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, 2000 Commission File No. 1-12811
-------------
U.S.B. HOLDING CO., INC.
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3197969
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 DUTCH HILL ROAD, ORANGEBURG, NEW YORK 10962
-----------------------------------------------
(Address of principal executive office with zip code)
845-365-4600
------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT AUGUST 4, 2000
----- -----------------------------
Common stock, par value 16,672,043
$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, 2000 (UNAUDITED)
AND DECEMBER 31, 1999 1
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999 (UNAUDITED) 2
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE SIX MONTHS ENDED JUNE 30,
2000 AND 1999 (UNAUDITED) 3
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999 (UNAUDITED) 4
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
1999 (UNAUDITED) 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 24
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
- i -
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
U.S.B. HOLDING CO., INC. (Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION June 30, December 31,
2000 1999
----------- -----------
ASSETS (000's, except share data)
<S> <C> <C>
Cash and due from banks $ 35,518 $ 40,111
Federal funds sold 29,500 28,200
----------- -----------
Cash and cash equivalents 65,018 68,311
Interest bearing deposits in other banks 643 543
Securities:
Available for sale (at estimated fair value) 424,132 398,939
Held to maturity (estimated fair value
$192,274 in 2000 and $181,458 in 1999) 197,610 187,411
Loans, net of allowance for loan losses of
$11,458 in 2000 and $10,687 in 1999 1,023,670 916,816
Premises and equipment, net 11,269 10,624
Accrued interest receivable 12,283 10,194
Other real estate owned (OREO) 34 34
Federal Home Loan Bank of New York stock 34,139 34,139
Other assets 21,179 19,360
----------- -----------
TOTAL ASSETS $ 1,789,977 $ 1,646,371
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits $ 173,945 $ 169,361
Interest bearing deposits:
NOW accounts 72,150 68,863
Money market accounts 73,676 50,098
Savings deposits 326,200 347,901
Time deposits 749,166 505,526
----------- -----------
Total deposits 1,395,137 1,141,749
Accrued interest payable 6,701 6,166
Accrued expenses and other liabilities 8,535 8,135
Securities sold under agreements to repurchase 177,780 285,780
Federal Home Loan Bank of New York advances 78,713 87,995
----------- -----------
Total 1,666,866 1,529,825
Corporation-Obligated mandatory redeemable capital
securities of subsidiary trust 20,000 20,000
Minority interest-junior preferred stock of consolidated
subsidiary 134 135
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.01 par value; authorized shares
50,000,000; issued shares of 17,444,889 in 2000 and
16,383,980 in 1999 174 164
Additional paid-in capital 111,715 98,926
Retained earnings 10,265 13,875
Treasury stock at cost, 773,008 shares
in 2000 and 499,707 shares in 1999 (9,877) (6,464)
Common stock held for benefit plans (1,476) (1,490)
Deferred compensation obligation 818 748
Accumulated other comprehensive loss (8,642) (9,348)
----------- -----------
Total stockholders' equity 102,977 96,411
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,789,977 $ 1,646,371
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
2000 1999
-------- --------
(000's, except share data)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 21,732 $ 16,363
Interest on federal funds sold 474 344
Interest and dividends on securities:
Mortgage-backed securities 6,487 6,012
U.S. Treasury and government agencies 3,557 1,793
Obligations of states and political subdivisions 735 754
Corporate and other 8 21
Interest on deposits in other banks 3 10
Dividends on Federal Home Loan Bank of New York stock 572 363
-------- --------
Total interest income 33,568 25,660
-------- --------
INTEREST EXPENSE:
Interest on deposits 13,646 8,997
Interest on borrowings 4,317 3,469
Interest on Corporation - Obligated mandatory redeemable
capital securities of subsidiary trust 488 488
-------- --------
Total interest expense 18,451 12,954
-------- --------
NET INTEREST INCOME 15,117 12,706
Provision for loan losses 500 302
-------- --------
Net interest income after provision for loan losses 14,617 12,404
-------- --------
NON-INTEREST INCOME:
Service charges and fees 842 766
Other income 334 306
(Losses) gains on securities transactions - net (105) 201
-------- --------
Total non-interest income 1,071 1,273
-------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,697 4,275
Occupancy and equipment expense 1,444 1,340
Advertising and business development 559 463
Professional fees 169 247
Communications 259 187
Stationery and printing 159 146
FDIC insurance 59 44
Other expenses 624 601
-------- --------
Total non-interest expense 7,970 7,303
-------- --------
Income before income taxes 7,718 6,374
Provision for income taxes 2,685 2,391
-------- --------
NET INCOME $ 5,033 $ 3,983
======== ========
BASIC EARNINGS PER COMMON SHARE $ 0.30 $ 0.24
======== ========
DILUTED EARNINGS PER COMMON SHARE $ 0.29 $ 0.23
======== ========
</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,
2000 1999
-------- --------
(000's, except share data)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 41,647 $ 31,995
Interest on federal funds sold 819 728
Interest and dividends on securities:
Mortgage-backed securities 12,966 11,244
U.S. Treasury and government agencies 6,816 2,709
Obligations of states and political subdivisions 1,492 1,523
Corporate and other 15 34
Interest on deposits in other banks 5 29
Dividends on Federal Home Loan Bank of New York stock 1,145 659
-------- --------
Total interest income 64,905 48,921
-------- --------
INTEREST EXPENSE:
Interest on deposits 24,725 17,491
Interest on borrowings 9,200 6,153
Interest on Corporation - Obligated mandatory redeemable
capital securities of subsidiary trust 976 976
-------- --------
Total interest expense 34,901 24,620
-------- --------
NET INTEREST INCOME 30,004 24,301
Provision for loan losses 950 910
-------- --------
Net interest income after provision for loan losses 29,054 23,391
-------- --------
NON-INTEREST INCOME:
Service charges and fees 1,739 1,551
Other income 726 672
(Losses) gains on securities transactions - net (105) 527
-------- --------
Total non-interest income 2,360 2,750
-------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 9,393 8,320
Occupancy and equipment expense 2,922 2,638
Advertising and business development 946 797
Professional fees 439 444
Communications 505 395
Stationery and printing 349 308
FDIC insurance 119 94
Other expenses 1,238 1,259
-------- --------
Total non-interest expense 15,911 14,255
-------- --------
Income before income taxes 15,503 11,886
Provision for income taxes 5,410 4,428
-------- --------
NET INCOME $ 10,093 $ 7,458
======== ========
BASIC EARNINGS PER COMMON SHARE $ 0.61 $ 0.45
======== ========
DILUTED EARNINGS PER COMMON SHARE $ 0.59 $ 0.43
======== ========
</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,
2000 1999
--------- ---------
OPERATING ACTIVITIES (000's)
<S> <C> <C>
Net income $ 10,093 $ 7,458
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 950 910
Depreciation and amortization 995 967
Amortization/accretion of premiums (discounts) on securities - net 484 780
Noncash benefit plan expense 134 148
Deferred income taxes (406) (600)
Losses (gains) on securities transactions - net 105 (527)
Origination of loans held for sale -- (481)
Losses on sale of loans 13 --
Proceeds from sale of loans 352 --
Increase in accrued interest receivable (2,089) (1,928)
Other - net (995) 1,325
--------- ---------
Net cash provided by operating activities 9,636 8,052
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 12,976 38,291
Proceeds from principal paydowns, redemptions and maturities of:
Securities available for sale 17,250 69,537
Securities held to maturity 5,930 4,782
Purchases of securities available for sale (54,752) (149,736)
Purchases of securities held to maturity (16,168) (113,994)
Net (increase) decrease in interest bearing deposits in other banks (100) 1,480
Loans originated, net of principal collections and charge-offs (108,169) (88,098)
Purchases of Federal Home Loan Bank of New York stock -- (7,893)
Purchases of premises and equipment - net (1,634) (597)
Proceeds from sales of OREO -- 505
--------- ---------
Net cash used for investing activities (144,667) (245,723)
--------- ---------
FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
NOW, money market and savings accounts 9,748 53,355
Increase in time deposits, net of withdrawals and maturities 243,640 51,826
Net (decrease) increase in securities sold under agreements
to repurchase - short-term (78,000) 73,000
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 -- 50,000
Repayment of securities sold under agreements to
repurchase - long-term (30,000) --
Repayment of Federal Home Loan Bank of New York
advances - long-term (1,927) (5,821)
Cash dividends paid (2,421) (2,093)
(Redemption of) proceeds from sale of junior preferred stock of
consolidated subsidiary (1) 137
Proceeds from issuance of common stock and tax benefit of
exercised stock options 1,467 934
Purchases of treasury stock (3,413) (1,459)
--------- ---------
Net cash provided by financing activities 131,738 219,879
--------- ---------
</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,
2000 1999
-------- --------
(000's)
<S> <C> <C>
Decrease in Cash and Cash Equivalents $ (3,293) $(17,792)
Cash and Cash Equivalents, Beginning of Period 68,311 69,160
-------- --------
Cash and Cash Equivalents, End of Period $ 65,018 $ 51,368
======== ========
Supplemental Disclosures:
Interest paid $ 34,366 $ 24,397
-------- --------
Income tax payments $ 6,877 $ 2,030
-------- --------
Transfer of loans to OREO - net $ -- $ 175
-------- --------
Transfer of loans held for sale to loans held to
maturity at the lower of cost or fair value $ -- $ 3,764
-------- --------
Change in shares held in trust for deferred compensation $ (70) $ (20)
-------- --------
Change in deferred compensation obligation $ 70 $ 20
-------- --------
Decrease (increase) in accumulated other comprehensive loss $ 706 $ (6,298)
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(000's, except share data)
<TABLE>
<CAPTION>
COMMON STOCK Additional
Shares Par Paid-in Retained Treasury
Outstanding Value Capital Earnings Stock
----------- ----- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 2000 15,884,273 $ 164 $ 98,926 $ 13,875 $ (6,464)
Net income 10,093
Other comprehensive income:
Net unrealized securities
gain arising during the
period, net of taxes of $469
Reclassification adjustment for
net losses included in net income,
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
ESOP shares committed to
be released 50
Deferred compensation obligation
---------- ----- --------- ---------- ---------
Balance at June 30, 2000 16,671,881 $ 174 $ 111,715 $ 10,265 $ (9,877)
========== ===== ========= ========== =========
<CAPTION>
Accumulated
Common Stock Deferred Other Total Common
Held For Compensation Comprehensive Stockholders'
Benefit Plans Obligation Income (Loss) Equity
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 2000 $ (1,490) $ 748 $ (9,348) $ 96,411
Net income 10,093
Other comprehensive income:
Net unrealized securities
gain arising during the
period, net of taxes of $469 652 652
Reclassification adjustment for
net losses included in net income,
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 19
ESOP shares committed to
be released 65 115
Deferred compensation obligation (70) 70 --
-------- ---------- ----------- --------
Balance at June 30, 2000 $ (1,476) $ 818 $ (8,642) $102,977
======== ========== =========== ========
</TABLE>
See notes to condensed consolidated financial statements
6
<PAGE>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(000's, except share data)
<TABLE>
<CAPTION>
COMMON STOCK Additional
Shares Par Paid-in Retained Treasury
Outstanding Value Capital Earnings Stock
----------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 15,963,547 $ 162 $ 96,919 $ 1,513 $ (2,223)
Net income 7,458
Other comprehensive loss:
Net unrealized securities
loss arising during the
period, net of taxes of $4,167
Reclassification adjustment
for net gain included in
net income, net of taxes
of $210
Other comprehensive loss
Total comprehensive income
Cash dividends:
Common $0.12 per share (2,082)
Junior preferred stock (11)
Common stock options exercised
and related tax benefit 160,753 1 933
Purchases of treasury stock (102,479) (1,459)
Amortization of RRP awards
ESOP shares committed to
be released 39
Deferred compensation obligation
---------- --------- ----------- ------------ --------
Balance at June 30, 1999 16,021,821 $ 163 $ 97,891 $ 6,878 $ (3,682)
========== ========= =========== ============ ========
<CAPTION>
Accumulated
Common Stock Deferred Other Total Common
Held For Compensation Comprehensive Stockholders'
Benefit Plans Obligation Income (Loss) Equity
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 $ (1,628) $ 675 $ 2,021 $ 97,439
Net income 7,458
Other comprehensive loss:
Net unrealized securities
loss arising during the
period, net of taxes of $4,167 (5,996) (5,996)
Reclassification adjustment
for net gain included in
net income, net of taxes
of $210 (302) (302)
------------ --------
Other comprehensive loss (6,298) (6,298)
--------
Total comprehensive income 1,160
Cash dividends:
Common $0.12 per share (2,082)
Junior preferred stock (11)
Common stock options exercised
and related tax benefit 934
Purchases of treasury stock (1,459)
Amortization of RRP awards 39 39
ESOP shares committed to
be released 70 109
Deferred compensation obligation (20) 20 --
------------ ---------- ------------ --------
Balance at June 30, 1999 $ (1,539) $ 695 $ (4,277) $ 96,129
============ ========== ============ ========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Principles of Consolidation
The consolidated financial statements include the accounts of U.S.B.
Holding Co., Inc. and its wholly-owned subsidiaries (the "Company"), Union
State Bank (the "Bank") [including its wholly-owned subsidiaries, Dutch
Hill Realty Corp., U.S.B. Financial Services, Inc, and TPNZ Preferred
Funding Corporation ("TPNZ") (since April 30, 1999)], Tarrytowns Bank, FSB
("Tarrytowns") through April 30, 1999, the date of its merger with and
into the Bank (including its wholly-owned subsidiary, TPNZ, through that
date), Union State Capital Trust I and Ad Con, Inc. Intercompany accounts
and transactions are eliminated in consolidation.
2. Acquisition of La Jolla Bank Branches
On May 25, 2000, the Bank and La Jolla Bank, La Jolla, California signed a
definitive agreement pursuant to which the Bank will acquire the Stamford,
Connecticut and Manhattan branches of La Jolla Bank ("La Jolla"). The two
branches to be acquired have approximately $100 million in deposits that
will be assumed by the Bank in the transaction. A premium of 6.8% will be
paid by the Bank for the assumption of such deposits, and $150,000 will be
paid for furniture and fixtures. The branch offices will be leased from a
company owned by the principal stockholder of La Jolla. La Jolla will
retain its loan portfolio and lending operations in the New York area.
Upon completion of this transaction, the branches will become Bank
branches. The parties anticipate that the transaction, which is subject to
regulator approval, will be consummated in the latter part of 2000.
3. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (comprising of
only normal recurring accruals) necessary to present fairly the financial
position of the Company as of June 30, 2000 and December 31, 1999, and its
operations, for the three and six months ended June 30, 2000 and 1999, and
its cash flows and changes in common stockholders' equity for the six
month periods ended June 30, 2000 and 1999. A summary of the Company's
significant accounting policies is set forth in Note 3 to the consolidated
financial statements included in the Company's 1999 Annual Report to
Stockholders.
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America and predominant practices used within the banking industry. In
preparing such financial statements, management is required to make
estimates and assumptions that affect the reported amounts of actual and
contingent assets and liabilities as of the dates of the condensed
consolidated statements of condition and the revenues and expenses for the
periods reported. Actual results could differ significantly from those
estimates.
8
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
Estimates that are particularly susceptible to significant change relate
to the determination of the allowance for loan losses and the valuation of
other real estate acquired in connection with foreclosures or in
satisfaction of loan receivables. In connection with the determination of
the allowance for loan losses and OREO, management obtains independent
appraisals for significant properties.
4. Reclassifications
Certain reclassifications have been made to prior period accounts to
conform to the current period's presentation.
5. Pending Accounting Pronouncements
Revenue Recognition in Financial Statements In December 1999, the
Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying
generally accepted accounting principles to revenue recognition in
financial statements. On June 26, 2000, the SEC issued SAB 101B to defer
the effective date of implementation of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after December 31, 1999.
The Company is required to adopt SAB 101 by December 31, 2000. The Company
does not expect the adoption of SAB 101 to have a material impact on the
consolidated financial statements.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended in June
1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133" and
SFAS No. 138 "Accounting for Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133 (collectively, "SFAS
No. 133)". SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that all
derivatives be recognized in the statement of condition, either as assets
or as liabilities, and measured at fair value. This statement requires
that changes in a derivative's fair value be recognized in current
earnings unless specific hedge accounting criteria are met. Hedge
accounting for qualifying hedges permits a derivative's gains and losses
to offset the related results on the hedged item. An entity that elects to
apply hedge accounting is required to establish at the inception of the
hedge the method it will use for assessing the effectiveness of the
hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk.
For the Company, SFAS No. 133 is effective January 1, 2001. The Company
does not anticipate that the statement will have a material impact on its
consolidated financial position or results of operations.
9
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
6. Earnings Per Common Share ("EPS")
The Company computes EPS based upon the provisions of SFAS No. 128,
"Earning per Share." SFAS No. 128 establishes standards for computing and
presenting "Basic" and "Diluted" EPS. Basic EPS excludes dilution and is
computed by dividing net income available to common stockholders (net
income after preferred stock dividend requirements) by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that would then
share in the earnings of the entity, reduced by common stock that could be
repurchased by the Company with the assumed proceeds of such exercise or
conversion. Diluted EPS is based on net income available to common
stockholders divided by the weighted average number of common shares
outstanding and common equivalent shares ("adjusted weighted average
shares"). Stock options granted, but not yet exercised under the Company's
stock option plans and restricted stock issued under the Company's
recognition and retention stock plans but not yet vested, are considered
common stock equivalents for Diluted EPS calculations.
The computations of basic and diluted earnings per common share for the
three and six months ended June 30 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Numerator: (000's, except share data)
<S> <C> <C> <C> <C>
Net income $ 5,033 $ 3,983 $ 10,093 $ 7,458
Less preferred stock dividends 11 11 11 11
----------- ----------- ----------- -----------
Net income for basic and diluted
earnings per common share - net
income available to common
stockholders $ 5,022 $ 3,972 $ 10,082 $ 7,447
=========== =========== =========== ===========
Denominator:
Denominator for basic earnings
per common share - weighted
average shares 16,516,349 16,734,977 16,543,393 16,708,757
Effects of dilutive securities:
Director and employee
stock options 559,669 699,727 610,312 709,061
Restricted stock not vested 4,193 12,633 4,223 12,689
----------- ----------- ----------- -----------
Total effects of dilutive securities 563,862 712,360 614,535 721,750
----------- ----------- ----------- -----------
Denominator for diluted earnings
per common share - adjusted
weighted average shares 17,080,211 17,447,337 17,157,928 17,430,507
=========== =========== =========== ===========
Basic earnings per common share $ 0.30 $ 0.24 $ 0.61 $ 0.45
=========== =========== =========== ===========
Diluted earnings per common share $ 0.29 $ 0.23 $ 0.59 $ 0.43
=========== =========== =========== ===========
</TABLE>
Weighted average common shares outstanding and common per share amounts for the
three and six months ended June 30, 2000 and 1999 have been adjusted to reflect
the five percent stock dividend distributed May 15, 2000.
10
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
7. Securities
In accordance with SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities," the Company's investment policies include a
determination of the appropriate classification of securities at the time
of purchase. Securities that may be sold as part of the Company's
asset/liability or liquidity management, or in response to or in
anticipation of changes in interest rates and resulting prepayment risk,
or for similar factors, are classified as available for sale. Securities
that the Company has the ability and positive intent to hold to maturity
are classified as held to maturity and carried at amortized cost. Realized
gains and losses on the sales of all securities, determined by using the
specific identification method, are reported in earnings. Securities
available for sale are shown in the condensed consolidated statements of
condition at estimated fair value and the resulting net unrealized gains
and losses, net of tax, are shown in accumulated other comprehensive loss.
The decision to sell available for sale securities is based on
management's assessment of changes in economic or financial market
conditions, interest rate risk, and the Company's financial position and
liquidity. Estimated fair values for securities are based on quoted market
prices, where available. If quoted market prices are not available,
estimated fair values are based on quoted market prices of comparable
instruments. The Company does not acquire securities for the purpose of
engaging in trading activities.
For both the three and six month periods ended June 30, 2000 and 1999,
there were gross losses on sales of securities of $105,000 and $25,000,
respectively. For the three and six month periods ended June 30, 1999,
there were gross gains of $226,000 and $552,000, respectively.
A summary of the amortized cost, estimated fair values, and related gross
unrealized gains and losses on securities at June 30, 2000 and December
31, 1999, is as follows:
<TABLE>
<CAPTION>
=======================================================================================
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 2000: Cost Gains Losses Value
--------- ---------- ---------- ---------
Available for Sale: (000's)
<S> <C> <C> <C> <C>
U.S. government agencies $101,443 $ 87 $ 3,721 $ 97,809
Mortgage-backed securities 335,290 401 11,664 324,027
Obligations of states and
political subdivisions 1,536 21 -- 1,557
Other 721 66 48 739
-------- -------- -------- --------
Total securities available for sale $438,990 $ 575 $ 15,433 $424,132
======== ======== ======== ========
Held to Maturity:
U.S. government agencies $ 95,746 $ -- $ 5,145 $ 90,601
Mortgage-backed securities 44,385 220 1,021 43,584
Obligations of states and
political subdivisions 57,479 696 86 58,089
-------- -------- -------- --------
Total securities held to maturity $197,610 $ 916 $ 6,252 $192,274
======== ======== ======== ========
</TABLE>
11
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
December 31, 1999: --------- ---------- ---------- ---------
Available for Sale: (000's)
<S> <C> <C> <C> <C>
U.S. Treasury and
government agencies $ 79,459 $ -- $ 4,143 $ 75,316
Mortgage-backed securities 333,202 331 12,299 321,234
Obligations of states and
political subdivisions 1,539 21 -- 1,560
Corporate securities 93 -- -- 93
Other 721 34 19 736
-------- -------- -------- --------
Total securities available for sale $415,014 $ 386 $ 16,461 $398,939
======== ======== ======== ========
Held to Maturity:
U.S. Treasury and
government agencies $ 85,750 $ -- $ 5,784 $ 79,966
Mortgage-backed securities 44,543 244 1,262 43,525
Obligations of states and
political subdivisions 57,118 924 75 57,967
-------- -------- -------- --------
Total securities held to maturity $187,411 $ 1,168 $ 7,121 $181,458
======== ======== ======== ========
</TABLE>
8. Loans
Nonaccrual loans were $1.6 million at June 30, 2000 and $2.6 million at
December 31, 1999. Restructured loans were $0.2 million at June 30, 2000
and $0.6 million at December 31, 1999.
Substantially all of the nonaccruing and restructured loans are
collateralized by real estate or lease receivables. At June 30, 2000, the
Company has no commitments to lend additional funds to any customers with
nonaccrual or restructured loan balances.
At June 30, 2000, there are loans aggregating approximately $0.3 million,
which are not on nonaccrual status, that were potential problem loans
which may result in their being placed on nonaccrual status in the future.
At June 30, 2000 and December 31, 1999, the recorded investment in loans
that are considered to be impaired under SFAS No. 114, "Accounting for
Impairment of a Loan" ("SFAS No. 114) approximated $0.9 million and $2.1
million, of which $0.7 million and $1.6 million at June 30, 2000 and
December 31, 1999 were in nonaccrual status, respectively. Where
warranted, each impaired loan has a related allowance for loan losses
determined in accordance with SFAS No. 114. The total allowance for loan
losses related to impaired loans was $0.2 million at both June 30, 2000
and December 31, 1999. The average recorded investment in impaired loans
for both the six months ended June 30, 2000 and year ended December 31,
1999 was approximately $1.5 million. For the six months ended June 30,
2000 and 1999, interest income recognized by the Company on impaired loans
was not material.
12
<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, 2000
and December 31, 1999, respectively, that are considered to be impaired
due to a reduction in the contractual interest rate, are on accrual status
because the collateral securing these loans is sufficient to protect the
contractual principal and interest of the restructured loans. These loans
have been performing for a reasonable period of time. Interest accrued on
these loans and not yet collected as of June 30, 2000 is immaterial.
At June 30, 2000, the Bank had $0.3 million of outstanding loans,
collateralized by cash and lease receivables, to Bennett Funding Group
("Bennett") a lease finance company, which filed for bankruptcy protection
during the first quarter of 1996. Collection of the Bank's loans continues
to be delayed by the bankruptcy proceedings. However, as a result of a
favorable ruling in the second quarter of 1998 by the Bankruptcy Court
with jurisdiction over Bennett, the Bank has collected payments of $2.6
million, reducing the original balance of $3.3 million to $0.7 million.
The ruling by the Bankruptcy Court is subject to appeal by the Trustee. A
total of $0.4 million was charged-off in 1999 and 1998, further reducing
the recorded balance of the loans to $0.3 million at June 30, 2000. The
Bennett loans are on nonaccrual status and a specific allocation is
included in the allowance for loan losses, which includes an amount to
provide for potential losses in the event the Trustee is successful in its
appeal. In addition, the Trustee contends that the Bank received payments
from Bennett under the theory of fraudulent conveyance. If the Trustee is
successful, the Bank would be liable for loan payments aggregating $9.5
million received from Bennett for the six year period preceding the
bankruptcy filing date of March 1996. The Bankruptcy Court recently
dismissed a significant portion of the Trustee's fraudulent conveyance
claims. The Company believes, based on advice of legal counsel, that it
will also prevail with regard to the remaining fraudulent conveyance
claims.
9. Borrowings and Stockholders' Equity
The Company utilizes borrowings primarily to meet the funding requirements
for its asset growth and to manage its interest rate risk. Borrowings
include securities sold under agreements to repurchase, federal funds
purchased, and Federal Home Loan Bank of New York ("FHLB") advances.
Short-term securities sold under agreements to repurchase generally mature
between one and 365 days. The Bank may borrow up to $50.0 million (of
which $9.8 million was long- term and outstanding at June 30, 2000) from
two primary investment firms under master security sale and repurchase
agreements. In addition, the Bank has the ability to borrow from the FHLB
under similar master security sale and repurchase agreements and, to a
lesser extent, its customers. At June 30, 2000 and December 31, 1999, the
Bank had $33.0 million at an interest rate of 6.57 percent and $111.0
million at interest rates between 5.38 percent and 6.00 percent of such
short-term borrowings outstanding, respectively. At June 30, 2000 and
December 31, 1999, these borrowings were collateralized by securities with
an aggregate amortized cost of $34.5 million and $117.5 million and
estimated fair value of $33.7 million and $112.7 million, respectively.
13
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
Federal funds purchased represent overnight funds. The Bank has federal
funds purchase lines available with five financial institutions for a
total of $46.0 million. At June 30, 2000 and December 31, 1999, the Bank
had no federal funds purchased balances outstanding.
Short-term FHLB advances are borrowings with original maturities between
one and 365 days. At June 30, 2000 and December 31, 1999, the Bank had
short-term FHLB advances of $59.0 million at an interest rate of 6.68
percent and $66.4 million at interest rates ranging from 5.74 percent to
5.92 percent, respectively. The Bank had collateralized these borrowings
by pledging to the FHLB a security interest in certain mortgage-related
assets having an aggregate book value of $81.1 million at June 30, 2000
and $91.2 million at December 31, 1999.
Additional information with respect to short-term borrowings as of and for
the six months ended June 30, 2000 and 1999 is presented in the table
below.
--------------------------------------------------------------------------
Short-Term Borrowings 2000 1999
--------------------------------------------------------------------------
(000's except percentages)
Balance at June 30 $ 92,000 $ 74,000
Average balance outstanding 142,492 18,685
Weighted-average interest rate
As of June 30 6.64% 5.20%
Paid during period 5.96% 5.14%
==========================================================================
The Bank had long-term borrowings, which have original maturities of over
one year, of $144.8 million and $174.8 million in securities sold under
agreements to repurchase as of June 30, 2000 and December 31, 1999,
respectively. At June 30, 2000, these borrowings included $9.8 million
having an original term of three years at an interest rate of 6.08
percent, and $135.0 million having original terms of ten years at interest
rates between 4.52 percent and 5.67 percent that are callable on certain
dates after an initial noncall period at the option of the counterparty to
the repurchase agreement. As of June 30, 2000 and December 31, 1999, these
borrowings are collateralized by securities with an aggregate amortized
cost of $161.6 million and $185.0 million, respectively, and estimated
fair value of $153.8 million and $174.9 million, respectively.
At June 30, 2000 and December 31, 1999, long-term FHLB advances totaled
$19.7 million and $21.6 million, respectively. These borrowings are
amortizing advances having scheduled payments and may not be repaid in
full prior to maturity without penalty.
A summary of long-term, fixed-rate debt distributed based upon remaining
contractual payment date and expected option call date at June 30, 2000,
with comparative totals for December 31, 1999, is as follows:
14
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
After 1
Within But Within After 2000 1999
Long-Term Debt 1 Year 5 Years 5 Years Total Total
------------------------------------------------------------------------------------------------------------------
Contractual Payment Date: (000's, except percentages)
<S> <C> <C> <C> <C> <C>
Total long-term debt $ 13,573 $ 14,084 $ 136,836 $ 164,493 $ 196,420
Weighted-average interest rate 5.97% 5.64% 5.29% 5.38% 5.33%
==================================================================================================================
Expected Call Date:
Total long-term debt $ 33,573 $ 129,084 $ 1,836 $ 164,493 $ 196,420
Weighted-average interest rate 5.61% 5.31% 5.99% 5.38% 5.33%
==================================================================================================================
</TABLE>
At June 30, 2000 and December 31, 1999, the Bank held 341,395 shares of
capital stock of the FHLB with a carrying value of $34.1 million, which is
required in order to borrow under the short- and long-term advance and
securities sold under agreements to repurchase programs from the FHLB. The
FHLB generally limits borrowings up to an aggregate of 30 percent of total
assets, excluding securities sold under agreements to repurchase, upon the
prerequisite purchase of shares of FHLB stock. Any advances made from the
FHLB are required to be collateralized by the FHLB stock purchased and
certain other assets.
The ability of the Company and Bank to pay cash dividends in the future is
restricted by various regulatory requirements. The Company's ability to
pay cash dividends to its stockholders is primarily dependent upon the
receipt of dividends from the Bank. The Bank's dividends to the Company
may not exceed the sum of the Bank's net income for that year and its
undistributed net income for the preceding two years, less any required
transfers to additional paid-in capital. At June 30, 2000, the Bank could
pay dividends of $27.1 million to the Company without having to obtain
prior regulatory approval.
On April 13, 2000, the Company's Board of Directors authorized a five
percent common stock dividend, which was distributed on May 15, 2000 to
stockholders of record as of May 1, 2000. The weighted average common
shares outstanding and per common share amounts for the three and six
months ended June 30, 2000 and 1999 have been adjusted to reflect the five
percent stock dividend.
10. Commitments and Contingencies
In the normal course of business, various commitments to extend credit are
made which are not reflected in the accompanying consolidated financial
statements. At June 30, 2000, formal credit line and loan commitments,
which are primarily loans collateralized by real estate and credit card
lines, approximated $332.5 million and outstanding letters of credit
totaled $23.2 million. Such amounts represent the maximum risk of loss on
these commitments.
In connection with the Bank's asset/liability program, the Bank may enter
into derivative contracts to manage interest rate risk. In addition, the
Bank, from time to time, enters into
15
<PAGE>
U.S.B. HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont'd)
forward commitments to sell residential first mortgage loans to reduce
market risk associated with originating and holding loans for sale. No
such contracts were outstanding at June 30, 2000.
Commitments regarding employment contracts are described in Note 16 to the
consolidated financial statements of the Company for the year ended
December 31, 1999, which is included in the Company's 1999 Annual Report
on Form 10-K.
In the ordinary course of business, the Company is party to various legal
proceedings, none of which, in the opinion of management, based on advice
from legal counsel, will have a material adverse effect on the Company's
consolidated financial position or results of operations.
11. Segment Information
The Company has one reportable segment, "Community Banking." All of the
Company's activities are interrelated, and each activity is dependent and
assessed based on how each of the activities of the Company supports the
others. For example, commercial lending is dependent upon the ability of
the Bank to fund loans with retail deposits and other borrowings and to
manage interest rate and credit risk. This situation is also similar for
consumer and residential mortgage lending. Accordingly, all significant
operating decisions are based upon analysis of the Company as one
operating segment or unit.
General information required by SFAS No. 131 is disclosed in the
consolidated financial statements and accompanying notes. The Company
operates only in the U.S. domestic market, specifically the lower Hudson
Valley, which includes the counties of Rockland, Westchester, Orange,
Putnam and Dutchess, New York, as well as New York City and Long Island,
New York, northern New Jersey and southern Connecticut. For the six months
ended June 30, 2000 and 1999, there is no customer that accounted for more
than ten percent of the Company's revenue.
16
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to June 30, 2000. The Company cautions
that these forward-looking statements are subject to numerous assumptions, risks
and uncertainties, and that statements relating to subsequent periods
increasingly are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.
In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: competitive
pressures on loan and deposit product pricing; other actions of competitors;
changes in economic conditions, including changes in interest rates and the
shape of the U.S. Treasury yield curve; the extent and timing of actions of the
Federal Reserve Board and other regulatory agencies; customer deposit
disintermediation; changes in customers' acceptance of the Company's products
and services; increase in Federal and state income taxes; and the extent and
timing of legislative and regulatory actions and reform, including the recently
enacted Gramm-Leach Bliley act.
The Company's forward-looking statements are only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances.
FINANCIAL CONDITION
At June 30, 2000, the Company had total assets of $1,790.0 million, an increase
of $143.6 million or 8.7 percent from December 31, 1999.
The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, of $655.9 million and $620.5 million at June 30, 2000 and
December 31, 1999, respectively, consists of securities held to maturity at
amortized cost of $197.6 million and $187.4 million, securities available for
sale at estimated fair value totaling $424.1 million and $398.9 million at June
30, 2000 and December 31, 1999, respectively, and FHLB stock of $34.1 million at
both June 30, 2000 and December 31, 1999.
During the six months ended June 30, 2000, U.S. Treasury and government agency
obligations increased $32.5 million due primarily to purchases of $45.0 million
in callable bonds, sales of $13.0 million in U.S. Treasury notes, and a net
increase in the estimated fair value of available for sale securities of $0.5
million. Mortgage-backed securities increased by $2.6 million primarily due to
purchases totaling $19.8 million and a net increase in the estimated fair value
of available for sale securities of $0.7 million, partially offset by principal
paydowns of $17.4 million
and net premium amortization of $0.5 million. Mortgage-backed
securities purchased are fixed-rate securities having expected weighted-average
lives of less than ten years at the time of purchase. The Bank's investment in
obligations of states and political subdivisions, or municipal securities,
17
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
increased by $0.4 million principally due to purchases of $6.2 million that were
partially offset by maturities of $5.8 million during the six month period ended
June 30, 2000. Municipal securities are considered core investments which are
high yielding on a tax equivalent basis and have diversified maturities.
Purchases of municipal securities are dependent upon their availability in the
marketplace and the comparative tax equivalent yield of such securities to other
securities of comparable credit risk and maturity. The Company currently has
$0.7 million of holdings in equity securities. Equity investments of other
publicly traded financial institutions and medium- term corporate debt
securities which are rated investment grade by nationally recognized credit
rating organizations will continue to be evaluated for investment in the future.
The Company continues to exercise its conservative approach to investing by
making high quality investments and controlling interest rate risk by purchasing
both fixed and floating rate securities and through the averaging of investments
in medium-term maturities.
At June 30, 2000, loans outstanding were $1,035.1 million, a net increase of
$107.6 million or 11.6 percent over December 31, 1999. The primary increases of
outstanding loan balances were $42.7 million in commercial mortgages, $38.0
million in land, acquisition and construction loans, $16.6 million in
residential mortgages, $12.9 million in time unsecured loans, $6.8 million in
home equity mortgages, and $2.2 million in other loan categories, partially
offset by reductions in time secured loans of $8.9 million, commercial
installment loans of $1.8 million, credit cards of $0.7 million and other loan
categories of $0.2 million. The Company had approximately $332.5 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 $0.8 million or 7.2 percent to
$11.5 million at June 30, 2000, from $10.7 million at December 31, 1999. The
allowance for loan losses represents 1.11 percent of gross loans outstanding at
June 30, 2000, compared to 1.15 percent at December 31, 1999. The allowance
reflects a provision of $950,000 and net charge-offs of $179,000 recorded for
the six months ended June 30, 2000.
Management believes that allowance for loan losses at June 30, 2000
appropriately 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. During
1999, the FDIC completed an examination of the Bank and the Federal Reserve
completed an off-site examination of the Company. The regulatory agencies
concluded that the process of internal asset review and the allowance for loan
losses were adequate.
Total deposits increased $253.4 million for the six month period ended June 30,
2000 to $1,395.1 million, which represents a 22.2 percent increase from December
31, 1999. Of this increase, $51.6 million were in retail and commercial accounts
and $201.8 million were in wholesale type accounts. Demand deposits increased
$4.6 million due primarily to the opening of a new branch
18
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
and increased deposits from loan related customers. NOW deposits increased $3.3
million due to normal fluctuations in this transaction type account and an
increase in the number of accounts. Money market accounts increased $23.6
million due to the introduction of a more competitive higher rate money market
product. Savings deposits decreased $21.7 million, due to temporary deposits
placed in the Bank at December 31, 1999, increased rate competition for savings
deposits, as well as money transferred into higher yielding time deposits and
the new money market product. Retail time deposits less than $100,000 and IRA
and KEOGH time deposits increased $23.1 million and $6.5 million, respectively,
due to attractive yields offered to attract additional deposits. Brokered time
deposits of $34.8 million were acquired to help fund increased loan growth. Time
deposits greater than $100,000 from local municipalities, which are obtained on
a bidding basis with maturities of 30 to 180 days, and personal time deposits
over $100,000 increased $160.3 million and $18.9 million, respectively, during
the six month period ended June 30, 2000. Depending on rate and term, the Bank
utilizes municipal, brokered and large time deposits as an alternative to
borrowed funds.
During the three months ended June 30, 2000, the Company decreased the amount of
outstanding short and long-term advances with the Federal Home Loan Bank of New
York by $9.3 million and borrowings under securities sold under agreements to
repurchase by $108.0 million as the Bank replaced such funds, primarily with
municipal and brokered deposits.
Stockholders' equity increased to $103.0 million at June 30, 2000 from the
December 31, 1999 balance of $96.4 million. The increase primarily results from:
net income of $10.1 million for the six month period ended June 30, 2000; $1.5
million of stock options exercised and related tax benefit; other comprehensive
income of $0.7 million; and other equity transactions of $0.1 million; partially
offset by common stock dividends paid of $2.4 million and treasury stock
purchases of $3.4 million.
The Company's leverage ratio at June 30, 2000 was 7.50 percent, compared to 7.73
percent at December 31, 1999. The Company's Tier I and total capital ratios
under the risk-based capital guidelines were 11.61 percent and 12.62 percent at
June 30, 2000 and 12.49 percent and 13.56 percent at December 31, 1999,
respectively. In addition, the Bank exceeds all current regulatory capital
requirements and was in the "well-capitalized" category at June 30, 2000 and
December 31, 1999.
RESULTS OF OPERATIONS
Earnings
Net income for the three and six month periods ended June 30, 2000 was $5.0
million and $10.1 million compared to $4.0 million and $7.5 million for the
three and six month periods ended June 30, 1999, an increase of 26.4 percent and
35.3 percent, respectively. Diluted earnings per common share were $0.29 and
$0.59 for the three and six month periods ended June 30, 2000, compared to $0.23
and $0.43 for the three and six month periods ended June 30, 1999, respectively,
increases of 26.1 percent and 37.2 percent, respectively.
19
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
The increase in net income for the three and six month periods ended June 30,
2000, compared to the prior year periods, reflects higher net interest income,
higher non-interest income, and a lower effective income tax rate. These
increases to net income were partially offset by losses on security sales in the
current periods compared to gains in the prior year periods, higher provisions
for loan losses and higher non-interest expenses.
A discussion of the factors impacting the changes in the various components of
net income follows.
Net Interest Income
Net interest income, the difference between interest income and interest
expense, is a significant component of the Company's consolidated earnings. For
the three and six month periods ended June 30, 2000, net interest income
increased 19.0 percent and 23.5 percent to $15.1 million and $30.0 million, from
$12.7 million and $24.3 million recorded for the three and six month periods
ended June 30, 1999, respectively. The increase in net interest income is
primarily a result of an increase in average earning assets to $1.70 billion and
$1.66 billion for the three and six months ended June 30, 2000, compared to
$1.38 billion and $1.31 billion for the three and six months ended June 30,
1999, an increase of 22.9 percent and 26.6 percent, respectively. The increases
in average earning assets for the three and six month periods ended June 30,
2000 compared to the prior year periods results primarily from increased
investment in mortgage-backed securities and U.S. government agency securities,
and origination of residential and commercial mortgages and real estate secured
land acquisition and construction loans. Net interest income for the three and
six months ended June 30, 2000 also benefited from increases in average earning
assets over average interest bearing liabilities to $250.3 million and $247.7
million, from $216.7 million and $209.9 million in the prior year periods,
reflecting increases of 15.5 percent and 18.0 percent, respectively. The
increase in net interest income was partially offset by a decline in the net
interest margin on a tax equivalent basis which was 3.67 percent for the three
months ended June 30, 2000 and 3.72 percent for the six months ended June 30,
2000, compared to 3.81 percent for the three months ended June 30, 1999 and 3.84
percent for the six months ended June 30, 1999, due to compression in the net
interest spread as the Federal Reserve Board has raised interest rates six times
since June 30, 1999.
For the three and six month periods ended June 30, 2000, the net interest spread
(yield on earning assets less cost of funds, including demand deposits) was 3.42
percent and 3.47 percent, respectively, compared to 3.53 percent and 3.55
percent for the same periods in 1999, respectively. Yields on interest bearing
liabilities increased during the three and six month periods ended June 30, 2000
at a faster rate than the yields on interest earning assets during this period
of rising interest rates, as compared to the comparable 1999 periods. The
increase in asset yields is primarily a result of higher yields on
mortgage-backed and government agency securities purchased during the six months
ended June 30, 2000 and adjustments for floating rate securities, as well as
higher yields on loans due to the general increase in interest rates. The cost
of borrowings, which increased due to a rise in interest rates, together with
higher yields on interest bearing deposits that include brokered time deposits,
increased the overall yield on
20
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
interest bearing liabilities for the three and six month periods ended June 30,
2000, compared to the prior period in 1999. The higher yields on interest
bearing liabilities and the Company's continuing leverage strategy of purchasing
government securities funded by borrowings both contributed to tighter spreads
resulting in the decline in the net interest spread. Although leverage
strategies result in decreasing net interest spreads, the strategies have the
effect of increasing net interest income while managing interest rate risk.
Provision for Loan Losses
The provision for loan losses increased $198,000 to $500,000 and $40,000 to
$950,000 for the three and six month periods ended June 30, 2000, respectively,
compared to the same periods in 1999. The increase in the provision for loan
losses reflects the significant increase in the loan portfolio. During the three
and six month periods ended June 30, 2000, net charge-offs totaled $139,000 and
$179,000, compared to net charge-offs of $65,000 and $166,000 for the three
month and six month periods ended June 30, 1999, respectively. The net
charge-offs in the three and six month periods ended June 30, 2000 primarily
relate to real estate and credit card loans, while the net charge-offs in both
1999 periods primarily relate to credit card loans. Nonaccrual loans were $1.6
million and $1.3 million, respectively, at June 30, 2000 and 1999, compared to
$2.6 million at December 31, 1999. It is the Company's policy to discontinue the
accrual of interest on loans when, in the opinion of management, a reasonable
doubt exists as to the timely collectibility of the amounts due. Net income is
adversely impacted by the level of non-performing assets of the Company since,
in addition to foregone revenue, the Company must increase the level of
provision for loan losses, and incur other costs associated with collections of
past due balances.
An evaluation of the quality of the loan portfolio is performed by management on
a quarterly basis as an integral part of the credit administration function,
which includes the identification of past due loans, non-performing loans and
impaired loans, assessments of the expected effects of the current economic
environment and industry, geographic and customer concentrations in the loan
portfolio, and review of the historical loan loss experience. Management takes a
prudent and cautious position in evaluating various business and economic
uncertainties in relation to the Company's loan portfolio. In Management's
judgment, the allowance for loan losses at June 30, 2000 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
with respect to real estate foreclosures, time and demand loans, installment,
credit card and other loans, and the effect of the real estate market and
general economic conditions of the New York Metropolitan area on the loan
portfolio. There is no assurance that the Company will not be required to make
future adjustments to the allowance in response to changing economic conditions
or regulatory examinations.
21
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
Non-Interest Income
Non-interest income for the three and six month periods ended June 30, 2000
decreased by $202,000 (15.9 percent) to $1,071,000 and decreased $390,000 (14.2
percent) to $2,360,000 compared to the same periods in 1999. The decrease for
the three and six month periods ended June 30, 2000 reflects losses on security
sales in the current periods of $105,000 compared to net gains in the prior year
periods of $201,000 and $527,000 for the three and six month periods ended June
30, 1999, respectively. The decrease was partially offset by higher service
charges and fees and other income of $104,000 and $242,000 for the three and six
months ended June 30, 2000, respectively, compared to the prior year periods.
Service charges and fees increased due to an increase in the number of deposit
accounts, restructuring of fees charged and management of waived charges. The
other income increase primarily reflects higher letter of credit fees, credit
card fee income, and U.S.B. Financial Services, Inc. commissions.
Non-Interest Expense
Non-interest expense increased $667,000 (9.1 percent) to $7,970,000 and
$1,656,000 (11.6 percent) to $15,911,000 for the three and six month periods
ended June 30, 2000 from the comparable periods in 1999, respectively. The
primary reason for these increases results from higher levels of salaries and
benefits, occupancy and equipment expense, advertising and business development
expense and communications expense necessary to expand and support increased
business volume and balance sheet growth, partially offset by estimated merger
related savings of approximately $100,000 and $300,000 for the three and six
months ended June 30, 2000, respectively, compared to the prior year periods,
resulting from the mergers of Tappan Zee in August 1998 and Tarrytowns Bank in
April 1999.
Salaries and employee benefits, the largest component of non-interest expense,
increased by $422,000, or 9.9 percent and $1,073,000 or 12.9 percent during the
three and six month periods ended June 30, 2000 compared to the prior year
periods. The increase occurred due to additional personnel employed by the
Company to accommodate the increases in deposits and loans and their related
services. In addition, salaries and employee benefits increased because of
additional expenses related to incentive compensation programs, and increases in
the cost of employee benefit programs such as retirement and stock plans,
medical coverage, and tuition reimbursement. Increases in salaries and employee
benefits expense was partially offset by estimated merger related savings of
$50,000 and $110,000 for the three and six months ended June 30, 2000,
respectively.
Significant changes in the other components of non-interest expense for the
three and six month periods ended June 30, 2000 compared to the prior periods,
were due to the following:
o Increase of $104,000 (7.8 percent) and $284,000 (10.8 percent) in
occupancy and equipment expense. This increase is primarily due to the
opening of a new branch office in May 2000, higher equipment maintenance
and utility expenses relating to the Company's facilities and computer
related equipment, and increased rental and depreciation expense related
to additional space for corporate and administrative offices.
22
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (cont'd)
o Increase of $96,000 (20.7 percent) and $149,000 (18.7 percent) in
advertising and business development. The increase reflects additional
emphasis on business development efforts, as well as marketing the Bank's
products and focus on the Bank's ad campaign, "Do business with us, do
better with us."
o Decrease of $78,000 (31.6 percent) and $5,000 (1.1 percent) in
professional fees. The decrease relates to lower auditing and legal fees
primarily due to estimated merger related savings of $50,000 and $100,000
for the three and six months ended June 30, 2000, partially offset by
increases due to higher levels of business volume.
o Increase of $72,000 (38.5 percent) and $110,000 (27.8 percent) in
communications expense. The increase relates to greater telephone usage as
a result of increased employees, office space and data lines usage.
o Increase of $13,000 (8.9 percent) and $41,000 (13.3 percent) in stationery
and printing. The increase reflects an increase in office supplies and
equipment necessary to support the continuing growth of the Bank's
business volume.
o Increase of $15,000 (34.1 percent) and $25,000 (26.6 percent) in FDIC
insurance. The increase is related to the higher level of total deposits
during the first half of 2000 compared to the prior year periods.
o Increase of $23,000 (3.8 percent) and decrease of $21,000 (1.7 percent) in
other expenses. The increase for the three month period is primarily due
to higher courier fees and a gain on the sale of foreclosed property in
the 1999 quarter, partially offset by the allocation of costs related to
loan fees. The decrease for the six month period is primarily due to
estimated merger related savings of $80,000 and allocation of costs
related to loan fees, partially offset by a higher level of other outside
services to support higher levels of business.
Income Taxes
The effective income tax rates for the three and six month periods ended June
30, 2000 were 34.8 percent and 34.9 percent, respectively, compared to 37.5
percent and 37.3 percent, respectively, for the prior periods in 1999. The lower
effective tax rate for the three and six month periods ended June 30, 2000
primarily reflects lower state income taxes.
23
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk at December 31, 1999
were reported in the Company's 1999 Annual Report on Form 10-K. There have been
no material changes in the Company's market risk exposures at June 30, 2000
compared to December 31, 1999. Interest rate risk continues to be the Company's
primary market risk exposure since all Company transactions are denominated in
U.S. dollars with no direct foreign currency exchange or changes in commodity
price exposures. All market risk sensitive instruments continue to be held to
maturity or available for sale with no financial instruments entered into for
trading purposes. The Company does not use derivative financial instruments such
as interest rate swaps and caps extensively and has not entered into any
derivative financial instruments during the six months ended June 30, 2000.
The Company continues to use two methods to evaluate its market risk to changes
in interest rates, a "Static Gap" evaluation and a simulation analysis of the
impact of changes in interest rates on the Company's net interest income and
cash flow. There have been no changes in the Company's policy limit of
acceptable variances to net interest income at June 30, 2000 as compared to
December 31, 1999. The Company's "Static Gap" at June 30, 2000 was a negative
$397.8 million in the one year time frame compared to a negative $302.1 million
at December 31, 1999. If interest rates were to gradually ramp up or down 200
basis points from current rates, the percentage change in estimated net interest
income for the subsequent 12 month measurement period continues to be within
the Company's policy limit of not declining by more than 5.0 percent.
24
<PAGE>
PART II - OTHER INFORMATION
U.S.B. HOLDING CO., INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 26, 2000 for
the purpose of considering and voting upon the following matters:
I. Election of three directors, Messrs. Thomas E. Hales, Raymond J. Crotty,
and Michael H. Fury, constituting Class III 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
-----------------------------------------------
T. E. Hales R. J. Crotty M. H. Fury
----------- ------------ ----------
Votes:
For 14,111,949 14,112,296 14,116,756
Against or Withheld 76,031 75,684 71,224
Abstentions -- -- --
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)).
(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)).
25
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
(A) Exhibits (cont'd)
Exhibit No. Exhibit
----------- -------
(10) (a) Agreement of Employment dated as of November 16, 1998 between
the Company and the Bank and Thomas E. Hales (incorporated
herein by reference to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 ("1998 10-K") Exhibit
(10)(a)).
(10) (b) Agreement of Employment dated as of November 16, 1998 between
the Company and the Bank and Raymond J. Crotty (incorporated
herein by reference to Registrant's 1998 10-K, Exhibit (10)(b)).
(10) (c) Agreement of Employment dated as of November 16, 1998 between
the Company and the Bank and Steven T. Sabatini (incorporated
herein by reference to Registrant's 1998 10-K, 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)).
(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).
26
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
(A) Exhibits (cont'd)
Exhibit No. Exhibit
----------- -------
(10) (m) Agreement and Plan of Merger, dated as of March 6, 1998, between
U.S.B. Holding Co., Inc. and Tappan Zee Financial, Inc.
(incorporated herein by reference to Registrant's Current Report
on Form 8-K dated as of March 6, 1998).
(10) (n) Tappan Zee Financial, Inc. 1996 Stock Option Plan for Officers
and Employees ("Employee Stock Option Plan") (incorporated
herein by reference to Exhibit B to Tappan Zee Financial, Inc.'s
Proxy Statement for use in connection with its 1996 Annual
Meeting of Shareholders ("Tappan Zee 1996 Proxy Statement")).
10) (o) Amendment No. 1 to the Employee Stock Option Plan (incorporated
herein by reference to Tappan Zee Financial, Inc.'s Annual
Report on Form 10-K for the fiscal year ended March 31, 1997
("Tappan Zee 1997 10-K"), Exhibit 10.1.1).
(10) (p) Amendment No. 2 to the Employee Stock Option Plan (incorporated
herein by reference to Exhibit A to Tappan Zee Financial, Inc.'s
Proxy Statement for use in connection with its 1997 Annual
Meeting of Shareholders ("Tappan Zee 1997 Proxy Statement")).
(10) (q) Tappan Zee Financial, Inc. 1996 Stock Option Plan for Outside
Directors ("Outside Director Option Plan") (incorporated herein
by reference to Exhibit B to the Tappan Zee 1997 Proxy
Statement).
(10) (r) Amendment No. 1 to the Outside Director Option Plan
(incorporated herein by reference to the Tappan Zee 1997 10-K,
Exhibit 10.2.1).
(10) (s) Amendment No. 2 to the Outside Director Option Plan
(incorporated herein by reference to Exhibit B to the Tappan Zee
1997 Proxy Statement).
(10) (t) Tappan Zee Financial, Inc. 1996 Recognition and Retention Plan
for Officers and Employees ("Employee RRP") (incorporated herein
by reference to Exhibit B to the Tappan Zee 1996 Proxy
Statement).
(10) (u) Amendment No. 1 to the Employee RRP (incorporated herein by
reference to the Tappan Zee 1997 10-K, Exhibit 10.3.1 ).
(10) (v) Amendment No. 2 to the Employee RRP (incorporated herein by
reference to Exhibit C to the Tappan Zee 1997 Proxy Statement).
(10) (w) Tappan Zee Financial, Inc. 1996 Recognition and Retention Plan
for Outside Directors ("Outside Director RRP") (incorporated
herein by reference to Exhibit D to the Tappan Zee 1997 Proxy
Statement).
(10) (x) Amendment No. 1 to the Outside Director RRP (incorporated herein
by reference to the Tappan Zee 1997 10-K, Exhibit 10.4.1).
27
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
(A) Exhibits (cont'd)
Exhibit No. Exhibit
----------- -------
(10) (y) Amendment No. 2 to the Outside Director RRP (incorporated herein
by reference to Exhibit D to the Tappan Zee 1997 Proxy
Statement).
(10) (z) Loan Agreement to the Employee Stock Ownership Plan Trust of
Tappan Zee Financial, Inc. and Certain Affiliates (incorporated
herein by reference to the Tappan Zee Financial, Inc.'s Annual
Report on Form 10-K for the fiscal year ended March 31, 1996
("Tappan Zee 1996 10-K"), Exhibit 10.7).
(10) (aa) Deferred Compensation Plan for Directors of Tarrytowns Bank, FSB
(Incorporated herein by reference to the Registration Statement
on Form S-1 filed No. 33-94128), filed on June 30, 1995, as
amended ("Tappan Zee Registration Statement"), Exhibit 10.7).
(10) (bb) Consulting Agreement by and between Tarrytowns Bank, FSB and
Stephen C. Byelick, dated effective as of August 31, 1998
(incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998
Third Quarter 1998 10-Q"), Exhibit (10)(dd)).
(10) (cc) Employment Agreement by and between Tarrytowns Bank, FSB and
Harry G. Murphy, dated effective as of August 31, 1998
(incorporated herein by reference to the 1998 Third Quarter
10-Q, Exhibit (10)(cc)).
(10) (dd) Employee Retention Agreement by and among Tappan Zee Financial,
Inc. Tarrytowns Bank, FSB and Christina Vidal, effective as of
October 5, 1995 (incorporated herein by reference to the Tappan
Zee 1996 10-K, Exhibit 10.15).
(10) (ee) Employee Retention Agreement by and among Tappan Zee Financial,
Inc., Tarrytowns Bank, FSB and James D. Haralambie, effective as
of June 23, 1997 (incorporated herein by reference to
Registrant's 1998 10-K, Exhibit (10)(17)).
(10) (ff) 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) (gg) Forms of Restricted Stock Award Notices to award recipients,
pursuant to the Employee RRP and the Outside Director RRP
(incorporated herein by reference to the Tappan Zee 1997 10-K,
Exhibit 10.17).
(10) (hh) 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)).
28
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (cont'd)
(A) Exhibits (cont'd)
Exhibit No. Exhibit
----------- -------
(10) (ii) Amendment Number 1 to Registrant's Employee Stock Ownership Plan
(with Code Section 401(k) Provisions) dated January 27, 1995
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1999 ("1999
10-K"), Exhibit (10)(jj)).
(10) (jj) 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) (kk) 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) (ll) 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) (mm) 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) (nn) 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) (oo) Asset Purchase and Account Assumption Agreement by and between
Union State Bank and La Jolla Bank dated May 25, 2000.*
(11) Computation of earnings per share.*
(27) Financial Data Schedule.*
*Filed Herewith.
(B) Reports on Form 8-K
The Company filed a report on Form 8-K on June 2, 2000 regarding a
definitive agreement between the Bank and La Jolla Bank pursuant to which
the Bank will acquire two La Jolla Bank branches.
29
<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, 2000.
U.S.B. HOLDING CO., INC.
/s/ Thomas E. Hales /s/ Steven T. Sabatini
------------------------------------ ----------------------------------
Thomas E. Hales Steven T. Sabatini
Chairman of the Board, President, Senior Executive Vice President,
Chief Executive Officer and Director Chief Financial Officer and
Assistant Secretary
(Principal Financial and
Accounting Officer)
30
