U.S.B. Holding Co., Inc., Union State Bank's Parent Company, Reports a 12.1 Percent Increase in Third Quarter 2005 Earnings to $

ORANGEBURG, N.Y., Oct. 27  /PRNewswire-FirstCall/ -- Thomas E. Hales, Chairman of the Board of U.S.B. Holding Co., Inc. (the "Company") (NYSE:UBH), the parent company of Union State Bank (the "Bank"), with consolidated assets of $3.0 billion, today announced that the Company's net income for the three months ended September 30, 2005 was $8.4 million compared to $7.5 million for the three months ended September 30, 2004, an increase of 12.1 percent. Diluted earnings per common share for the quarter ended September 30, 2005 was $0.37 compared to $0.34 in the prior year period, an increase of 8.8 percent. The Company's third quarter 2005 net income resulted in a 17.05 percent return on average common stockholders' equity and a 1.18 percent return on average total assets, as compared to 17.47 percent and 1.02 percent, respectively, for the prior year period.

For the nine months ended September 30, 2005, net income was $24.6 million compared to $21.9 million for the nine months ended September 30, 2004, an increase of 12.4 percent. Diluted earnings per common share was $1.10 for the nine months ended September 30, 2005 compared to $0.98 in the prior year period, an increase of 12.2 percent. The Company's net income for the nine months ended September 30, 2005 resulted in a 17.21 percent return on average common stockholders' equity and a 1.17 percent return on average total assets as compared to 17.00 percent and 1.00 percent, respectively, for the 2004 period.

The increases in the 2005 third quarter and nine months ended September 30, 2005 net income and diluted earnings per common share compared to the 2004 periods are due to an increase in net interest income of $1.3 million and $6.1 million, respectively, and gains on sales of loans, combined with reductions in the provision for credit losses and the effective rate for the provision for income taxes. The increases in net income for both 2005 periods were partially offset by an increase in non-interest expenses and a decrease in non-interest income, as compared to the prior year periods. The nine months ended September 30, 2004 also included gains on securities transactions of $1.2 million ($0.6 million after income tax and incentive compensation effect), while there were no gains on securities transactions for the 2005 period.

Mr. Hales stated that, "The Company's increase in its core revenue, net interest income, combined with offering competitive products delivered with an exceptional level of service, has significantly contributed to the net income increases in both 2005 periods. The Bank's officers and employees continue to prudently operate our Company by working to expand the Bank's customer base and controlling expenses as evidenced by an efficiency ratio of approximately 51 percent for both 2005 periods."

Mr. Raymond J. Crotty, President and Chief Operating Officer of the Company and the Bank, added, "The Bank has prudently managed interest rate risk and credit risk in 2005 while increasing year-to-date net income at a double digit rate. Mr. Crotty also noted that, "The Company's current common stock cash dividend of $0.14 per share had been effectively increased by 5.0 percent after considering the 5.0 percent common stock dividend, which was distributed in the third quarter. These dividend increases are due to the Company's consistently strong earnings and strong capital position."

Net interest income increased 5.7 percent to $23.8 million for the quarter ended September 30, 2005 and 9.4 percent to $70.7 million for the nine months ended September 30, 2005 compared to the prior year third quarter and nine month periods, respectively. The primary reason for the increase in net interest income in both 2005 periods was due to a significant increase in the tax equivalent net interest margin to 3.62 percent and 3.61 percent for the three and nine months ended September 30, 2005, as compared to 3.33 percent and 3.17 percent for the 2004 periods, respectively. These increases were partially offset by decreases in average interest earning assets of $69.4 million, or 2.5 percent, and $113.7 million, or 4.1 percent, for the September 30, 2005 three and nine month periods, respectively, as compared to the prior year periods.

Mr. Hales commented that, "The Company's net interest income has significantly benefited in 2005 from the net interest margin increases as a result of the Federal Reserve increasing short-term interest rates. This was a result of carefully positioning the asset/liability structure of the balance sheet. We did an excellent job in managing interest rate risk."

Mr. Hales added, "However, the Company's balance sheet is currently in a relatively neutral asset/liability rate sensitive position at September 30, 2005. The Company's net interest income could be negatively affected and compression of the net interest margin may occur if the U.S. treasury yield curve maintains a relatively flat position, continues to flatten further, or becomes inverted resulting in short-term interest rates at higher levels than medium- to long-term interest rates."

The Company also continues to experience acceleration of loan payments, particularly in construction and land development loans, and increased competition for loan customers. Loans outstanding have decreased $38.4 million during the nine months ended September 30, 2005. A continued decrease in loans outstanding can also negatively affect net interest income.

The provision for credit losses remained relatively flat for the 2005 third quarter and decreased to $0.6 million for the nine months ended September 30, 2005 compared to $0.7 million for the nine months ended September 30, 2004. The 2005 nine-month decrease was due to a lower level of loan growth in the 2005 period primarily as a result of prepayments on commercial loans. Non-performing assets continue to remain at low levels in relation to the overall loan portfolio. The ratio of non-performing assets to total assets at September 30, 2005 was 0.33 percent compared to 0.14 percent at September 30, 2004. As of September 30, 2005, loans related to two different customer relationships aggregating $8.8 million, which are not on nonaccrual status, are potential problem loans that may result in the loans being placed on nonaccrual status in the near future. All the loans in both the relationships are well secured and supported by personal guarantees.

Non-interest income decreased $0.2 million and $0.3 million for the three and nine months ended September 30, 2005, respectively, compared to the prior 2004 periods. The decreases for both periods were primarily due to decreases in service charges on deposit accounts, letter of credit fees, and loan prepayment fees, partially offset by increases in fee income on investment product sales and commission-based products. During the 2005 third quarter, $7.2 million of residential mortgages were sold to Freddie Mac. The transaction resulted in gains on sales of loans of $0.3 million.

Non-interest expenses increased 2.7 percent to $13.4 million and 4.9 percent to $39.7 million for the three and nine months ended September 30, 2005, respectively, as compared to the prior year periods. The increase in non-interest expense of $0.4 million and $1.9 million for the three and nine months ended September 30, 2005, respectively, as compared to the prior year periods was primarily a result of increases in salaries and benefits of $0.7 million and $2.3 million, resulting from higher levels of incentive and deferred compensation, and a decrease in the deferral of loan origination expenses. Also contributing to the increase in non-interest expenses for the nine months ended September 30, 2005 was an increase in medical benefits, and for the 2005 third quarter, an increase in advertising and business development expense of $0.2 million compared to the prior year periods.

The increases in non-interest expenses for the third quarter and nine months ended September 30, 2005 were partially offset by decreases of $0.1 million in both occupancy and equipment expenses and communication expense, as compared to the 2004 periods. Also, partially offsetting the increase in non- interest expense for the nine month 2005 period was a decrease in advertising and business development expense of $0.1 million, as compared to the nine months ended September 30, 2004, and for the quarter ended September 30, 2005, a decrease in professional fees expense of $0.3 million as compared to the quarter ended September 30, 2004. The Bank's management remains focused on effectively controlling expenses while continuing to provide exceptional customer service.

The effective rate for the provision for income taxes for the three and nine months ended September 30, 2005 decreased to 32.4 percent and 32.1 percent, respectively, compared to 33.8 percent and 33.9 percent for the 2004 periods. The decreases in both 2005 periods were primarily due to a decrease in the income tax reserves as a result of the satisfactory completion of Federal and State tax examinations for prior income tax years.

The Company operates through its banking subsidiary, Union State Bank, a commercial bank currently with 28 branches, of which 25 are located in Rockland and Westchester Counties, New York, and one branch each in Stamford, Connecticut, Goshen, Orange County, New York, and Manhattan, New York City. The Bank also operates four loan production offices in Rockland, Westchester, and Orange Counties, New York, and Stamford, Connecticut. Further information on the Company can be found on the Bank's website at http://www.unionstate.com/.

Forward-Looking Statements: This Press Release contains a number of "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "intend," "should," "will," "would," "could," "may," "planned," "estimated," "potential," "outlook," "predict," "project" and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management's experience and its perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non- occurrence of events may be subject to circumstances beyond our control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins or affect the value of investments; changes in deposit flows, loan demand or real estate values may adversely affect our business; changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently; general economic conditions, either nationally or locally in some or all of the areas in which we do business, or conditions in the securities markets or the banking industry may be less favorable than we currently anticipate; legislative or regulatory changes may adversely affect our business; applicable technological changes may be more difficult or expensive than we anticipate; success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or litigation or matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than we anticipate.

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. You should consider these risks and uncertainties in evaluating forward-looking statements and you should not place undue reliance on these statements.

                         U.S.B. HOLDING CO., INC.
                SELECTED FINANCIAL INFORMATION - UNAUDITED
             (in thousands, except ratios and share amounts)

                                   Nine Months Ended     Three Months Ended
                                      September 30,         September 30,
                                    2005       2004        2005        2004
  Consolidated summary of
   operations:
    Interest income               $117,259   $107,026     $40,546    $36,750
    Interest expense                46,571     42,400      16,761     14,258
    Net interest income             70,688     64,626      23,785     22,492
    Provision for credit losses        571        664          95        110
    Non-interest income              5,555      5,851       1,849      2,008
    Gains on securities transactions     -      1,197           -          -
    Gains on sales of loans            314          -         314          -
    Non-interest expenses           39,722     37,863      13,390     13,035
    Income before income taxes      36,264     33,147      12,463     11,355

    Provision for income taxes      11,633     11,234       4,032      3,836

    Net income                     $24,631    $21,913      $8,431     $7,519

  Consolidated common share
   data:(1)
    Basic earnings per share         $1.14      $1.02       $0.39      $0.35
    Diluted earnings per share       $1.10      $0.98       $0.37      $0.34
    Weighted average shares     21,567,925 21,427,984  21,685,896 21,340,626
    Adjusted weighted average
     shares                     22,466,223 22,373,511  22,605,328 22,278,580

    Cash dividends per share         $0.40      $0.32       $0.14      $0.12

                                    September 30, December 31, September 30,
  Selected balance sheet data at
   period end:                         2005            2004          2004
    Securities available for sale,
     at estimated fair value         $404,370        $589,572      $901,619
    Securities held to maturity       721,789         502,201       503,612
    Loans, net of unearned income   1,469,703       1,508,098     1,487,599
    Allowance for loan losses          15,163          15,226        15,134
    Total assets                    2,983,847       2,746,270     3,138,932
    Deposits                        2,076,835       1,858,218     1,996,437
    Borrowings                        592,255         625,032       880,785
    Subordinated debt issued in
     connection with Corporation-
     Obligated mandatory redeemable
     capital securities of
     subsidiary trusts                 61,858          61,858        61,858
    Stockholders' equity              200,024         182,046       179,071
    Tier 1 capital                    261,478         241,494       237,161
    Book value per common share(1)      $9.20           $8.52         $8.39
  Common shares outstanding(1)     21,732,559      21,364,155    21,340,684

  Selected balance sheet financial
   ratios:
    Leverage ratio                      9.15%           8.15%         8.07%
    Allowance for loan losses to
     total loans                        1.03%           1.01%         1.02%
    Non-performing assets to total
     assets                             0.33%           0.06%         0.14%



  Selected income statement        Nine Months Ended     Three Months Ended
   data for the period ended:     Sept. 30,  Sept. 30,  Sept. 30,  Sept. 30,
                                     2005      2004        2005       2004
  Return on average total assets     1.17%     1.00%       1.18%      1.02%
  Return on average common
   stockholders' equity             17.21%    17.00%       17.05%    17.47%
  Efficiency ratio                  50.93%    52.54%       51.02%    52.08%
  Net interest spread - tax
   equivalent                        3.50%     3.10%        3.53%     3.27%
  Net interest margin - tax
   equivalent                        3.61%     3.17%        3.62%     3.33%


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

                 AVERAGE BALANCE INFORMATION - UNAUDITED

                              Nine Months Ended    Three Months Ended
                                 September 30,            September 30,
                              2005         2004        2005          2004
  ASSETS                           (000's)                   (000's)

  Federal funds sold         $55,226      $28,905      $82,855      $25,321
  Securities(2)            1,120,353    1,283,481    1,135,286    1,260,066
  Loans(3)                 1,500,116    1,477,016    1,480,898    1,483,012
  Earning assets           2,675,695    2,789,402    2,699,039    2,768,399
  Total Assets            $2,801,004   $2,921,867   $2,861,898   $2,946,521

  LIABILITIES AND
  STOCKHOLDERS' EQUITY
  Non-interest bearing
   deposits                 $341,446     $316,251     $354,861     $333,323
  Interest bearing
   deposits                1,551,099    1,555,069    1,576,474    1,551,713
  Total deposits           1,892,545    1,871,320    1,931,335    1,885,036
  Borrowings                 611,937      780,072      602,716      745,991
  Subordinated debt issued
   in connection with
   Corporation-Obligated
   mandatory redeemable
   capital securities of
   subsidiary trusts          61,858       58,643       61,858       61,858
  Interest bearing
   liabilities             2,224,894    2,393,784    2,241,048    2,359,562
  Stockholders' Equity      $190,761     $171,790     $197,818     $172,179


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

              SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED


                                             Consolidated Balance Sheet Data
                                                    At September 30,
                                                  2005           2004
                                                        (000's)
   Commercial (time and demand) loans           $159,892       $162,912
   Construction and land development loans       351,206        390,654
   Commercial mortgages                          609,128        600,419
   Residential mortgages                         259,336        250,286
   Home equity loans                              81,780         73,495
   Personal installment loans                      1,632          2,103
   Credit card loans                               6,564          6,111
   Other loans                                     2,995          5,770
   Deferred commitment fees                        2,830          4,151
   Intangibles                                     4,153          5,385
   Goodwill                                        1,380          1,457
   Nonaccrual loans                                9,902          4,264
   Restructured loans                                134            139
   Reserve for unfunded loan commitments and
    standby letters of credit(4)                   1,116            558
   Non-interest bearing deposits                 442,211        403,713
   Interest bearing deposits                   1,634,624      1,592,724


                                 Consolidated Income Statement Data for the
                                  Nine Months Ended      Three Months Ended
                                     September 30,          September 30,
                                    2005       2004        2005       2004
                                        (000's)                (000's)

  Interest income - FTE           $119,007  $108,617      $41,159   $37,277
  Net interest income - FTE         72,436    66,217       24,398    23,019
  Deposit service charges            2,749     3,206          918     1,038
  Other income                       2,806     2,645          931       970
  Salaries and employee benefits

   expense                          24,866    22,571        8,277     7,554
  Occupancy and equipment
   expense                           5,783     5,863        1,921     2,049
  Advertising and business
   development expense               1,974     2,099          804       620
  Professional fees expense
       1,726     1,739          588       875
  Communications expense               970     1,104          302       424
  Stationery and printing expense      423       532          110       148
  Amortization of intangibles
       861       835          285       290
  Other expense                      3,119     3,120        1,103     1,075
  Net charge-offs                       61       265           68       130


   (1) Share amounts are adjusted for the five percent common stock dividend
       distributed in September 2005.

   (2) Securities exclude mark-to-market adjustment required by FASB No.
       115.

   (3) Loans are net of unearned discount and the allowance for loan losses.
       Nonaccruing loans are included in average balances for purposes of
       computing average loans, average earning assets, and total assets.

   (4) The reserve for standby letters of credit of $0.4 million in 2004 was
       included in the allowance for loan losses.


DATASOURCE: U.S.B. Holding Co., Inc.



CONTACT:  Steven T. Sabatini, Senior Executive V.P. & Chief Financial

Officer, U.S.B. Holding Co., Inc., [phone]



Web site:  http://www.unionstate.com/ 

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