U.S.B. Holding Co., Inc., Union State Bank's Parent Company, Reports Earnings for the 2006 Third Quarter and for the Nine Months

ORANGEBURG, N.Y., Oct. 25  /PRNewswire-FirstCall/ -- Thomas E. Hales, Chairman of the Board and Chief Executive Officer 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, announced today that the Company's net income for the three months ended September 30, 2006 was $8.1 million compared to $8.4 million for the three months ended September 30, 2005, a decrease of $0.3 million, or 3.4 percent.  Diluted earnings per common share for the quarter ended September 30, 2006 was $0.36 compared to $0.37 for the prior year period, a decrease of 2.7 percent. The Company's third quarter 2006 net income resulted in a 15.27 percent return on average common stockholders' equity and a 1.13 percent return on average total assets, as compared to 17.05 percent and 1.18 percent, respectively, for the prior year period.

For the nine months ended September 30, 2006, net income was $23.5 million compared to $24.6 million for the nine months ended September 30, 2005, a decrease of $1.1 million, or 4.7 percent.  Diluted earnings per common share was $1.03 for the nine months ended September 30, 2006 compared to $1.10 for the prior year period, a decrease of 6.4 percent.  The Company's net income for the nine months ended September 30, 2006 resulted in a 14.94 percent return on average common stockholders' equity and a 1.11 percent return on average total assets, as compared to 17.21 percent and 1.17 percent, respectively, for the 2005 period.

The decreases in the 2006 third quarter and nine months ended September 30, 2006 net income and diluted earnings per common share compared to the 2005 periods were primarily due to decreases in net interest income, and for the nine month period, an increase in the provision for credit losses. The decreases in net income and diluted earnings per common share for both 2006 periods were partially offset by gains on securities transactions and a decrease in non-interest expenses.

Net interest income decreased 2.7 percent to $23.2 million for the quarter ended September 30, 2006 and 1.9 percent to $69.4 million for the nine months ended September 30, 2006 compared to the prior year third quarter and nine month periods, respectively.  The primary reason for the decrease in net interest income in both 2006 periods was a decrease in the tax equivalent net interest margin to 3.41 percent and 3.49 percent for the three and nine months ended September 30, 2006, as compared to 3.62 percent and 3.61 percent for the 2005 periods, respectively.  These decreases were partially offset by increases in average interest earning assets of $83.3 million, or 3.1 percent, and $47.5 million, or 1.8 percent, for the September 30, 2006 three and nine month periods, respectively, as compared to the prior year periods.

The net interest margin may continue to be negatively affected if the U.S. Treasury yield curve maintains an inverted position resulting in short-term interest rates at higher levels than medium- to long-term interest rates, or, to a lesser extent, begins to flatten resulting in short-term interest rates at similar levels to medium- and long-term interest rates.  If short-term interest rates begin to decrease resulting in a steepening U.S. Treasury yield curve, the net interest margin would be positively affected.

The provision for credit losses increased to $1.3 million for the nine months ended September 30, 2006 compared to $0.6 million for the 2005 period. The increase was primarily due to an increase in a specific reserve required for one relationship related to non-performing real estate construction loans totaling $2.4 million as of September 30, 2006.  Non-performing assets at September 30, 2006 decreased to $3.7 million compared to $9.0 million and $9.9 million at December 31, 2005 and September 30, 2005, respectively.  The decrease was primarily due to a payoff of non-performing construction loans totaling $4.7 million and charge-offs of two business loans totaling $0.4 million.

Mr. Hales commented that, "Non-performing assets primarily consist of one relationship and the ratio to total assets of 0.12 percent is extremely low, especially when considering our $1.5 billion loan portfolio."  He further stated that, "Loan growth has been strong during the third quarter of 2006 and the momentum is expected to continue into the fourth quarter as loan officers have been benefiting from loan originations to both new and existing borrowers.  The increase in earning assets has helped to offset some of the compression in the net interest margin.  Our exceptional products and services and prudent pricing of loans and deposits will be key factors in maximizing the Company's performance.  Also, the Bank received regulatory approvals for the opening of two new Orange County, New York, branches, which will enhance the distribution of the Bank's products and services.  One branch is scheduled to be opened in Washingtonville later in the 2006 fourth quarter and the other in Monroe during the year 2007."

Non-interest income decreased $0.2 million and $0.3 million for the three and nine months ended September 30, 2006, respectively, compared to the prior 2005 periods.  The decreases were primarily due to lower levels of service charges on deposit accounts, loan prepayment fees, and investment product sales.

The decrease in net income for the three and nine months ended September 30, 2006 was partially offset by $0.3 million and $0.9 million reductions in non-interest expenses despite recognizing $0.4 million and $0.9 million of stock option expense, respectively.  Stock option expense recorded in 2006 was due to the implementation of a new accounting pronouncement, "Accounting for Stock-Based Compensation," which began on January 1, 2006.

The decrease in non-interest expenses of 2.1 percent to $13.1 million and 2.2 percent to $38.9 million for the three and nine months ended September 30, 2006, respectively, as compared to the prior year periods were primarily due to decreases in legal expenses for an appeal related to litigation involving a non-performing real estate construction loan, employee incentive compensation and medical benefits, and advertising costs related to the "Get to Know Us" television campaign developed in 2005.

Mr. Raymond J. Crotty, President and Chief Operating Officer of the Company and the Bank, added, "Management remains diligent in the constant scrutiny of operating expenses, which has more than offset the stock option expense recorded in 2006.  We are also proud of our efficiency ratio of nearly 50 percent for both periods in 2006, which demonstrates that management has command of the Company's resources."

Gains on securities transactions were $0.4 million for both the three and nine months ended September 30, 2006.  The gains on securities transactions primarily resulted from the sale of $47.0 million of collateralized mortgage obligations.  There were no gains on securities transactions during the 2005 periods.  The Company recognized gains on sales of loans of $0.3 million from the sale of $7.1 million of residential mortgages during the three and nine months ended September 30, 2005.  There were no gains on sales of loans during the 2006 periods.

The effective rate for the provision for income taxes for the three and nine months ended September 30, 2006 increased to 32.8 percent and 32.6 percent, respectively, compared to 32.4 percent and 32.1 percent for the 2005 periods.

The Company operates through its banking subsidiary, Union State Bank, a commercial bank currently with 29 branches, of which 26 are located in Rockland and Westchester Counties, New York, and one branch each located in Stamford, Connecticut, Manhattan, New York City, and Orange County, New York. 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,
                             2006        2005         2006         2005
  Consolidated summary of
   operations data:
   Interest income        $130,927    $117,259      $45,625      $40,546
   Interest expense         61,550      46,571       22,475       16,761
   Net interest income      69,377      70,688       23,150       23,785
   Provision for credit
    losses                   1,344         571           37           95
   Non-interest income       5,238       5,555        1,679        1,849
   Gains on securities
    transactions               431           -          426            -
   Gains on sales of loans       -         314            -          314
   Non-interest expenses    38,863      39,722       13,105       13,390
   Income before income
    taxes                   34,839      36,264       12,113       12,463
   Provision for income
    taxes                   11,354      11,633        3,968        4,032
   Net income              $23,485     $24,631       $8,145       $8,431

  Consolidated common
   share data:
   Basic earnings per
    share                    $1.08       $1.14        $0.37        $0.39
   Diluted earnings per
    share                    $1.03       $1.10        $0.36        $0.37
   Weighted average
    shares              21,746,909  21,567,925   22,751,565   21,685,896
   Adjusted weighted
    average shares      22,708,031  22,466,223   22,641,540   22,605,328
   Cash dividends per
    share                    $0.42       $0.40        $0.14        $0.14


  Selected balance sheet
   data at period end:         September 30,   December 31,  September 30,
                                     2006            2005          2005
   Securities available for sale,
    at estimated fair value        $440,385       $375,990       $404,370
   Securities held to maturity      738,124        746,851        721,789
   Loans, net of unearned income  1,534,456      1,474,984      1,469,703
   Allowance for loan losses         15,822         15,164         15,163
   Total assets                   3,004,520      2,758,226      2,983,847
   Deposits                       1,990,037      1,847,202      2,076,835
   Borrowings                       708,177        622,159        592,255
   Subordinated debt issued in
    connection with
    corporation-obligated
    mandatory redeemable capital
    securities of subsidiary
    trusts                           61,858         61,858         61,858
   Stockholders' equity             217,768        204,153        200,024
   Tier 1 capital                   281,956        266,823        261,478
   Book value per common share      $ 10.02          $9.40          $9.20
   Common shares outstanding     21,741,169     21,713,805     21,732,559

  Selected balance sheet
   financial ratios:
   Leverage ratio                     9.75%          9.47%          9.15%
   Allowance for loan losses
    to total loans                    1.03%          1.03%          1.03%
   Non-performing assets to
    total assets                      0.12%          0.33%          0.33%



  Selected income statement        Nine Months Ended   Three Months Ended
   data for the period ended:        September 30,        September 30,
                                     2006      2005        2006     2005

   Return on average total assets    1.11%     1.17%       1.13%    1.18%
   Return on average common
    stockholders' equity            14.94%    17.21%      15.27%   17.05%
   Efficiency ratio                 50.80%    50.93%      51.53%   51.02%
   Net interest spread
    - tax equivalent                 3.34%     3.50%       3.25%    3.53%
   Net interest margin
    - tax equivalent                 3.49%     3.61%       3.41%    3.62%


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

                   AVERAGE BALANCE INFORMATION - UNAUDITED

                             Nine Months Ended       Three Months Ended
                              September 30,            September 30,
                            2006         2005        2006          2005
                                 (000's)                    (000's)

  ASSETS
  Federal funds sold      $27,472      $55,226      $30,029       $82,855
  Securities(1)         1,209,677    1,120,353    1,258,667     1,135,286
  Loans(2)              1,486,081    1,500,116    1,493,654     1,480,898
  Earning assets        2,723,230    2,675,695    2,782,350     2,699,039
  Assets              $ 2,832,270   $2,801,004   $2,894,790    $2,861,898

  LIABILITIES AND
  STOCKHOLDERS' EQUITY
  Non-interest bearing
   deposits              $311,648     $341,446     $314,263      $354,861
  Interest bearing
   deposits             1,537,360    1,551,099    1,548,224     1,576,474
  Total deposits        1,849,008    1,892,545    1,862,487     1,931,335
  Borrowings              685,705      611,937      717,994       602,716
  Subordinated debt
   issued in connection
   with
   corporation-obligated
   mandatory redeemable
   capital securities
   of subsidiary trusts    61,858       61,858       61,858        61,858
  Interest bearing
   liabilities          2,284,923    2,224,894    2,328,076     2,241,048
  Stockholders' Equity   $209,566     $190,761     $213,373      $197,818


  (1) Securities exclude mark-to-market adjustment required by FASB No. 115.
  (2) Loans are net of both the 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.


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

                SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED

                                            Consolidated Balance Sheet Data
                                                      at September 30,
                                                     2006           2005
                                                          (000's)
  Commercial (time and demand) loans              $167,793       $159,892
  Construction and land development loans          406,312        351,206
  Commercial mortgages                             585,322        609,128
  Residential mortgages                            289,098        259,336
  Home equity loans                                 75,831         81,780
  Personal installment loans                         1,877          1,632
  Credit card loans                                  6,990          6,564
  Other loans                                        3,266          2,995
  Deferred commitment fees                           2,033          2,830
  Intangibles                                        2,816          4,153
  Goodwill                                           1,380          1,380
  Nonaccrual loans                                   3,710          9,902
  Restructured loans                                   127            134
  Reserve for unfunded loan commitments
   and standby letters of credit                     1,038          1,116
  Non-interest bearing deposits                    378,820        442,211
  Interest bearing deposits                      1,611,217      1,634,624


                              Consolidated Income Statement Data for the
                                Nine Months Ended     Three Months Ended
                                  September 30,          September 30,
                                 2006      2005         2006      2005
                                                (000's)
  Interest income - tax
   equivalent                 $132,814  $119,007      $46,228   $41,159
  Net interest income - tax
   equivalent                   71,264    72,436       23,753    24,398
  Deposit service charges        2,489     2,749          826       918
  Other income                   2,749     2,806          853       931
  Salaries and employee
   benefits expense             24,627    24,866        8,363     8,277
  Occupancy and equipment
   expense                       5,885     5,783        1,995     1,921
  Advertising and business
   development expense           1,941     1,974          666       804
  Professional fees expense      1,153     1,726          379       588
  Communications expense           980       970          337       302
  Stationery and printing expense  432       423          136       110
  Amortization of intangibles      838       861          277       285
  Other expense                  3,007     3,119          952     1,103
  Net charge-offs                  754        61          438        68


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



CONTACT:  Thomas M. Buonaiuto, Executive Vice President & Chief Financial

Officer of U.S.B., [phone]



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

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