily reflects an increase in
        office supplies and equipment necessary to support the two new locations
        in New York City and Stamford, Connecticut.

        Increase of $12,000 (20.3 percent) and $22,000 (18.5 percent) in FDIC
        insurance. The increase is related to the higher level of insured
        deposits during the first half of 2001 compared to the prior year
        periods.

        The increase in amortization of intangibles to $226,000 and $452,000 for
        the three and six month periods ended June 30, 2001 compared to $3,000
        and $6,000 for the prior year periods, respectively, reflects the
        amortization of intangible assets resulting from the La Jolla deposit
        acquisition.

        Increase of $10,000 (1.6 percent) and increase of $84,000 (6.8 percent)
        in other expenses. The increases are primarily due to increased courier
        fees for the two additional branch locations and Internet set-up fees at
        the corporate headquarters, partially offset by the reduction in credit
        card vendor reserves and a reduction in insurance expense.

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

The effective income tax rates for the three and six month periods ended June
30, 2001 were 34.8 percent and 34.6 percent, respectively, compared to 34.8
percent and 34.9 percent, respectively, for the prior periods in 2000. The lower
effective tax rate for the six month period ended June 30, 2001 primarily
reflects lower state income taxes.

                                       28
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
         ----------------------------------------------------------------
         RESULTS OF OPERATIONS (cont'd)
         ------------------------------

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

Quantitative and qualitative disclosures about market risk at December 31, 2000
were reported in the Company's 2000 Annual Report on Form 10-K. There have been
no material changes in the Company's market risk exposures at June 30, 2001
compared to December 31, 2000. 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 entered into any
derivative financial instruments during the six months ended June 30, 2001.

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, 2001 as compared to
December 31, 2000. The Company's "Static Gap" at June 30, 2001 was a negative
$189.1 million in the one year time frame compared to a negative $181.7 million
at December 31, 2000. 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.

                                       29
<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 17, 2001 for
the purpose of considering and voting upon the following matters:

I.    Election of two directors, Messrs. Howard V. Ruderman and Edward T. Lutz,
      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
                          -----------------------------------------------
                           H.V. RUDERMAN              E.T. LUTZ
-------------------------------------------------------------------------
Votes:
        For                   14,481,020              14,475,956
--------
        Withheld                 281,911                 286,975


II.   Approval of the 2001 Employee Stock Option Plan.

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

                                             ITEM II
--------------------------------------------------------------------------------
Votes:
        For                                 11,429,945
--------
        Against                                781,080
        Abstentions                             99,565


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

(A)     EXHIBITS

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

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

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

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

                                       30
<PAGE>

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

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

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

(4)(d)            Junior Subordinated Indenture, dated July 31, 2001,
                  between Registrant and State Street Bank and Trust Company of
                  Connecticut, National Association, as trustee (Registrant will
                  furnish copies to the Securities and Exchange Commission upon
                  request).

(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 Capital Trust II
                  (Registrant will furnish copies to the Securities and Exchange
                  Commission upon request).

(4)(f)            Amended and Restated Declaration of Trust of Union State
                  Capital Trust II (Registrant will furnish copies to the
                  Securities and Exchange Commission upon request).

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

                                       31
<PAGE>


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

(A)   EXHIBITS (CONT'D)

Exhibit No.       Exhibit
-------------------------
(10)(e)           Registrant's 1993 Incentive Stock Option Plan
                  (incorporated herein by reference from Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 1999
                  ("1999 Third Quarter 10-Q"), Exhibit (10)(e)).

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

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

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

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

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

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

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

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

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

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

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

                                       32
<PAGE>

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

(A)   EXHIBITS (CONT'D)

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

(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 ("Tappan Zee 1996 10-K"), 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 ("Tappan Zee Registration
                  Statement"), Exhibit 10.7).

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

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

(10)(x)           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)(y)           Registrant's Retirement Plan for Non-Employee Directors of
                  U.S.B. Holding Co., Inc. and Certain Affiliates dated
                  effective as of May 19, 1999 (incorporated herein by reference
                  to the Registrant's Quarterly Report on Form 10-Q for the
                  quarter ended June 30, 1999, (Exhibit (10)(ll)).

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

                                       33
<PAGE>

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

(A)   EXHIBITS (CONT'D)

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

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

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

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

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

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

(10)(ff)          Asset Purchase and Account Assumption Agreement by and
                  between Union State Bank and La Jolla Bank dated May 25, 2000
                  (incorporated herein by reference to the Registrant's
                  Quarterly Report on Form 10-Q for the six months ended June
                  30, 2000 Exhibit (10)(oo).

(11)              Computation of earnings per share.*

*Filed Herewith.

(B)     REPORTS ON FORM 8-K

        No reports on Form 8-K were filed during the quarter ended June 30,
2001.

                                       34

<PAGE>


                                   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 10, 2001

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



/s/ Thomas E. Hales                            /s/ Steven T. Sabatini
------------------------------------           --------------------------------

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







                                       35