<PAGE>
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 September 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 NOVEMBER 6, 2000
----- -------------------------------
Common stock, par value 16,591,011
$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 SEPTEMBER 30, 2000 (UNAUDITED)
AND DECEMBER 31, 1999. 1
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (UNAUDITED). 2
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2000 AND 1999 (UNAUDITED). 3
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (UNAUDITED). 4
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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. 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK. 28
PART II. OTHER INFORMATION AND SIGNATURES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 29
- i -
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
U.S.B. HOLDING CO., INC. (UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
(000'S, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Cash and due from banks $ 79,907 $ 40,111
Federal funds sold 19,300 28,200
----------- -----------
Cash and cash equivalents 99,207 68,311
Interest bearing deposits in other banks 23 543
Securities:
Available for sale (at estimated fair value) 418,621 398,939
Held to maturity (estimated fair value
$192,884 in 2000 and $181,458 in 1999) 197,925 187,411
Loans, net of allowance for loan losses of
$11,660 in 2000 and $10,687 in 1999 1,042,096 916,816
Premises and equipment, net 10,889 10,624
Accrued interest receivable 13,523 10,194
Other real estate owned (OREO) 34 34
Federal Home Loan Bank of New York stock 34,139 34,139
Other assets 20,009 19,360
----------- -----------
TOTAL ASSETS $ 1,836,466 $ 1,646,371
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits $ 226,355 $ 169,361
Interest bearing deposits:
NOW accounts 123,809 68,863
Money market accounts 57,742 50,098
Savings deposits 354,332 347,901
Time deposits 650,880 505,526
----------- -----------
TOTAL DEPOSITS 1,413,118 1,141,749
Accrued interest payable 6,699 6,166
Accrued expenses and other liabilities 8,857 8,135
Securities sold under agreements to repurchase 225,000 285,780
Federal Home Loan Bank of New York advances 53,729 87,995
----------- -----------
TOTAL 1,707,403 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 17,464,455 in 2000 and
16,383,980 in 1999 175 164
Additional paid-in capital 111,925 98,926
Retained earnings 13,981 13,875
Treasury stock at cost, 873,444 shares
in 2000 and 499,707 shares in 1999 (11,159) (6,464)
Common stock held for benefit plans (1,475) (1,490)
Deferred compensation obligation 859 748
Accumulated other comprehensive loss (5,377) (9,348)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 108,929 96,411
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,836,466 $ 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
SEPTEMBER 30,
2000 1999
------- -------
(000'S, EXCEPT SHARE DATA)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $22,883 $17,831
Interest on federal funds sold 615 274
Interest and dividends on securities:
Mortgage-backed securities 6,340 6,217
U.S. Treasury and government agencies 3,659 2,792
Obligations of states and political subdivisions 782 734
Corporate and other 10 17
Interest on deposits in other banks 3 1
Dividends on Federal Home Loan Bank of New York stock 594 463
------- -------
TOTAL INTEREST INCOME 34,886 28,329
------- -------
INTEREST EXPENSE:
Interest on deposits 15,715 9,268
Interest on borrowings 3,896 4,269
Interest on Corporation - Obligated mandatory redeemable
capital securities of subsidiary trust 488 488
------- -------
TOTAL INTEREST EXPENSE 20,099 14,025
------- -------
NET INTEREST INCOME 14,787 14,304
Provision for loan losses 275 700
------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 14,512 13,604
------- -------
NON-INTEREST INCOME:
Service charges and fees 871 834
Other income 339 377
Gains on securities transactions - net 6 --
------- -------
TOTAL NON-INTEREST INCOME 1,216 1,211
------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,842 4,633
Occupancy and equipment expense 1,385 1,348
Advertising and business development 525 407
Professional fees 136 284
Communications 268 217
Stationery and printing 145 159
FDIC insurance 64 44
Other expenses 648 650
------- -------
TOTAL NON-INTEREST EXPENSE 8,013 7,742
------- -------
Income before income taxes 7,715 7,073
Provision for income taxes 2,669 2,645
------- -------
NET INCOME $ 5,046 $ 4,428
======= =======
BASIC EARNINGS PER COMMON SHARE $ 0.30 $ 0.27
======= =======
DILUTED EARNINGS PER COMMON SHARE $ 0.30 $ 0.26
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------- --------
(000'S, EXCEPT SHARE DATA)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 64,530 $ 49,826
Interest on federal funds sold 1,434 1,002
Interest and dividends on securities:
Mortgage-backed securities 19,306 17,461
U.S. Treasury and government agencies 10,475 5,501
Obligations of states and political subdivisions 2,274 2,257
Corporate and other 25 51
Interest on deposits in other banks 8 30
Dividends on Federal Home Loan Bank of New York stock 1,739 1,122
-------- --------
TOTAL INTEREST INCOME 99,791 77,250
-------- --------
INTEREST EXPENSE:
Interest on deposits 40,440 26,759
Interest on borrowings 13,096 10,422
Interest on Corporation - Obligated mandatory redeemable
capital securities of subsidiary trust 1,464 1,464
-------- --------
TOTAL INTEREST EXPENSE 55,000 38,645
-------- --------
NET INTEREST INCOME 44,791 38,605
Provision for loan losses 1,225 1,610
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 43,566 36,995
-------- --------
NON-INTEREST INCOME:
Service charges and fees 2,610 2,385
Other income 1,065 1,049
(Losses) gains on securities transactions - net (99) 527
-------- --------
TOTAL NON-INTEREST INCOME 3,576 3,961
-------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 14,235 12,953
Occupancy and equipment expense 4,307 3,986
Advertising and business development 1,471 1,204
Professional fees 575 728
Communications 773 612
Stationery and printing 494 467
FDIC insurance 183 138
Other expenses 1,886 1,909
-------- --------
TOTAL NON-INTEREST EXPENSE 23,924 21,997
-------- --------
Income before income taxes 23,218 18,959
Provision for income taxes 8,079 7,073
-------- --------
NET INCOME $ 15,139 $ 11,886
======== ========
BASIC EARNINGS PER COMMON SHARE $ 0.91 $ 0.71
======== ========
DILUTED EARNINGS PER COMMON SHARE $ 0.88 $ 0.68
======== ========
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
--------- ---------
(000'S)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,139 $ 11,886
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 1,225 1,610
Depreciation and amortization 1,483 1,472
Amortization/accretion of premiums (discounts) on securities - net 723 1,042
Noncash benefit plan expense 208 336
Deferred income taxes (576) (499)
Losses (gains) on securities transactions - net 99 (527)
Origination of loans held for sale -- (481)
Proceeds from sale of loans 352 --
Increase in accrued interest receivable (3,329) (3,699)
Other - net (1,670) 3,369
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,654 14,509
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 13,090 40,614
Proceeds from principal paydowns, redemptions and maturities of:
Securities available for sale 28,103 81,543
Securities held to maturity 7,877 6,205
Purchases of securities available for sale (54,815) (160,228)
Purchases of securities held to maturity (18,445) (134,948)
Net decrease in interest bearing deposits in other banks 520 1,389
Loans originated, net of principal collections and charge-offs (126,870) (154,024)
Purchases of Federal Home Loan Bank of New York stock -- (10,189)
Purchases of premises and equipment - net (1,740) (905)
Proceeds from sales of OREO -- 641
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (152,280) (329,902)
--------- ---------
FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
NOW, money market and savings accounts 126,015 94,036
Increase in time deposits, net of withdrawals and maturities 145,354 100,158
Net (decrease) increase in securities sold under agreements
to repurchase - short-term (111,000) 111,355
Net decrease in Federal Home Loan Bank of New York
advances - short-term (31,355) --
Proceeds from securities sold under agreements to
repurchase - long-term 100,000 50,000
Repayment of securities sold under agreements to
repurchase - long-term (49,780) (10,000)
Repayment of Federal Home Loan Bank of New York
advances - long-term (2,911) (6,751)
Cash dividends paid (3,751) (3,204)
(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 1,646 1,560
Purchases of treasury stock (4,695) (4,203)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 169,522 333,088
--------- ---------
</TABLE>
-Continued-
4
<PAGE>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONT'D)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------- --------
(000'S)
<S> <C> <C>
INCREASE IN CASH AND CASH EQUIVALENTS $ 30,896 $ 17,695
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 68,311 69,160
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 99,207 $ 86,855
======== ========
Supplemental Disclosures:
Interest paid $ 54,467 $ 38,459
-------- --------
Income tax payments $ 9,637 $ 4,556
-------- --------
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 $ (111) $ (48)
-------- --------
Change in deferred compensation obligation $ 111 $ 48
-------- --------
Decrease (increase) in other comprehensive loss $ 3,971 $ (7,526)
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(000'S, EXCEPT SHARE DATA)
COMMON DEFERRED ACCUMULATED TOTAL
STOCK COMPEN- OTHER COMMON
COMMON STOCK ADDITIONAL HELD FOR SATION COMPRE- STOCK-
SHARES PAR PAID-IN RETAINED TREASURY BENEFIT OBLI- HENSIVE HOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS STOCK PLANS GATION LOSS EQUITY
---------- ----- -------- -------- -------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 15,884,273 $ 164 $ 98,926 $ 13,875 $ (6,464) $ (1,490) $ 748 $ (9,348) $ 96,411
Net income 15,139 15,139
Other comprehensive income:
Net unrealized securities
gain arising during the
period, net of taxes of $2,817 3,916 3,916
Reclassification adjustment for
net losses included in net
income, net of taxes of $39 55 55
-------- --------
Other comprehensive income 3,971 3,971
--------
Total comprehensive income 19,110
Cash dividends:
Common $0.23 per share (3,733) (3,733)
Junior preferred stock (11) (11)
Five percent stock dividend 819,975 8 11,274 (11,289) (7)
Common stock options exercised
and related tax benefit 260,500 3 1,643 1,646
Purchases of treasury stock (373,737) (4,695) (4,695)
Amortization of RRP awards 28 28
ESOP shares committed to
be released 82 98 180
Deferred compensation obligation (111) 111 --
---------- ----- -------- -------- -------- -------- ----- -------- --------
BALANCE AT SEPTEMBER 30, 2000 16,591,011 $ 175 $111,925 $ 13,981 $(11,159) $ (1,475) $ 859 $ (5,377) $108,929
========== ===== ======== ======== ======== ======== ===== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
U.S.B. HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(000'S, EXCEPT SHARE DATA)
COMMON DEFERRED ACCUMULATED TOTAL
STOCK COMPEN- OTHER COMMON
COMMON STOCK ADDITIONAL HELD FOR SATION COMPRE- STOCK-
SHARES PAR PAID-IN RETAINED TREASURY BENEFIT OBLI- HENSIVE HOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS STOCK PLANS GATION LOSS EQUITY
---------- ----- -------- -------- -------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 15,963,547 $ 162 $ 96,919 $ 1,513 $ (2,223) $ (1,628) $ 675 $ 2,021 $ 97,439
Net income 11,886 11,886
Other comprehensive loss:
Net unrealized securities
loss arising during the
period, net of taxes
of $5,202 (7,229) (7,229)
Reclassification adjustment
for net gain included in
net income, net of taxes
of $214 (297) (297)
-------- --------
Other comprehensive loss (7,526) (7,526)
--------
Total comprehensive income 4,360
Cash dividends:
Common $0.19 per share (3,193) (3,193)
Junior preferred stock (11) (11)
Common stock options exercised
and related tax benefit 206,307 2 1,558 1,560
Purchases of treasury stock (295,279) (4,203) (4,203)
Amortization of RRP awards 133 133
ESOP shares committed to
be released 124 79 203
Deferred compensation obligation (48) 48 --
---------- ----- -------- -------- -------- -------- ----- -------- --------
BALANCE AT SEPTEMBER 30, 1999 15,874,575 $ 164 $ 98,601 $ 10,195 $ (6,426) $ (1,464) $ 723 $ (5,505) $ 96,288
========== ===== ======== ======== ======== ======== ===== ======== ========
</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 (New York City) 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 will be consummated in the fourth
quarter 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 September 30, 2000 and December
31, 1999, and its operations, for the three and nine months ended
September 30, 2000 and 1999, and its cash flows and changes in common
stockholders' equity for the nine month periods ended September 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.
9
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
For the Company, SFAS No. 133 is effective January 1, 2001. The Company
does not anticipate that a transition adjustment will be required upon
adoption of this statement.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES
In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS No. 140") replacing FASB Statement No. 125. SFAS No. 140 revises
the standard for accounting and reporting for transfers and servicing of
financial assets and extinguishments of liabilities. The new standard is
based on consistent application of a financial-components approach that
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished.
SFAS No. 140 provides consistent guidelines for distinguishing transfers
of financial assets that are sales from transfers that are secured
borrowings. The Company is required to adopt SFAS No. 140 by March 31,
2001. SFAS No. 140 is not expected to have a material impact on the
Company's consolidated financial statements.
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.
10
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
The computations of basic and diluted earnings per common share for the
three and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(000'S, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
NUMERATOR:
Net income $ 5,046 $ 4,428 $ 15,139 $ 11,886
Less preferred stock dividends -- -- 11 11
----------- ----------- ----------- -----------
Net income for basic and diluted
earnings per common share - net
income available to common
stockholders $ 5,046 $ 4,428 $ 15,128 $ 11,875
=========== =========== =========== ===========
DENOMINATOR:
Denominator for basic earnings
per common share - weighted
average shares 16,554,569 16,677,557 16,547,145 16,702,521
Effects of dilutive securities:
Director and employee
stock options 455,930 637,961 552,450 674,444
Restricted stock not vested 1,252 5,293 1,283 5,289
----------- ----------- ----------- -----------
Total effects of dilutive securities 457,182 643,254 553,733 679,733
----------- ----------- ----------- -----------
Denominator for diluted earnings
per common share - adjusted
weighted average shares 17,011,751 17,320,811 17,100,878 17,382,254
=========== =========== =========== ===========
Basic earnings per common share $ 0.30 $ 0.27 $ 0.91 $ 0.71
=========== =========== =========== ===========
Diluted earnings per common share $ 0.30 $ 0.26 $ 0.88 $ 0.68
=========== =========== =========== ===========
</TABLE>
Weighted average common shares outstanding and common per share amounts
for the three and nine months ended September 30, 2000 and 1999 have
been adjusted to reflect the five percent stock dividend distributed May
15, 2000.
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
11
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
comprehensive income (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 the three months ended September 30, 2000, there were gross gains on
sales of securities of $6,000. For the nine months ended September 30,
2000 and 1999, gross gains were $6,000 and $552,000, respectively, and
gross losses were $105,000 and $25,000, respectively.
A summary of the amortized cost, estimated fair values, and related
gross unrealized gains and losses on securities at September 30, 2000
and December 31, 1999, is as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- -------- --------
(000'S)
<S> <C> <C> <C> <C>
SEPTEMBER 30 , 2000:
AVAILABLE FOR SALE:
U.S. government agencies $101,447 $ 495 $ 2,993 $ 98,949
Mortgage-backed securities 324,272 270 7,154 317,388
Obligations of states and
political subdivisions 1,536 30 -- 1,566
Other 613 134 29 718
-------- -------- -------- --------
TOTAL SECURITIES AVAILABLE FOR SALE $427,868 $ 929 $ 10,176 $418,621
======== ======== ======== ========
HELD TO MATURITY:
U.S. government agencies $ 95,748 $ -- $ 4,346 $ 91,402
Mortgage-backed securities 44,358 147 1,711 42,794
Obligations of states and
political subdivisions 57,819 892 23 58,688
-------- -------- -------- --------
TOTAL SECURITIES HELD TO MATURITY $197,925 $ 1,039 $ 6,080 $192,884
======== ======== ======== ========
</TABLE>
12
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- -------- -------- --------
(000'S)
<S> <C> <C> <C> <C>
DECEMBER 31, 1999:
AVAILABLE FOR SALE:
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 $1.4 million at September 30, 2000 and $2.6
million at December 31, 1999. Restructured loans were $0.2 million at
September 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 September 30,
2000, the Company has no commitments to lend additional funds to any
customers with nonaccrual or restructured loan balances.
At September 30, 2000, there were loans aggregating approximately $2.4
million, which were not on nonaccrual status, that were potential
problem loans which may result in their being placed on nonaccrual
status in the future. In addition, as discussed further in Note 12, a
construction loan totaling $19.6 million was identified as impaired
subsequent to September 30, 2000 and placed on nonaccrual status on
November 9, 2000.
At September 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 $0.7 million and
$2.1 million, of which $0.6 million and $1.6 million at September 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
September 30, 2000 and December 31, 1999. The average recorded
investment in impaired loans for the nine months ended September 30,
2000 and year ended December 31, 1999 was approximately $1.1 million and
$1.5
13
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
million, respectively. For the three and nine months ended September 30,
2000 and 1999, interest income recognized by the Company on impaired
loans was not material.
Restructured loans in the amounts of $0.1 million for September 30, 2000
and $0.5 million for 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 September 30, 2000 is immaterial.
At September 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. 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 September 30, 2000. The ruling by the Bankruptcy Court is subject to
appeal by the Trustee. The Bennett loans are on nonaccrual status and a
specific allocation is included in the allowance for loan losses. 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
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 September 30,
2000, the Bank had no such repurchase agreements outstanding . At
December 31, 1999, the Bank had $111.0 million of such short-term
borrowings outstanding at interest rates between 5.38 percent and 6.00
percent. At December 31, 1999, these borrowings were collateralized by
securities with an aggregate amortized cost of $117.5 million and
estimated fair value of $112.7 million.
14
<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 September 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 September 30, 2000 and December 31, 1999, the Bank
had short-term FHLB advances of $35.0 million at an interest rate of
6.63 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 $41.4 million
at September 30, 2000 and $91.2 million at December 31, 1999.
Additional information with respect to short-term borrowings as of and
for the nine months ended September 30, 2000 and 1999 is presented in
the table below.
---------------------------------------------------------------------
SHORT-TERM BORROWINGS 2000 1999
---------------------------------------------------------------------
(000's except percentages)
Balance at September 30 $ 35,000 $112,355
Average balance outstanding 118,718 40,239
Weighted-average interest rate
As of September 30 6.63% 5.38%
Paid during period 6.08% 5.26%
=====================================================================
The Bank had long-term borrowings, which have original maturities of
over one year, of $225.0 million in securities sold under agreements to
repurchase as of September 30, 2000, which have original terms of ten
years at interest rates between 4.52 percent and 6.08 percent that are
callable on certain dates after an initial noncall period at the option
of the counterparty to the repurchase agreement. At December 31, 1999,
the Bank had long-term borrowings under securities sold under agreements
to repurchase of $174.8 million. As of September 30, 2000 and December
31, 1999, these borrowings are collateralized by securities with an
aggregate amortized cost of $260.5 million and $185.0 million,
respectively, and estimated fair value of $251.4 million and $174.9
million, respectively.
At September 30, 2000 and December 31, 1999, long-term FHLB advances
totaled $18.7 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 September 30,
2000, with comparative totals for December 31, 1999, is as follows:
15
<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
----------------------------------------------------------------------------------------------------------------
(000's, except percentages)
<S> <C> <C> <C> <C> <C>
Contractual Payment Date:
Total long-term debt $ 3,617 $ 13,280 $226,832 $243,729 $196,420
Weighted-average interest rate 5.71% 5.64% 5.50% 5.51% 5.33%
================================================================================================================
Expected Call Date:
Total long-term debt $23,617 $198,280 $ 21,832 $243,729 $196,420
Weighted-average interest rate 5.46% 5.46% 6.07% 5.51% 5.33%
================================================================================================================
</TABLE>
At September 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 September 30, 2000,
the Bank could pay dividends of $30.0 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 nine
months ended September 30, 2000 and 1999 have been adjusted to reflect
the five percent stock dividend.
On September 27, 2000, the Company's Board of Directors authorized the
repurchase of up to 300,000 common shares, or approximately 1.8%, of the
Company's outstanding common stock. Repurchases of common stock are
authorized to be made from time to time in open-market and private
transactions throughout the remainder of the year 2000 and into 2001 as,
in the opinion of management, market conditions may warrant. The
repurchased common shares will be held as treasury stock and will be
available for general corporate purposes.
16
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
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 September 30, 2000, formal credit line and loan
commitments, which are primarily loans collateralized by real estate and
credit card lines, approximated $340.9 million and outstanding letters
of credit totaled $27.7 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 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 September 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 nine
months ended September 30, 2000 and 1999, there is no customer that
accounted for more than ten percent of the Company's revenue.
17
<PAGE>
U.S.B HOLDING CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONT'D)
12. SUBSEQUENT EVENT
As discussed in Note 8, on November 9, 2000, the Company classified a
construction loan of approximately $19.6 million as a non-performing
asset and placed the loan on nonaccrual status as principal payments
have not been received in accordance with the terms of the loan
agreement. Timing of the receipt of past due principal is uncertain.
Interest earned through November 9, 2000 has been collected. The
allowance for loan losses was increased by $0.8 million as a result of
the impairment of this loan. Measurement of the impaired value was based
on present value of expected future cash flows. The additional provision
for loan losses was recorded in the fourth quarter 2000 and will result
in a reduction in net income of approximately $0.4 million.
18
<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 SEPTEMBER 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 September 30, 2000, the Company had total assets of $1,836.5 million, an
increase of $190.1 million or 11.5 percent from December 31, 1999.
The securities portfolio, including investments in Federal Home Loan Bank of New
York ("FHLB") stock, of $650.7 million and $620.5 million at September 30, 2000
and December 31, 1999, respectively, consists of securities held to maturity at
amortized cost of $197.9 million and $187.4 million, securities available for
sale at estimated fair value totaling $418.6 million and $398.9 million at
September 30, 2000 and December 31, 1999, respectively, and FHLB stock of $34.1
million at both September 30, 2000 and December 31, 1999.
During the nine months ended September 30, 2000, U.S. Treasury and government
agency obligations increased $33.6 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
$1.6 million. Mortgage-backed securities decreased by $4.0 million primarily due
to principal paydowns of $28.3 million and net premium amortization of $0.7
million, partially offset by purchases totaling $19.9 million, and a net
increase in the estimated fair value of available for sale securities of $5.1
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
19
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
subdivisions, or municipal securities, increased by $0.7 million principally due
to purchases of $8.4 million that were partially offset by maturities of $7.7
million during the nine month period ended September 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 September 30, 2000, loans outstanding were $1,053.8 million, a net increase
of $126.3 million or 13.6 percent over December 31, 1999. The primary increases
of outstanding loan balances were $34.9 million in commercial mortgages, $55.8
million in land, acquisition and construction loans, $19.7 million in
residential mortgages, $18.7 million in time unsecured loans, $8.7 million in
home equity mortgages, and $1.7 million in other loan categories, partially
offset by reductions in time secured loans of $9.7 million, commercial
installment loans of $2.6 million, credit cards of $0.7 million and other loan
categories of $0.2 million. The Company had approximately $340.9 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 $1.0 million or 9.1 percent to
$11.7 million at September 30, 2000, from $10.7 million at December 31, 1999.
The allowance for loan losses represents 1.11 percent of gross loans outstanding
at September 30, 2000, compared to 1.15 percent at December 31, 1999. The
allowance reflects a provision of $1,225,000 and net charge-offs of $252,000
recorded for the nine months ended September 30, 2000. As discussed in Notes 8
and 12 to the condensed consolidated financial statements, subsequent to
September 30, 2000, the allowance for loan losses was increased by $0.8 million
as a result of the impairment of a construction loan in the amount of $19.6
million. This loan has been classified as non-performing as of November 9, 2000.
Management believes that the allowance for loan losses appropriately reflects
the risk elements inherent in the total loan portfolio. In management's
judgment, the allowance is considered adequate to absorb losses inherent in the
loan portfolio. There is no assurance that the Company will not be required to
make future adjustments to the allowance in response to changing economic
conditions or regulatory examinations.
Total deposits increased $271.4 million for the nine month period ended
September 30, 2000 to $1,413.1 million, which represents a 23.8 percent increase
from December 31, 1999. Of this
20
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
increase, $93.0 million were in retail and commercial accounts and $178.4
million were in wholesale type accounts. Demand deposits increased $57.0 million
due primarily to the opening of a new branch, increased deposits primarily from
loan related customers, and seasonal municipal deposits of approximately $48.0
million. NOW deposits increased $54.9 million due to normal fluctuations in this
transaction type account and seasonal municipal deposits of approximately $49.0
million. Money market accounts increased $7.7 million due to the introduction of
a more competitive higher rate money market product. Savings deposits increased
$6.4 million due to deposits placed in the higher yielding liquid gold account.
Retail time deposits less than $100,000 and IRA and KEOGH time deposits
increased $39.7 million and $8.6 million, respectively, due to attractive yields
offered to attract additional deposits. 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 $69.7 million
and $27.4 million, respectively, during the nine month period ended September
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 September 30, 2000, the Company decreased the
amount of outstanding short and long-term advances with the Federal Home Loan
Bank of New York by $34.3 million and borrowings under securities sold under
agreements to repurchase by $60.8 million as the Bank replaced such funds,
primarily with municipal deposits.
Stockholders' equity increased to $109.0 million at September 30, 2000 from the
December 31, 1999 balance of $96.4 million. The increase primarily results from:
net income of $15.1 million for the nine month period ended September 30, 2000;
$1.6 million of stock options exercised and related tax benefit; other
comprehensive income of $4.0 million; and other equity transactions of $0.3
million; partially offset by common stock dividends paid of $3.7 million and
treasury stock purchases of $4.7 million.
21
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
The following table summarizes average balances for the Company's three and nine
month periods ended September 30, 2000 and 1999 balance sheet:
<TABLE>
<CAPTION>
THREE MONTHS ENDING NINE MONTHS ENDING
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
(000'S) (000'S)
<S> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 37,324 $ 21,213 $ 30,636 $ 27,305
Securities(1) 666,763 614,128 667,486 550,629
Loans(2) 1,028,138 837,943 985,018 788,470
---------- ---------- ---------- ----------
Earning assets 1,732,225 1,473,284 1,683,140 1,366,404
Total Assets $1,798,815 $1,554,733 $1,742,383 $1,434,237
========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Non-interest bearing deposits $ 181,669 $ 163,647 $ 174,970 $ 147,699
Interest bearing deposits 1,213,602 928,838 1,129,999 887,366
---------- ---------- ---------- ----------
Total deposits 1,395,271 1,092,485 1,304,969 1,035,065
Borrowings 261,551 317,748 302,271 261,054
Interest bearing liabilities 1,475,153 1,246,586 1,432,270 1,148,420
Corporation-Obligated
mandatory redeemable
capital securities of
subsidiary trust 20,000 20,000 20,000 20,000
Stockholder's equity $ 105,621 $ 95,683 $ 100,368 $ 97,465
========== ========== ========== ==========
</TABLE>
----------
(1) Securities exclude the mark-to-market adjustment required by SFAS
No. 115.
(2) Loans are net of unearned discount and exclude the allowance for
loan losses.
The Company's leverage ratio at September 30, 2000 was 7.44 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 11.79 percent and 12.82 percent at
September 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 September 30, 2000
and December 31, 1999.
RESULTS OF OPERATIONS
EARNINGS
Net income for the three and nine month periods ended September 30, 2000 was
$5.0 million and $15.1 million, compared to $4.4 million and $11.9 million for
the three and nine month periods ended September 30, 1999, an increase of 14.0
percent and 27.4 percent, respectively. Diluted
22
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
earnings per common share were $0.30 and $0.88 for the three and nine month
periods ended September 30, 2000, compared to $0.26 and $0.68 for the three and
nine month periods ended September 30, 1999, increases of 15.4 percent and 29.4
percent, respectively.
The increase in net income for the three and nine month periods ended September
30, 2000, compared to the prior year periods, reflects higher net interest
income, a lower provision for loan losses, a lower effective income tax rate,
and higher non-interest income for the nine month period ended September 30,
2000. The increases in net income were partially offset by losses on security
sales in the nine month period compared to gains in the prior year period and
higher non-interest expenses for both periods.
As discussed in Notes 8 and 12 to the condensed consolidated financial
statements, net income for the fourth quarter 2000 will be negatively impacted
by the classification as non-performing of a $19.6 million construction loan as
of November 9, 2000. Net income in subsequent periods may also be negatively
impacted. Interest on this loan has been approximately $160,000 per month.
A discussion of the factors impacting the changes in the various components of
net income for the three and nine months ended September 30, 2000 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. The
increase in net income for the quarter and nine months ended September 30, 2000,
compared to the prior year periods, reflects 3.4 percent and 16.0 percent
increases in net interest income to $14.8 million and $44.8 million,
respectively. The increase in net interest income is primarily a result of an
increase in average earning assets to $1.73 billion and $1.68 billion for the
quarter and nine months ended September 30, 2000, compared to $1.47 billion and
$1.37 billion for the quarter and nine months ended September 30, 1999, an
increase of 17.6 percent and 23.2 percent, respectively. The increases in
average earning assets for the three and nine month periods ended September 30,
2000, compared to the prior year period, results from increased investment in
U.S. government agency securities and origination of residential (first mortgage
and home equity) and commercial mortgages, real estate secured land and
construction loans, and time unsecured loans. Net interest income for the
quarter and nine months ended September 30, 2000 also benefited from increases
in average earning assets over average interest bearing liabilities to $257.1
million and $250.9 million, from $226.7 million and $218.0 million in the prior
year periods, reflecting increases of 13.4 percent and 15.1 percent,
respectively. The net interest income increase was partially offset by a decline
in the net interest margin on a tax equivalent basis which was 3.53 percent for
the quarter ended September 30, 2000 and 3.66 percent for the nine months ended
September 30, 2000, compared to 4.00 percent for the third quarter of 1999 and
3.90 percent for the nine months ended September 30, 1999, due to compression in
the net interest spread as the Federal Reserve Board has raised rates three
times during the year 2000, which has caused the cost of funds to increase at a
faster rate than the yields on earning assets.
23
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
For the three and nine month periods ended September 30, 2000, the net interest
spread (yield on earning assets less cost of funds, including demand deposits)
was 3.26 percent and 3.39 percent, respectively, compared to 3.80 percent and
3.61 percent for the same periods in 1999, respectively. Yields on interest
bearing liabilities increased during the three and nine month periods ended
September 30, 2000 at a faster rate than the yields on interest earning assets
during this period of rising interest rates, as compared to the prior year
periods. The increase in asset yields is primarily as a result of higher yields
on mortgage-backed and government agency securities purchased during the nine
months ended September 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 and municipal deposits, increased the overall yield on interest bearing
liabilities for the three and nine month periods ended September 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 decreased $425,000 to $275,000 and $385,000 to
$1,225,000 for the three and nine month periods ended September 30, 2000,
respectively, compared to the same periods in 1999. The decrease in the
provision for loan losses reflects the credit quality of the loan portfolio and
a moderation of loan growth in the third quarter 2000. During the three and nine
month periods ended September 30, 2000, net charge-offs totaled $73,000 and
$252,000, compared to net charge-offs of $152,000 and $318,000 for the three
month and nine month periods ended September 30, 1999, respectively. The net
charge-offs in the three and nine month periods ended September 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 $1.4 million and $1.9 million, respectively, at September 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 September 30, 2000 reflects the risk
elements identified and inherent in the total loan portfolio
24
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
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.
NON-INTEREST INCOME
Non-interest income for the three and nine month periods ended September 30,
2000 increased by $5,000 to $1,216,000 and decreased $385,000 (9.7 percent) to
$3,576,000 compared to the same periods in 1999. The increase for the three
month period ended September 30, 2000 reflects gains on security sales of $6,000
and service charges and fees of $871,000, compared to $834,000 in the prior year
period. The increase was partially offset by a decrease in other income to
$339,000, compared to $377,000 in the prior year period. The decrease for the
nine month period ended September 30, 2000 reflects losses on securities
transactions of $99,000 compared to gains of $527,000 in the prior period. These
losses were partially offset by higher service charges and fees and other income
of $2,610,000 and $1,065,000, compared to $2,385,000 and $1,049,000 in the prior
year period, respectively. 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 decrease for the three month period ended
September 30, 2000 primarily reflects lower letter of credit fees and mortgage
payoff and prepayment penalty fees. The other income increase for the nine month
period ended September 30, 2000 primarily reflects higher credit card fee income
and U.S.B. Financial Services, Inc. commissions.
NON-INTEREST EXPENSE
Non-interest expense increased $271,000 (3.5 percent) to $8,013,000 and
$1,927,000 (8.8 percent) to $23,924,000 for the three and nine month periods
ended September 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 net
merger related savings of approximately $75,000 and $360,000 for the three and
nine months ended September 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 $209,000 or 4.5 percent and $1,282,000 or 9.9 percent during the
three and nine month periods ended September 30, 2000, respectively, 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 merit increases, additional expenses related to incentive
compensation
25
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
programs, and increases in the cost of employee benefit programs such as
retirement and profit sharing plans, medical coverage, and tuition
reimbursement. Increases in salaries and employee benefits expense was partially
offset by estimated merger related savings of approximately $50,000 and $160,000
for the three and nine months ended September 30, 2000, respectively, compared
to the prior year period.
Significant changes in the other components of non-interest expense for the
three and nine month periods ended September 30, 2000 compared to the prior
periods, were due to the following:
o Increase of $37,000 (2.7 percent) and $321,000 (8.1 percent) in
occupancy and equipment expense. This increase is primarily due to the
opening of a new branch office in May 2000, higher utility expenses
relating to the Company's facilities and computer related equipment,
increased depreciation expense related to additional furniture and
fixtures for corporate and administrative offices, and a decrease in
rental income due to more space needed at the corporate headquarters.
o Increase of $118,000 (29.0 percent) and $267,000 (22.2 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 $148,000 (52.1 percent) and $153,000 (21.0 percent) in
professional fees. The decrease relates to lower auditing and legal fees
primarily due to estimated merger related savings of approximately
$50,000 and $140,000 and lower loan collection and foreclosure related
attorney fees for the three and nine months ended September 30, 2000.
o Increase of $51,000 (23.5 percent) and $161,000 (26.3 percent) in
communications expense. The increase relates to greater telephone usage
as a result of increased employees, office space and data lines.
o Decrease of $14,000 (8.8 percent) and an increase of $27,000 (5.8
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 and new branch opening in Spring
Valley, while the decrease for the quarter reflects better control of
expenses.
o Increase of $20,000 (45.5 percent) and $45,000 (32.6 percent) in FDIC
insurance. The increase is related to the higher level of total deposits
during 2000 compared to the prior year periods.
o Decrease of $2,000 and decrease of $23,000 (1.2 percent) in other
expenses. The decrease for the three month and nine month period is
primarily due to a higher allocation of costs related to loan fees and
lower levels of other outside services due to Y2K related expenses in
1999. The decrease was partially offset by increases in courier fees
related to an increased number of customer pickups and credit card
related fees.
26
<PAGE>
U.S.B. HOLDING CO., INC.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
INCOME TAXES
The effective income tax rates for the three and nine month periods ended
September 30, 2000 were 34.6 percent and 34.8 percent, respectively, compared to
37.4 percent and 37.3 percent, respectively, for the prior periods in 1999. The
lower effective tax rate for the three and nine month periods ended September
30, 2000 primarily reflects lower state income taxes.
27
<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 September 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 been party to any
derivative financial instruments during the nine months ended September 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 September 30, 2000 as compared to
December 31, 1999. The Company's "Static Gap" at September 30, 2000 was a
negative $215.7 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 twelve month measurement period continues to
be within the Company's policy limit of not declining by more than 5.0 percent.
28
<PAGE>
PART II - OTHER INFORMATION
U.S.B. HOLDING CO., INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
(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)).
(10)(a) Agreement of Employment dated as of November 16, 1998, and
as amended November 8, 2000, between the Company and the Bank
and Thomas E. Hales.*
(10)(b) Agreement of Employment dated as of November 16, 1998, and
as amended November 8, 2000, between the Company and the Bank
and Raymond J. Crotty.*
(10)(c) Agreement of Employment dated as of November 16, 1998, and
as amended November 8, 2000, between the Company and the Bank
and Steven T. Sabatini.*
(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)).
</TABLE>
29
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)
(A) EXHIBITS (CONT'D)
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
(10)(g) Registrant's Dividend Reinvestment and Stock Purchase Plan
(incorporated herein by reference from Registrant's Form S-3
Registration Statement (file No. 33-72788).
(10)(h) Registrant's Director Stock Option Plan (incorporated herein
by reference to Registrant's 1996 10-K, Exhibit (10)(f)).
(10)(i) Registrant's 1998 Director Stock Option Plan (incorporated
herein by reference to Registrant's Form S-8 Registration
Statement, filed June 5, 1998, Exhibit (10)(d)).
(10)(j) Registrant's Key Employees' Supplemental Investment Plan,
as amended July 1, 1997 and September 1, 1998 (incorporated
herein by reference to the Plan's Annual Report on Form 11-K
for the year ended December 31, 1998).
(10)(k) Registrant's Key Employees' Supplemental Diversified
Investment Plan dated September 1, 1998 (incorporated herein
by reference to the Plan's Annual Report on Form 11-K for the
year ended December 31, 1998).
(10)(l) Registrant's 1997 Employee Stock Option Plan (incorporated
herein by reference to Registrant's Proxy Statement filed
April 18, 1997).
(10)(m) Agreement and Plan of Merger, dated as of March 6, 1998,
between U.S.B. Holding Co., Inc. and Tappan Zee Financial,
Inc. (incorporated herein by reference to Registrant's Current
Report on Form 8-K dated as of March 6, 1998).
(10)(n) Tappan Zee Financial, Inc. 1996 Stock Option Plan for Officers
and Employees ("Employee Stock Option Plan") (incorporated
herein by reference to Exhibit B to Tappan Zee Financial,
Inc.'s Proxy Statement for use in connection with its 1996
Annual Meeting of Shareholders ("Tappan Zee 1996 Proxy
Statement")).
(10)(o) Amendment No. 1 to the Employee Stock Option Plan
(incorporated herein by reference to Tappan Zee Financial,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 ("Tappan Zee 1997 10-K"), Exhibit 10.1.1).
(10)(p) Amendment No. 2 to the Employee Stock Option Plan
(incorporated herein by reference to Exhibit A to Tappan Zee
Financial, Inc.'s Proxy Statement for use in connection with
its 1997 Annual Meeting of Shareholders ("Tappan Zee 1997
Proxy Statement")).
(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).
</TABLE>
30
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)
(A) EXHIBITS (CONT'D)
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
(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).
(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)).
</TABLE>
31
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)
(A) EXHIBITS (CONT'D)
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
(10)(dd) 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)(ee) 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)(ff) Registrant's Retirement Plan for Non-Employee Directors
of U.S.B. Holding Co., Inc. and Certain Affiliates dated
effective as of May 19, 1999 (incorporated herein by reference
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, Exhibit (10)(ll)).
(10)(gg) 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)(hh) 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)(ii) 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)(jj) 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)(kk) 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)(ll) 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)(mm) Asset Purchase and Account Assumption Agreement by and between
Union State Bank and La Jolla Bank dated May 25, 2000
(incorporated herein by reference to the Registrant's
Quarterly Report on Form 10-Q for the six months ended June
30, 2000).
</TABLE>
32
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)
(A) EXHIBITS (CONT'D)
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
(11) Computation of earnings per share.*
(27) Financial Data Schedule.*
</TABLE>
*Filed Herewith.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 2000.
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 November 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)
33
