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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                -----------------

                                    FORM 10-Q

                                   (Mark One)

          [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1997

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           For the transition period from ____________ to ____________

                         Commission file number 0-20187

                                MSB BANCORP, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                                06-1341670
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

                   35 Matthews Street, Goshen, New York 10924
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (914) 294-8100
               (Registrant's telephone number including area code)

                                       N/A
              (Former name, former address and former fiscal year,
                          if changed from last Report)

        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  twelve  months (or for such shorter  period that the
registrant was required to file such reports),  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
                                                             September 30, 1997
                 Common Stock,
                par value $.01                                    2,844,153

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<PAGE>


                                      TABLE OF CONTENTS


                                PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Balance Sheets (Unaudited) -- September 30, 1997
        and December 31, 1996..................................................1

        Consolidated Statements of Income (Unaudited) -- Quarter and 
        Nine months ended September 30, 1997 and 1996..........................2

        Consolidated Statements of Cash Flows (Unaudited) --Nine months
        ended September 30, 1997 and 1996......................................3

        Notes to Unaudited Consolidated Financial Statements...................5

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations................................................. 9

Item 3. Quantitative and Qualitative Disclosures
        about Market Risk.....................................................17


                                 PART II -- OTHER INFORMATION

Item 1. Legal Proceedings ....................................................18

Item 2. Changes in Securities and Use of Proceeds.............................18

Item 3. Defaults upon Senior Securities.......................................18

Item 4. Submission of Matters to a Vote of Security Holders...................18

Item 5. Other Information.....................................................18

Item 6. Exhibits and Reports on Form 8-K......................................18

        Signatures........................................................... 19



<PAGE>


Item 1.  Financial Statements

MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
             (Unaudited)
(dollars in thousands)                               September 30,  December 31,
                                                          1997          1996
                                                     ------------   ------------

ASSETS
  Cash and due from banks ..........................   $  16,901    $  16,375
  Federal funds sold ...............................      16,020       32,590
  Securities available for sale ....................      58,315       50,685
  Mortgage-backed securities available for sale ....     254,601      323,428
  Loans, net .......................................     372,282      338,491
  Premises and equipment, net ......................      14,304       14,869
  Accrued interest receivable ......................       4,740        5,552
  Real estate owned ................................       2,247          915
  Goodwill .........................................      29,734       32,835
  Other assets .....................................       4,847        5,176
                                                       ---------    ---------
        Total assets ...............................   $ 773,991    $ 820,916
                                                       =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
  Liabilities
          Deposits .................................     684,018      736,161
    Mortgagors' escrow deposits ....................       2,042        1,849
    Accrued expenses and other liabilities .........      11,521       11,684
    ESOP obligations ...............................         273          432
                                                       ---------    ---------
    Total liabilities ..............................     697,854      750,126
                                                       ---------    ---------
  Stockholders' Equity
   Preferred stock ($.01 par value; 1,000,000
     shares authorized; 600,000 shares issued at
     September 30, 1997 and December 31, 1996) .....           6            6
   Common stock ($.01 par value; 5,000,000
     shares authorized; 3,045,000 shares issued
     at September 30, 1997 and December 31, 1996) ..          30           30
   Additional paid-in capital .......................     48,059       48,163
   Retained earnings ................................     33,168       32,009
   Treasury stock, at cost (200,847 shares and
    211,064 shares at September 30, 1997 and .......      (3,941)      (4,137)
    December 31, 1996, respectively)
   Unallocated ESOP stock ...........................       (273)        (432)
   Unallocated BRP stock ............................        (75)        (172)
   Net unrealized loss on securities
     available for sale ............................        (837)      (4,677)
                                                       ---------    ---------
        Total stockholders' equity .................      76,137       70,790
                                                       ---------    ---------
        Total liabilities and stockholders' equity .   $ 773,991    $ 820,916
                                                       =========    =========



See accompanying notes to the unaudited consolidated financial statements.


<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
             (Unaudited)
(In thousands except shares and per share amounts)

                                                        For the Quarter Ended   
                                                             September 30
                                                    ----------------------------
                                                          1997          1996    
                                                    ----------------------------
INTEREST INCOME
  Mortgage loans .................................   $     6,745    $     5,816
  Other loans ....................................           725            567
  Mortgage-backed securities .....................         4,002          6,527
  Securities .....................................           897            892
  Federal funds sold .............................           749             51
                                                     -----------    -----------
        Total interest income ....................        13,118         13,853

INTEREST EXPENSE
  Interest on deposits ...........................         7,001          7,755
  Interest on borrowings .........................             1             18
  Interest on ESOP obligation ....................             5             12
                                                     -----------    -----------
        Total interest expense ...................         7,007          7,785
                                                     -----------    -----------
  Net interest income ............................         6,111          6,068
  Provision for loan losses ......................           275            400
                                                     -----------    -----------
  Net interest income after provision for
   loan losses ...................................         5,836          5,668

NON-INTEREST INCOME
  Service fees ...................................         1,180            970
  Net realized gains (losses) on sales of
   securities and mortgage loans .................            73             (8)
  Other non-interest income ......................            32              2
                                                     -----------    -----------
                                                           1,285            964
NON-INTEREST EXPENSE
  Salaries and employee benefits .................         2,104          2,106
  Occupancy and equipment ........................           817            801
  Federal deposit insurance premiums .............            68            264
  Goodwill amortization ..........................           909            920
  Other non-interest expense .....................         1,183          1,122
  SAIF recapitalization assessment ................          --           2,925
                                                     -----------    -----------
       Total non-interest expense ................         5,081          8,138
                                                     -----------    -----------
  Income (loss)  before income taxes .............         2,040         (1,506)
  Income tax expense (benefit) ...................           810           (648)
                                                     -----------    -----------
  Net income (loss) ..............................   $     1,230    $      (858)
                                                     ===========    ===========
  Earnings per share .............................   $      0.33    $     (0.40)

  Weighted average shares outstanding ............     2,886,109      2,833,936
                                                     ===========    ===========


<PAGE>


                                                     For the Nine Months Ended
                                                             September 30
                                                    ---------------------------
                                                          1997           1996
                                                    --------------- -----------
INTEREST INCOME
  Mortgage loans .................................   $    19,804    $    16,369
  Other loans ....................................         1,953          1,553
  Mortgage-backed securities .....................        14,372         18,433
  Securities .....................................         2,604          3,334
  Federal funds sold .............................         1,608          1,029
                                                     -----------    -----------
        Total interest income ....................        40,341         40,718

INTEREST EXPENSE
  Interest on deposits ...........................        21,900         22,982
  Interest on borrowings .........................             1             18
  Interest on ESOP obligation ....................            21             41
                                                     -----------    -----------
        Total interest expense ...................        21,922         23,041
                                                     -----------    -----------
  Net interest income ............................        18,419         17,677
  Provision for loan losses ......................           850            970
                                                     -----------    -----------
  Net interest income after provision for
   loan losses ...................................        17,569         16,707

NON-INTEREST INCOME
  Service fees ...................................         3,079          2,780
  Net realized gains (losses) on sales of
   securities and mortgage loans .................           167             80
  Other non-interest income ......................            79              7
                                                     -----------    -----------
                                                           3,325          2,867
NON-INTEREST EXPENSE
  Salaries and employee benefits .................         6,495          6,284
  Occupancy and equipment ........................         2,407          2,333
  Federal deposit insurance premiums .............           221            741
  Goodwill amortization ..........................         2,751          2,596
  Other non-interest expense .....................         3,605          3,609
  SAIF recapitalization assessment ...............          --            2,925
                                                     -----------    -----------
       Total non-interest expense ................        15,479         18,488
                                                     -----------    -----------
  Income (loss)  before income taxes .............         5,415          1,086
  Income tax expense (benefit) ...................         2,143            440
                                                     -----------    -----------
  Net income (loss) ..............................   $     3,272    $       646
                                                     ===========    ===========
  Earnings per share .............................   $      0.84    $     (0.06)
  Weighted average shares outstanding ............     2,878,031      2,808,124
                                                     ===========    ===========

See accompanying notes to the unaudited consolidated financial statements.


<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
             (Unaudited)
             (In thousands)
                                                      For the Nine Months Ended
                                                            September 30,
                                                            1997          1996 
                                                     -------------- ------------
OPERATING ACTIVITIES
  Net income .....................................   $     3,272    $       646
  Adjustments to reconcile net income to net
   cash provided by operating activities:
  Realized losses (gains) ........................          (167)           (80)
  Amortization of premiums/discounts on securities           786            872
  Proceeds from the sale of student loans ........         1,209          1,149
  Origination of mortgage loans held for sale ....        (9,282)        (7,909)
  Proceeds from the sale of mortgage loans .......         9,600          8,562
  Amortization of net deferred loan origination
     fees ........................................           (98)          (137)
  Depreciation and amortization ..................           951            932
  Provisions for loan losses .....................           850            970
  Write-downs on real estate .....................            66            171
  Goodwill amortization ..........................         2,751          2,596
  Decrease (increase) in accrued interest
     receivable ..................................           812         (2,052)
  Decrease (increase) in prepaid expenses and
   other assets ..................................        (2,572)           434
  Increase (decrease) in accrued expenses and
   other liabilities .............................           183           (763)
  Net change in Federal and State income tax
   payables and receivables ......................           481         (1,280)
  Deferred income taxes ..........................          (164)          (479)
  Other ..........................................           300           (454)
                                                     -----------    -----------
    Net cash provided by (used in) operating
     activities ..................................        8,977    $    (3,178)
                                                     ===========    ===========

INVESTING ACTIVITIES
  Net (increase) decrease in loans ...............       (38,043)       (49,379)
  Maturities and redemptions of debt securities ..            49         14,142
  Purchases of securities available for sale .....        (9,623)       (25,391)
  Proceeds from the sale of securities available
     for sale ....................................         3,000         31,082
  Purchases of mortgage-backed securities
     available for sale ..........................       (53,590)      (383,209)
  Proceeds from the sale of mortgage-backed
   securities available for sale .................       109,599         26,368
  Repayments of mortgage-backed securities
     available for sale ..........................        17,505         14,365
  Repayments of asset backed securities ..........          --              143
  Proceeds from the sale of real estate owned, net           602            343
  Purchases of property and equipment ............          (385)        (3,980)
  Cash received in branch acquisition ............          --          380,299
                                                     -----------    -----------
    Net cash provided by investing activities ....   $    29,114    $     5,503
                                                     ===========    ===========

See accompanying notes to the unaudited consolidated financial statements.


<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
               (Unaudited)
                (In thousands)
                                                     For the Nine Months Ended
                                                             September 30,
                                                          1997            1996
                                                    -------------   ------------
FINANCING ACTIVITIES
  Net change in deposits .........................   $   (52,143)   $   (55,321)
  Net increase (decrease) in mortgagors' escrow
     deposits ....................................           193           (344)
   Proceeds from borrowings ......................          --           12,100
  Repayment of ESOP loan .........................          (159)          (223)
  Proceeds from the sale of stock ................          --           32,078
  Payment of cash dividends on common and
     preferred stock .............................        (2,128)        (1,678)
  Proceeds from the exercise of stock options ....           102             40
                                                     -----------    -----------
        Net cash used in financing activities ....   $   (54,135)   $   (13,348)
                                                     -----------    -----------

  Increase (decrease) in cash and cash equivalents   $   (16,044)   $    (4,667)
  Cash and cash equivalents at beginning of period   $    48,965    $    26,814
                                                     -----------    -----------
  Cash and cash equivalents at end of period .....   $    32,921    $    22,147
                                                     ===========    ===========

SUPPLEMENTAL INFORMATION
  Interest paid on savings deposits ..............   $    21,901    $    22,969
  Income taxes paid (received) ...................         1,558          2,203

  Non-cash transactions:
   Transfer of balances from loans receivable to
     real estate owned ...........................   $     2,300    $       778
                                                     ===========    ===========

See accompanying notes to the unaudited consolidated financial statements.


<PAGE>


MSB Bancorp, Inc. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation

     In September 1992, MSB Bancorp, Inc. (the "Company") completed the issuance
of  1,840,000  shares of  common  stock in  connection  with the  conversion  of
Middletown  Savings Bank (the "Bank") from a mutual to a stock savings bank (the
"Conversion").  Concurrent with the Conversion,  the Company acquired all of the
Bank's common stock.

        On January 10, 1996, the Company sold  1,100,000  shares of common stock
at $18  per  share  and  600,000  shares  of its  8.75%  Cumulative  Convertible
Preferred Stock,  Series A at $21.60 per share. On February 7, 1996, the Company
sold an additional  105,000 shares of Common Stock pursuant to the underwriters'
exercise of their over-allotment  option. The issuance and sale of the shares of
Common Stock and  Preferred  Stock on January 10 and February 7 are  hereinafter
collectively  referred to as the  "Offering."  Net  proceeds  from the  Offering
amounted  to  $32.1  million.  The  purpose  of  the  Offering  was to  raise  a
significant  portion of the additional  capital  necessary to permit the Bank to
qualify as "adequately  capitalized" for regulatory capital purposes immediately
following the  consummation of the acquisition (the  "Acquisition")  of branches
from First Nationwide Bank, A Federal Savings Bank ("First Nationwide").

        In September  1995,  the Bank  entered  into an Asset  Purchase and Sale
Agreement (as amended,  the "First Nationwide  Agreement") with First Nationwide
pursuant  to  which  the  Bank  acquired  certain  assets  and  assumed  certain
liabilities relating to seven First Nationwide branch offices located in Carmel,
Liberty, Mahopac, Monticello, Port Jervis, Warwick and Washingtonville, New York
(the "First  Nationwide  Branches").  The closing took place on January 12, 1996
(the  "Closing  Date"),  whereupon  the Bank  assumed the  deposits  (the "First
Nationwide Deposits") of the First Nationwide Branches.

        On January  12,  1996,  the First  Nationwide  Deposits  totaled  $414.8
million.  In addition,  the Bank acquired  certain  assets  related to the First
Nationwide  Branches,  including  branch  facilities and fixed operating  assets
associated  with  the  First   Nationwide   Branches  at  a  purchase  price  of
approximately  $2.9 million,  and certain savings  account and overdraft  loans,
which totaled $1.0 million at January 12, 1996, at face value.

        On October 27, 1995, the Bank converted from a New York  state-chartered
savings bank to a federal savings bank in order to facilitate the Acquisition as
well as future expansion. In addition, the Bank changed its name to MSB Bank.

        The  Company  is a  savings  and loan  holding  company  subject  to the
regulation, examination and supervision of the Office of Thrift Supervision (the
"OTS").  Prior to the  conversion  of the Bank to a federal  savings  bank,  the
Company was a bank holding company  subject to the  regulation,  examination and
supervision of the Federal Reserve Board ("FRB").

        The  Bank  provides   banking   services  to  individual  and  corporate
customers, with its business activities concentrated in the New York counties of
Orange, Putnam and Sullivan, and the surrounding areas.

        The consolidated financial statements included herein have been prepared
by the Company  without  audit.  In the  opinion of  management,  the  quarterly
unaudited  financial  statements  include all adjustments,  consisting of normal
recurring  accruals,  necessary  for a fair  presentation  of  the  consolidated
financial position and results of operations for the periods presented.  Certain
information  and  footnote  disclosures  normally  included in  accordance  with
generally accepted accounting principles have been condensed or omitted pursuant
to the rules and  regulations  of the Securities  and Exchange  Commission.  The
Company  believes  that the  disclosures  are  adequate to make the  information
presented not misleading, however, the results for the periods presented are not
necessarily indicative of results to be expected for the entire year.


<PAGE>


        The unaudited quarterly and year to date financial  statements presented
herein  should  be read in  conjunction  with the  annual  audited  consolidated
financial statements of the Company for the fiscal year ended December 31, 1996.

        The accompanying  consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, MSB Bank and MSB Travel, Inc.,
and the Bank's wholly owned subsidiary, MSB Financial Services, Inc. Significant
inter-company  transactions and amounts have been  eliminated.  In preparing the
consolidated financial statements,  management is required to make estimates and
assumptions  that affect the reported amounts of assets,  liabilities,  revenues
and expenses.  Estimates that are particularly susceptible to significant change
in the near-term  relate to the  determination  of the allowances for losses and
real estate investments.

2.  Earnings Per Share

        Primary  earnings per common share is calculated based upon the weighted
average common shares  outstanding  adjusted for common stock  equivalents  that
have a  dilutive  effect on the per share  data.  Earnings  for the  purpose  of
computing  primary earnings per share consists of net income for the period less
dividends on preferred stock.  Common stock  equivalents  include stock options.
During the first quarter of 1996,  the Company sold 600,000  shares of its 8.75%
Cumulative Convertible Preferred Stock, Series A in the Offering.  This stock is
not considered a common stock equivalent but is used in the calculation of fully
diluted  earnings  per share.  Since the  preferred  stock has an  anti-dilutive
effect on  earnings  per share for the  quarters  and nine month  periods  ended
September 30, 1997 and 1996, it has not been  incorporated  in the  calculation;
fully diluted and primary earnings per share are the same.

3.  Allowance for Loan Losses

        The  allowance  for loan losses is  increased  by  provision  charged to
operations and decreased by charge-offs  (net of recoveries).  Loans are charged
off when, in the opinion of management,  the recorded  investment in the loan is
uncollectible. Management's periodic evaluation of the adequacy of the allowance
considers  factors such as the Bank's past loan  experience,  known and inherent
risks in the  portfolio,  adverse  situations  that may  affect  the  borrowers'
ability to repay,  estimated value of any underlying  collateral and current and
prospective economic conditions. Management believes that the allowance for loan
losses is  adequate.  While  management  estimates  loan  losses  using the best
available information, such as independent appraisals for significant collateral
properties,  no assurance can be made that future  adjustments  to the allowance
will not be  necessary  based on  changes in  economic  and real  estate  market
conditions,   further  information   obtained  regarding  known  problem  loans,
identification  of additional  problem loans and other factors,  both within and
outside of management's control.



<PAGE>


        Activity in the allowance  for loan losses for the periods  indicated is
summarized as follows:
                                     Quarter             Nine           Year
                                      Ended          Months Ended       Ended
                                  September 30,     September 30,   December 31,
                                  1997     1996     1997      1996      1996
                                 ------  -------  -------   -------    ------
                                               (Dollars in thousands)
Balance at beginning of 
period ...... ................   $2,238   $1,556   $1,960    $1,659    $1,659
Provision for loan
losses .......................      275      400      850       970     1,400
LOANS CHARGED OFF
    Real estate ..............       89      175      383       497       634
    Other loans ..............       82        6      257       367       485
                                  -----   ------   ------    ------    ------
Total loans charged off ......      171      181      640       864     1,119
                                  -----   ------   ------    ------    ------
RECOVERIES
    Real estate ..............     --       --        148         1         1
    Other loans ..............       11        7       35        16        19
                                  -----   ------   ------    ------    ------
    Total recoveries .........       11        7      183        17        20
                                  -----   ------   ------    ------    ------
    Net charge-offs ..........      160      174      457       847     1,099
                                  -----   ------   ------    ------    ------
Balance at end of period .....   $2,353   $1,782   $2,353    $1,782    $1,960
                                 ======   ======   ======    ======    ======
Ratio of net  charge-offs
  to average net loans
  outstanding (annualized) ...     0.17%    0.22%    0.26%     0.38%     0.36%
                                 ======   ======   ======    ======    ======


4.  Legal Proceedings

        Except as  described  below,  the Company is not involved in any pending
legal proceedings other than routine legal proceedings occurring in the ordinary
course of business. Such routine legal proceedings in the aggregate are believed
by management to be immaterial to the Company's  financial condition and results
of operations.

        The Company and its directors are defendants in a lawsuit, Kahn Brothers
& Co., Inc. Profit Plan and Trust et al. v. MSB Bancorp,  Inc. et al., commenced
by  stockholders  in the  Delaware  Court of  Chancery,  New Castle  County,  on
November 22, 1995.  (The Company and its directors were defendants in a lawsuit,
Pohli v. MSB Bancorp,  Inc. et al.,  commenced by a stockholder  in the Delaware
Court of  Chancery,  New Castle  County,  on November  7, 1995.  This action was
consolidated with the Kahn litigation.) The plaintiffs,  who own in excess of 5%
of the  outstanding  shares of the Common Stock and purport to represent a class
consisting of all stockholders  except the stockholder  defendants,  allege that
the defendant  directors  breached their duty of care by failing to become fully
informed about the  expression of interest of HUBCO,  Inc.  ("HUBCO");  breached
their duty of  disclosure  to  stockholders  by not  notifying the public or the
Company's  stockholders  of HUBCO's  expression of interest;  and breached their
duty of  good  faith  and  fair  representation  by,  among  other  things,  not
investigating whether the Acquisition  constituted a reasonable  alternative for
building  stockholder  value.  The plaintiffs  further allege that the Company's
offering of Common Stock in connection with the  Acquisition  (the "Common Stock
Offering") was not intended to enhance stockholder value, but rather was for the
purpose of diluting the ownership and voting  strength of existing  stockholders
and further entrenching existing management and the Board. The plaintiffs sought
to enjoin the Common Stock  Offering and are also seeking  damages  equal to the


<PAGE>


difference  between the market  price of the Common  Stock on September 7, 1995,
and $35 (approximately $14,989,000 in the aggregate) or, in the alternative, the
difference between the market price of the Common Stock on October 26, 1995, and
$25  (approximately  $7,394,000  in  the  aggregate),   including  interest  and
attorneys'  and  other  professional  fees.  In  connection  with  this  action,
plaintiffs  filed a  motion  seeking  expedited  discovery  and  scheduling.  On
December  6,  1995,  in  response  to  the  plaintiffs'   motion  for  expedited
proceedings,  which was treated by the court as an  application  for a temporary
restraining  order with respect to the Common Stock  Offering,  the court denied
the  plaintiffs'  application  for such order.  On December 12, 1995,  the court
denied the plaintiffs' motion for re-argument. On December 18, 1995, the Company
filed an answer denying all of the substantive  allegations in the complaint and
seeking,  among other things,  an order dismissing the complaint with prejudice.
Plaintiffs  amended  their  complaint  to  include  allegations  relating  to an
unsolicited  merger proposal received by the Company from the First Empire State
Corporation  ("First  Empire") on December 28, 1995.  Specifically,  the amended
complaint alleges, among other things, that the Company's Board of Directors, in
breach of its duties of care,  loyalty and  disclosure,  relied on the advice of
Bear, Stearns & Co., Inc. ("Bear Stearns"),  the Company's financial advisor and
underwriter  for the  Offering,  knowing  that Bear  Stearns  could  not  render
independent financial advice regarding the First Empire proposal. The plaintiffs
are seeking alternative damages based on these allegations in an amount equal to
the difference between the market price of the Common Stock on December 28, 1995
and $26  (approximately  $11,560,000  in the  aggregate).  The Company filed its
amended answer on February 1, 1996 denying all of the substantive allegations in
the amended  complaint and seeking,  among other things, an order dismissing the
amended  complaint  with  prejudice.  The parties  have  engaged in  substantial
written  discovery and plaintiffs  have deposed all of the directors and certain
representatives of Bear Stearns.  On October 10, 1997, all the defendants served
and filed with the Court a motion for summary judgment which seeks the dismissal
of all the allegations in plaintiffs' amended complaint.  The Company intends to
continue to vigorously contest the allegations of wrongdoing in this action.

        While the Company  believes  that it has  meritorious  defenses in these
legal actions and is vigorously  defending these suits, the legal responsibility
and financial impact with respect to these  litigation  matters cannot presently
be  ascertained  and,  accordingly,  there is risk that the final  resolution of
these  matters  could result in the payment of monetary  damages  which would be
material in  relation  to the  consolidated  financial  condition  or results of
operations of the Company.  The Company does not believe that the  likelihood of
such a result  is  probable  and has not  established  any  specific  litigation
reserves with respect to such matters.



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         Results of Operations

General

     MSB  Bancorp,  Inc.  (the  "Company")  is the holding  company for MSB Bank
("MSB" or the "Bank"). The financial conditions and results of operations of the
Company are primarily dependent upon the operations of the Bank.

        On January 10, 1996, the Company sold  1,100,000  shares of Common Stock
at $18 per share and 600,000  shares of its Series A  Preferred  Stock at $21.60
per share. On February 7, 1996 the Company sold an additional  105,000 shares of
Common  Stock  pursuant to the  underwriters'  exercise of their  over-allotment
option.  The  issuance  and sales of the  shares of  Common  Stock and  Series A
Preferred  Stock on  January  10 and  February 7 are  hereinafter  referred  to,
collectively,  as the  "Offering."  Net proceeds  from the Offering  amounted to
approximately  $32.1  million.  The  purpose  of the  Offering  was to  raise  a
significant  portion of the additional  capital  necessary to permit the Bank to
qualify as "adequately  capitalized" for regulatory capital purposes immediately
following the acquisition of seven branches (the "Acquired Branches") from First
Nationwide Bank, A Federal Savings Bank ("First  Nationwide"),  in January, 1996
(the  "Acquisition").  The Acquisition  closed on January 12, 1996 with the Bank
assuming  $414.8 million of deposits.  The Bank also acquired the related branch
facilities and operating  assets at a purchase price of $2.9 million and certain
deposit-related loans with a face value of $1.0 million.

        The Company announced a Reengineering Plan (the "Plan") on July 14, 1997
designed to increase the Company's  earnings and  stockholder  value.  The major
components of the Plan included (i) the reduction of employee costs primarily by
certain  staff reductions and by reducing  the number of hours  worked by branch
personnel,  (ii) reduction of various operating expenses, (iii) fee initiatives,
(iv) the introduction of trust and insurance  services and (v) the repurchase of
up to 5% of the Company's outstanding common stock subject to market conditions.

Results of Operations

     The Bank's  results of operations  are dependent  primarily on net interest
income,  which is the difference  between the interest income earned on its loan
and  securities  portfolios and its cost of funds,  consisting  primarily of the
interest paid on its deposits. The Bank's operating expenses principally consist
of employee compensation,  occupancy expenses,  goodwill  amortization,  federal
despoit insurance  premiums and other general and administrative  expenses.  The
Bank's  results of operations  are also  significantly  affected by its periodic
provision for loan losses and write-downs of real estate owned. Such results are
also  significantly  affected by general  economic and  competitive  conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities.

        The Company is subject to certain legal  proceedings  that, if adversely
determined,  could  materially  and adversely  affect the  Company's  results of
operations. See Part II, Item 1, "Legal Proceedings."

        The  following  tables set forth  information  relating to the Company's
consolidated  balance sheet and consolidated  statements of income for the three
and nine month periods ended September 30, 1997 and 1996 and reflect the average
yield (not on a tax equivalent  basis) on assets and average cost of liabilities
for the periods indicated.  Such yields and costs are derived by dividing income
or expense by the average balances of assets or liabilities,  respectively,  for
the periods shown. Average balances are derived from average daily balances. The
average  balances  of  securities  available  for sale are  calculated  based on
amortized  cost.  The  yields  and costs  include  fees,  which  are  considered
adjustments to yields.


<PAGE>


<TABLE>
                                                                       For the Quarter Ended September 30,
                                        --------------------------------------------------------------------------------------------
                                                            1997                                            1996
                                        -----------------------------------------------  -------------------------------------------
                                                                             Average                                         Average
                                             Average                          Yield/        Average                           Yield/
                                             Balance         Interest         Cost          Balance        Interest           Cost
                                          ----------      ----------     -----------     ----------      ----------       ----------
                                                                             (Dollars in thousands)
<S>                                              <C>             <C>              <C>            <C>             <C>            <C>
 Assets:
   Interest-earning assets:
     Mortgage loans, net(1)...........  $    335,889    $      6,745            7.97%  $    291,912    $      5,816            7.93%
     Other loans(1)...................        27,975             725           10.28         20,123             567           11.21
     Mortgage-backed securities.......       245,338           4,002            6.47        396,285           6,527            6.55
     Other securities.................        57,896             897            6.15         56,558             892            6.27
     Federal funds, overnight.........        53,744             749            5.53          3,590              51            5.65
                                          ----------      ----------     -----------     ----------      ----------      ----------
     Total interest-earning assets....       720,842          13,118            7.22        768,468          13,853            7.17
   Non-interest earning assets........        67,612                                         65,608
                                          ----------                                     ----------
     Total assets.....................  $    788,454                                   $    834,076
                                          ==========                                     ==========


 Liabilities and Retained Earnings:
   Interest-bearing liabilities:
     Deposits:
       Savings accounts...............  $    209,640           1,694            3.21   $    206,241           1,637            3.16
       Super NOW accounts.............        40,332             190            1.87         41,869             202            1.92
       Money market accounts..........        53,038             546            4.08         50,348             523            4.13
       Time deposits..................       347,950           4,571            5.21        406,170           5,393            5.28
     Borrowings.......................            72               1            5.51          1,466              18            4.88
     ESOP obligation..................           278               5            7.14            584              12            8.17
                                          ----------      ----------     -----------     ----------      ----------      ----------
     Total interest-bearing
       liabilities....................       641,310           7,007            4.27        706,678           7,785            4.38
   Other liabilities..................        61,182                                         58,033
                                          ----------                                     ----------
        Total liabilities.............       712,492                                        764,711
   Retained earnings..................        75,962                                         69,365
                                          ----------                                     ----------
        Total liabilities and
          retained earnings...........  $    788,454                                   $    834,076
                                          ==========                                     ==========
   Net interest income/
    interest rate spread(2)...........                  $      6,111            2.95%                  $      6,068            2.97%
                                                          ==========     ===========                     ==========      ==========
   Net earning assets/net
    interest margin(3)................  $     69,532                            3.36%  $     61,790                            3.14%
                                          ==========                     ===========     ==========                      ==========
   Ratio of interest-earning assets
    to interest-bearing liabilities...                                          1.11x                                          1.09x
                                                                         ===========                                     ==========
</TABLE>

   ------------------------

   (1) In computing the average  balance of loans,  non-accrual  loans have been
included.
   (2) Interest rate spread represents the difference  between the average yield
       on  interest-earning  assets  and the  average  cost of  interest-bearing
       liabilities.
   (3) Net interest  margin  represents  net interest  income divided by average
interest-earning assets.



<PAGE>


<TABLE>
                                                                       For the Nine Months Ended September 30,
                                        -------------------------------------------------------------------------------------------
                                                            1997                                            1996
                                        ------------------------------------------------  -----------------------------------------
                                                                            Average                                         Average
                                             Average                         Yield/           Average                        Yield/
                                               Balance         Interest       Cost            Balance        Interest          Cost
                                                                             (Dollars in thousands)
<S>                                             <C>              <C>            <C>             <C>            <C>              <C>
 Assets:
   Interest-earning assets:
     Mortgage loans, net(1)...........    $    325,170    $     19,804          8.14%    $    276,603    $     16,369          7.90%
     Other loans(1)...................          25,466           1,953         10.25           19,008           1,553         10.91
     Mortgage-backed securities.......         291,076          14,372          6.60          374,829          18,433          6.57
     Other securities.................          56,172           2,604          6.20           70,033           3,334          6.36
     Federal funds, overnight.........          39,729           1,608          5.41           20,144           1,029          4.72
                                            ----------      ----------     ---------       ----------      ----------    ----------
     Total interest-earning assets....         737,613          40,341          7.31          769,617          40,178          7.07
   Non-interest earning assets........          65,570                                         67,696
                                            ----------                                     ----------
     Total assets.....................    $    803,183                                   $    837,313
                                            ==========                                     ==========


 Liabilities and Retained Earnings:
   Interest-bearing liabilities:
     Deposits:
       Savings accounts...............    $    203,209           4,920          3.24     $    203,490           4,585          3.01
       Super NOW accounts.............          39,811             567          1.90           41,610             600          1.93
       Money market accounts..........          52,039           1,609          4.13           50,076           1,296          3.46
       Time deposits..................         375,946          14,803          5.26          409,025          16,501          5.39
       Borrowings.....................              25               1          5.35              492              18          4.89
     ESOP obligation..................             354              21          7.93              655              41          8.36
                                            ----------      ----------     ---------       ----------      ----------    ----------
     Total interest-bearing
       liabilities....................         671,384          21,921          4.37          705,348          23,041          4.36
   Other liabilities..................          58,713                                         61,442
                                            ----------                                     ----------
        Total liabilities.............         730,097                                        766,790
   Retained earnings..................          73,090                                         70,523
                                            ----------                                     ----------
        Total liabilities and
          retained earnings...........    $    803,187                                   $    837,313
                                            ==========                                     ==========
   Net interest income/
    interest rate spread(2)...........                    $     18,420          2.95%                    $     17,677          2.70%
                                                            ==========     =========                       ==========     =========
   Net earning assets/net
    interest margin(3)................    $     66,229                          3.34%    $     64,269                          3.07%
                                            ==========                     =========       ==========                     =========
   Ratio of interest-earning assets
    to interest-bearing liabilities...                                          1.10x                                          1.09x
                                                                           =========                                      =========
</TABLE>

   ------------------------

   (1) In computing the average  balance of loans,  non-accrual  loans have been
included.
   (2) Interest rate spread represents the difference  between the average yield
       on  interest-earning  assets  and the  average  cost of  interest-bearing
       liabilities.
   (3) Net interest  margin  represents  net interest  income divided by average
interest-earning assets.



<PAGE>


Financial Condition

     The  Company's  total assets were $774.0  million at September 30, 1997, as
compared to $820.9 million at December 31, 1996.  This decrease is due primarily
to a decrease  in  deposits.  For those same  dates,  deposits  decreased  $52.1
million to $684.0  million at September 30, 1997, as compared to $736.2  million
at December 31, 1996. The decreases in the average  balances of deposits are due
to  Management's  strategy  to reduce the  interest  rate paid on  certain  time
deposits.  Approximately  $27.7 million of time deposits were withdrawn from the
Bank in the third  quarter of 1997.  Many of these time  deposits were earning a
premium  rate.  The deposit  outflow is also due to  disintermediation  which is
affecting  many  of  the  Bank's  peer  thrift   institutions.   Securities  and
mortgage-backed  securities available for sale decreased $61.2 million to $312.9
million at  September  30, 1997,  as compared to $374.1  million at December 31,
1996.  Loans,  net increased  $33.8  million to $372.3  million at September 30,
1997,  as compared to $338.5  million at December 31, 1996.  Goodwill  decreased
$3.1  million to $29.7  million at  September  30,  1997,  as  compared to $32.8
million at December 31, 1996.  Real estate owned  increased $1.3 million to $2.2
million at September 30, 1997, as compared to December 31, 1996.

        Total  stockholders'  equity  increased $5.3 million to $76.1 million at
September  30, 1997,  as compared to $70.8  million at December  31, 1996.  This
increase is due primarily to a $3.8 million  decrease in the net unrealized loss
on  securities  available  for  sale and a $1.2  million  increase  in  retained
earnings.  The Bank's Tier 1 leverage  capital  ratio was 6.23% at September 30,
1997.

Comparison of Results of Operations

     General.  Net income for the third quarter of 1997 amounted to $1.2 million
as compared to a net loss of ($858,000) for the comparable  quarter in 1996. For
the nine months ended  September  30, 1997,  net income  totaled $3.3 million as
compared  to  $646,000  for the same  period in 1996.  The results for the third
quarter and nine month  periods  ended  September  30, 1996,  included a pre-tax
charge  of  $2.9  million  related  to  the   recapitalization  of  the  Savings
Association Insurance Fund ("SAIF").

        Net Interest  Income.  Net  interest  income  increased  $43,000 to $6.1
million for the third quarter of 1997, as compared to the third quarter of 1996.
The Company's interest rate spread was 2.95% and 2.79% for the third quarters of
1997 and 1996,  respectively.  The Company's  net interest  margin was 3.36% and
3.14%, respectively, for those same periods. For the nine months ended September
30, 1997, net interest income totaled $18.4 million as compared to $17.7 million
for the same period in 1996.  For the nine months ended  September  30, 1997 and
1996,  the  interest  rate spread was 2.95% and 2.70%,  respectively.  For those
periods, the net interest margin was 3.34% and 3.07%, respectively.

        Interest Income. Interest income was $13.1 million for the third quarter
of 1997 as  compared to $13.9  million  for the same  period in 1996.  The yield
earned on  interest-earning  assets  was 7.22% for the third  quarter of 1997 as
compared to 7.17% for the same period in 1996. This increase in yield was offset
by a decrease of $47.6  million in average  interest  earnings  assets to $720.8
million for the third  quarter of 1997,  as  compared to $768.5  million for the
third quarter of 1996. The yield earned on interest-earning assets was 7.31% for
the nine months  ended  September  30,  1997,  as compared to 7.07% for the same
period in 1996.  For the nine month period  ended  September  30, 1997,  average
interest  earning  assets  decreased  to $737.6  million as  compared  to $769.6
million for the nine months ended September 30, 1996.

     The  decreases in the balances of average  interest-earning  assets are due
primarily  to  decreases  of $53.7  million  and $33.2  million  in the  average
balances  of  deposits  for  the  quarter  and  nine  month   periods  of  1997,
respectively,  as compared to the same periods in 1996. See "Interest  Expense."
The  increases in yields  earned were a result of the  redeployment  of proceeds
from the sale of mortgage-backed and other securities into the loan portfolio.


<PAGE>


        Interest  income on mortgage loans amounted to $6.7 million in the third
quarter of 1997, as compared to $5.8 million for the comparable  period in 1996.
This increase is due to a $44.0 million or 15.1% increase in the average balance
of  mortgage  loans to $335.9  million  during  the third  quarter  of 1997,  as
compared to $291.9  million  for the third  quarter of 1996.  The average  yield
earned on mortgage  loans  remained  virtually  unchanged at 7.97% for the third
quarter of 1997 as compared to 7.93% for the third quarter of 1996. For the nine
months ended  September 30, 1997,  interest income on mortgage loans amounted to
$19.8  million,  a $3.4 million or 21.0%  increase over the $16.4 million earned
for the same  period in 1996.  This  increase  was due to an  increase  of $48.6
million in the average  balance of mortgage  loans to $325.2  million during the
nine months ended  September 30, 1997 as compared to $276.6 million for the nine
months ended September 30, 1996. In addition, the average yield earned increased
24 basis points to 8.14% for those same periods.

        The growth in the average balance of mortgage loans was due primarily to
Management's  strategy to redeploy  funds received in the  Acquisition  from the
securities  portfolio to the loan  portfolio  and  continued  loan  demand.  The
increase in the yield  earned  during the 1997 nine month  period is primarily a
result of a new ARM product that the Bank began to offer in 1996. These ARMs are
primarily  5-year fixed rate loans that convert to 1-year ARMs after the initial
5-year period.  These loans are not offered at introductory  rates. The increase
in yield is also due to the repricing of one-year  ARMs that were  originated in
1994 and 1995 at introductory  rates. These ARMs repriced to higher rates due to
the expiration of their initial lower introductory rates.

        Interest  income  on other  loans  amounted  to  $725,000  for the third
quarter of 1997,  as compared to $567,000  for the third  quarter of 1996.  This
increase is due to a $7.9  million or 39.0%  increase in the average  balance of
other  loans to $28.0  million,  which was  offset  in part by a 93 basis  point
decrease in the yield earned to 10.28%.  For the nine months ended September 30,
1997,  interest  income on other loans  totaled $2.0 million as compared to $1.6
million for the same  period in 1996.  This  increase  was  primarily  due to an
increase  in the average  balance of other  loans to $25.5  million for the 1997
period as compared to $19.0  million for the same period in 1996.  This increase
in the average  balance of other loans was partially  offset by a 66 basis point
decrease  in the  average  yield  earned to  10.25%  for the nine  months  ended
September 30, 1997, as compared to 10.91% for the same period in 1996.

     Interest income on mortgage-backed  securities amounted to $4.0 million for
the third  quarter of 1997,  as compared to $6.5 million for the same quarter in
1996.  This decrease was due  primarily to a decrease in the average  balance of
mortgage-backed  securities.  For the third quarter of 1997, the average balance
of  mortgage-backed  securities  decreased  $150.9  million  or 38.1% to  $245.4
million as compared to $396.3  million  for the third  quarter of 1996.  For the
nine  months  ended  September  30,  1997,  interest  income on  mortgage-backed
securities totaled $14.4 million, a $4.1 million decrease from the $18.4 million
earned for the same period in 1996.  For the nine  months  ended  September  30,
1997, the average balance of mortgage-backed  securities decreased $83.8 million
to $291.1 million as compared to $374.8 million for the same period in 1996. The
decrease in the average balances of  mortgage-backed  securities was a result of
Management's  strategy to redeploy funds  currently  invested in securities into
the loan portfolio,  which typically provides greater yields and to fund deposit
outflows.


<PAGE>


        Interest income on other  securities  amounted to $897,000 for the third
quarter of 1997,  virtually  unchanged  from the third quarter of 1996.  For the
nine months  ended  September  30,  1997,  interest  income on other  securities
totaled  $2.6  million as compared to $3.3  million for the same period in 1996.
This  decrease  was  primarily  the result of a $13.9  million  decrease  in the
average balance of other  securities to $56.2 million during the 1997 nine month
period as compared to the same period in 1996. In addition,  the yield earned on
these securities decreased to 6.20% for the nine months ended September 30, 1997
as compared to 6.36% for the same period in the prior year.  The decrease in the
average  balance of other  securities  is a result of  Management's  strategy to
redeploy funds currently  invested in securities into the loan portfolio,  which
typically provides greater yields.

        Interest  income on Federal  funds  amounted to  $749,000  for the third
quarter of 1997,  as  compared to $51,000  for the third  quarter of 1996.  This
increase in Federal  funds  interest is due to a $50.2  million  increase in the
average balance to $53.7 million, which was partially offset by a 12 basis point
decrease in the average yield to 5.53%.  For the nine months ended September 30,
1997,  interest  income on Federal funds amounted to $1.6 million as compared to
$1.0  million  for the same  period  in 1996.  This  increase  is due to a $10.6
million  increase in the average  balance of Federal  funds to $39.7 million for
the nine months ended  September 30, 1997,  and a 69 basis point increase in the
yield earned to 5.41% for the same period.  The increase in the average  balance
of Federal  funds is a result of the  temporary  investment of proceeds from the
sale of  mortgage-backed  and  other  securities.  The  securities  were sold to
provide sufficient  liquidity for loan originations and the anticipated  outflow
of time  deposits as a result of  Management's  decision to reduce the  interest
rates paid on these deposits (see "Interest Expense").

        Interest  Expense.  Interest  expense  was $7.0  million  for the  third
quarter of 1997,  as compared to $7.8 million for the same quarter in 1996.  For
the nine months ended September 30, 1997, interest expense totaled $21.9 million
as compared to $23.0  million for the same period in 1996.  These  decreases are
primarily  due to  decreases  of $55.4  million  and $34.0  million  in  average
interest-bearing  liabilities  to $641.3  million  and  $671.4  million  for the
quarter and nine months ended September 30, 1997,  respectively,  as compared to
$706.7  million  and $705.3  million,  resepectively,  for the  quarter and nine
months ended  September 30, 1996. In addition,  for the 1997 third quarter,  the
average  cost of these  liabilities  was 4.27% as compared to 4.38% for the same
period  in 1996.  The  average  cost of  interest-bearing  liabilities  remained
virtually unchanged in the nine month periods.

        Interest expense on savings accounts  increased  $57,000 or 3.5% to $1.7
million for the third quarter of 1997, as compared to $1.6 million for the third
quarter 1996. For the nine months ended September 30, 1997,  interest expense on
savings  accounts  increased to $4.9 million as compared to $4.6 million for the
same period in 1996.  These  increases  were due  primarily  to increases in the
average  rates  paid on  savings  accounts.  The  average  rate paid on  savings
accounts was 3.21% for the third  quarter of 1997,  as compared to 3.16% for the
third quarter of 1996. For the nine months ended September 30, 1997, the average
rate paid on savings accounts was 3.24% as compared to 3.01% for the same period
of the prior year. The average  balances of savings accounts were $209.6 million
and $203.2  million for the quarter and nine months  ended  September  30, 1997,
respectively,  as  compared to $206.2  million  and $203.5  million for the same
respective periods in 1996.


<PAGE>


        Interest  expense on time  deposits  totaled  $4.6 million for the third
quarter of 1997, as compared to $5.4 million for the third quarter of 1996. This
decrease is due to a $58.2 million or 14.3%  decrease in the average  balance to
$348.0  million and a 7 basis point  decrease in the average  rate paid to 5.21%
from the 1996 to the 1997 quarter. For the nine months ended September 30, 1997,
interest  expense on time  deposits  totaled  $14.8 million as compared to $16.5
million for the same period in 1996.  This decrease was due to a decrease in the
average balance of time deposits of $33.1 million to $375.9 million for the 1997
nine month period as compared to $409.0  million for the same period in 1996. In
addition, the average cost of these deposits decreased 13 basis points to 5.26%.

        The   decreases  in  the  average   balances  of  deposits  are  due  to
Management's strategy to reduce the interest rate paid on certain time deposits.
Approximately $27.7 million of time deposits were withdrawn from the Bank in the
third quarter of 1997.  Many of these time deposits were earning a premium rate.
The deposit outflow is also due to disintermediation  which is affecting many of
the Bank's peer thrift institutions.

     Provision  for Loan Losses.  The provision for loan losses was $275,000 and
$400,000  for the third  quarters of 1997 and 1996,  respectively.  For the nine
months ended  September 30, 1997 and 1996, the provision for loan losses totaled
$850,000 and  $970,000,  respectively.  Non-performing  loans (loans that are 90
days or more past  due)  amounted  to $3.2  million  or 0.85% of total  loans at
September  30,  1997,  as  compared  to $4.8  million or 1.40% of total loans at
December  31,  1996 and $5.0  million or 1.53% of total loans at  September  30,
1996.  Non-performing  assets amounted to $5.4 million or 0.70% of total assets,
$5.7  million or 0.69% of total assets and $6.0 million or 0.70% of total assets
at September 30, 1997,  December 31, 1996 and September 30, 1996,  respectively.
Real estate owned increased $1.3 million to $22.0 million at September 30, 1997,
as compared to December 31, 1996.

        The allowance for loan losses  amounted to $2.4 million and $1.8 million
at September 30, 1997 and 1996, respectively,  which represented 74.3% and 35.4%
of  non-performing  loans at those  respective  dates. At December 31, 1996, the
allowance  for loan losses  amounted to $2.0 million or 41.1% of  non-performing
loans.  Charge-offs,  net of recoveries,  totaled  $160,000 and $457,000 for the
quarter and nine months ended  September  30, 1997,  as compared to $174,000 and
$847,000 for the same respective periods in 1996.

        In determining the adequacy of its allowance for loan losses, management
considers the level of  non-performing  loans,  the current status of the Bank's
loan portfolio,  changes in appraised  values of collateral and general economic
conditions. Although the Bank maintains its allowance for loan losses at a level
which it considers to be adequate to provide for potential losses,  there can be
no assurance that such losses will not exceed the current estimated amounts.  As
a result,  higher  provisions for loan losses may be necessary in future periods
which would adversely affect operating results.

     Non-Interest  Income.  Non-interest  income  amounted  to $1.3  million and
$964,000 for the third quarters of 1997 and 1996, respectively. This increase is
due to a $210,000  increase in service fees, an $81,000 increase in net realized
gains on  securities  and  mortgage  loan sales and a $30,000  increase in other
non-interest  income.  For the nine months  ended  September  30, 1997 and 1996,
non-interest  income totaled $3.3 million and $2.9 million,  respectively.  This
increase is due to a $299,000  increase in service fees, an $87,000  increase in
net realized gains on securities and mortgage loan sales and a $72,000  increase
in other non-interest income. The increases in service fees are due primarily to
changes in MSB's fee structure on deposit  products and services.  These changes
were part of the Plan announced earlier in the third quarter of 1997.


<PAGE>


     Non-Interest  Expense.  Non-interest  expense  amounted to $5.1 million and
$15.5  million for the  quarters and nine months ended  September  30, 1997,  as
compared to $5.2 million and $15.6  million for the same  respective  periods in
1996  (excluding  the SAIF  assessment  of $2.9  million in 1996).  Salaries and
employee benefits increased $211,000 or 3.4% to $6.5 million for the nine months
ended  September 30, 1997, as compared to $6.3 million for the nine months ended
September  30, 1996.  The  increase in salaries  and  employee  benefits for the
nine-month period is due primarily to normal salary  increases.  Federal deposit
insurance premiums decreased $196,000 to $68,000 in the third quarter of 1997 as
compared  to  $264,000  for the same  period  in the  prior  year and  decreased
$520,000 to $221,000  for the 1997 nine month period as compared to $741,000 for
the same period in 1996. These decreases  reflect the lower insurance rates that
resulted from the payment of the SAIF special assessment in the third quarter of
1996.  The  amortization  of goodwill  resulting  primarily  from the  Company's
Acquisition that was completed in the first quarter of 1996 amounted to $909,000
in the third  quarter of 1997,  virtually  unchanged  from the third  quarter of
1996.  For the nine months  ended  September  30,  1997,  goodwill  amortization
increased   $155,000  to  $2.8  million,   reflecting  a  full  nine  months  of
amortization as compared to 1996.

Liquidity and Capital Resources

        The Company's  primary sources of funds are deposits,  the proceeds from
principal and interest payments on loans and the proceeds from the maturities of
investments. Proceeds from securities and loan sales are also a source of funds.
While  maturities  and scheduled  amortization  of loans and  investments  are a
predictable source of funds,  deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition.

        The Bank is  required to  maintain  an average  daily  balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable  deposit
accounts plus  short-term  borrowings as defined by the  regulations of the OTS.
The minimum  required  liquidity and short-term  liquidity  ratios are currently
5.0% and 1.0%,  respectively.  At September 30, 1997, the Bank's liquidity ratio
under OTS regulations was 12.3%, and its short-term liquidity ratio was 9.8%.

        The primary  investing  activity of the  Company is the  origination  of
loans and the  purchase of  securities.  For the  quarter and nine months  ended
September  30,  1997 and for the year  ended  December  31,  1996,  the  Company
originated  mortgage  loans  totaling  $29.7  million,  $73.5 million and $100.1
million,  respectively.  For those same periods,  the Company  originated  other
loans totaling $6.3 million, $15.6 million and $15.9 million,  respectively. The
Company purchased securities,  including  mortgage-backed  securities,  totaling
$63.2  million and $408.6  million for the nine months ended  September 30, 1997
and fiscal 1996, respectively.

        The Company's  most liquid assets are cash and cash  equivalents,  which
include investments in highly liquid, short-term securities. The levels of these
assets are dependent on the Bank's operating,  financing,  lending and investing
activities  during any given period.  The Company's  ratios of cash and due from
banks, Federal Funds and investment  securities with remaining maturities of one
year or less to total  deposits  were  6.0% at  September  30,  1997 and 6.7% at
December 31, 1996. At September 30, 1997, cash and cash equivalents,  as defined
above, totaled $41.1 million as compared to $49.0 million at December 31, 1996.

        Liquidity management for the Bank is both a daily and long-term function
of the Bank's  management  strategy.  Excess  funds are  generally  invested  in
short-term  investments such as Federal funds. In the event that the Bank should
require funds beyond its ability to generate them internally, additional sources
of funds are  available  through a $46.0 million line of credit from the Federal
Home  Loan  Bank of New  York.  In  addition,  the Bank  may  access  funds,  if
necessary, through the Federal Reserve Bank of New York discount window.

        At September 30, 1997,  the Bank had  outstanding  loan  commitments  of
$55.8 million. The Bank anticipates that it will have sufficient funds available
to meet its current loan commitments.  Time deposits  scheduled to mature in one
year or less  from  September  30,  1997,  totaled  $244.7  million.  Management
believes that a significant portion of such deposits will remain with the Bank.


<PAGE>


        The Bank is subject to certain minimum leverage, tangible and risk-based
capital  requirements  established by regulations of the OTS. These  regulations
require savings associations to meet three minimum capital standards: a tangible
capital  ratio  requirement  of 1.5% of total  assets as adjusted  under the OTS
regulations;  a  leverage  ratio  requirement  of 3.0% of core  capital  to such
adjusted  total assets;  and a risk-based  capital ratio  requirement of 8.0% of
core and supplementary capital to total risk-based assets. The 3.0% core capital
requirement has been effectively  superseded by the OTS prompt corrective action
regulations,  which impose a 4.0% core capital  requirement  for treatment as an
"adequately  capitalized"  thrift  and  a  5.0%  core  capital  requirement  for
treatment  as  a  "well  capitalized"  thrift.  In  determining  the  amount  of
risk-weighted  assets for  purposes of the  risk-based  capital  requirement,  a
savings association must compute its risk-based assets by multiplying its assets
and certain  off-balance  sheet items by  risk-weights,  which range from 0% for
cash and obligations  issued by the United States  Government or its agencies to
100%  for  consumer  and  commercial  loans,  as  assigned  by the  OTS  capital
regulation  based on the risks OTS  believes are inherent in the type of assets.
At September  30,  1997,  the Bank  exceeded  all of the OTS minimum  regulatory
capital requirements.

        The  following  table sets  forth the  capital  position  of the Bank as
calculated at September 30, 1997.

                              Tangible             Core            Risk-Based
                          Amount   Percent    Amount   Percent   Amount  Percent
                         -------   -------   -------   -------  -------  -------
                                          (Dollars in thousands)
Capital as calculated     
  under GAAP ..........  $ 75,703   10.16%  $ 75,703   10.16%  $ 75,703   20.73%
Deduct goodwill .......    29,734    3.99     29,734    3.99     29,734    8.14
Add qualifying general
 loan loss allowance,
 as limited by
 regulation. ..........      --      --         --      --        2,352    0.64
Add unrealized loss on
 securities available
 for sale, net of taxes       798    0.10        798    0.10        798    0.22
Deduct equity
 investments ..........      --      --         --      --          125    0.04
Deduct servicing rights        15    0.00         15    0.00         15    0.00
                          -------   -----    -------   -----    -------   -----
Capital, as calculated     46,752    6.27%    46,752    6.27%    48,979   13.41%
Capital, as required ..    11,177    1.50     29,805    4.00     29,218    8.00
                          -------   -----    -------   -----    -------   -----
Excess ................   $35,575    4.77%   $16,947    2.27%   $19,761    5.41%
                          =======   =====    =======   =====    =======  ======



<PAGE>


        The Board of  Directors  declared  a cash  dividend  of $0.15 per common
share on  September  19,  1997 that was  payable  to  stockholders  of record on
October 9, 1997.  The Company has been paying a quarterly cash dividend of $0.15
per common share since the first quarter of 1995 and had been paying a quarterly
cash dividend of $0.13 per common share since the third quarter of 1994.

Recent Accounting Pronouncements

        Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  per
Share" ("SFAS 128") established  standards for computing and presenting earnings
per share  ("EPS") and applies to entities  with  publicly  held common stock or
potential common stock. SFAS 128 replaces the presentation of primary EPS with a
presentation  of basic EPS and requires dual  presentation  of basic and diluted
EPS on the face of the income  statement for all entities  with complex  capital
structures.  SFAS 128 requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS
computation.  SFAS 128 is effective for financial  statements issued for periods
ending  after  December  15,  1997,   including  interim  periods,  and  earlier
application  is not permitted.  SFAS 128 also requires  restatement of all prior
period EPS data  presented.  Management does not expect the adoption of SFAS 128
to have a significant effect on the Company's EPS calculation.

        Statement  of  Financial   Accounting   Standards  No.  130,  "Reporting
Comprehensive  Income"  ("SFAS 130")  establishes  standards  for  reporting and
display of comprehensive income and its components (revenues,  expenses,  gains,
and  losses) in a full set of  general-purpose  financial  statements.  SFAS 130
requires  that all items that are  required to be  recognized  under  accounting
standards  as  components  of  comprehensive  income be  reported in a financial
statement  that is  displayed  with  the  same  prominence  as  other  financial
statements.  SFAS 130 does not  require  a  specific  format  for the  financial
statement,  but requires that an enterprise display an amount representing total
comprehensive  income  for the  period  in that  financial  statement.  SFAS 130
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in a financial statement and (b) display the accumulated balance of
other  comprehensive  income  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position. SFAS
130  is  effective  for  fiscal  years   beginning   after  December  15,  1997.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative purposes is required.

        Statement of Financial Accounting Standards No. 131,  "Disclosures About
Segments of an Enterprise  and Related  Information"  ("SFAS 131") requires that
public  companies report  information  about segments of their business in their
annual  financial  statements  and  require  them  to  report  selected  segment
information in their quarterly reports issued to shareholders. SFAS 131 requires
entity-wide  disclosure about the products and services an entity provides,  the
material countries in which it holds assets and reports revenues,  and its major
customers.  SFAS 131  supersedes  FASB  Statement 14,  "Financial  Reporting for
Segments  of a Business  Enterprise."  SFAS 131 is  effective  for fiscal  years
beginning after December 15, 1997.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

        Not Applicable.



<PAGE>


Part II--OTHER INFORMATION

Item 1.  Legal Proceedings

     The information set forth in Note 4 to the unaudited consolidated financial
statements  ("Legal  Proceedings")  in Part I, Item 1,  hereto  is  incorporated
herein by reference.


Item 2.  Changes in Securities and Use of Proceeds

        None


Item 3.  Defaults upon Senior Securities

        None


Item 4.  Submission of Matters to a Vote of Security Holders

        None.


Item 5.  Other Information

        None.


Item 6.  Exhibits and Reports on Form 8-K

                      (a)    Exhibit 11--Computation of Earnings Per Share
                             Exhibit 27--Financial Data schedule*


                      (b)    Reports on Form 8-K

                             None


                      *   Submitted only with filing in electronic format.


<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.






                                                MSB Bancorp, Inc.
(Registrant)





                                         By:    /s/ Anthony J. Fabiano
                                                Anthony J. Fabiano
                                                Senior Vice President and Chief
                                                Financial and Accounting Officer

November 10, 1997


<PAGE>


                                   EXHIBIT 11

                       COMPUTATION OF NET INCOME PER SHARE


                              For The Quarter Ended

                                                    September 30,  September 30,
                                                         1997          1996
                                                     -----------    -----------

Net income .......................................   $ 1,230,000    $  (858,000)
  Preferred stock dividends ......................       283,500        283,500
                                                     -----------    -----------

  Net income applicable to common stock ..........   $   946,500    $(1,141,500)
                                                     ===========    ===========

  Weighted average common shares .................     2,886,109      2,833,936

  Earnings per common share ......................   $      0.33    $     (0.40)
                                                     ===========    ===========




                            For the Nine months Ended

                                                    September 30,  September 30,
                                                         1997          1996
                                                     -----------    -----------

Net income .......................................   $ 3,272,000    $   646,000
  Preferred stock dividends ......................       850,500        819,000
                                                     -----------    -----------

  Net income applicable to common stock ..........   $ 2,421,500    $  (173,000)
                                                     ===========    ===========

  Weighted average common shares .................     2,878,031      2,808,124

  Earnings per common share ......................   $      0.84    $     (0.06)
                                                     ===========    ===========



<PAGE>


                                                                      Exhibit 27

                             FINANCIAL DATA SCHEDULE

        This schedule contains summary financial  information extracted from the
Company's  consolidated  balance sheet and the consolidated  statement of income
and is qualified in its entirety by reference to such financial statements.

 Item Number       Item Description                                       Amount
 9-03(1)           Cash and due from banks                        $      16,901
 9-03(2)           Interest-bearing assets                                    0
 9-03(3)           Federal funds sold                                    16,020
 9-03(4)           Trading account assets                                     0
 9-03(6)           Investment and mortgage backed
                   securities held for sale                             312,916
 9-03(6)           Investments held to maturity--
                    carrying value                                            0
 9-03(6)           Investments held to maturity--
                    market value                                              0
 9-03(7)           Loans                                                372,282
 9-03(7)(2)        Allowance for losses                                   2,353
 9-03(11)          Total assets                                         773,991
 9-03(12)          Deposits                                             684,018
 9-03(13)          Short-term borrowings                                      0
 9-03(15)          Other liabilities                                     13,563
 9-03(16)          Long-term debt                                           273
 9-03(19)          Preferred stock - mandatory
                    redemption                                                0
 9-03(20)          Preferred stock - no mandatory
                    redemption                                                6
 9-03(21)          Common Stock                                              30
 9-03(22)          Other stockholders' equity                            76,101
 9-03(23)          Total liabilities and stockholders'
                    equity                                              773,991
 9-04(1)           Interest and fees on loans                            21,757
 9-04(2)           Interest and dividends on investments                 16,965
 9-04(4)           Other interest income                                  1,619
 9-04(5)           Total interest income                                 40,341
 9-04(6)           Interest on deposits                                  21,900
 9-04((9)          Total interest expense                                21,922
 9-04(10)          Net interest income                                   18,419
 9-04(11)          Provision for loan losses                                850
 9-04(13)(h)       Investment securities gains/losses                        66
 9-04(14)          Other expenses                                        15,479
 9-04(15)          Income/loss before income tax                          5,415
 9-04(17)          Income/loss before extraordinary items                 5,415
 9-04(18)          Extraordinary items, less tax                              0
 9-04(19)          Cumulative change in accounting 
                    principles                                                0
 9-04(20)          Net income or loss                                     3,272
 9-04(21)          Earnings per share - primary                            0.84
 9-04(21)          Earnings per share - fully diluted                      0.84
 1.B.5             Net yield - interest earning assets                     3.34
 III.C.1(a)        Loans on non-accrual                                   3,167
 III.C.1(b)        Accruing loans past due 90 days                            0
 III.C.1(c)        Troubled debt restructuring                              601
 III.C.2           Potential problem loans                                5,631
 IV.A.1            Allowance for loan loss-- beginning
                    of period                                             1,960
 IV.A.2            Total charge-offs                                        640
 IV.A.3            Total recoveries                                         183
 IV.A.4            Allowance for loan loss-- end of period                2,353
 IV.B.1            Loan loss allowance domestic                               0
 IV.B.2            Loan loss allowance foreign                                0
 IV.B.3            Loan loss allowance unallocated                        2,353