SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only
(as permitted by Rule 14a-6(e) (2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
U.S.B. Holding Co., Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
(4) Date Filed:
<PAGE>
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------
May 26, 2000
To the Stockholders of
U.S.B. Holding Co., Inc.:
At the direction of the Board of Directors of U.S.B. Holding Co., Inc. (the
"Company"), a Delaware corporation, NOTICE IS HEREBY GIVEN that the Annual
Meeting of Stockholders of the Company will be held at the Holiday Inn, 3
Executive Boulevard, Suffern, New York 10901 on May 26, 2000 at 10:00 a.m.
(local time), for the purpose of considering and voting upon the following
matters:
1. Election of three directors, constituting Class III members of the
Board of Directors, to a three-year term of office.
2. Any other business which may be properly brought before the meeting
or any adjournment thereof.
By order of the Board of Directors
Michael H. Fury, Secretary
April 28, 2000
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>
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
-----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 26, 2000
This Proxy Statement and the accompanying form of proxy are being sent to
the stockholders of U.S.B. Holding Co., Inc. (the "Company"), a Delaware
corporation, in connection with the solicitation by the Board of Directors of
the Company (the "Board") of proxies to be voted at the Annual Meeting of
Stockholders of the Company (the "Meeting") to be held at 10:00 a.m. (local
time) on Friday, May 26, 2000, at the Holiday Inn, 3 Executive Boulevard,
Suffern, New York 10901, and at any adjournments thereof. The Notice of Meeting,
this Proxy Statement and the accompanying form of proxy are being mailed to the
stockholders on or about April 28, 2000. The Annual Report of the Company for
the year 1999 has been furnished to stockholders with this Proxy Statement.
At the Meeting, three Class III directors will be elected to the Board of
Directors to serve for a three-year term (until the 2003 Annual Meeting of
Stockholders), with each director to hold office until his successor has been
duly elected and qualified, or until his earlier death, resignation or removal.
VOTING RIGHTS AND PROXIES
The Board of Directors has fixed the close of business on April 20, 2000,
as the record date for determination of stockholders 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 15,750,739 shares of common stock, $0.01 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.
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 of Common Stock represented thereby will be voted at the Meeting and,
where instructions have been given by a stockholder, will be voted in accordance
with such instructions.
Any stockholder 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 Common
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
commercial banking 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 stockholders and obtaining their
proxies.
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
Three directors, Mr. Thomas E. Hales, Mr. Raymond J. Crotty and Mr. Michael
H. Fury, constituting Class III members of the Board of Directors, are proposed
to be elected to serve for a three-year term (until the 2003 Annual Meeting of
Stockholders), 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 III directors with terms expiring at this meeting, three Class I directors
with terms expiring in 2001 and two Class II directors with terms expiring in
2002, making a total of eight 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 III directors, and the Class I and Class II directors
continuing in office.
NOMINEES FOR DIRECTOR
CLASS III
(Terms Expiring in 2003)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
and the Bank and Principal Occupation for at least the Past Five Years Company Since
---------------------------------------------------------------------- -----------
<S> <C>
Thomas E. Hales, 63 ........................................................... 1982
Chairman of the Board and Chief Executive Officer of the Company (since
1982); Chairman of the Board of the Bank (since 1981); Chief Executive
Officer of the Bank (since 1983); President of the Company and the Bank
(since 1984).
Raymond J. Crotty, 52 ......................................................... 1996
Senior Executive Vice President, Chief Credit Officer and Assistant
Secretary of the Company and the Bank (since 1997); Executive Vice
President, Chief Credit Officer and Assistant Secretary of the Company and
the Bank (1995 to 1997, and 1992 to 1997, respectively); Senior Vice
President and Chief Credit Officer of the Bank (1988 to 1992); Director of
the Bank (since 1995).
Michael H. Fury, 73 ........................................................... 1982
Attorney, senior partner in law firm of Fury, Kennedy, Griffin & Smith,
Pearl River, NY (since 1955); Secretary of the Company and the Bank (since
1985); General Counsel of the Company (1982 to 1998) and the Bank (1969 to
1998); Director of the Bank (since 1969).
</TABLE>
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS I
(Terms Expiring in 2001)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
and the Bank and Principal Occupation for at least the Past Five Years Company Since
---------------------------------------------------------------------- ---------------
<S> <C>
Herbert E. Peckman, 88 ........................................................ 1982
Proprietor, Peckman's Liquor Store, Pearl River, NY (since 1947); Director
of the Bank (since 1969).
Howard V. Ruderman, 72 ........................................................ 1982
Retired - President, Mohegan Electric Supply Co., Mohegan Lake, NY (1973 to
1997); Director of the Bank (since 1969).
Edward T. Lutz, 53 ............................................................ 1999
Principal, Tucker Anthony (since 1999); Senior Vice President, Capital
Resources, Inc. (1996 to 1999); Senior Vice President, Lyons Zomback &
Ostowski, Inc./Advest, Inc. (1988-1996); Regional Director FDIC - New York
(1984 to 1988); Director of the Bank (since 1999).
</TABLE>
CLASS II
(Terms Expiring in 2002)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
and the Bank and Principal Occupation for at least the Past Five Years Company Since
---------------------------------------------------------------------- -----------
<S> <C>
Kenneth J. Torsoe, 64 ......................................................... 1982
President, Torsoe Brothers Construction Corp., Suffern, NY; partner,
Normandy Village Company; partner, Normandy Village Apts., Nanuet, NY
(since 1964); Director of the Bank (since 1981).
Kevin J. Plunkett, 50 ......................................................... 1998
Attorney; Member of law firm of Plunkett & Jaffe, P.C., White Plains, NY
(since 1979); Director of the Bank (since 1998).
</TABLE>
Executive Officers
In addition to Mr. Hales and Mr. Crotty, the other executive officer of the
Company is Steven T. Sabatini, 48, Senior Executive Vice President, Chief
Financial Officer and Assistant Secretary of the Company since 1997, and
Executive Vice President, Chief Financial Officer and Assistant Secretary of the
Company, 1995 to 1997. Mr. Sabatini has held the same positions with the Bank as
he does with the Company for the same periods. Mr. Sabatini was Assistant to the
Chairman of the Board of Directors of the Bank from September 1994 to March
1995, and for at least five years prior to that, an audit partner with Ernst &
Young LLP.
Board Committees and Meetings
The Board of Directors of the Company met 13 times during 1999. Each
director attended 75% or more of the Board of Directors meetings held during the
period he was a director, with the exception of Herbert E. Peckman, who attended
69% of the Board meetings. The standing committees of the Board include the
Stock Option Committee, presently comprised of Messrs. Ruderman (Chairman), Lutz
and Peckman and the Examining Committee, presently comprised of Messrs. Ruderman
(Chairman), Lutz, Peckman and Plunkett. The Stock Option Committee evaluates
3
<PAGE>
the awarding of options to purchase common stock of the Company to employees
under the Company's stock option plans. The Examining Committee of the Company
functions in a similar manner as that described below for the Bank's Examining
Committee. The Board of Directors of the Company does not have a standing
executive, nominating or compensation committee or committees performing similar
functions.
Each of the directors of the Company is also a member of the Board of
Directors of the Bank, which is the Company's principal subsidiary. Among its
standing committees, the Board of Directors of the Bank has an Executive
Committee, an Examining Committee and a Compensation 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 Executive Committee's
present members are Messrs. Torsoe (Chairman), Crotty, Fury, Hales, Lutz,
Peckman, Plunkett and Ruderman.
The Examining Committee of the Bank's Board of Directors serves the same
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), Lutz, Peckman and Plunkett.
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
compensation policy. Its present members are Messrs. Ruderman (Chairman), Fury
and Plunkett.
The above Committees meet as and when required, except for the Examining
Committees which meet at least twice each year. Certain matters that may come
before a committee may be reviewed or acted on by the Board as a whole.
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. Based solely on its review of copies of
such reports furnished to the Company, the Company believes that the directors
and executive officers are in substantial compliance with the filing
requirements of Section 16(a).
Compensation of Directors
Each director of the Company during 1999 received $2,500 for each month
served on the Company's Board of Directors. In addition, each director of the
Bank received $500 for each month served on the Bank's Board of Directors. 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.
Director Stock Option Plan
Under the Company's existing Director Stock Option Plan, as amended by the
Board of Directors on March 24, 1999, certain non-employee directors receive
annually, effective as of the close of each annual meeting of stockholders 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. The number of shares subject to the option is based upon
the number of years of service completed by the director. After two years of
service, the director is entitled to an option covering 1,000 shares. Each
additional year of service entitles the director to an option covering an
4
<PAGE>
additional 1,000 shares, until the director has completed fifteen years of
service, after which the director is entitled to options covering 18,634 shares.
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, 1999,
there were 361,464 shares remaining to be granted under the Director Stock
Option Plan.
OWNERSHIP OF SHARES BY MANAGEMENT
The following table sets forth certain information as of March 31, 2000
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
Beneficial Percent
Beneficial Owner Ownership* of Class
- ---------------- ------------ ------
<S> <C> <C>
Raymond J. Crotty (a) ............................................... 319,940 1.99%
Michael H. Fury (b) ................................................. 377,649 2.38%
Thomas E. Hales (c) ................................................. 2,458,599 14.79%
Edward T. Lutz ...................................................... 1,000 **
Herbert E. Peckman (d) .............................................. 314,681 1.99%
Kevin J. Plunkett (e) ............................................... 25,483 **
Howard V. Ruderman (f) .............................................. 863,599 5.46%
Kenneth J. Torsoe (g) (h) ........................................... 1,569,184 9.92%
Steven T. Sabatini (i) .............................................. 206,492 1.29%
All directors and executive officers as a group (9 individuals) ..... 6,136,627 35.16%
</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
1,390,896 shares owned by the Company's Employee Stock Ownership Plan (With
401(k) Provisions) ("KSOP"), of which Mr. Peckman, Mr. Plunkett and Mr.
Sabatini are trustees, nor that portion of the 87,342 shares owned by the
Bank's Key Employees' Supplemental Investment Plan ("KESIP"), of which Mr.
Hales and Mr. Sabatini are trustees, which may be allocated to any named
beneficial owner.
** Less than 1.00% beneficial ownership in the Company.
(a) Includes 30,716 shares owned by Mr. Crotty jointly with his wife, and
289,224 shares that may be acquired pursuant to the exercise of options
within 60 days of March 31, 2000. Does not include 69,363 or 8,101 shares
allocated to Mr. Crotty under the KSOP and KESIP, respectively.
(b) Includes 112,730 shares owned by Mr. Fury jointly with his wife, 6,396
shares which he holds as trustee for his children, and 144,494 shares that
may be acquired pursuant to the exercise of options within 60 days of March
31, 2000.
(c) Includes 544,519 shares owned by Mr. Hales jointly with his wife, 171,140
shares owned by his wife, 163,938 shares held by the Hales Family
Foundation, Inc., and 865,502 shares that may be acquired pursuant to the
exercise of options within 60 days of March 31, 2000. Does not include
207,262 or 65,737 shares allocated to Mr. Hales under the KSOP and KESIP,
respectively.
5
<PAGE>
(d) Includes 74,536 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000.
(e) Includes 7,515 shares held by Mr. Plunkett's wife and 13,979 shares that
may be acquired pursuant to the exercise of options within 60 days of March
31, 2000.
(f) Includes 55,902 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000.
(g) Includes 55,902 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000.
(h) If shares owned by Harold R. Torsoe were included, the total would be
2,639,097 shares (16.69%). Harold R. Torsoe is the brother of Kenneth J.
Torsoe. However, Kenneth J. Torsoe disclaims beneficial ownership of the
shares owned by his brother.
(i) Includes 199,650 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000. Does not include 17,498 shares or
3,866 shares allocated to Mr. Sabatini under the KSOP and KESIP,
respectively.
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 two 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>
Annual Compensation Long-Term
--------------------- Compensation All Other
Name and Principal Position(s) Year Salary(1) Bonus(2) Options(3) Compensation(4)
- ------------------------------ ---- ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Thomas E. Hales ....................... 1999 $611,040 $1,001,100 110,117 $138,028
President, Chairman of the Board 1998 $540,333 $ 868,620 144,437 $145,482
and Chief Executive Officer 1997 $423,750 $ 624,120 106,480 $175,306
Raymond J. Crotty ..................... 1999 $204,654 $ 166,850 40,972 $ 33,697
Senior Executive Vice President, 1998 $187,500 $ 144,770 39,930 $ 29,809
Chief Credit Officer and 1997 $171,750 $ 104,020 39,930 $ 28,032
Assistant Secretary
Steven T. Sabatini .................... 1999 $168,654 $ 166,850 39,930 $ 31,851
Senior Executive Vice President, 1998 $151,500 $ 144,770 39,930 $ 27,936
Chief Financial Officer and 1997 $135,750 $ 104,020 39,930 $ 24,590
Assistant Secretary
</TABLE>
- ----------
(1) Includes director fees in the case of Messrs. Hales and Crotty; also
includes that portion of each named executive's salary deferred pursuant to
the KSOP, the KESIP and the Key Employees Supplemental Diversified
Investment Plan ("KESDIP") (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 Incentive Bonus Plan.
(3) Number of shares covered by stock options granted, adjusted for stock
dividends and splits.
(4) Reflects annual contributions made for the account of each named executive
to the KSOP, KESIP and KESDIP, the value of personal use of a Company
provided car and Company paid life insurance.
6
<PAGE>
Option Grants in 1999
The options referred to below were granted under the Company's 1997
Employee Stock Option Plan.
<TABLE>
<CAPTION>
Potential Realizable
Aggregate Value at
% of Total Assumed Annual Rates
Options of Stock Price
Granted to Appreciation for Option
Employees Exercise Term*
Options In Fiscal Price Expiration ------------------------
Name Granted Year ($/Share) Date 5% 10%
- ----- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Hales .......... 6,702 2.43 $14.92 4/7/04 $ 27,626 $ 61,047
Thomas E. Hales .......... 99,778 36.14 $13.5625 4/7/09 $851,045 $2,156,715
Thomas E. Hales .......... 3,637 1.32 $13.93 4/13/09 $ 31,862 $ 80,744
Raymond J. Crotty ........ 1,042 0.38 $14.31 5/26/09 $ 9,377 $ 23,764
Raymond J. Crotty ........ 39,930 14.46 $13.5625 4/7/09 $340,578 $ 863,092
Steven T. Sabatini ....... 39,930 14.46 $13.5625 4/7/09 $340,578 $ 863,092
</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 the Common Stock of the Company over the
option term, which is ten years (five years in the case of Mr. Hales'
incentive stock options). The gains reflect a future value based upon
growth at these prescribed rates.
Option Exercises in 1999 and December 31, 1999 Values
<TABLE>
<CAPTION>
Value
of Unexercised
Unexercised In-the-Money
Options at Options at
Shares 12/31/99 12/31/99*
Acquired Value (Exercisable/ (Exercisable/
Name on Exercise Realized Unexercisable) Unexercisable)
- ----- --------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Thomas E. Hales....... 25,075 $298,393 865,502/0 $6,478,913/NA
Raymond J. Crotty..... 7,278 $ 89,246 296,510/0 $2,197,933/NA
Steven T. Sabatini ... None N/A 199,650/0 $ 957,422/NA
</TABLE>
- ----------
* Difference between the market value per share of the Company's Common Stock
at December 31, 1999 ($15.9375) and the option exercise price, multiplied
by the number of shares covered by the options.
Employment Agreements. The Company and the Bank are committed under
employment agreements with Mr. Hales, the Chairman, President and CEO; Mr.
Crotty, Senior Executive Vice President and Chief Credit Officer; and Mr.
Sabatini, Senior Executive Vice President and CFO, requiring annual salaries of
$590,000, $185,000 and $185,000, respectively; annual bonus payments equal to
six, one and one percent of net income of the Company under the Executive
Incentive Bonus Plan, respectively, and annual stock option grants of 106,480
shares, 39,930 shares and 39,930 shares, respectively, issued at fair value (110
percent of fair value for incentive stock options if the key officer's ownership
of the Company equals or exceeds 10 percent at the date of grant) and other
benefits for the term of the agreements. Mr. Hales' employment agreement is for
a five year term, expiring November 16, 2003, while the agreements of Mr. Crotty
and Mr. Sabatini are for three year terms, expiring November 16, 2001.
Mr. Hales' agreement also requires minimum annual salary increases of
$30,000. All of the employment agreements include change in control provisions,
requiring certain payments including three times annual salary and average bonus
payments (as defined) in the event of voluntary or involuntary termination in
the event of a change in control of the Company or Bank.
7
<PAGE>
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 SEC 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 and/or the full Board. Accordingly,
the following report is submitted by the Bank's Compensation Committee.
Compensation Policies for Executive Officers
The Compensation Committee's executive compensation policy is 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
Company and Bank levels, recognize individual initiative and achievements and
assist the Company in attracting and retaining qualified executives. A
significant portion of an executive officer's compensation is performance
related, and, therefore, 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
is beneficial in aligning the interests of management and the Company's
stockholders. Accordingly, the Compensation Committee has also relied upon
stock-based compensation arrangements in compensating executive officers.
Relationship of Company's Performance to Compensation
Compensation paid to the executive officers for 1999 consisted primarily of
salary, annual bonus under the Company's Executive Incentive Bonus Plan and
awards of stock options under the Company's 1997 Employee Stock Option Plan.
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.
Annual Bonus Arrangements
Corporate performance determines the aggregate amount of annual bonuses, if
any, awarded to the executive officers under the Executive Incentive Bonus Plan.
In determining the aggregate percent of consolidated net income after taxes that
is paid as bonuses in accordance with each executive's employment contract and
the Executive Incentive Bonus Plan, 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 may have identified as
being priorities for that year.
8
<PAGE>
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 Compensation 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.
In 1999, the Committee took into account the fact that the Company achieved
the highest net income reported in its history. Net income was $16.7 million and
diluted earnings per common share was $1.01 for the year ended December 31,
1999, increases of 38.9 percent and 40.3 percent, respectively, over 1998. Net
income for the year ended December 31, 1998 includes expenses, net of tax, of
$3.3 million, related to the acquisition of Tappan Zee Financial, Inc. and a
reduction of tax expense, net of associated expenses, of approximately $1.9
million resulting from tax free liquidating distributions of earnings from the
Bank's Real Estate Investment Trust subsidiary, U.S.B. Realty Corp. (the
"Nonrecurring Items"). Excluding the Nonrecurring Items, net income for the year
ended December 31, 1998 was $13.4 million, and the 1999 increases in net income
and diluted earnings per share were 24.3 percent and 24.7 percent, respectively,
over the comparable 1998 period.
Return on average common stockholders' equity was 17.13 percent in 1999 and
return on average total assets in 1999 was 1.13 percent.
Long-Term Incentive Plan Arrangements
The long-term incentive component of executive officers' compensation for
1999 consists of awards of stock options under the Company's 1997 Employee Stock
Option Plan (the "Plan"). The Plan is designed to link rewards for executive
officers and other key personnel to increases in stockholder 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 Plan and
in accordance with each executive's employment contract consider 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 to Mr. Hales, Mr. Crotty and Mr. Sabatini in 1999, shown under
the caption "Long-Term Compensation Options" in the Summary Compensation Table,
reflect their high level of individual performance and the Committee's view of
the continuing importance of their role in determining the future success of the
Company. The actual size of any stock option gains Mr. Hales, Mr. Crotty and Mr.
Sabatini and other executives will realize depends solely on the future
performance of the Company's Common Stock.
The Committee believes that the programs described above provide
compensation that is competitive with the levels paid by other major
corporations, effectively links executive and stockholder interests through
performance and 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
Kevin J. Plunkett
9
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the annual percentage changes
in the cumulative total stockholder return on the Company's Common Stock with
that of two Peer Groups* and the Russell 2000 Market Value Index ("Russell 2000
Index") for the five-year period ended December 31, 1999. The comparison assumes
that $100 was invested on December 31, 1994 in the Common Stock of the Company
and in each of the foregoing indices and assumes the reinvestment of all
dividends.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED DOCUMENT
Comparison of Five-Year Cumulative Total Return
Among the Company, Two Peer Groups and Russell 2000 Index
- --------------------------------------------------------------------------------
U.S.B. Holding Co., Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ending
- -----------------------------------------------------------------------------------------------------
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S.B. Holding Co., Inc. 100.00 125.42 178.92 545.43 400.28 389.54
Russell 2000 100.00 128.45 149.64 183.10 178.44 216.37
U.S.B. Peer Group* $500M-$1.5B Bank Index 100.00 128.86 150.21 263.59 258.12 223.74
U.S.B. Peer Group* $500M-$2.5B Bank Index 100.00 128.55 154.10 271.58 270.02 237.08
</TABLE>
- ----------
* U.S.B. Peer Group-- $500M-$1.5B Bank Index. This U.S.B. Peer Group is a
market-capitalization-weighted stock index combining price information from
18 banking institutions in New Jersey and New York with asset size of at
least $500 million, but less than $1.5 billion as of December 31, 1999. The
banking institutions included are: Alliance Financial Corporation, Arrow
Financial Corporation, Center Bancorp, Inc., CNB Financial Corp.,
Commercial Bank of New York, Financial Institutions, Inc., First of Long
Island Corporation, Greater Community Bancorp, Interchange Financial
Services Corporation, Iroquois Bancorp, Inc., Merchants New York Bancorp,
Inc., NBT Bancorp Inc., State Bancorp, Inc., Sterling Bancorp, Suffolk
Bancorp, Tompkins Trustco, Inc., Vista Bancorp, Inc. and Yardville National
Bancorp.
** U.S.B. Peer Group-- $500M-$2.5B Bank Index. This U.S.B. Peer Group is a
market-capitalization-weighted stock index combining price information from
24 banking institutions in New Jersey and New York with an asset size of at
least $500 million, but less than $2.5 billion as of December 31, 1999. The
banking institutions
10
<PAGE>
included are: Alliance Financial Corporation, Arrow Financial Corporation,
BSB Bancorp, Inc., Center Bancorp, Inc., CNB Financial Corp., Commercial
Bank of New York, Community Bank System, Inc., Financial Institutions,
Inc., First of Long Island Corporation, Greater Community Bancorp,
Interchange Financial Services Corporation, Iroquois Bancorp, Inc.,
Merchants New York Bancorp, Inc., NBT Bancorp Inc., Premier National
Bancorp Inc., State Bancorp, Inc., Sterling Bancorp, Suffolk Bancorp, Sun
Bancorp, Inc., Tompkins Trustco, Inc., TrustCo Bank Corp of NY, United
National Bancorp, Vista Bancorp, Inc. and Yardville National Bancorp.
PRINCIPAL STOCKHOLDERS 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 March 31, 2000:
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership* of Class
-------------- --------------- ------
Thomas E. Hales (a)
66 Brookwood Drive
Briarcliff Manor, NY 10510 ............. 2,458,599 14.79%
Howard V. Ruderman (b)
6 Aspen Court
Pomona, NY 10970........................ 863,599 5.46%
Harold R. Torsoe (c)
4 Bridgitte Court
Suffern, NY 10901....................... 1,069,913 6.79%
Kenneth J. Torsoe (d)
70 West Gate Road
Suffern, NY 10901....................... 1,569,184 9.92%
U.S.B. Holding Co., Inc.
Employee Stock Ownership Plan
(With 401(k) Provisions)
100 Dutch Hill Road
Orangeburg, NY 10962.................... 1,390,896 8.83%
- ----------
* 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 544,519 shares owned by Mr. Hales jointly with his wife, 171,140
shares owned by his wife, 163,938 shares held by the Hales Family
Foundation, Inc., and 865,502 shares that may be acquired pursuant to the
exercise of options within 60 days of March 31 , 2000. Does not include
207,262 or 65,737 shares allocated to Mr. Hales under the KSOP and KESIP,
respectively.
(b) Includes 55,902 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000.
(c) Includes 25,687 shares owned by Harold R. Torsoe's wife.
(d) Includes 55,902 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 2000.
11
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
During 1999, 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 $976,000 (or 1.00% of stockholders' equity at March 31, 2000)
at any one time during 1999, 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.
Outside of normal customer relationships, none of the directors, executive
officers or 5% stockholders 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 as follows. Michael H. Fury is a director of the Company and the Bank and
is a senior partner in the law firm of Fury, Kennedy, Griffin & Smith, which was
employed by the Company and the Bank during 1999 and received $1,527 from the
Bank for services rendered and related out-of-pocket disbursements. Edward T.
Lutz is a Principal of Tucker Anthony, an investment banking firm that was
employed by the Company during 1999 and earned $3,000 for services rendered.
RELATIONSHIP WITH INDEPENDENT AUDITORS
On recommendation of the Examining Committees of the Company and the Bank,
the Board has appointed Deloitte & Touche LLP as independent auditors of the
Company and the Bank, for the year ending December 31, 2000. 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
Meeting and will have the opportunity to make statements if they so desire and
will be available to respond to appropriate questions.
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.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy statement for the 2001
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices by January 27, 2001. Such stockholder proposals, together with
any supporting statements, should be directed to the Secretary of the Company.
Date: April 28, 2000
By order of the Board of Directors
Michael H. Fury, Secretary
12
<PAGE>
PROXY
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
2000 Annual Meeting of Stockholders
The Proxy is Solicited by the Board of Directors of U.S.B. Holding Co.,
Inc., a Delaware Corporation (the "Company"). The undersigned stockholder(s) of
the Company hereby appoint(s) Michael Giglio and Alfred L. Fox, 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 stockholders to be held at the Holiday Inn, 3
Executive Boulevard, Suffern, New York 10901, on Friday, May 26, 2000, at 10:00
a.m. (local time), and at any adjournment thereof, with all powers the
undersigned would possess if personally present as specified on the reverse
side:
<PAGE>
1. Election of Class III Directors:
<TABLE>
<S> <C> <C>
Thomas E. Hales, Raymond J. Crotty and WITHHOLD INSTRUCTION: To withhold
Michael H. Fury AUTHORITY for one or more nominee(s),
FOR all nominees listed to vote for all write the name(s) of the
(Except as marked to the contrary) nominees listed nominee(s) in the space below,
[_] [_] [_]
</TABLE>
2. 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.
Dated ___________________________ , 2000
Signature ______________________________
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.
