<PAGE> 1
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
-----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------
May 17, 1995
To the Shareholders of U.S.B. Holding Co., Inc.:
At the direction of the Board of Directors (the "Board") of U.S.B. Holding
Co., Inc., a Delaware corporation (the "Company"), NOTICE IS HEREBY GIVEN
that the Annual Meeting of Shareholders of the Company will be held at the
Comfort Inn, 425 East Route 59, Nanuet, New York, on Wednesday, May 17, 1995
at 10:00 a.m. (local time), for the purpose of considering and voting upon
the following matters:
1. Election of two directors, constituting Class I members of the
Board, to a three-year term of office.
2. An amendment to the Director Stock Option Plan (covering non-employee
directors) to increase the annual option grant amount per director.
3. Any other business which may be properly brought before the meeting
or any adjournment thereof.
By order of the Board of Directors
/s/ Michael H. Fury
-----------------------------------
Michael H. Fury, Secretary
April 24, 1995
YOU ARE REQUESTED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE, WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR
NOT. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF YOU
ATTEND THE MEETING YOU MAY REVOKE YOUR PROXY AT THAT TIME, IF YOU WISH.
<PAGE> 2
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
-----------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
May 17, 1995
This Proxy Statement and the accompanying form of proxy are being sent to
the shareholders of U.S.B. Holding Co., Inc., a Delaware corporation (the
"Company"), in connection with the solicitation by the Board of Directors of
the Company of proxies to be voted at the Annual Meeting of Shareholders of
the Company (the "Meeting") to be held at 10:00 a.m. (local time) on
Wednesday, May 17, 1995, at the Comfort Inn, 425 East Route 59, Nanuet, New
York, and at any adjournments thereof. The Notice of Meeting, this Proxy
Statement and the accompanying form of proxy are being mailed to the
shareholders on or about April 24, 1995. The Annual Report of the Company for
the year 1994 has been furnished to shareholders prior to or with this Proxy
Statement.
At the Meeting, two directors, constituting Class I members of the Board,
will be elected to the Board of Directors to serve for a three-year term
(until the 1998 Annual Meeting of Shareholders), with each director to hold
office until his successor has been duly elected and qualified, or until his
earlier death, resignation or removal.
In addition to the election of directors, shareholders will be asked at
the Meeting to approve an amendment to the existing Director Stock Option
Plan for non-employee directors.
VOTING RIGHTS AND PROXIES
The Board of Directors of the Company has fixed the close of business on
April 7, 1995, as the record date for determination of shareholders entitled
to notice of, and to vote at, the Meeting. At the close of business on such
date, there were outstanding and entitled to vote 2,467,963 shares of common
stock, $5 par value per share ("Common Stock"), which is the Company's only
authorized and outstanding class of stock entitled to vote at the Meeting.
A majority of the outstanding shares of Common Stock is required to be
represented at the Meeting, in person or by proxy, to constitute a quorum.
Each outstanding share of Common Stock is entitled to one vote. There will be
no cumulative voting of shares for any matter voted upon at the Meeting.
Directors are elected by a plurality of the votes cast. Abstentions and
broker nonvotes will be disregarded and have no effect on the outcome of the
election of directors. The affirmative vote of the holders of a majority of
the shares of Common Stock represented at the meeting will be required to
approve the amendment to the Director Stock Option Plan. In determining
whether this proposal has received the requisite number of affirmative votes,
abstentions and broker nonvotes will have the same effect as votes against
the proposal.
1
<PAGE> 3
If the enclosed form of proxy is properly executed and returned to the
Company prior to or at the Meeting and is not revoked prior to its exercise,
all shares represented thereby will be voted at the Meeting and, where
instructions have been given by a shareholder, will be voted in accordance
with such instructions.
Any shareholder executing a proxy which is solicited hereby has the power
to revoke it prior to exercise of the authority conferred thereby. Revocation
may be made effective by attending the Meeting and voting the shares of stock
in person or by delivering to the Secretary of the Company at the principal
offices of the Company prior to exercise of the Proxy a written notice of
revocation or a later-dated, properly executed proxy.
The solicitation of proxies will be by mail, but proxies also may be
solicited by telephone, telegram or in person by directors, officers and
other employees of the Company or of Union State Bank (the "Bank"), the
Company's principal subsidiary. The Company will bear all costs of soliciting
proxies. Should the Company, in order to solicit proxies, request the
assistance of other financial institutions, brokerage houses or other
custodians, nominees or fiduciaries, the Company will reimburse such persons
for their reasonable expense in forwarding proxy materials to shareholders
and obtaining their proxies.
Under the laws of the State of Delaware, the state of incorporation of the
Company, a shareholder dissenting with respect to any of the matters proposed
to be acted upon, whether dissenting in writing, by failing to vote or by
voting against the proposals, or otherwise dissenting, is not entitled to
have his shares appraised and paid for by the Company.
ITEM 1: ELECTION OF DIRECTORS
Two directors, Mr. Herbert Peckman and Mr. Howard V. Ruderman,
constituting Class I members of the Board of Directors, are proposed to be
elected to serve for a three-year term (until the 1998 Annual Meeting of
Shareholders), with each to hold office until his successor shall have been
duly elected and qualified, or until his earlier death, resignation or
removal.
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors, as nearly equal in
number as possible, with terms expiring in successive years. There are
currently three Class I directors with terms expiring at this meeting, two
Class II directors with terms expiring in 1996 and two Class III directors
with terms expiring in 1997, making a total of seven directors.*
All proxies which are timely received in proper form will be voted FOR the
Board's nominees for director, unless contrary instructions are given. All
nominees are presently directors of the Company. If any nominee is unable to
serve, the Board of Directors may designate a substitute nominee, in which
event the votes which would have been cast for the nominee not serving will
be cast for the substitute nominee.
The following information is furnished with respect to each of the Board's
nominees for Class I director and the Class II and Class III directors
continuing in office.
- -------
* Mr. James B. White, a Class I director whose term expires at the time of
the Meeting, has not been nominated by the Board of Directors to stand for
re-election as a director. Upon the expiration of Mr. White's term, there
will be a total of six directors. Mr. White ceased to be employed as an
officer of the Company and the Bank as of February 24, 1995.
2
<PAGE> 4
NOMINEES FOR DIRECTOR
CLASS I
(TERMS EXPIRING IN 1998)
<TABLE>
<CAPTION>
Name, Age, Other Positions with the Company Served as a
or the Bank and Principal Occupation for the Past Five Years Director Since
- ---------------------------------------------------------------- --------------
<S> <C>
Herbert Peckman, 83 1982
Proprietor, Peckman's Liquor Store, Pearl River, NY
Howard V. Ruderman, 66 1982
President, Mohegan Electric Supply Co., Mohegan Lake, NY
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS II
(TERMS EXPIRING IN 1996)
<TABLE>
<CAPTION>
Name, Age, Other Positions with the Company Served as a
or the Bank and Principal Occupation for the Past Five Years Director Since
- ------------------------------------------------------------------- --------------
<S> <C>
Fred F. Graziano, M.D., 74 1982
Licensed physician in State of New York; offices in Nanuet, NY;
Treasurer of the Bank
Kenneth J. Torsoe, 59 1982
President, Torsoe Brothers Construction Corp., Suffern, NY; partner,
Normandy Village Company; owner, Normandy Village Apts., Nanuet, NY
</TABLE>
CLASS III
(TERMS EXPIRING IN 1997)
<TABLE>
<CAPTION>
Name, Age, Other Positions with the Company Served as a
or the Bank and Principal Occupation for the Past Five Years Director Since
- --------------------------------------------------------------------------------- --------------
<S> <C>
Michael H. Fury, 67 1982
Attorney, partner in law firm of Fury & Kennedy, Pearl River, NY;
Secretary and General Counsel of the Company and the Bank
Thomas E. Hales, 58 1982
Chairman of the Board and Chief Executive Officer of the Company (from 1982);
Chairman of the Board of the Bank (from 1981); Chief Executive Officer of the Bank
(from 1983); President of the Company and the Bank (from 1984)
</TABLE>
EXECUTIVE OFFICERS
In addition to Mr. Hales, the executive officers of the Company are Robert
F. Picarelli, 59, Executive Vice President of the Company since 1987, Steven
T. Sabatini, 43, Executive Vice President and Chief Financial Officer of the
Company since March 22, 1995 (acting Chief Financial Officer from February
27, 1995 until March 22, 1995), and Raymond J. Crotty, 47, Executive Vice
President of the Bank since 1992. Messrs. Picarelli, Sabatini and Crotty do
not hold their offices for any specific term. James B. White ceased to be
employed as Executive Vice President and Chief Financial Officer of the
Company and the Bank as of February 24, 1995.
3
<PAGE> 5
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company met 12 times during 1994. Each
incumbent director attended at least 75% of the Board meetings held during
the year. The only standing committee of the Board is the Stock Option
Committee, comprised of Messrs. Ruderman (Chairman), Fury and Peckman. The
Board of Directors of the Company does not have a standing executive, audit,
nominating or compensation committee or committees performing similar
functions.
Each of the directors of the Company (other than James B. White) is also a
director of the Bank, which is the Company's principal subsidiary. The Bank's
Board of Directors met 12 times last year and each director attended at least
75% of its meetings. Among its standing committees, the Board of Directors of
the Bank has an Executive Committee, an Examining Committee, a Compensation
Committee and an Asset/Liability Committee.
The Executive Committee of the Bank's Board of Directors supervises the
day-to-day business of the Bank, but does not have authority to act on
matters which are not within the ordinary course of business. The committee's
present voting members are Messrs. Torsoe (Chairman), Graziano, Fury,
Ruderman, Peckman and Hales.
The Examining Committee of the Bank's Board of Directors serves many of
the purposes which would be served by an audit committee. It reviews the
Bank's internal auditing and control procedures and reviews and makes
recommendations concerning internal accounting controls. Its present members
are Messrs. Ruderman (Chairman), Peckman and Torsoe.
The Compensation Committee of the Bank's Board of Directors establishes
and reviews the policies and standards for hiring employees and makes
recommendations to the Bank's Board concerning hiring, promotions and salary
adjustments. Its present members are Messrs. Ruderman (Chairman), Fury and
Peckman.
The Asset/Liability Committee of the Bank's Board of Directors establishes
and reviews the Bank's policies and standards for investments and makes
recommendations to the Bank's management on investment matters. Its present
members are Messrs. Torsoe (Chairman), Fury and Graziano.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
Rules issued thereunder, the Company's directors and executive officers are
required to file with the Securities and Exchange Commission ("SEC") reports
of ownership and changes in ownership of Common Stock. Copies of such forms
are required to be filed with the Company. The Company believes that certain
directors and executive officers have engaged in Common Stock transactions
which are required to be reported to the SEC and have not yet been reported.
COMPENSATION OF DIRECTORS
Each director of the Company during 1994 received $1,016 for each meeting
of the Company's Board of Directors from January through November 1994 and
$1,100 per meeting beginning in December 1994. In addition, each director of
the Bank received $1,700 for each meeting of the Bank's Board of Directors
from January through November 1994, and $1,900 per meeting beginning in
December 1994. No compensation is paid to directors for serving on or
attending meetings of the committees of the Company's or Bank's Board of
Directors.
4
<PAGE> 6
DIRECTOR STOCK OPTION PLAN
Under the Company's Director Stock Option Plan, each non-employee director
automatically receives annually, effective as of the close of each annual
meeting of shareholders of the Company, a non-qualified option to purchase a
fixed number of shares of Common Stock at an exercise price equal to the
market value of such shares on the date of the grant. Subject to shareholder
approval at the 1995 Annual Meeting of an amendment to the plan adopted by
the Board in 1994, each eligible director currently receives an option
covering 3,500 shares of Common Stock annually. (See ITEM 2: AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN.) The options may not be exercised prior to the
first anniversary of the date of grant and expire ten years after the date of
grant. At December 31, 1994, options had been granted under the plan for
57,940 shares, of which options for 18,900 shares had been exercised and
options for 39,040 shares (of which 27,490 were immediately exercisable) were
outstanding.
5
<PAGE> 7
OWNERSHIP OF SHARES BY MANAGEMENT
The following table sets forth certain information as of April 7, 1995
regarding the amount of Common Stock beneficially owned by the Company's
directors and director nominees, the executive officers listed below under
EXECUTIVE COMPENSATION and all directors and executives as a group:
<TABLE>
<CAPTION>
Number of Shares
and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class
- ----------------------------------------------- --------------------- ----------
<S> <C> <C>
Raymond J. Crotty 601 (a) 0.02
Michael H. Fury 40,987 (b) 1.66
Fred F. Graziano, M.D. 61,761 (c) 2.50
Thomas E. Hales 260,112 (d) 10.54
Herbert Peckman 40,886 1.66
Robert F. Picarelli 5,739 (e) 0.23
Howard V. Ruderman 126,058 (f) 5.11
Kenneth J. Torsoe 250,744 (g) 10.16
James B. White 18,583 (h) 0.75
All directors and executive officers as a group
(10 individuals) 805,471 (i) 32.64
</TABLE>
- ------
* The table shows all shares as to which each named beneficial owner
possessed sole or shared voting or investment power as of the specified
date, including shares held by, in the name of, or in trust for the spouse
and dependent children of the named individual and other relatives living
in the same household, even if beneficial ownership of such shares has been
disclaimed by the named individual. Unless otherwise indicated, the named
beneficial owner was the sole and exclusive owner of all listed shares as
of the specified date. The table does not include that portion of the
245,145 shares owned by the Company's Employee Stock Ownership Plan (With
401(k) Provisions) (the "KSOP"), of which Mr. Peckman is trustee, nor that
portion of the 3,003 shares owned by the Bank's Supplemental Employees'
Investment Plan (the "SEIP") which may be allocated to any named beneficial
owner.
(a) Includes 585 shares owned by Mr. Crotty jointly with his wife. Does not
include 14,591 or 168 shares allocated to Mr. Crotty under the KSOP and
SEIP, respectively.
(b) Includes 20,905 shares owned by Mr. Fury jointly with his wife and 1,188
shares which he holds as trustee for his children.
(c) Includes 43,840 shares held by Mr. Graziano's wife.
(d) Includes 91,976 shares owned by Mr. Hales jointly with his wife, 32,891
shares owned by his wife, 1,075 shares held by Mr. Hales as custodian for
his grandchildren and 16,886 shares held by the Hales Family Foundation,
Inc. Does not include 35,572 or 1,856 shares allocated to Mr. Hales under
the KSOP and SEIP, respectively.
(e) Includes 4,843 shares owned by Mr. Picarelli jointly with his wife. Does
not include 15,825 or 210 shares allocated to Mr. Picarelli under the
KSOP and SEIP, respectively.
(f) Includes 605 shares held by Mr. Ruderman in trust for his brother.
(g) Includes 2,244 shares owned by Mr. Torsoe's son.
(h) Includes 868 shares which Mr. White holds in trust for his sons. Does not
include 9,220 or 769 shares allocated to Mr. White under the KSOP and
SEIP, respectively.
(i) If shares owned by Harold R. Torsoe were included, the total would be
999,531 shares (40.50%). Harold R. Torsoe is the brother of Kenneth J.
Torsoe. However, Kenneth J. Torsoe disclaims beneficial ownership of the
shares owned by his brother.
6
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth cash and certain other compensation paid to
or earned by the chief executive officer and the three other executive
officers of the Company for the years indicated. The Bank, which is the
principal subsidiary of the Company, has paid or accrued all of the cash
compensation shown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Name and Annual Compensation Compensation
Principal ----------------------------------- -------------- All Other
Position(s) Year Salary (1) Bonus(2) Other(3) Options(4) Compensation(5)
- -------------------- ------ ---------- ---------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Hales 1994 $320,000 $420,000 -- 20,000 $47,500
Chairman of the 1993 $290,000 $372,000 -- 13,690 $32,497
Board and Chief 1992 $287,200 $285,000 -- 13,690 $32,364
Executive Officer
James B. White 1994 $148,000 $175,000 -- 7,500 $10,785
Executive Vice 1993 $126,600 $155,000 -- 4,565 $ 4,497
President and Chief 1992 $125,200 $ 10,000 -- 4,565 $ 4,364
Financial Officer
Robert F. Picarelli 1994 $ 95,800 $ 70,000 -- 7,500 $ 6,312
Executive Vice 1993 $ 95,800 $ 62,000 -- 4,565 $ 4,497
President 1992 $ 96,812 $ 47,500 -- 4,565 $ 4,364
Raymond J. Crotty 1994 $ 87,000 $ 70,000 -- 7,500 $ 5,960
Executive Vice 1993 $ 87,000 $ 62,000 -- 4,565 $ 4,497
President 1992 $ 77,437 $ 47,500 -- 4,565 $ 4,245
</TABLE>
- ------
(1) Includes director fees in the case of Messrs. Hales and White; also
includes that portion of each named executive's salary deferred pursuant
to the KSOP (but not amounts contributed for the named executives by the
Company, which are included under "All Other Compensation").
(2) Reflects payments accrued for the indicated years under the Company's
Executive Compensation Plan.
(3) The only type of Other Annual Compensation for each of the named
executives consisted of personal use of business automobiles and was less
than the level required for reporting.
(4) Number of shares covered by stock options granted.
(5) Reflects annual contributions made for the account of each named
executive to the KSOP. Also reflects additional compensation each year
for Mr. Hales and in 1994 for each named executive, representing certain
lost benefits from the KSOP as a result of IRS regulations.
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<PAGE> 9
The options referred to below were granted under the Company's 1984 and
1993 Incentive Stock Option Plans.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
% of Total Potential Realizable Aggregate
Options Value at Assumed Annual Rates
Granted to of Stock Price Appreciation
Employees Exercise Expira- for Option Term (10 Years)*
Options in Fiscal Price tion ------------------------------
Name Granted Year ($/share) Date 5% 10%
- ------------------- --------- ------------ ---------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Hales 20,000 41.24% $25.30 7/27/99 $ 81,000 $234,800**
James B. White 7,500 15.46% $23.00 7/27/04 $108,450 $274,950
Robert F. Picarelli 7,500 15.46% $23.00 7/27/04 $108,450 $274,950
Raymond J. Crotty 7,500 15.46% $23.00 7/27/04 $108,450 $274,950
</TABLE>
- ------
* The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the SEC and are not intended to forecast
future price appreciation of Common Stock of the Company over the option
term. The gains reflect a future value based upon growth at these
prescribed rates. The Company did not use an alternative formula for a
grant date valuation, an approach which would state gains at present, and
therefore lower, value. The Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors.
** Potential realizable aggregate value at assumed annual rates of stock
price appreciation for option term which is five years. Exercise price of
$25.30 is 110% of market value at date of grant.
OPTION EXERCISES IN 1994 AND DECEMBER 31, 1994 VALUES
<TABLE>
<CAPTION>
Value*
Unexercised of Unexercised
Options at In-the-Money
Shares 12/31/94 Options at 12/31/94
Acquired Value (Exercisable/ (Exercisable/
Name on Exercise Realized Unexercisable) Unexercisable)
- ------------------- ------------- ---------- --------------- -------------------
<S> <C> <C> <C> <C>
Thomas E. Hales None N/A 79,125/10,000 $943,211/$ --
James B. White None N/A 34,860/3,750 $447,117/$5,625
Robert F. Picarelli None N/A 34,360/3,750 $438,327/$5,625
Raymond J. Crotty None N/A 18,416/3,750 $204,791/$5,625
</TABLE>
- ------
* Difference between the market value per share of the Company's Common Stock
at December 31, 1994 ($24.50) and the option exercise price, multiplied by
the number of shares covered by the options.
Employment Agreement. The Company and the Bank are parties to an
employment agreement with Mr. Hales for a term of five years expiring July 1,
1999 covering his services as Chairman of the Board of Directors of the
Company and the Bank. The agreement provides for annual salary and other
payments to Mr. Hales of $340,000, increasing by $30,000 annually during the
term of the agreement, for annual stock option grants of 20,000 shares issued
at fair value at the date of grant, and for other fringe benefits.
Executive Compensation Plan. Under the Company's Executive Compensation
Plan, key officers are entitled to bonuses at varying percentages of the
Company's consolidated net income after taxes for the Company's fiscal year.
The Compensation Committee of the Bank's Board of Directors determines the
annual percentages for eligible key officers. The aggregate amount of such
additional compensation may not exceed 15% of the consolidated net income
after taxes for the Company's fiscal year.
8
<PAGE> 10
Other Benefit Plans. The Company has an Employee Stock Ownership Plan With
401(k) Provisions ("KSOP") for the purpose of providing additional
compensation and retirement benefits to employees. The 401(k) portion of the
KSOP is intended to qualify as a cash deferred compensation arrangement under
Section 401(k) of the Internal Revenue Code. All employees over 18 are
eligible to participate after one year of service. Eligible employees may
elect to defer a portion of their salary (not to exceed 15% on an annual
basis) and contribute the same to the KSOP. The Company may elect to match
50% of the employee's deferred salary up to a maximum of 4% of the employee's
annual salary. The Company may make additional contributions out of its
current or cumulative earnings as determined annually by the Board of
Directors. Participating employees may make additional voluntary
contributions to the KSOP, not to exceed 10% of their salary, which are not
matched by the Company. Participants may elect to invest their deferred
salary contributions and additional voluntary contributions in a fund which
purchases Common Stock or in an investment fund. Withdrawals may be made by
participating employees in certain limited circumstances.
The Employee Stock Ownership portion of the KSOP provides an opportunity
for eligible employees to own Common Stock. Contributions to the KSOP made on
behalf of eligible employees by the Company are not taxable until a
distribution of benefits is actually received by the employee. The KSOP has a
stock bonus section and is designed to qualify for special tax treatment
under Section 4975(e)(7) of the Internal Revenue Code. The KSOP has a
graduated vesting period which starts after the second year the employee
becomes a participant. The amounts of Common Stock allocated under the KSOP
for 1994 to Messrs. Hales, White and Picarelli as a result of Company
contributions and forfeitures were 180 shares each and for Mr. Crotty, 179
shares, with each share of stock valued at $26.50.
The KSOP is administered by the Board of Directors and by trustees which
include Mr. Peckman.
During 1994, the Bank adopted a Supplemental Employees' Investment Plan
(SEIP) for certain salaried employees. The SEIP was established solely for
the purpose of providing, to certain management personnel who participate in
the KSOP, benefits attributable to contribution allocations which would
otherwise be made under the KSOP but for Internal Revenue limitations. Under
the SEIP, salary reduction contributions may be made in excess of the
limitations on annual additions, imposed by the Internal Revenue Code Section
415, and the Bank may elect to match fifty percent of the employee's
contribution under the SEIP. The Bank's matching contribution in 1994 was
$24,000.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Report of the Bank's Compensation Committee on Executive Compensation and the
Performance Graph shall not be incorporated by reference into any such
filings.
REPORT OF BANK'S COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The proxy statement rules of the Securities and Exchange Commission
require a report from the Compensation Committee of the Board of Directors
which discusses the compensation policies for Executive Officers and the
Committee's rationale for compensation paid to the Chief Executive Officer.
The Company's Board does not have a Compensation Committee. All of the
compensation (other than stock options) paid to the Company's Executive
Officers is paid to them by the Bank, and decisions concerning the Chief
Executive Officer's compensation and guidelines for the compensation of the
other Executive Officers are made by the Compensation Committee of the Bank's
Board of Directors. Accordingly, the following report is submitted by the
Bank's Compensation Committee.
9
<PAGE> 11
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that align compensation with
the Company's annual and long-term performance goals, reward good performance
at the corporate and bank levels, recognize individual initiative and
achievements and assist the Company in attracting and retaining qualified
executives. At the beginning of each year the Committee sets target levels of
executive compensation that it believes are consistent with competitors in
the banking industry. However, because a significant portion of an Executive
Officer's compensation is performance related, actual compensation levels
vary from year to year and in any particular year may be above or below those
of the Company's competitors.
The Compensation Committee also believes that stock ownership by
management of the Company is beneficial in aligning the interests of
management and the Company's shareholders. Accordingly, the Compensation
Committee has relied upon stock-based compensation arrangements in
compensating the Company's Executive Officers.
RELATIONSHIP OF COMPANY'S PERFORMANCE TO COMPENSATION
Compensation paid to the Company's Executive Officers for 1994 consisted
primarily of salary, annual bonus under the Company's Executive Compensation
Plan and awards of stock options under the Company's 1984 and 1993 Incentive
Stock Option Plans. While each Executive Officer's salary is determined on
the basis of the individual's responsibilities and a comparison with salaries
paid by competitors of the Company, the other primary components of executive
compensation are directly related to Company and Bank performance. In light
of the Compensation Committee's increasing emphasis on performance related
compensation, the base salaries of the Executive Officers remained relatively
at the same level in the years 1992-1994, except for Mr. Hales, whose salary
increased upon renewal of his contract in 1994 and is subject to annual
increases thereafter in accordance with the contract terms.
ANNUAL BONUS ARRANGEMENTS
Corporate performance determines the aggregate amount of annual bonuses,
if any, awarded to the Company's Executive Officers under the Executive
Compensation Plan. In making annual bonus determinations, the Compensation
Committee considers the financial performance of the Company in comparison to
the Company's business plan for the year, with particular emphasis on net
income, return on average common equity, return on average assets and expense
to revenue ratios. The Compensation Committee also considers certain measures
of asset quality, including net charge-offs and the level of nonperforming
loans, and other specific items such as capital ratios that the Board of
Directors may have identified as being priorities for that year.
In 1994, the Committee took into account the fact that the Company
achieved the highest net income and earnings per share levels in its history.
Net income of $7.0 million and earnings per common and common equivalent
share of $2.66 represented increases of 13% and 6%, respectively, over 1993.
In addition, the Company's risk-based capital position was strengthened as
Tier I and total capital ratios at year-end exceeded the well capitalized
regulatory minimums. The price of the Company's Common Stock rose 29% during
1994, while the return on average assets was 1.23% and return on average
common stockholders' equity was 20.58% for the year.
Certain subjective factors, such as the achievement of qualitative goals
relating to customers and employees and the historic level of bonus payments
at competing organizations in light of their relative performance, are also
considered. After the Committee's evaluation of overall corporate
performance, the individual performance of each of the Executive Officers is
evaluated in light of the factors described above that are relevant to the
officer's responsibilities.
10
<PAGE> 12
LONG-TERM INCENTIVE PLAN ARRANGEMENTS
The long-term incentive component of Executive Officers' compensation for
1994 consists of awards of stock options under the Company's Incentive Stock
Option Plans. The Plans are designed to link rewards for Executive Officers
and other key personnel to increases in shareholder value, foster share
ownership by the Company's executives and enable the Company to retain and
attract key employees with superior management skills. Awards under the Plans
each year take into account performance during the prior year as measured by
the factors described above under the caption Annual Bonus Arrangements and
the Company's progress toward meeting longer-term objectives, emphasizing
profitability and capital strength. The options granted Mr. Hales in 1994,
shown under the caption Stock Options Granted in the Summary Compensation
Table, reflect his high level of individual performance and the Committee's
view of the continuing importance of his role in determining the future
success of the Company. The actual size of any stock option gains Mr. Hales
and other executives will realize depends solely on the future performance of
the Company's Common Stock.
The Committee believes that those programs described above provide
compensation that is competitive with the levels paid by other major
corporations, effectively links executive and shareholder interests through
equity based plans and is structured to provide incentives that are
consistent with the long-term investment horizons which characterize the
business in which the Company is engaged.
COMPENSATION COMMITTEE
Howard V. Ruderman, Chairman
Michael H. Fury
Herbert Peckman
11
<PAGE> 13
PERFORMANCE GRAPH
The following graph provides a comparison of the annual percentage changes
in the cumulative total shareholder return on the Company's Common Stock with
that of a Peer Group* and the American Stock Exchange Market value Index
("AMEX Index") for the five-year period ending December 31, 1994. The
comparison assumes that $100 was invested on December 31, 1989 in the Common
Stock of the Company and in each of the foregoing indices and assumes the
reinvestment of all dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, A PEER GROUP AND AMEX INDEX
$300|------------------------------------------------------------------|
| |
| |
| |
$250|------------------------------------------------------------------|
| |
| # |
| |
$200|------------------------------------------------------------------|
| # |
| |
| |
$150|------------------------------------------------------------------|
| & |
| &* |
| # * |
$100|----*&#--------#---------*-----------*----------------------------|
| * # & |
| & & |
| |
$50|-----|---------|---------|-----------|------------|-----------|---|
1989 1990 1991 1992 1993 1994
*=AMEX Index &=Peer Group #=The Company
The dollar amounts in the foregoing graph and in the table below are as of
December 31 in each year indicated.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
The Company $100.00 $105.46 $ 95.13 $107.14 $191.69 $252.79
Peer Group* $100.00 $ 69.83 $ 70.71 $ 97.06 $127.47 $135.68
AMEX Index $100.00 $ 81.51 $104.51 $105.62 $126.23 $114.73
</TABLE>
- ------
* The Peer Group is a market-capitalization-weighted stock index combining
price information from 22 banking institutions comprising all such
institutions in Connecticut, New Jersey, and New York with asset size of at
least $250 million, but less than $1 billion, as of December 31, 1994, as
reported in the SNL Quarterly Bank Digest of March 1995. The banking
institutions included are: BNH Bancshares, Inc., Putnam Trust Co. of
Greenwich, Lafayette American Bancorp and Westport Bancorp, Inc. (CT);
Broad National BanCorporation, Ramapo Financial Corporation, United
National Bancorp, B.M.J. Financial Corp., Interchange Financial Services
Corp., and Hubco (NJ); Gateway Bancorp., Inc., FNB Rochester Corp., First
of Long Island Corp., State Bancorp, Inc., Tompkins Country Trust Company,
Sterling Bancorp, Suffolk Bancorp, Community Bank System, Inc., Arrow
Financial Corporation, NBT Bancorp, Evergreen Bancorp, Inc., and New York
Bancorp Inc. (NY).
12
<PAGE> 14
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following information is furnished with respect to each person known
by management of the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock as of April 7, 1995:
<TABLE>
<CAPTION>
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership* of Class
- -------------------------- --------------------- ----------
<S> <C> <C>
Thomas E. Hales 260,112 (a) 10.54%
66 Brookwood Drive
Briarcliff Manor, NY 10510
Howard V. Ruderman 126,058 (b) 5.11%
6 Aspen Court
Pomona, NY 10970
Harold R. Torsoe 194,060 (c) 7.86%
4 Brigitte Court
Suffern, NY 10901
Kenneth J. Torsoe 250,744 (d) 10.16%
70 West Gate Road
Suffern, NY 10901
U.S.B. Holding Co., Inc. 245,145 9.93%
Employee Stock Ownership
Plan (With 401(k) Provisions)
100 Dutch Hill Road
Orangeburg, NY 10962
</TABLE>
- ------
* The table shows all shares as to which each named beneficial owner
possessed sole or shared voting or investment power as of the specified
date, including shares held by, in the name of, or in trust for, the spouse
and dependent children of the named individual and other relatives living
in the same household, even if beneficial ownership of such shares has been
disclaimed by the named individual. Unless otherwise indicated, the named
beneficial owner was the sole and exclusive owner of all listed shares as
of the specified date.
(a) Includes 91,976 shares owned by Mr. Hales jointly with his wife, 32,891
shares owned by his wife, 1,075 shares held by Mr. Hales as custodian for
his grandchildren, and 16,886 shares held by the Hales Family Foundation,
Inc. Does not include 35,572 or 1,856 shares allocated to Mr. Hales under
the KSOP and SEIP, respectively.
(b) Includes 605 shares held by Mr. Ruderman in trust for his brother.
(c) Includes 420 shares owned by Harold R. Torsoe's son.
(d) Includes 2,244 shares owned by Kenneth J. Torsoe's son.
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
During 1994, some of the directors and executive officers of the Company
(and members of their immediate families and corporations, organizations,
trusts and estates with which these individuals are associated) were indebted
to the Bank in amounts of $60,000 or more. However, all such loans, which did
not exceed a total of $1,001,000 (or 2.4% of shareholders' equity at March
31, 1995) at any one time during 1994, were made in the ordinary course of
business, did not involve more than normal risk of collectibility or present
other unfavorable features, and were made on substantially the same terms,
including interest rate and collateral requirements, as those prevailing at
the same time for comparable loan transactions with unaffiliated persons, and
no such loan is classified at present as a nonaccrual, past due, restructured
or potential problem loan.
13
<PAGE> 15
Outside of normal customer relationships, none of the directors, executive
officers or 5% shareholders of the Company (or members of their immediate
families) presently maintains, directly or indirectly, any significant
business or personal relationship with the Company or the Bank, other than
such as might arise by virtue of his position with, or ownership interest in,
the Company, except Michael H. Fury, who is a director of the Company and the
Bank and is a partner in the law firm of Fury & Kennedy, which was employed
by the Company and the Bank during 1994 and received $29,250 from the Bank
for services rendered and related out-of-pocket disbursements.
RELATIONSHIP WITH INDEPENDENT AUDITORS
On recommendation of the Examining Committee of the Bank, the Board of
Directors has appointed Deloitte & Touche LLP as independent auditors of the
Company and the Bank, for the year ending December 31, 1995. The appointment
of Deloitte & Touche LLP continues a relationship that began in 1980.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will have the opportunity to make statements if they so
desire and will be available to respond to appropriate questions.
ITEM 2: AMENDMENT TO THE DIRECTOR STOCK OPTION PLAN
The Board of Directors has approved, and is recommending that the
shareholders approve, an amendment to the Company's Director Stock Option
Plan (the "Director Plan") increasing from 2,310 to 3,500 the number of
shares covered by stock options which are granted automatically to
non-employee members of the Board each year. The Board approved the amendment
on October 19, 1994, effective immediately, subject to shareholder approval
of the amendment at the 1995 Annual Meeting.
The Director Plan, adopted in 1989, provides for options to purchase
Common Stock to be issued once each year to non-employee members of the
Company's Board of Directors. Under the Director Plan, each eligible director
automatically receives annually, effective as of the close of each annual
meeting of shareholders of the Company, a non-qualified option to purchase a
fixed, uniform number of shares of Common Stock at an exercise price equal to
the market value of such shares on the date of the grant. Options may not be
exercised prior to the first anniversary of the date of grant and expire ten
years after date of grant. The Director Plan is limited to 128,711 shares of
Common Stock (subject to adjustment for stock splits and dividends) and has a
term of ten years.
As amended in 1993, the Director Plan provides for the annual grant to
each eligible director of an option to purchase 2,310 shares of Common Stock
(as adjusted for stock splits and dividends). The Company's management
believes that it is desirable and in the interests of shareholders to
increase the annual grant amount to 3,500 shares per director, so as to
further the original purposes of the Director Plan, which are to encourage
ownership in the Company by outside directors whose continued services are
essential to the Company's success, and to provide them with an additional
incentive to continue as directors.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the meeting and entitled to vote will be required for
approval of the proposed amendment to the Director Plan. The Board of
Directors recommends that shareholders vote FOR the proposed amendment.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
that may come before the Meeting. However, the proxies may be voted with
discretionary authority with respect to any other matters that may properly
come before the Meeting.
14
<PAGE> 16
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy statement for the 1996
Annual Meeting of Shareholders must be received by the Company at its
principal executive offices by December 15, 1995. Such shareholder proposals,
together with any supporting statements, should be directed to the Secretary
of the Company.
Date: April 24, 1995
By order of the Board of Directors
/s/ Michael H. Fury
----------------------------------
Michael H. Fury, Secretary
15
<PAGE> 17
PROXY
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
1995 Annual Meeting of Shareholders
This Proxy is Solicited by the Board of Directors of U.S.B. Holding Co.,
Inc., a Delaware corporation (the "Company"). The undersigned shareholder(s)
of the Company hereby appoint(s) Raymond J. Crotty and Robert F. Picarelli,
and each or either of them, with full power of substitution and revocation,
and hereby authorize(s) them, and each or either of them, to represent and to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at the annual meeting of its shareholders to be held at the Comfort
Inn, 425 East Route 59, Nanuet New York, on Wednesday, May 17, 1995, at
10:00 a.m. (local time), and at any adjournment thereof, with all powers the
undersigned would possess if personally present as follows:
1. Election of Class I Directors: Herbert Peckman, Howard V. Ruderman
/ / FOR the nominees listed / / WITHHOLD AUTHORITY to vote for
(except as marked to the the nominees listed
contrary below)
INSTRUCTION: To withhold for one or more nominee(s), write the name(s) of
the nominee(s) in the space below.
------------------------------------------------------------
2. Amendment to the Director Stock Option Plan (as described in the Proxy
Statement)
/ / FOR / / AGAINST / / ABSTAIN
(Management recommends a vote FOR)
(Continued and to be signed on other side)
<PAGE> 18
3. In their discretion upon such other business as may properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR
DIRECTOR AND FOR ITEM 2 ABOVE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
COMPANY'S BOARD OF DIRECTORS.
Date , 1995 Signature
--------------------- ------------------------------
YOU ARE REQUESTED TO MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. ALL JOINT OWNERS MUST SIGN.
PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS, TRUSTEES OR CORPORATE
OFFICERS OR IN OTHER REPRESENTATIVE CAPACITIES SHOULD SO INDICATE.
