UBH Usb Holdings CO

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., +1-845-365-4615 Web site: http://www.unionstate.com/

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