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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 June 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.
                                                       Outstanding at
                     Class                             June 30, 1997
                    -------                            --------------
                 Common Stock,                           2,844,153
                par value $.01

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<PAGE>



                                TABLE OF CONTENTS


                         PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

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

        Consolidated Statements of Income (Unaudited) -- Quarter and Six
        Months ended June 30, 1997 and 1996....................................2

        Consolidated Statements of Cash Flows (Unaudited) --Six Months
        ended June 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.....................................................18


                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings ....................................................19

Item 2. Changes in Securities.................................................19

Item 3. Defaults upon Senior Securities.......................................19

Item 4. Submission of Matters to a Vote of Security Holders...................19

Item 5. Other Information.....................................................20

Item 6. Exhibits and Reports on Form 8-K......................................20

        Signatures............................................................21







                                      -2-
<PAGE>





Item 1.  Financial Statements

MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
             (Unaudited)

 (In thousands except shares and per share amounts)
                                                         June 30,   December 31,
                                                           1997         1996
                                                        ----------  ------------

ASSETS
  Cash and due from banks ............................   $  19,840    $  16,375
  Federal funds sold .................................      28,535       32,590
  Securities available for sale ......................      54,547       50,685
  Mortgage-backed securities available for sale ......     294,179      323,428
  Loans, net .........................................     355,683      338,491
  Premises and equipment, net ........................      14,491       14,869
  Accrued interest receivable ........................       5,388        5,552
  Real estate owned ..................................       1,710          915
  Goodwill ...........................................      30,645       32,835
  Other assets .......................................       8,884        5,176
                                                         ---------    ---------
        Total assets .................................   $ 813,902    $ 820,916
                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
  Liabilities
          Deposits ...................................     720,741      736,161
    Mortgagors' escrow deposits ......................       2,544        1,849
    Accrued expenses and other liabilities ...........      17,736       11,684
    ESOP obligations .................................         280          432
                                                         ---------    ---------
    Total liabilities ................................     741,301      750,126
                                                         ---------    ---------
  Stockholders' Equity
   Preferred stock ($.01 par value; 1,000,000
     shares authorized;  600,000 shares issued
     at June 30, 1997 and December 31, 1996) ........            6            6
   Common stock ($.01 par value; 5,000,000
     shares authorized; 3,045,000 shares issued
     at June 30, 1997 and December 31, 1996) ........           30           30
    Additional paid-in capital ......................       48,059       48,163
    Retained earnings ...............................       32,644       32,009
    Treasury  stock, at cost (200,847 shares and
     211,064 shares at June 30, 1997 and December
     31, 1996, respectively) ........................      (3,941)      (4,137)
    Unallocated ESOP stock ..........................        (280)        (432)
    Unallocated BRP stock ...........................        (107)        (172)
    Net unrealized loss on securities
     available for sale .............................      (3,810)      (4,677)
                                                         ---------    ---------
          Total stockholders' equity .................      72,601       70,790
                                                         ---------    ---------
          Total liabilities and stockholders'
           equity ....................................   $ 813,902    $ 820,916
                                                         =========    =========


See accompanying notes to the unaudited consolidated financial statements.

                                      -3-
<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
             (Unaudited)
(In thousands except shares and per share amounts)
                                                          For the Quarter Ended
                                                                 June 30,      
                                                         ----------------------
                                                           1997           1996 
                                                           ----           ---- 
INTEREST INCOME
  Mortgage loans ..............................      $    6,553      $    5,337
  Other loans .................................             665             491
  Mortgage-backed securities ..................           5,101           6,688
  Securities ..................................             858           1,058
  Federal funds sold ..........................             520             166
                                                     ----------      ----------
        Total interest income .................          13,697          13,740

INTEREST EXPENSE
  Interest on deposits ........................           7,462           7,666
  Interest on ESOP obligation .................               7              14
                                                     ----------      ----------
        Total interest expense ................           7,469           7,680
                                                     ----------      ----------
  Net interest income .........................           6,228           6,060
  Provision for loan losses ...................             275             320
                                                     ----------      ----------
  Net interest income after provision 
  for loan losses                                         5,953           5,740


NON-INTEREST INCOME
  Service fees ................................           1,004             982
  Net realized gains on sales of securities and
     mortgage loans ...........................              47              41
  Other non-interest income ...................              32              17
                                                     ----------      ----------
                                                          1,083           1,040
NON-INTEREST EXPENSE
  Salaries and employee benefits ..............           2,251           2,138
  Occupancy and equipment .....................             772             764
  Federal deposit insurance premiums ..........              71             239
  Goodwill amortization .......................             918             921
  Other non-interest expense ..................           1,208           1,149
                                                     ----------      ----------
                                                          5,220           5,211
                                                     ----------      ----------
  Income before income taxes ..................           1,816           1,569
  Income tax expense ..........................             731             653
                                                     ----------      ----------
  Net income ..................................      $    1,085      $      916
                                                     ==========      ==========
  Earnings per share ..........................      $     0.28      $     0.22
  Weighted average shares outstanding .........       2,873,925       2,869,563
                                                     ==========      ==========




                                      -4-
<PAGE>


                                                       For the Six Months Ended
                                                                 June 30,
                                                       ------------------------
                                                           1997           1996 
                                                           ----           ---- 
INTEREST INCOME
  Mortgage loans ..............................          13,059      $   10,553
  Other loans .................................           1,228             986
  Mortgage-backed securities ..................          10,370          11,906
  Securities ..................................           1,696           2,442
  Federal funds sold ..........................             870             978
                                                     ----------      ----------
        Total interest income .................          27,223          26,865

INTEREST EXPENSE
  Interest on deposits ........................          14,899          15,227
  Interest on ESOP obligation .................              16              29
                                                     ----------      ----------
        Total interest expense ................          14,915          15,256
                                                     ----------      ----------
  Net interest income .........................          12,308          11,609
  Provision for loan losses ...................             575             570
                                                     ----------      ----------
  Net interest income after provision
    for loan losses                                      11,733          11,039


NON-INTEREST INCOME
  Service fees ................................           1,899           1,794
  Net realized gains on sales of securities and
     mortgage loans ...........................              94              88
  Other non-interest income ...................              47              21
                                                     ----------      ----------
                                                          2,040           1,903
NON-INTEREST EXPENSE
  Salaries and employee benefits ..............           4,391           4,178
  Occupancy and equipment .....................           1,590           1,532
  Federal deposit insurance premiums ..........             153             477
  Goodwill amortization .......................           1,842           1,676
  Other non-interest expense ..................           2,422           2,487
                                                     ----------      ----------
                                                         10,398          10,350
                                                     ----------      ----------
  Income before income taxes ..................           3,375           2,592
  Income tax expense ..........................           1,333           1,088
                                                     ----------      ----------
  Net income ..................................      $    2,042      $    1,504
                                                     ==========      ==========
  Earnings per share ..........................      $     0.51      $     0.35
  Weighted average shares outstanding .........       2,873,961       2,794,939
                                                     ==========      ==========



See accompanying notes to the unaudited consolidated financial statements.

                                      -5-
<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
             (Unaudited)
           (In thousands)
                                                    For the Six Months Ended
                                                             June 30,
                                                  -----------------------------
                                                       1997              1996
                                                  -------------    ------------
OPERATING ACTIVITIES
Net Income ....................................      $    2,042      $    1,504
Adjustments to reconcile net income
  to net cash provided by operating
  activities:
Realized gain on sale of mortgage loans .......             (94)            (88)
Amortization of premiums/discounts
  on securities ...............................             518             549
Proceeds from the sale of student loans .......             560             496
Origination of mortgage loans held
  for sale ....................................          (6,809)         (5,267)
Proceeds from the sale of mortgage loans ......           7,042           6,081
Amortization of net deferred loan
  origination fees ............................             (87)            (90)
Depreciation and amortization .................             637             615
Provisions for loan losses ....................             575             570
Write-downs on real estate ....................              36             144
Goodwill amortization .........................           1,842           1,676
Decrease (increase) in accrued interest
  receivable ..................................             125          (2,834)
Decrease (increase) in prepaid expenses
  and other assets ............................          (3,019)            363
Increase (decrease) in accrued expenses
 and other liabilities ........................           5,110          (6,756)
Net change in Federal and State income
 tax payables and receivables .................             291              46
Deferred income taxes .........................            (124)           (178)
Other .........................................             174            (245)
                                                     ----------      ----------
  Net cash provided by (used in)
   operating activities .......................      $    8,819      $   (3,414)
                                                     ==========      ==========

INVESTING ACTIVITIES
  Net (increase) decrease in loans ............         (20,002)        (24,272)
  Maturities and redemptions of debt
    securities ................................            --            12,769
  Purchases of securities available
    for sale ..................................          (3,638)        (25,337)
  Proceeds from the sale of securities
    available for sale ........................            --            28,068
  Purchases of mortgage-backed securities
    available for sale ........................         (19,346)       (383,209)
  Proceeds from the sale of mortgage-
    backed securities available for sale ......          38,085          17,383
  Repayments of mortgage-backed securities
    available for sale ........................          11,277          11,636
  Repayments of asset backed securities .......            --               143
  Proceeds from the sale of real estate
    owned, net ................................             651             117
  Purchases of property and equipment .........            (243)         (3,745)
  Cash received in branch acquisition .........            --           380,299
                                                     ----------      ----------
    Net cash provided by (used in)
     investing activities .....................      $    6,784      $   13,852
                                                     ==========      ==========


See accompanying notes to the unaudited consolidated financial statements.

                                      -6-
<PAGE>


MSB Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
               (Unaudited)
                (In thousands)
                                                          For the Six Months
                                                             Ended June 30,
                                                      -------------------------
                                                         1997             1996
                                                      ----------      ---------
FINANCING ACTIVITIES
  Net change in deposits ......................      $  (15,420)     $  (46,795)
  Net increase (decrease) in
     mortgagors' escrow deposits ..............             695             181
  Repayment of ESOP loan ......................            (152)           (158)
  Proceeds from the sale of stock .............            --            32,078
  Payment of common stock dividends ...........          (1,418)           (969)
  Proceeds from the exercise of stock options .             102              10
                                                     ----------      ----------
        Net cash provided by (used in)
          financing activities ................      $  (16,193)     $  (15,653)
                                                     ----------      ----------

  Increase (decrease) in cash and cash
     equivalents ..............................      $     (590)     $   (5,215)
  Cash and cash equivalents at beginning
     of period ................................      $   48,965      $   26,814
                                                     ----------      ----------
  Cash and cash equivalents at end of
     period ...................................      $   48,375      $   21,599
                                                     ==========      ==========

SUPPLEMENTAL INFORMATION
  Interest paid on savings deposits ...........      $   14,887      $   15,198
  Income taxes paid (received) ................           1,088           1,093

  Non-cash transactions:
   Transfer of balances from loans 
     receivable to real estate owned ..........      $    1,550      $      476
                                                     ==========      ==========


See accompanying notes to the unaudited consolidated financial statements.

                                      -7-
<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 seven
("Acquired  Branches") branches of First Nationwide Bank, A Federal Savings Bank
("First Nationwide").

        The Bank entered into an Asset  Purchase and Sale Agreement (as amended,
the "First  Nationwide  Agreement") with First Nationwide for the acquisition of
certain assets and the assumption of certain liabilities relating to eight First
Nationwide branch offices located in Carmel, Liberty, Mahopac,  Monticello, Port
Jervis,  Spring  Valley,  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 Acquired
Branches, including branch facilities and fixed operating assets associated with
the Acquired  Branches (the "First  Nationwide  Assets") at a purchase  price of
approximately $2.9 million, and certain savings account and overdraft loans (the
"First  Nationwide  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

                                       -8-
<PAGE>



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.

        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 six month  periods  ended June
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.


                                      -9-
<PAGE>



        Activity in the allowance  for loan losses for the periods  indicated is
summarized as follows:
                                                              Quarter Ended    
                                                                  June 30,     
                                                       ------------------------
                                                          1997            1996 
                                                    -----------     -----------
                                                        (Dollars in thousands) 
Balance at beginning of period ................      $    2,074      $    1,652
Provision for loan losses .....................             275             320
LOANS CHARGED OFF
    Real estate ...............................             173             112
    Other loans ...............................              84             310
                                                     ----------      ----------
Total loans charged off .......................             257             422
                                                     ----------      ----------
RECOVERIES
    Real estate ...............................             142               1
    Other loans ...............................               4               5
                                                     ----------      ----------
    Total recoveries ..........................             146               6
                                                     ----------      ----------
    Net charge-offs ...........................             111             416
                                                     ----------      ----------
Balance at end of period ......................           2,238      $    1,556
                                                     ==========      ==========
Ratio of net charge-offs to
  average net loans outstanding (annualized)...            0.13%           0.57%
                                                     ==========      ==========


                                             Six Months Ended       Year Ended
                                                   June 30,         December 31
                                   ----------------------------    ------------
                                       1997             1996            1996
                                   -----------      -----------    ------------
Balance at beginning of
  period ......................      $   1,960        $   1,659       $   1,659
Provision for loan losses .....            575              570           1,400
LOANS CHARGED OFF
    Real estate ...............            294              322             634
    Other loans ...............            175              361             485
                                        ------           ------          ------
Total loans charged off .......            469              683           1,119
                                        ------           ------          ------
RECOVERIES
    Real estate ...............            148                1               1
    Other loans ...............             24                9              19
                                        ------           ------          ------
    Total recoveries ..........            172               10              20
                                        ------           ------          ------
    Net charge-offs ...........            297              673           1,099
                                        ------           ------          ------
Balance at end of period ......          2,238           $1,556          $1,960
                                        ======           ======          ======
Ratio of net charge-offs to
  average net loans
  outstanding (annualized) ....           0.17%            0.47%           0.36%
                                        ======           ======          ======



                                      -10-
<PAGE>



4.      Legal Proceedingsf

        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
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 have
requested  the  depositions  of certain  representatives  of Bear  Stearns.  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.


                                      -11-
<PAGE>


     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
              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").

     Management's  strategy  is to  increase  stockholder  value by  remaining a
community  bank and growing both  internally and through  acquisitions  of other
institutions   or  branches   of  other   institutions   while  not   precluding
consideration of other strategic  alternatives  that could increase  stockholder
value.  In furtherance of that strategic  direction,  the Bank has, from time to
time,  approached financial  institutions in its market areas seeking to acquire
one or more branches from such  institutions and submitted  proposals to acquire
one or more branches from such other  institutions.  In 1995, the Bank initiated
discussions with the seller of the Central Valley branch,  which resulted in the
signing of a  definitive  agreement  to acquire  that branch in April 1995.  The
acquisition  of that branch  closed on November 10, 1995,  with the Bank thereby
assuming  approximately  $21.8  million in deposits.  In  addition,  the Company
entered into the branch acquisition agreement with First Nationwide during 1995.
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.

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, federal deposit 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
balance sheet and statements of income for the three and six month periods ended
June 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 are calculated based on amortized cost. The yields and
costs include fees, which are considered adjustments to yields.

                                      -12-
<PAGE>


                                          For the Quarter Ended June 30, 1997
                                       -----------------------------------------
                                                                       Average
                                        Average                         Yield/
                                        Balance        Interest          Cost
                                       ---------      ---------       ----------
                                                (Dollars in thousands)          
    Assets:
  Interest-earning assets:
    Mortgage loans, net(1) .......     $321,329       $  6,553           8.18%
    Other loans(1) ...............       25,133            665          10.61
    Mortgage-backed securities ...      306,113          5,101           6.68
    Other securities .............       56,325            858           6.11
    Federal funds, overnight .....       37,935            520           5.50
                                       ---------      ---------       ----------
    Total interest-earning assets       746,835         13,697           7.36
  Non-interest earning assets ....       63,899 
                                       ---------
    Total assets .................     $810,734 
                                       =========


Liabilities and Retained Earnings:
  Interest-bearing liabilities:
    Deposits:
      Savings accounts ...........      204,136          1,657           3.26
      Super NOW accounts .........       39,941            192           1.93
      Money market accounts ......       51,902            538           4.16
      Time deposits ..............      384,330          5,075           5.30
    ESOP obligation ..............          355              7           7.91
                                       ---------      ---------       ----------
    Total interest-bearing
      liabilities ................      680,664          7,469           4.40
  Other liabilities ..............       58,595
                                       ---------
       Total liabilities .........      739,259
  Retained earnings ..............       71,475
                                       ---------
       Total liabilities and
         retained earnings .......     $810,734
                                       =========
  Net interest income/
   interest rate spread(2) .......                    $  6,228           2.96%
                                                      =========       ==========
  Net earning assets/net
   interest margin(3) ............     $ 66,171                          3.34%
                                       =========                      ==========
  Ratio of interest-earning
   assets to interest-bearing
  liabilities ....................                                       1.10x
                                                                      ==========

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

   (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.


                                      -13-
<PAGE>


                                          For the Quarter Ended June 30, 1996   
                                       -----------------------------------------
                                                                       Average  
                                        Average                         Yield/  
                                        Balance        Interest          Cost   
                                       ---------      ---------       ----------
                                                (Dollars in thousands)          

  Interest-earning assets:
    Mortgage loans, net(1) .......     $272,255       $  5,337           7.88%
    Other loans(1) ...............       19,169            491          10.30
    Mortgage-backed securities ...      408,429          6,688           6.59
    Other securities .............       64,855          1,058           6.56
    Federal funds, overnight .....       12,431            166           5.37
                                       ---------      ---------       ----------
    Total interest-earning assets       777,139         13,740           7.11
  Non-interest earning assets ....       69,321
                                       ---------
    Total assets .................      846,460
                                       =========


Liabilities and Retained Earnings:
  Interest-bearing liabilities:
    Deposits:
      Savings accounts ...........      207,346          1,506           2.92
      Super NOW accounts .........       42,643            202           1.91
      Money market accounts ......       49,792            385           3.11
      Time deposits ..............      417,647          5,573           5.37
    ESOP obligation ..............          655             14           8.60
                                       ---------      ---------       ----------
    Total interest-bearing
      liabilities ................      718,083          7,680           4.30
  Other liabilities ..............       58,700
                                       ---------
       Total liabilities .........      776,783
  Retained earnings ..............       69,677
                                       ---------
       Total liabilities and
         retained earnings .......      846,460
                                       =========
  Net interest income/
   interest rate spread(2) .......                    $  6,060           2.81%
                                                      =========       ==========
  Net earning assets/net
   interest margin(3) ............     $ 59,056                          3.14%
                                       =========                      ==========
  Ratio of interest-earning
   assets to interest-bearing
   liabilities ...................                                       1.08x
                                                                      ==========


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

   (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.


                                      -14-
<PAGE>



                                         For the Six Months Ended June 30, 1997
                                       -----------------------------------------
                                                                       Average  
                                        Average                         Yield/  
                                        Balance        Interest          Cost   
                                       --------       --------       -----------
                                               (Dollars in thousands)           
    Assets:
  Interest-earning assets:
    Mortgage loans, net(1) .......     $319,723       $ 13,059           8.24%
    Other loans(1) ...............       24,192          1,228          10.24
    Mortgage-backed securities ...      314,299         10,370           6.65
    Other securities .............       55,182          1,696           6.20
    Federal funds, overnight .....       32,728            870           5.36
                                       --------       --------       -----------
    Total interest-earning assets       746,124         27,223           7.36
  Non-interest earning assets ....       63,622
                                       --------
    Total assets .................     $809,746
                                       ========


Liabilities and Retained Earnings:
  Interest-bearing liabilities:
    Deposits:
      Savings accounts ...........      199,940          3,227           3.25
      Super NOW accounts .........       39,546            377           1.92
      Money market accounts ......       51,532          1,063           4.16
      Time deposits ..............      390,359         10,232           5.29
    ESOP obligation ..............          395             16           8.17
                                       --------       --------       -----------
    Total interest-bearing
      liabilities ................      681,772         14,915           4.41%
  Other liabilities ..............       56,485
                                       --------
       Total liabilities .........      738,257
  Retained earnings ..............       71,489
                                       --------
       Total liabilities and
         retained earnings .......     $809,746
                                       ========
  Net interest income/
   interest rate spread(2) .......                    $ 12,308           2.95%
                                                      ========       ===========
  Net earning assets/net
   interest margin(3) ............     $ 64,352                          3.33%
                                       ========
  Ratio of interest-earning
   assets to interest-bearing
   liabilities ...................                                       1.09x
                                                                     ===========


                                      -15-
<PAGE>


                                         For the Six Months Ended June 30, 1996
                                       -----------------------------------------
                                                                       Average  
                                        Average                         Yield/  
                                        Balance        Interest          Cost   
                                       --------       --------       -----------
                                               (Dollars in thousands)           
  Interest-earning assets:
    Mortgage loans, net(1) .......    $ 268,844       $ 10,553           7.89%
    Other loans(1) ...............       18,436            986          10.76
    Mortgage-backed securities ...      363,984         11,906           6.58
    Other securities .............       76,968          2,442           6.38
    Federal funds, overnight .....       39,769            978           4.95
                                      ---------       --------       -----------
    Total interest-earning assets       768,001         26,865           7.04
  Non-interest earning assets            68,752
                                      ---------
    Total assets                      $ 836,753
                                      =========

Liabilities and Retained Earnings:
  Interest-bearing liabilities:
    Deposits:
      Savings accounts ...........      202,100          2,948           2.93
      Super NOW accounts .........       41,479            398           1.93
      Money market accounts ......       49,938            773           3.11
      Time deposits ..............      410,468         11,108           5.44
    ESOP obligation ..............          691             29           8.44
                                      ---------       --------       -----------
    Total interest-bearing
      liabilities ................      704,676         15,256           4.35
  Other liabilities                      60,976
                                      ---------
       Total liabilities                765,652
  Retained earnings                      71,101
                                      ---------
       Total liabilities and
         retained earnings            $ 836,753
                                      =========
  Net interest income/
   interest rate spread(2) .......                    $ 11,609           2.69%
                                                      ========       ===========
  Net earning assets/net
   interest margin(3) ............     $ 63,325                          3.04%
                                       ========                      ===========
  Ratio of interest-earning assets
   to interest-bearing liabilities                                       1.09x

                                                                     ===========


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

   (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.


                                      -16-
<PAGE>




Financial Condition

        The  Company's  total assets were $813.9  million at June 30,  1997,  as
compared to $820.9 million at December 31, 1996.  Securities and mortgage-backed
securities  available for sale decreased $25.4 million to $348.7 million at June
30,  1997,  as  compared to $374.1  million at December  31,  1996.  Loans,  net
increased  $17.2  million to $355.7  million at June 30,  1997,  as  compared to
$338.5  million at December  31,  1996.  This  increase  is due to  Management's
strategy  of  redepoloying   proceeds  received  in  the  Acquisition  from  the
securities portfolio into the loan portfolio. Goodwill decreased $2.2 million to
$30.6  million at June 30,  1997,  as compared to $32.8  million at December 31,
1996. For these same dates,  deposits decreased $15.4 million to $720.7 million.
The decrease in deposits is a result of run-off  following the  Acquisition  and
Management's  strategy  of reducing  the cost of time  deposits.  See  "Interest
Expense."

        Total  stockholders'  equity  increased $1.8 million to $72.6 million at
June 30, 1997, as compared to $70.8 million at December 31, 1996.  This increase
is due primarily to a $867,000 decrease in the net unrealized loss on securities
available for sale and a $635,000 increase in retained earnings.

Comparison of Results of Operations

        General.  Net  income for the second  quarter of 1997  amounted  to $1.1
million as compared to $916,000 for the comparable  quarter in 1996. For the six
months ended June 30, 1997,  net income totaled $2.0 million as compared to $1.5
million for the comparable period in 1996.

        Net Interest  Income.  Net interest  income amounted to $6.2 million for
the second  quarter of 1997, as compared to $6.1 million for the second  quarter
of 1996.  For the six months ended June 30, 1997,  net interest  income  totaled
$12.3  million as  compared to $11.6  million  for the same period in 1996.  The
Company's  interest  rate  spread was 2.96% and 2.81% for the second  quarter of
1997 and 1996,  respectively.  The Company's  net interest  margin was 3.34% and
3.14%,  respectively,  for those same periods. For the six months ended June 30,
1997 and 1996,  the interest rate spread was 2.95% and 2.69%  respectively.  For
those periods, the net interest margin was 3.33% and 3.04%, respectively.

        Interest Income. Interest income was $13.7 million and $27.2 million the
quarter and six months ended June 30, 1997,  respectively,  as compared to $13.7
million and $26.9  million for the same  respective  periods in 1996.  The yield
earned on interest-earning  assets was 7.36% for both the quarter and six months
ended June 30,  1997,  as  compared  to 7.11% and 7.04% for the same  periods in
1996.  These  increases  in yield were offset by a decrease of $30.3  million in
average  interest  earnings  assets to $746.8  million for the second quarter of
1997, as compared to $777.1  million for the second quarter of 1996. For the six
month period ended June 30, 1997,  average  interest earning assets decreased to
$746.1  million as compared to $768.0  million for the six months ended June 30,
1996.  The  decrease in the balances of average  interest-earning  assets is due
primarily  to  decreases  of $37.1  million  and $22.6  million  in the  average
balances of deposits  for the quarter  and six months  ended June 30,  1997,  as
compared to the same  periods in 1996.  The  decrease in deposits is a result of
run-off following the Acquisition and Management's strategy of reducing the cost
of time deposits.  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.  For the second quarter of 1997, the
average  balance of mortgage loans  increased $49.1 million to $321.3 million as
compared to the second  quarter of 1996. For the six months ended June 30, 1997,
the average  balance of mortgage loans increased $50.9 million to $319.7 million
as compared to the same period in the prior year.

        Interest income on mortgage loans amounted to $6.6 million in the second
quarter of 1997, as compared to $5.3 million for the comparable  period in 1996.
This increase is due to a $49.1 million or 18.0% increase in the average balance
of  mortgage  loans to $321.3  million  during  the second  quarter of 1997,  as


                                      -17-
<PAGE>


compared to the second quarter of 1996. In addition, the average yield earned on
mortgage  loans  increased  30 basis  points to 8.18% for the second  quarter of
1997. For the six months ended June 30, 1997,  interest income on mortgage loans
amounted  to $13.1  million,  a $2.5  million or 23.8%  increase  over the $10.6
million earned for the same period in 1996. This increase was due to an increase
of $50.9  million in the  average  balance of mortgage  loans to $319.7  million
during the six months ended June 30, 1997 as compared to $268.8  million for the
six months ended June 30, 1996. In addition,  the average yield earned increased
35 basis points to 8.24% 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 yields  earned are  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 the yield  earned on
mortgage  loans  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  $665,000  for the second
quarter of 1997,  as compared to $491,000 for the second  quarter of 1996.  This
increase is due to a $6.0  million or 31.1%  increase in the average  balance of
other loans to $25.1  million and a 31 basis point  increase in the yield earned
to 10.61%.  For the six months  ended June 30,  1997,  interest  income on other
loans  totaled $1.2 million as compared to $986,000 for the same period in 1996.
This increase was  primarily due to an increase in the average  balance of other
loans to $24.2  million for the 1997 period as compared to $18.4 million for the
same period in 1996.  This  increase  in the average  balance of other loans was
partially  offset by a 52 basis point  decrease in the average  yield  earned to
10.24% for the six months ended June 30, 1997, as compared to the same period in
1996.

        Interest income on mortgage-backed  securities  amounted to $5.1 million
for the second quarter of 1997, as compared to $6.7 million for the same quarter
in  1996.  For  the  six  months  ended  June  30,  1997,   interest  income  on
mortgage-backed  securities  totaled $10.4 million, a $1.5 million decrease from
the $11.9 million  earned for the same period in 1996.  These  decreases are due
primarily to decreases in the average  balances of  mortgage-backed  securities.
For  the  second  quarter  of  1997,  the  average  balance  of  mortgage-backed
securities  decreased  $102.3  million or 25.1% to $306.1 million as compared to
$408.4 million for the second quarter of 1996. For the six months ended June 30,
1997, the average balance of mortgage-backed  securities decreased $49.7 million
to $314.3  million as compared to 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.

        Interest  income  on other  securities  decreased  $200,000  or 18.9% to
$858,000  for the second  quarter of 1997,  as compared to $1.1  million for the
second quarter of 1996. For the six months ended June 30, 1997,  interest income
on other  securities  totaled  $1.7  million as compared to $2.4 million for the
same period in 1996.  These  decreases  are primarily the result of decreases in
the  average  balances  of  other  securities.  The  average  balance  of  other
securities was $56.3 million and $55.2  million,  for the quarter and six months
ended June 30,  1997,  respectively,  as  compared  to $64.9  million  and $77.0
million for the same  respective  periods in the prior year.  In  addition,  the
yields earned on these  securities  decreased to 6.11% and 6.20% for the quarter
and six months ended June 30, 1997, respectively, as compared to 6.56% and 6.38%
for the same  respective  periods in the prior year. The decrease in the average
balance of securities  is a result of  management's  strategy to redeploy  funds
currently  invested  in  securities  into the loan  portfolio,  which  typically
provides greater yields.

                                      -18-
<PAGE>


        Interest  income on Federal  funds  amounted to $520,000  for the second
quarter of 1997,  as compared to $166,000 for the second  quarter of 1996.  This
increase in Federal  funds  interest is due to a $25.5  million  increase in the
average  balance to $37.9  million and a 13 basis point  increase in the average
yield to 5.50%. 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").  For the six months ended June 30, 1997, interest income on
Federal  funds  amounted to $870,000 as compared to $978,000 for the same period
in 1996. This decrease is due to a $7.0 million  decrease in the average balance
of Federal  funds to $32.7  million  offset by a 41 basis point  increase in the
yield  earned to 5.36% for those  same  periods.  The  decrease  in the  average
balance of Federal  funds is due to  proceeds  from the  Acquisition  which were
received in the first  quarter of 1996 and were  invested in Federal funds until
securities were purchased.

        Interest  Expense.  Interest  expense  was $7.5  million  for the second
quarter of 1997,  as compared to $7.7 million for the same quarter in 1996.  For
the six months ended June 30, 1997,  interest  expense  totaled $14.9 million as
compared  to $15.3  million  for the same period in 1996.  These  decreases  are
primarily  due to  decreases  of $37.4  million  and $22.9  million  in  average
interest-bearing  liabilities  to $680.7  million  and  $681.8  million  for the
quarter and six months ended June 30,  1997,  as compared to the quarter and six
months ended June 30, 1996.

     Interest  expense on savings accounts  increased  $151,000 or 10.0% to $1.7
million for the second  quarter of 1997,  as  compared  to $1.5  million for the
second quarter 1996. For the six months ended June 30, 1997, interest expense on
savings  accounts  increased to $3.2 million as compared to $2.9 million for the
same period in 1996.  These increases were due to increases in the average rates
paid on savings  accounts which are partially offset by decreases in the average
balance of these accounts.  The average rate paid on savings  accounts was 3.26%
for the second  quarter of 1997, as compared to 2.92% for the second  quarter of
1996.  For the six months ended June 30, 1997,  the average rate paid on savings
accounts  was 3.25% as  compared to 2.93% for the same period of the prior year.
The average  balances of savings accounts were $204.1 million and $199.9 million
for the  quarter  and six months  ended June 30,  1997,  as  compared  to $207.3
million and $202.1 million for the same respective periods in 1996.

        Interest  expense on time  deposits  totaled $5.1 million for the second
quarter of 1997,  as  compared to $5.6  million for the second  quarter of 1996.
This decrease is due to a $33.3 million or 8.0% decrease in the average  balance
to $384.3  million  and a 7 basis point  decrease  in the  average  rate paid to
5.30%. For the six months ended June 30, 1997, interest expense on time deposits
totaled  $10.2 million as compared to $11.1 million for the same period in 1996.
This  decrease was due to a decrease in the average  balance of time deposits of
$20.1 million to $390.4 million for the 1997 six month period as compared to the
same period in 1996. In addition,  the average cost of these deposits  decreased
15 basis points to 5.29%.

                                      -19-
<PAGE>


        Included in time deposits is  approximately  $50.0 million of nine-month
certificates  of deposits  ("CD") that are priced at a premium rate of 5.75%.  A
significant  number of these accounts will be maturing  during the third quarter
of 1997.  Management's  strategy is to reduce the cost of these time deposits by
offering a lower rate at maturity.  The Bank's current rate on these deposits is
5.05%.  Management  anticipates  that many of those  customers  that have  other
relationships  with MSB will not  withdraw  these funds from the Bank.  However,
Management  anticipates that those customers that only have a nine-month CD, and
utilize no other products or services from MSB, may withdraw these funds.

        Provision  for Loan Losses.  The  provision for loan losses was $275,000
and $320,000 for the second quarters of 1997 and 1996, respectively. For the six
months  ended June 30, 1997 and 1996,  the  provision  for loan  losses  totaled
$575,000 and  $570,000,  respectively.  Non-performing  loans (loans that are 90
days or more past due)  amounted to $3.5 million or 0.97% of total loans at June
30,  1997,  as compared to $4.8  million or 1.40% of total loans at December 31,
1996 and $3.5 million or 1.01% of total loans at June 30,  1996.  Non-performing
assets amounted to $5.2 million or 0.64% of total assets,  $5.7 million or 0.69%
of total  assets  and $4.6  million or 0.54% of total  assets at June 30,  1997,
December 31, 1996 and June 30, 1996, respectively.

        The allowance for loan losses  amounted to $2.2 million and $1.6 million
at June 30, 1997 and 1996,  respectively,  which  represented 64.5% and 44.5% 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  $111,000 and $297,000 for the
quarter and six months ended June 30, 1997, as compared to $416,000 and $673,000
for the same  respective  periods in 1996.  Included in recoveries in the second
quarter  of 1997 is a  $141,000  recovery  on a loan  that  the  Bank  partially
charged-off in 1991.  The loan was  subsequently  restructured  in 1994 and then
satisfied in 1997.

        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 $1.1 million for
the second  quarter of 1997, as compared to $1.0 million for the second  quarter
of 1996.  This  increase  was due  primarily  to a $22,000 or 2.2%  increase  in
service fees to $1.0 million for the 1997 second quarter as compared to $982,000
for the  second  quarter  of 1996.  For the six  months  ended  June  30,  1997,
non-interest  income  totaled  $2.0  million as compared to $1.9 million for the
same period in 1996.  This  increase  was due to a $105,000 or 5.9%  increase in
service  fees to $1.9  million for the 1997 six month period as compared to $1.8
million  for the same  period  in 1996.  The  increase  in  service  fees is due
primarily to the  Acquisition.  The Bank waived service  charges on the Acquired
Deposits until March 1, 1996.

                                      -20-
<PAGE>


        Non-Interest  Expense.  Non-interest  expense  for  each  of the  second
quarters of 1997 and 1996 totaled $5.2 million.  Salaries and employee  benefits
increased $113,000 to $2.3 million for the second quarter of 1997 as compared to
the second  quarter of 1996 due  primarily to normal  annual  salary  increases.
Federal deposit insurance  premiums decreased $168,000 to $71,000 for these same
periods,  reflecting the lower insurance rates that resulted from the payment of
the Savings Association  Insurance Fund ("SAIF") special assessment in the third
quarter of 1996.  Other  non-interest  expense  amounted to $1.2 million for the
1997  second  quarter,  an increase  of $59,000  over the $1.1  million in other
expenses for the 1996 second quarter.  Other non-interest  expenses for the 1997
second quarter  includes a one-time charge of $130,000  related to the Company's
Reengineering  Plan that was  implemented on July 14, 1997. See "Other Matters -
Reengineering Plan."

     For the six months ended June 30, 1997,  non-interest expense totaled $10.4
million,  representing  a $48,000  increase  over the same period in 1996.  This
increase is due to a $213,000 increase in salaries and benefits to $4.4 million,
a $58,000  increase in occupancy costs to $1.6 million,  an increase of $166,000
to $1.8  million  in  goodwill  amortization  offset by a $324,000  decrease  in
Federal deposit  insurance  premiums of $153,000 and a $65,000 decrease in other
non-interest  expenses to $2.4 million.  Other non-interest expenses for the six
months ended June 30, 1997,  included  $110,000 of legal and other costs related
to employment litigation that was settled. The increase in goodwill amortization
reflects a full six 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 June 30, 1997 the Bank's liquidity ratio under
OTS regulations was 10.11% and its short-term liquidity ratio was 6.56%

        The primary  investing  activity of the  Company is the  origination  of
loans and the purchase of securities.  For the quarter and six months ended June
30,  1997 and for the year ended  December  31,  1996,  the  Company  originated
mortgage  loans  totaling  $26.7  million,  $43.8  million  and $100.1  million,
respectively.  For those  same  periods,  the  Company  originated  other  loans
totaling $4.9 million, $9.3 million and $15.9 million, respectively. The Company
purchased  securities totaling $3.6 million and $27.4 million for the six months
ended June 30, 1997 and during 1996,  respectively.  Other investing  activities
for those same  periods  included  the  purchase of  mortgage-backed  securities
totaling $19.3 million and $386.3 million, respectively.

                                      -21-
<PAGE>


        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 7.9% at June 30, 1997 and 6.7% at December
31, 1996. At June 30, 1997, cash and cash equivalents, as defined above, totaled
$57.3 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 June 30, 1997,  the Bank had  outstanding  loan  commitments of $43.2
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 June 30, 1997, totaled $283.9 million.  Management  believes that a
significant portion of such deposits will remain with the Bank.

        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's  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 June 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 June 30, 1997.

                                      -22-
<PAGE>


                                                             Tangible
                                                     Amount            Percent
                                                 ----------           ----------
                                                     (Dollars in thousands)

Capital as calculated under GAAP ........        $   72,172              9.19%
Deduct goodwill ........... .............            30,645              3.90
Add qualifying general loan loss
 allowance, as limited by regulation ....               --                 --
Add unrealized loss on
 securities available for sale,
 net of taxes............................             3,758               0.48

Deduct equity investments ...............               --                 --   
Deduct servicing rights .................                14               0.00
                                                 ----------           ----------
Capital, as calculated ..................            45,271               5.76
Capital, as required ....................            11,784               1.50
                                                 ----------           ----------
Excess ..................................        $   33,487               4.26%
                                                 ==========           ==========



                                          Core                  Risk-Based
                                    Amount    Percent       Amount      Percent
                                 ----------  ---------   ----------    ---------
                                                     (Dollars in thousands)
Capital as calculated
 under GAAP                        $72,172      9.19%     $ 72,172       19.72%
Deduct goodwill ...........         30,645      3.90        30,645        8.37
Add qualifying general
 loan loss allowance, as
 limited by regulation                 --        --          2,237        0.61
Add unrealized loss
 on securities available for
 sale, net of taxes                  3,758      0.48         3,758        1.03
Deduct equity investments .           --         --            162         .04
Deduct servicing rights ...             14      0.00            14        0.00
                                     -----     -----       -------      ------
Capital, as calculated ....         45,271      5.76        47,346       12.94
Capital, as required ......         31,423      4.00        29,282         8.00
                                     -----     -----       -------      ------
Excess ....................        $13,848      1.76%     $ 18,064        4.94%
                                     =====     =====       =======      ======
                                   


                                      -23-
<PAGE>


        The Board of  Directors  declared  a cash  dividend  of $0.15 per common
share on June 20,  1997 that was payable to  stockholders  of record on June 30,
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 second 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.

                                      -24-
<PAGE>


Other Matters - Reengineering Plan

On July 14,  1997,  the Company  announced  a  reengineering  plan (the  "Plan")
designed to increase the Company's  earnings and stockholder  value. The Plan is
anticipated to result in approximately $600,000 in additional net income in 1997
and  approximately  $1.7  million in  additional  net income on an annual  basis
thereafter.

The major components of the Plan are as follows:
  -    Financial  Initiatives - Repurchase of up to 5% or 142,000  shares of the
       Company's  common  stock.
  -    Expense  Reduction  Initiatives  - Expected to
       result in an annual cost savings of $1.3 million.
  -    Product Pricing Initiatives - Change in deposit fee structure expected to
       increase fees by $435,000 annually. In addition, the Bank has changed its
       pricing strategy on time deposits and reduced the rates  being  paid  on
       these  deposits,  which  is  expected  to  result  in  decreased interest
       expense.
  -    New  Products  and  Services - The Company  will start offering insurance
       and limited trust services which is expected to generate additional  fee
       income.

This report contains certain forward looking statements  consisting of estimates
with respect to the financial  condition,  results of operations and business of
the Company and the Bank as a result of the adoption of the reengineering  Plan.
These  estimates are subject to various  factors that could cause actual results
to differ  materially from these estimates.  Such factors include (i) the effect
that an adverse  movement in  interest  rates  could have on the  expected  cost
savings or income enhancements,  (ii) customer  preferences,  (iii) national and
local economic conditions, (iv) national and local competition,  (v) higher than
anticipated  operating  expenses  and (vi) a lower  level of or higher  cost for
deposits than anticipated.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

        Not Applicable.


                                      -25-
<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

        None


Item 3. Defaults upon Senior Securities

        None


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

        The Company held its Annual Meeting of  Stockholders  (the "Meeting") on
April  24,  1997.  The  purpose  of the  Meeting  was to vote  on the  following
proposals:

        1.     The election of three directors for terms of three years each;

        2.     The amendment of the Company's  Certificate of  Incorporation  to
               eliminate  the  provisions  that  prohibit  record  owners of the
               Company's  common stock who  beneficially own in excess of 10% of
               the outstanding  shares of common stock (the "Limit") from voting
               any shares of common stock in excess of the Limit; and

        3.     The  ratification  of the  appointment  of KPMG Peat  Marwick LLP
               as  independent  auditors  of the  Company  for  the  year ending
               December 31, 1997.

With respect to Proposal 1, all of the  directors  nominated by the Company were
elected at the  Meeting.  In  addition,  Proposal 3 was approved at the Meeting.
However,  Proposal 2 was not approved. The voting results for the Proposals were
as follows:

        Proposal 1:   John W. Norton        For                2,213,716
                                            Withheld             391,660

                      Nicholas J. Scali     For                2,213,864
                                            Withheld             391,512

                      Daniel R. Snyder      For                2,214,116
                                            Withheld             391,260

                                            Broker Non-Votes     231,760

        Proposal 2:                         For                1,464,585
                                            Against              333,731
                                            Abstain               16,642

                                            Broker Non-Votes   1,022,178

     Proposal 2 required an  affirmative  vote of at least 80% of the  Company's
outstanding  Common Stock on February 25, 1997.  Accordingly,  this proposal was
defeated.
                                      -26-
<PAGE>



        Proposal 3:                         For                2,436,307
                                            Against              153,438
                                            Abstain               15,631

                                            Broker Non-Votes:    231,760


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*
                             Exhibit   99--Independent   Auditors'  Report.  The
                             Company is filing an amended independent  auditors'
                             report of KPMG Peat Marwick  LLP.   This  amendment
                             corrects a  typographical  error in the independent
                             auditors'  report that was originally filed as part
                             of the Company's Annual Report on Form 10-K for the
                             year ended December 31, 1996.

                      (b)    Reports on Form 8-K

                             None


                      *   Submitted only with filing in electronic format.









                                      -27-
<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)
ppp




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

August 12, 1997




                                      -28-
<PAGE>


                                   EXHIBIT 11

                       COMPUTATION OF NET INCOME PER SHARE


                                                      For The Quarter Ended
                                               ---------------------------------
                                               June 30, 1997       June 30, 1996
                                               -------------       -------------

Net income ...............................       $1,085,000       $     916,000
  Preferred stock dividends ..............          283,500             283,500
                                                 ----------          ----------

  Net income applicable to common stock ..       $  801,500       $     632,500
                                                 ==========          ==========

  Weighted average common shares .........        2,873,925           2,869,563

  Earnings per common share ..............       $     0.28          $     0.22
                                                 ==========          ==========




                                                    For The Six Months Ended
                                               ---------------------------------
                                               June 30, 1997       June 30, 1996
                                               -------------       -------------

Net income ...............................       $2,042,000       $   1,504,000
  Preferred stock dividends ..............          567,000             535,500
                                                 ----------          ----------

  Net income applicable to common stock ..       $1,475,000       $     968,500
                                                 ==========          ==========

  Weighted average common shares .........        2,873,961           2,794,939

  Earnings per common share ..............       $     0.51          $     0.35
                                                 ==========          ==========







                                      -29-
<PAGE>

                                                                      Exhibit 99


                          Independent Auditors' Report


The Board of Directors and Stockholders
MSB Bancorp, Inc.:

We have audited the consolidated  financial statements of MSB Bancorp,  Inc. and
Subsidiaries as listed in the accompanying index as of December 31, 1996 and for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the 1996 consolidated  financial  statements  referred to above
present fairly, in all material respects, the financial position of MSB Bancorp,
Inc.  and  Subsidiaries  as of  December  31,  1996,  and the  results  of their
operations  and their  cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.





                                                   KPMG Peat Marwick LLP


Short Hills, New Jersey
January 27, 1997


                                      -30-