UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended: December 31, ~~2018~~2019

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

For the transition period ________________

Commission File No. 001-37506

MSB FINANCIAL CORP.

(Exact name of Registrant as specified in its Charter)



Maryland		34-1981437
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



1902 Long Hill Road, Millington, New Jersey		07946-0417
(Address of Principal Executive Offices)		(Zip Code)

Registrant's telephone number, including area code: 908-647-4000

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.01 par value		The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ ] NO [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES [ ] NO [X]

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 12 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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] YES [ ] NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," a "smaller reporting company," or an "emerging growth company in Rule 12b-2 of the Exchange Act.



	Large accelerated filer ☐		Accelerated filer ☒
	Non-accelerated filer ☐		Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to us the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant's common stock as quoted on the Nasdaq Stock Market LLC on June 2928, ~~2018~~2019, was approximately $8960.50 million.

As of March 29 13, ~~2019~~2020 there were 5,~~373~~184,~~954~~914 shares outstanding of the Registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE

1. ~~Portions of the proxy statement for the 2019 annual meeting of shareholders~~None.

MSB FINANCIAL CORP.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, ~~2018~~2019

INDEX

PART 1		Page
Item 1.	Business	1
Item 1A.	Risk Factors	1918
Item 1B.	Unresolved Staff Comments	1918
Item 2.	Properties	1918
Item 3.	Legal Proceedings	2019
Item 4.	Mine Safety Disclosures	2019
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2120
Item 6.	Selected Financial Data	2120
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	2827
Item 8.	Financial Statements and Supplementary Data	2928
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2928
Item 9A.	Controls and Procedures	2928
Item 9B.	Other Information	3130
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	3130
Item 11.	Executive Compensation	3234
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3237
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3339
Item 14.	Principal Accounting Fees and Services	3339
PART IV
Item 15.	Exhibits, Financial Statement Schedules	3441
Item 16.	Summary	3542
SIGNATURES		3643

PART I

Forward-Looking Statements

The Company may from time to time make written or oral "forward-looking statements," including statements contained in the Company's filings with the Securities and Exchange Commission (including this Annual Report on Form 10-K and the exhibits thereto), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the private securities litigation reform act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: The strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System ("Federal Reserve"), inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; market volatility; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Item 1. Business

General

MSB Financial Corp. (the "Company") is a Maryland-chartered corporation organized in 2014 to be the successor to MSB Financial Corp., a federal corporation ("Old MSB") upon completion of the second-step conversion of Millington Bank (the "Bank") from the two-tier mutual holding company structure to the stock holding company structure. MSB Financial, MHC (the "MHC") was the former mutual holding company for Old MSB prior to completion of the second-step conversion. In conjunction with the second-step conversion, each of the MHC and Old MSB ceased to exist. The second-step conversion was completed on July 16, 2015 at which time the Company sold 3,766,592 shares of its common stock (including 150,663 shares purchased by the Bank's employee stock ownership plan) at $10.00 per share for gross proceeds of approximately $37.7 million. Expenses related to the stock offering totaled $1.5 million and were netted against proceeds. As part of the second-step conversion, each of the outstanding shares of common stock of Old MSB held by persons other than the MHC were converted into 1.1397 shares of Company common stock with cash paid in lieu of fractional shares. As a result, a total of 2,187,242 shares were issued in exchange for Old MSB shares in the second-step conversion.

The Company's principal business is the ownership and operation of the Bank. The Bank is a New Jersey-chartered stock savings bank and its deposits are insured by the Federal Deposit Insurance Corporation. The primary business of the Bank is attracting retail deposits from the general public and using those deposits together with funds generated from operations, principal repayments on securities and loans and borrowed funds, for its lending and investing activities. The Bank's loan portfolio primarily consists of one-to-four family and home equity residential loans, commercial loans, and construction loans. It also invests in U.S. government obligations and mortgage-backed securities. The Bank is regulated by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. The Board of Governors of the Federal Reserve System (the "Federal Reserve") regulates the Company as a bank holding company.

In accordance with the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company is the successor issuer to Old MSB and all financial data included herein up through the completion of the second-step conversion is that of Old MSB.

Throughout this document, references to "we," "us," or "our" refer to the Bank or Company, or both, as the context indicates.

Proposed Merger with Kearny Financial Corp.

On December 18, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Kearny Financial Corp. (“Kearny”), the parent company of Kearny Bank, pursuant to which the Company will merge with and into Kearny (the “Merger”). As part of the transaction, the Bank will also merge with and into Kearny Bank.

Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of common stock of the Company will be automatically converted into and exchangeable for the right to receive either: (i) $18 in cash (the “Cash Consideration”), or (ii) 1.3 shares of the Kearny’s common stock with cash being paid in lieu of fractional shares (the “Stock Consideration” and, together with the Cash Consideration, the “Merger Consideration”). The Merger Agreement provides that 90% of the outstanding shares of the Company common stock will be converted into Stock Consideration and 10% of the outstanding shares of the Company common stock

will be converted into Cash Consideration. Each shareholder of the Company will be entitled to elect the number of shares of the Company common stock held by such shareholder that will be exchanged for the Stock Consideration or the Cash Consideration subject to proration in the event that a selected form of consideration is over-elected.

The Merger Agreement contains customary representations, warranties and covenants from both the Company and Kearny. Among other covenants, the Company has agreed: (i) to convene and hold a meeting of its shareholders to consider and vote upon the Merger, (ii) that, subject to certain exceptions, the board of directors of the Company will recommend the approval of the Merger and the Merger Agreement by its shareholders, and (iii) not to (A) solicit alternative third-party acquisition proposals or, (B) subject to certain exceptions, conduct discussions concerning or provide confidential information in connection with any alternative third-party acquisition proposal. The Merger Agreement contains provisions that provide for the termination of the Merger Agreement in certain circumstances, and such provisions may require the Company to pay to Kearny a termination fee of $3.54 million.

The Merger is expected to close during the second calendar quarter of 2020, subject to the Company receiving the requisite approval of its shareholders, receipt of all regulatory approvals and fulfillment of other customary closing conditions.

Change in Fiscal Year End

Effective November 17, 2014, the Company changed its fiscal year end from June 30 to December 31.

Competition

We operate in a market area with a high concentration of banking and other financial institutions, and we face substantial competition in attracting deposits and in originating loans. A number of our competitors are significantly larger institutions with greater financial and managerial resources and lending limits. Our ability to compete successfully is a significant factor affecting our growth potential and profitability.

Our competition for deposits and loans historically has come from other insured financial institutions such as local and regional commercial banks, savings institutions, and credit unions located in our primary market area. We also compete with mortgage banking and finance companies for real estate loans and with commercial banks and savings institutions for consumer loans, and we face competition for funds from investment products such as mutual funds, short-term money funds and corporate and government securities. There are large competitors operating throughout our total market area, and we also face strong competition from other community-based financial institutions.

Lending Activities

We have traditionally focused on the origination of one- to four-family loans and home equity loans and lines of credit, which together comprise a sizable portion of the total loan portfolio. During the past two years, we have significantly grown our commercial real estate portfolio, which includes multi-family dwellings/apartment buildings, service/retail and mixed-use properties, churches and non-profit properties, medical and dental facilities and other commercial real estate. Additionally, we originate residential and commercial construction loans and commercial and industrial loans. Our consumer loans are comprised of automobile loans, personal loans, account loans and overdraft lines of credit.

Loan Portfolio Composition. The following tables analyze the composition of the Company's loan portfolio by loan category at the dates indicated. Except as set forth below, there were no concentrations of loans exceeding 10% of total loans.

	At December 31,
	2018					2017					2016					2015					2014
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Type of Loans:
One- to four-family real estate	$	143,391		27.62	%	$	157,876		31.63	%	$	160,534		42.28	%	$	154,624		57.07	%	$	144,966		61.19	%
Commercial real estate and multi-family	212,606			40.95		196,681			39.40		124,656			32.83		59,642			22.02		31,637			13.35
Construction	29,628			5.71		43,718			8.76		16,554			4.36		10,895			4.02		12,651			5.34
Home equity	24,365			4.69		26,803			5.37		32,262			8.50		35,002			12.92		36,847			15.55
Commercial and industrial	108,602			20.92		73,465			14.72		45,246			11.92		10,275			3.79		9,663			4.08
Consumer	540			0.11		618			0.12		446			0.11		493			0.18		1,152			0.49
Total loans receivable	519,132			100.00	%	499,161			100.00	%	379,698			100.00	%	270,931			100.00	%	236,916			100.00	%
Less:
Construction loans in process	(10,677		)			(19,868		)			(6,557		)			(4,600		)			(1,499		)
Allowance for loan losses	(5,655		)			(5,414		)			(4,476		)			(3,602		)			(3,634		)
Deferred loan fees	(501		)			(474		)			(658		)			(417		)			(334		)
Total loans receivable, net	$	502,299				$	473,405				$	368,007				$	262,312				231,449

Loan Maturity Schedule. The following table sets forth the maturity of the Company's loan portfolio at December 31, 2018. Demand loans, loans having no stated maturity, and overdrafts are presented as due in one year or less. The construction loans presented in the table as of December 31, 2018 are net of $10.7 million of undistributed amounts. The table presents contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities may differ.

	At December 31, 2018
	One- to Four- Family Real Estate		Commercial and Multi-family Real Estate		Construction		Consumer		Home Equity		Commercialand Industrial		Total
	(In thousands)
Amounts Due:
Within 1 Year	$	991	$	2,624	$	5,275	$	13	$	3,133	$	29,431	$	41,467
After 1 year:
1 to 5 years	2,324		28,288		13,676		3		3,530		52,214		100,035
5 to 10 years	16,953		135,133		—		79		4,402		22,605		179,172
After 10 years	123,130		46,555		—		445		13,299		4,352		187,781
Total due after one year	142,407		209,976		13,676		527		21,231		79,171		466,988
Total	$	143,398	$	212,600	$	18,951	$	540	$	24,364	$	108,602	$	508,455

The following table sets forth the dollar amount of all loans due after December 31, 2019, which have fixed interest rates and which have floating or adjustable interest rates.



	At December 31,
	2019					2018					2017					2016					2015
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Type of Loans:
One- to four-family real estate	$	130,966		24.69	%	$	143,391		27.62	%	$	157,876		31.63	%	$	160,534		42.28	%	$	154,624		57.07	%
Commercial real estate and multi-family	227,441			42.88		212,606			40.95		196,681			39.40		124,656			32.83		59,642			22.02
Construction	47,635			8.98		29,628			5.71		43,718			8.76		16,554			4.36		10,895			4.02
Home equity	22,853			4.31		24,365			4.69		26,803			5.37		32,262			8.50		35,002			12.92
Commercial and industrial	101,062			19.06		108,602			20.92		73,465			14.72		45,246			11.92		10,275			3.79
Consumer	432			0.08		540			0.11		618			0.12		446			0.11		493			0.18
Total loans receivable	530,389			100.00	%	519,132			100.00	%	499,161			100.00	%	379,698			100.00	%	270,931			100.00	%
Less:
Construction loans in process	(16,109		)			(10,677		)			(19,868		)			(6,557		)			(4,600		)
Allowance for loan losses	(5,722		)			(5,655		)			(5,414		)			(4,476		)			(3,602		)
Deferred loan fees	(536		)			(501		)			(474		)			(658		)			(417		)
Total loans receivable, net	$	508,022				$	502,299				$	473,405				$	368,007				262,312

	Fixed Rates		Floating or Adjustable Rates		Total
	(In thousands)
One-to four-family real estate	$	98,227	$	44,180	$	142,407
Commercial real estate and multi-family	82,886		127,090		209,976
Construction	8,419		5,257		13,676
Consumer	62		465		527
Home equity	6,316		14,915		21,231
Commercial and industrial	43,268		35,903		79,171
Total	$	239,178	$	227,810	$	466,988

Loan Maturity Schedule. The following table sets forth the maturity of the Company's loan portfolio at December 31, 2019. Demand loans, loans having no stated maturity, and overdrafts are presented as due in one year or less. The construction loans presented in the table as of December 31, 2019 are net of 16.1 million of undistributed amounts. The table presents contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities may differ.



	At December 31, 2019
	One- to Four- Family Real Estate		Commercial and Multi-family Real Estate		Construction		Consumer		Home Equity		Commercial and Industrial		Total
	(In thousands)
Amounts Due:
Within 1 Year	$	633	$	4,097	$	18,081	$	49	$	1,569	$	20,937	$	45,366
After 1 year:
1 to 5 years	2,209		57,751		10,505		—		2,065		53,934		126,464
5 to 10 years	16,718		122,568		—		77		3,339		21,760		164,462
After 10 years	111,406		43,025		2,940		306		15,880		4,431		177,988
Total due after one year	130,333		223,344		13,445		383		21,284		80,125		468,914
Total	$	130,966	$	227,441	$	31,526	$	432	$	22,853	$	101,062	$	514,280

The following table sets forth the dollar amount of all loans due after December 31, 2020, which have fixed interest rates and which have floating or adjustable interest rates.



	Fixed Rates		Floating or Adjustable Rates		Total
	(In thousands)
One-to four-family real estate	$	91,874	$	39,092	$	130,966
Commercial real estate and multi-family	94,085		133,356		227,441
Construction	10,622		20,904		31,526
Consumer	102		330		432
Home equity	4,725		18,128		22,853
Commercial and industrial	45,755		55,307		101,062
Total	$	247,163	$	267,117	$	514,280

One- to Four-Family Real Estate Mortgages. Historically, the primary focus of our lending activity was the origination of one- to four-family first mortgage loans. We continue to offer fixed rate, conventional mortgage loans with terms from 5 to 30 years.

We also originate adjustable rate mortgages, or ARMs, with up to 30 year terms at rates based upon the U.S. Treasury One Year Constant Maturity as an index. Our ARMs currently reset on an annual basis, beginning with the first year, and have a 200 basis point annual increase cap and a 600 basis point lifetime adjustment cap. We do not originate "teaser" rate or negative amortization loans.

We are also offering a loan program whereby we offer an initial rate for a fixed period of time, normally 5 to 10 years, and thereafter there is one preset interest rate adjustment based on competitive rates.

Substantially all residential mortgages include "due on sale" clauses, which are provisions giving us the right to declare a loan immediately payable if the borrower sells or otherwise transfers an interest in the property to a third party. Property appraisals on real estate securing one-to four-family residential loans are made by state certified or licensed independent appraisers and are performed in accordance with applicable regulations and policies. We require title insurance policies on all first lien one-to four-family residential loans and all home equity loans over $250,000. Homeowners, liability, fire and, if applicable, flood insurance policies are also required.

We provide financing on residential investment properties with 5 to 30 year fixed duration mortgages. Our investment property lending product is available to individuals or proprietorships, partnerships, limited liability corporations, and corporations with personal guarantees. All investment property is underwritten on its ability substantially to carry itself, unless the property is a two‑family residence with the mortgagor living in one of the units. Preference is given to those loans where rental income covers all operating expenditures, including but not limited to principal and interest, real estate taxes, hazard insurance, utilities, maintenance, and reserve. The cash coverage ratio to cover operating expenses must be at least 1.25 times. Any negative cash flow will be included in the borrower's total debt ratio. At December 31, ~~2018~~2019, investment property loans secured by one- to four-family homes totaled $3534.95 million.

We generally originate one-to four-family first mortgage loans for primary residences and investment properties with loan-to-value ratios ranging from 65% to 80% depending on the collateral value.

Commercial and Multi-Family Real Estate Mortgages. Our commercial real estate lending includes multi-family dwellings/apartment buildings, service/retail and mixed-use properties, churches and non-profit properties, medical and dental facilities and other commercial real estate. Our commercial real estate mortgage loans are typically a 5 to 10 year balloon mortgage. Multi-family and commercial real estate loans can be amortized over 30 years with periodic rate resets or 15 year fixed duration mortgages. This type of lending is made available to proprietorships, partnerships, limited liability companies and corporations with personal guarantees and/or carve out guarantees. All commercial property loans are substantially underwritten on the ability of the underlying property to provide satisfactory cash flows. A cash flow and lease analysis is performed for each property. Preference is given to those loans where rental income covers all operating expenditures, including but not limited to principal and interest, real estate tax, hazard insurance, utilities, maintenance, and reserves. The cash coverage ratio to cover operating expenses must be at least 1.20 times for multi-family and 1.25 times for all other commercial loans. Any negative cash flow will be included in the limit on the borrower's total debt ratio. Cash from other assets of the borrower, who may own multiple properties and generate a surplus, can be made available to cover debt‑service shortages of the financed property. Maximum loan-to-value ratios on commercial real estate loans range from 65% to 80%.

The management skills of the borrower are judged on the basis of his/her professional experience and must be documented to meet the Company's satisfaction in relation to the desired project. The assets of the borrower must indicate his/her ability to support the proposed investment, both in terms of liquidity and net worth, and tangible history of the borrower's capability and experience must be evident.

Unlike single-family residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income, and which are secured by real property the value of which tends to be more easily ascertainable, multi-family and commercial real estate loans typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business or rental income. As a result, the availability of funds for the repayment of commercial real estate and multi-family loans may be substantially dependent on the success of the business itself, the tenants and the general economic environment. Commercial real estate and multi-family loans, therefore, have greater credit risk than one-to four-family residential mortgages or consumer loans. In addition, commercial real estate and multi-family loans generally result in larger balances to single borrowers, or related groups of borrowers and also generally require substantially greater evaluation and oversight efforts.

multi-family and commercial real estate loans typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business or rental income. As a result, the availability of funds for the repayment of commercial real estate and multi-family loans may be substantially dependent on the success of the business itself, the tenants and the general economic environment. Commercial real estate and multi-family loans, therefore, have greater credit risk than one-to four-family residential mortgages or consumer loans. In addition, commercial real estate and multi-family loans generally result in larger balances to single borrowers, or related groups of borrowers and also generally require substantially greater evaluation and oversight efforts.

Construction Loans. We originate construction loans for an owner-occupied residence or to a builder with a valid contract of sale. We also provide financing for speculative residential or commercial construction and development with individual consideration given to builders based on their past performance, workmanship, and financial worth. Our construction lending includes loans for construction or major renovations or improvements of owner-occupied residences. The portfolio consists primarily of properties held by real estate developers.

Construction loans are mortgages up to 24 months in duration. Funds are disbursed periodically upon inspections made by our inspectors on the percentage of work completed, as per the approved budget. Funds disbursed may not exceed 60% of the loan-to-value of land and 80% of the loan-to-value of improvements any time during construction. The majority of our construction loans are variable rate loans with rates tied to the prime rate published in The Wall Street Journal, plus a premium. The Bank also has established a floor rate on all transactions. A minimum of interest-only payments on disbursed funds must be made on a monthly basis.

Construction lending is generally considered to involve a higher degree of credit risk than residential mortgage lending. If the estimate of construction cost proves to be inaccurate, we may be compelled to advance additional funds to complete the construction with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a project prior to completion, there is no assurance that we will be able to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time.

Consumer Loans. Our consumer lending products consist of new and used automobile loans, secured and unsecured personal loans, account loans and overdraft lines of credit. The maximum term for a loan on a new or used automobile is six years and four years, respectively. We will lend up to 80% of the retail value or dealer invoice on a car loan. We offer a reduction on the interest rate for car loans if payments are automatically deducted from a Millington Bank checking or statement savings account.

Our personal loans have terms of up to four years with a minimum and maximum balance of $1,000 and $5,000, respectively. A reduction to the interest rate is offered for loans with automatic debit repayment from a Millington Bank checking or statement savings account. Our account loans permit a depositor to borrow up to 90% of his or her funds on deposit with us in certificate of deposit accounts. The interest rate is the current rate paid to the depositor, plus a premium. A minimum payment of interest only is required. We also offer an overdraft line of credit with a minimum of $500 and up to a maximum of $5,000 and an interest rate tied to the prime rate published in The Wall Street Journal, plus a premium.

Consumer lending is generally considered to involve a higher degree of credit risk than residential mortgage lending. Consumer loan repayment is dependent on the borrower's continuing financial stability and can be adversely affected by job loss, divorce, illness, personal bankruptcy and other factors. The application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on consumer loans in the event of a default. Account loans are fully secured.

Home Equity Loans and Lines of Credit. We offer fixed rate home equity loans and variable rate home equity lines of credit with a minimum credit limit of $5,000. Collateral valuation is established through a variety of methods, including an on-line appraisal valuation estimator, drive-by appraisals, recent assessed tax value, purchase price or consideration value as evidenced by a deed or property search report or a report of comparable real estate properties from a licensed realtor. Loan requests over $50,000, however, require a drive-by appraisal and amounts over $100,000 require full appraisals. Loan requests over $500,000 require Loan Committee approval. Any policy exception requires approval from the Board of Directors. The loan-to-value limit on home equity lending varies depending on the collateral value and ranges from 65% up to 80%. The variable rate on home equity lines of credit is adjusted monthly and is currently set at prime for owner occupied properties and prime plus a premium for investment properties. The fixed rate loans on investment property are also higher than fixed rate owner occupied home equity loans. We generally provide home equity financing only for a first or second lien position.

Our fixed rate home equity loans have terms of 5 to 30 years. All new variable rate home equity lines of credit have terms of 10 years interest only draw period and a 15 year repayment period with a loan to value ranging from 65% to 80%. Our existing portfolio of home equity lines is also comprised of interest only home equity lines of credit based on a 10 year draw period and 15 year repayment period consisting of principal and interest repayments. The loan-to-value limit on interest only home equity financing is 80% on owner-occupied property and 70% on investment property. We also offer bridge loans with a variable rate and a 70% loan-to-value limit on owner-occupied property and 60% on investment property.

Commercial and Industrial Loans. We offer revolving lines of credit to businesses to finance short‑term working capital needs like accounts receivable and inventory. These lines of credit may be unsecured or secured by liquid assets, accounts receivable and inventory or real estate. We generally provide such financing for no more than a 3 year term and with a variable rate. We also offer unsecured lines of credit to high net worth borrowers for short term working capital and/or business or investment purposes. These lines have a maximum term of two years with a variable interest rate.

We also originate commercial term loans to fund longer‑term borrowing needs such as purchasing equipment, property improvements or other fixed asset needs. These loans are secured by new and used machinery, equipment, fixtures, furniture or other long-term fixed assets and have terms of 1 to 15 years. We originate commercial term loans for other general long-term business purposes, and these loans are secured by real estate. Principal and interest on commercial term loans is payable monthly.

The normal minimum amount for our commercial term loans and lines of credit is $5,000. The maximum amount is based on the loan to value limits set in our policy. We typically do not provide working capital loans to businesses outside our normal market area or to new businesses where repayment is dependent solely on future profitable operation of the business. We avoid originating loans for which the primary source of repayment could be liquidation of the collateral securing the loan in light of poor repayment prospects. We typically require personal and/or carve out guarantees on all commercial loans, regardless of other collateral securing the loan.

The loan-to-value limits on commercial loans vary according to the collateral. Loans secured by real estate may be originated for up to an 80% loan-to-value ratio. Other limits are typically: Savings accounts-90% of the deposit amount; new equipment-75% of purchase price; and used equipment-the lesser of 75% of the purchase price or current market value.

Loans to One Borrower. The Bank's regulatory limit on total loans to any borrower or attributed to any one borrower is 15% of unimpaired capital and surplus. Accordingly, as of December 31, ~~2018~~2019, our loans to one borrower legal limit was approximately $10.1 million.

The Bank's lending policies require that any transaction between $500,000 and the Bank's legal lending limit must be approved by the Senior Loan Committee. Any exceptions to policy requires prior Board approval.

At December 31, ~~2018~~2019, the Bank's largest lending relationship with a single borrower was a $9.0 million commercial loan to a non-depository financial institution.

Loan Originations, Purchases, Sales, Solicitation and Processing. Our customary sources of loan applications include repeat customers, referrals from realtors and other professionals, "walk-in" customers and business opportunities generated by our commercial lenders. Our residential loan originations are driven by the Bank's reputation, as opposed to being advertising driven.

Generally, it has been our policy to retain the loans we originate in our portfolio. We have not uniformly originated real estate mortgage loans to meet the documentation standards to sell loans in the secondary market. We may do so, however, in the future if we find it desirable in connection with interest rate risk management to sell longer term fixed rate mortgages into the secondary mortgage market. However, in 2018, we began to sell loans with servicing released into the secondary mortgage market. We sold ~~eight~~ten residential mortgage loans through December 31, ~~2018,~~2019 ~~four~~and eight residential mortgage loans through December 31, ~~2017, and did not sell any loans for the preceding three year period~~2018.

We purchased $711.13 million in ~~whole~~participated commercial real estate loans during the year ended December 31, ~~2018~~2019. In addition, we participated out $308.51 million and sold $2.15 million in loans originated by us to other banks during ~~2018~~2019. The Company will continue to actively utilize purchases and participations to grow the portfolio.

Loan Approval Procedures and Authority. Lending policies and loan approval limits are approved and adopted by the Board of Directors. Lending authority is vested primarily in the Senior Loan Committee comprised of the Chief Executive Officer, Chief Operating Officer, Chief Lending Officer and the Chief Credit Officer who will review and approve loans over $500,000 and up to the Bank's legal lending limit. Each of the above individuals also has individual lending authority of up to $500,000. Certain other Bank employees also have limited lending authority. Prior Board approval is required for all loan products with any exceptions to loan policy, regardless of amount.

Asset Quality

Loan Delinquencies and Collection Procedures. The Company's procedures for delinquent loans are as follows:



	15 days delinquent:	late charge added, first delinquent notice mailed
	30 days delinquent:	second delinquent notice mailed
	45 days delinquent:	additional late charge, third delinquent notice mailed, telephone contact made
	60 days delinquent:	telephone contact made, separate letter mailed
	90 days delinquent:	decision made to refer to attorney to send demand letter
	120 days delinquent:	attorney to file complaint to begin legal action

When a loan is 90 days delinquent, the Senior Vice President and Chief Credit Officer or the President may determine to refer it to an attorney to send a demand letter. After 120 days, the attorney is able to start the foreclosure proceedings by filing a complaint with the court. All reasonable attempts are made to collect from borrowers prior to referral to an attorney for collection. In certain instances, we may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his or her financial affairs, and we attempt to work with the borrower to establish a repayment schedule to cure the delinquency.

5As to mortgage loans, if a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold or otherwise disposed of. When real estate owned is acquired, it is recorded at its fair value less estimated selling costs. The initial write-down of the property is charged to the allowance for loan losses. Adjustments to the carrying value of the property that result from subsequent declines in value are charged to operations in the period in which the declines occur. At December 31, 2019, we had no other real estate owned.

As to mortgage loans, if a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold or otherwise disposed of. When real estate owned is acquired, it is recorded at its fair value less estimated selling costs. The initial write-down of the property is charged to the allowance for loan losses. Adjustments to the carrying value of the property that result from subsequent declines in value are charged to operations in the period in which the declines occur. At December 31, 2018, we had no other real estate owned.

As to commercial loans, the Company requests updated financial statements when the loan becomes 90 days delinquent. As to account loans, the outstanding balance is collected from the related account along with accrued interest when the loan is 180 days delinquent.

Loans are reviewed on a regular basis, and all delinquencies of 60 days or more are reported to the Board of Directors. Loans are placed on nonaccrual status when they are more than 90 days delinquent, except for such loans which are "well secured" and "in the process of collection." In addition a loan may be placed on nonaccrual status at any time if, in the opinion of management, the collection of the loan in full is doubtful. An asset is "well secured" if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. An asset is "in process of collection" if collection of the asset is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or its restoration to a current status in the near future.

When loans with interest accrued and unpaid are placed on nonaccrual status, the accrued interest is reversed and charged against interest income. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectability of the loan. At December 31, 2018, we had approximately $4.1 million of loans that were held on a nonaccrual basis and classified as impaired with only $341,000 subject to specific loss allowance reserves totaling $30,000. The remaining nonaccrual impaired loans did not require specific loss allowances.

Non-Performing Assets. The following table provides information regarding our non-performing loans and other non-performing assets as of the dates indicated.

	AtDecember 31,
	2018			2017			2016			2015			2014
	(Dollars in thousands)
Loans accounted for on a nonaccrual basis:
One-to four-family real estate	$	2,276		$	3,446		$	5,744		$	3,744		$	3,360
Commercial and multi-family real estate	1,032			315			760			827			1,239
Construction	—			—			—			—			65
Consumer	—			—			—			—			—
Home equity	608			115			126			803			430
Commercial and industrial	215			99			350			542			628
Total (1)	4,131			3,975			6,980			5,916			5,722
Accruing loans contractually past due 90 days or more:
One-to four-family real estate	2			—			—			235			310
Commercial real estate	—			—			—			—			—
Construction	—			—			—			—			—
Consumer	—			1			—			—			—
Home equity	—			157			—			50			50
Commercial and industrial	—			—			—			—			—
Total	2			158			—			285			360
Total non-performing loans	$	4,133		$	4,133		$	6,980		$	6,201		$	6,082
Total non-performing assets (2)	$	4,133		$	4,133		$	6,980		$	6,201		$	7,365
Accruing loans modified in troubled debt restructurings	$	10,481		$	9,703		$	8,459		$	10,962		$	11,525
Total non-performing loans to total loans	0.80		%	0.83		%	1.84		%	2.29		%	2.57		%
Total non-performing loans to total assets	0.71		%	0.73		%	1.51		%	1.65		%	1.79		%
Total non-performing assets to total assets	0.71		%	0.73		%	1.51		%	1.65		%	2.16		%

pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. An asset is "in process of collection" if collection of the asset is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or its restoration to a current status in the near future.

~~(1)~~When ~~Includes~~loans ~~$915~~with interest accrued and unpaid are placed on nonaccrual status,~~000,~~ $1the accrued interest is reversed and charged against interest income.7 ~~million~~Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, $2depending on the assessment of the ultimate collectability of the loan.2 ~~million~~At December 31, ~~and~~2019, we had approximately $43.1 million inof ~~troubled~~loans ~~debt~~that ~~restructurings~~were ~~("TDRs")~~held aton ~~December~~a ~~31,~~nonaccrual ~~2018,~~basis ~~2017,~~and ~~2016~~classified as impaired with only $372,000 ~~and~~subject ~~2015~~to specific loss allowance reserves totaling $34,000. The ~~respectively~~remaining nonaccrual impaired loans did not require specific loss allowances.

~~(2)~~Non-Performing ~~Total~~Assets. ~~non-performing~~The ~~assets~~following ~~consist~~table ofprovides ~~total~~information regarding our non-performing loans and other ~~real~~non-performing ~~estate~~assets ~~owned~~as of ~~$-,~~the ~~$-,~~dates ~~$-, and $1~~indicated.~~3 million at December 31, 2018, 2017 ,2016 and 2015.~~

At December 31, 2018, there were no loans not disclosed in the table above where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms and which may result in disclosure of such loans in the future.



	At December 31,
	2019			2018			2017			2016			2015
	(Dollars in thousands)
Loans accounted for on a nonaccrual basis:
One-to four-family real estate	$	1,169		$	2,276		$	3,446		$	5,744		$	3,744
Commercial and multi-family real estate	996			1,032			315			760			827
Construction	—			—			—			—			—
Consumer	—			—			—			—			—
Home equity	943			608			115			126			803
Commercial and industrial	—			215			99			350			542
Total ⁽¹⁾	3,108			4,131			3,975			6,980			5,916
Accruing loans contractually past due 90 days or more:
One-to four-family real estate	—			2			—			—			235
Commercial real estate	—			—			—			—			—
Construction	—			—			—			—			—
Consumer	—			—			1			—			—
Home equity	—			—			157			—			50
Commercial and industrial	—			—			—			—			—
Total	—			2			158			—			285
Total non-performing loans	$	3,108		$	4,133		$	4,133		$	6,980		$	6,201
Total non-performing assets ⁽²⁾	$	3,108		$	4,133		$	4,133		$	6,980		$	6,201
Accruing loans modified in troubled debt restructurings	$	9,452		$	10,481		$	9,703		$	8,459		$	10,962
Total non-performing loans to total loans	0.59		%	0.81		%	0.83		%	1.84		%	2.29		%
Total non-performing loans to total assets	0.52		%	0.71		%	0.73		%	1.51		%	1.65		%
Total non-performing assets to total assets	0.52		%	0.71		%	0.73		%	1.51		%	1.65		%

_______________

~~During~~(1) ~~the~~Includes ~~year~~$1.8 ~~ended December 31~~million, ~~2018, gross interest income of~~ $~~211~~915,000, ~~would~~$1.7 ~~have~~million, ~~been~~$2.2 ~~recorded~~million ~~on loans accounted for on a nonaccrual basis~~ and ~~an additional~~ $~~59,000~~4.1 ~~would~~million ~~have~~in ~~been~~troubled ~~recorded~~debt onrestructurings ("TDRs") ifat ~~those~~December ~~loans~~31, ~~had~~2019, ~~been~~2018, ~~current~~2017, in2016 ~~accordance~~and ~~with their original terms. Interest collected on such loans totaling $543~~2015,~~000~~ ~~was included in interest income during the period~~respectively.


(2)	Total non-performing assets consist of total non-performing loans and other real estate owned of $-, $-, $-, $- and $1.3 million at December 31, 2019, 2018 ,2017, 2016 and 2015.

At December 31, 2019, there were no loans not disclosed in the table above where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms and which may result in disclosure of such loans in the future.

During the year ended December 31, 2019, gross interest income of $163,000 would have been recorded on loans accounted for on a nonaccrual basis and an additional $97,000 would have been recorded on TDRs if those loans had been current in accordance with their original terms. Interest collected on such loans totaling $443,000 was included in interest income during the period.

Classified Assets. The Company in compliance with the Uniform Credit Classification and Account Management Policy adopted by the Federal Deposit Insurance Corporation, and the Company has an internal loan review program, whereby non-performing loans are classified as special mention, substandard, doubtful or loss. It is our policy to review the commercial real estate, construction, and commercial loan portfolios, in accordance with regulatory classification procedures, on at least a quarterly basis. When a loan is classified as substandard or doubtful, management is required to evaluate the loan for impairment. When management classifies a portion of a loan as loss, a reserve equal to 100% of the loss amount is required to be established or the loan is to be charged-off, if a conforming loss event has occurred.

An asset that does not currently expose the Company to a sufficient degree of risk to warrant an adverse classification, but which possesses credit deficiencies or potential weaknesses that deserve management's close attention is classified as "special mention."

An asset classified as "substandard" is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets so classified have well‑defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

An asset classified as "doubtful" has all the weaknesses inherent in a "substandard" asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of a loss on a doubtful asset is high.

That portion of an asset classified as "loss" is considered uncollectible and of such little value that its continuance as an asset, without charge‑off, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be affected in the future.

Management's classification of assets is reviewed by the Board on a regular basis and by the regulatory agencies as part of their examination process.

The following table discloses the Company's classification of loans as of December 31, ~~2018~~2019.

	At December 31, 2018
	At December 31, 2019
	(In thousands)
Special Mention	$	1,~~367~~548
Substandard	1,717
Doubtful	—
Loss	—
Total	$	3,~~084~~265

At December 31, ~~2018~~2019, 72 out of the 149 loans adversely classified, totaling $1.20 million, are included as non-performing loans in the non-performing assets table.

Management further monitors the performance and credit quality of the retail portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.

Allowance for Credit Losses. The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded credit commitments. The allowance for loan losses represents management's estimate of probable incurred losses in the loan portfolio as of the Statement of Financial Condition date and is recorded as a reduction to loans. The reserve for unfunded credit commitments represents management's estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated Statement of Financial Condition. No additional provisions are recorded in the event the unallocated portion of the allowance for credit losses exceeds the calculated reserve for unfunded credit commitments. The allowance for credit losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. All, or part, of the principal balance of loans receivable that are deemed uncollectible are charged against the allowance when management determines that the repayment of that amount is highly unlikely. Any subsequent recoveries are credited to the allowance. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible.

Management, in determining the allowance for loan losses, considers the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price of the impaired loan) is lower than the carrying value of that loan. The general component covers pools of loans by loan class. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these classes of loans, adjusted for qualitative factors. Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation. The unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

The allowance calculation methodology includes segregation of the total loan portfolio into segments. The Company's loans receivable portfolio is comprised of the following segments: residential mortgage, commercial real estate, construction, consumer and commercial and industrial. Some segments of the Company's loan receivable portfolio are further disaggregated into classes which allows management to better monitor risk and performance.

The residential mortgage loan segment is disaggregated into two classes: one-to four-family loans, which are primarily first liens, and home equity loans, which consist of first and second liens. The commercial real estate loan segment consists of both owner and non-owner occupied loans and is further disaggregated into owner-occupied loans and investor properties, which have medium risk due to historical activity on these type loans. The construction loan segment is further disaggregated into two classes: one-to four-family owner occupied, which includes land loans, whereby the owner is known and there is less risk, and other, whereby the property is generally under development and tends to have more risk than the one-to four-family owner occupied loans. The commercial and industrial loan segment consists of loans made for the purpose of financing the activities of commercial customers. The commercial and industrial loans consist of a mix of loans secured by real estate and unsecured lines of credit some of which are for high net worth individuals. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Loans whose terms are modified are classified as TDRs if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a reduction in interest rate, a below market interest rate based on risk, or an extension of a loan's stated maturity date. Nonaccrual troubled debt restructuring are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as TDRs are designated as impaired.

The evaluation of the need and amount of the allowance for impaired loans and whether a loan can be removed from impairment status is made on a quarterly basis. The Company's policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

In addition, the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation, as an integral part of their examination processes, periodically review our loan and real estate owned portfolios and the related allowance for loan losses and valuation allowance for real estate owned. They may require the allowance for loan losses or the valuation allowance for real estate owned to be increased based on their review of information available at the time of the examination, which would negatively affect our earnings.

The following table sets forth information with respect to the Company's allowance for loan losses for the periods indicated:

	Year Ended December 31,													~~Six Months Ended December 31,~~
	2018			2017			2016			2015				2014
	2019			2018			2017			2016			2015
	(Dollars in thousands)
Allowance balance at beginning of period	$	5,~~414~~655		$	45,~~476~~414		$	34,~~602~~476		$	3,~~634~~602		$	$3,634	~~3,686~~
Provision for loan losses	~~240~~—			~~1,185~~240			~~800~~1,185			~~113~~800			113	~~100~~
Charge-offs:
One-to four-family real estate	—			~~178~~—			64178			6164			61	57
Commercial and multi-family real estate	—			43—			—43			47—			47	—
Construction	—			—			—			22—			22	73
Consumer	84			48			124			—12			—	2
Home equity	—			—			—			6—			6	~~285~~
Commercial and industrial	—			30—			—30			30—			30	1
Total charge-offs	84			~~255~~8			76255			~~166~~76			166	~~418~~
Recoveries:
Consumer	12			—1			1—			—1			—	—
One-to four-family real estate	869			78			167			716			7	6
Construction	—			—			—			12—			12	~~229~~
Home equity	—			—			2—			2			2	31
Commercial and industrial	—			1—			~~131~~1			—131			—	—
Total recoveries	971			89			~~150~~8			21150			21	~~266~~
Net charge-offs (recoveries)	(167		)	~~247~~(1		)	~~(74~~247		)	~~145~~(74		)	145	~~152~~
Allowance balance at end of period	$	5,~~655~~722		$	5,~~414~~655		$	45,~~476~~414		$	34,~~602~~476		$	$3,602	~~3,634~~
Total loans outstanding at end of period	$	~~519~~530,~~132~~389		$	~~499~~519,~~161~~132		$	~~379~~499,~~698~~161		$	~~270~~379,~~931~~698		$	$270,931	~~236,916~~
Average loans outstanding during period	$	~~495~~502,~~719~~186		$	~~429~~495,~~848~~719		$	~~301~~429,~~764~~848		$	~~247~~301,~~997~~764		$	$247,997	~~236,867~~
Allowance for loan losses as apercentage of non-performing loans	~~136~~184.8311		%	~~130~~136.9983		%	64130.1399		%	5864.0913		%	58.09	~~59.75~~	%	%
Allowance for loan losses as a percentage of total loans	1.0908		%	1.0809		%	1.1808		%	1.3318		%	1.33	~~1.53~~	%	%
Net loans charged-off as a percentage of average loans (six-month period annualized)	—		%	0.06		%	(0.02		)%	0.06		%		0.13		%
Net loans charged-off as a percentage of average loans	—		%	—		%	0.06		%	(0.02		)%	0.06		%

Allocation of Allowance for Loan Losses. The following table sets forth the allocation of the Company's allowance for loan losses by loan category and the percent of loans in each category to total loans receivable at the dates indicated. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future losses that may occur within the loan category since the total loan loss allowance is a valuation allocation applicable to the entire loan portfolio.

	AtDecember 31,
	2018				2017				2016				2015				2014
	2019				2018				2017				2016				2015
	Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount	Percent of Loans to Total Loans
	(Dollars in thousands)
One-to-four family real estate	$	1,~~872~~581	27.6263	%	$	1,~~667~~872	3127.6362	%	$	1,~~595~~667	4231.2863	%	$	1,~~723~~595	5742.0728	%	1,~~786~~723	6157.1907	%
Commercial and multi-family real estate	2,~~173~~612		4045.9565	%	2,~~267~~173		~~39.~~40.95		12,~~441~~267		3239.8340		1,~~015~~441		2232.0283		~~885~~1,015	1322.3502
Construction	~~222~~433		57.7157	%	~~302~~222		85.7671		~~248~~302		48.3676		~~143~~248		4.0236		~~317~~143	54.3402
Home equity	~~243~~165		42.6988	%	~~185~~243		54.3769		~~213~~185		85.5037		~~204~~213		128.9250		~~323~~204	1512.5592
Commercial and industrial	~~1,142~~929		2016.9224	%	~~710~~1,142		1420.7292		~~882~~710		1114.9272		~~235~~882		311.7992		~~290~~235	43.0879
Consumer	32		0.1103	%	53		0.1211		65		0.1112		96		0.1811		69	0.4918
Unallocated	—		—	%	~~278~~—		—		91278		—		~~273~~91		—		27273	—
Total allowance	$	5,~~655~~722	100.00	%	$	5,~~414~~655	100.00	%	$	45,~~476~~414	100.00	%	$	34,~~602~~476	100.00	%	3,~~634~~602	100.00	%

Securities Portfolio

Our investment policy is designed to manage cash flows and foster earnings within prudent interest rate risk and credit risk guidelines. The portfolio mix is governed by our short term and long term liquidity needs. Rate‑of‑return, cash flow, rating and guarantor‑backing are also considered when making investment decisions. The purchase of principal only and stripped coupon interest only security instruments is specifically not authorized by our investment policy. Furthermore, other than government related securities which may not be rated, we only purchase securities with a rating of AAA or AA. We invest primarily in mortgage-backed securities, U.S. Government obligations, U.S. Government agency issued securities, state and political subdivision general obligations and to a lesser extent in Corporate Bonds and Certificates of Deposits.

Mortgage‑backed securities represent a participation interest in a pool of mortgages issued by U.S. government agencies or government‑sponsored enterprises, such as Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Government National Mortgage Association ("Ginnie Mae"), and the Federal National Mortgage Association ("Fannie Mae"), as well as non-government, private corporate issuers. Mortgage‑backed securities are pass‑through securities and generally yield less than the mortgage loans underlying the securities. The characteristics of the underlying pool of mortgages, i.e., fixed‑rate or adjustable‑rate, as well as prepayment risk, are passed on to the certificate holder.

Mortgage-backed securities issued or sponsored by U.S. government agencies and government‑sponsored entities are guaranteed as to the payment of principal and interest to investors.

Corporate bonds often pay higher rates than government or municipal bonds, because they tend to be riskier. The bond holder receives interest payments (yield) and principal and is repaid on a fixed maturity date. Corporate bonds can mature anywhere between 1 to 30 years and changes in interest rates are generally reflected in the bond prices. Corporate bonds carry no claims to ownership and do not pay a dividend, but are considered to be less risky than stocks, since the company has to pay off all of its debts (including bonds) before it handles its obligations to stockholders. Corporate bonds have a wide range of ratings and yields because the financial health of the issuers can vary widely,

Accounting standards require that securities be categorized as "held to maturity," "trading securities" or "available for sale," based on management's intent as to the ultimate disposition of each security. These standards allow debt securities to be classified as "held to maturity" and reported in financial statements at amortized cost if the reporting entity has the positive intent and ability to hold these securities to maturity. Securities that might be sold in response to changes in market interest rates, changes in the security's prepayment risk, increases in loan demand, or other similar factors cannot be classified as "held to maturity."

At December 31, ~~2018~~2019, our entire securities portfolio was classified as held to maturity. All securities were purchased with the intent to hold each security until maturity. Securities not classified as "held to maturity" or as "trading securities" are classified as "available for sale" and are reported at fair value with unrealized gains and losses on the securities impacting equity. The Company held no available for sale or trading securities during the years ended December 31, ~~2018~~2019 and ~~2017~~2018.

Individual securities are considered impaired when their fair values are less than their amortized cost. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are "temporary" or "other-than-temporary" in accordance with applicable accounting guidance. Accordingly, the Company accounts for temporary impairments based upon security classification as either trading, available for sale or held to maturity. Temporary impairments on "available for sale" securities would be recognized, on a tax-effected basis, through other comprehensive income with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Temporary impairments of held to maturity securities are not recognized in the consolidated financial statements; however, information concerning the amount and duration of impairments on held to maturity securities is disclosed in the notes to the consolidated financial statements. The carrying value of securities held in a trading portfolio would be adjusted to fair value through earnings on a quarterly basis.

Other-than-temporary impairments on securities that the Company has decided to sell or will more likely than not be required to sell prior to the full recovery of their fair value to a level equal to or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components. The credit-related impairment generally represents the amount by which the present value of the cash flows expected to be collected on a debt security falls below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. Credit-related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred taxes, in other comprehensive income.

At December 31, ~~2018~~2019, our securities portfolio did not contain securities of any issuer, other than the U.S. Government agencies and government-sponsored enterprises, having an aggregate book value in excess of 10% of stockholders' equity. We do not currently participate in hedging programs, interest rate caps, floors or swaps, or other activities involving the use of off-balance sheet derivative financial instruments, however, we may in the future utilize such instruments if we believe it would be beneficial for managing our interest rate risk.

The following table sets forth certain information regarding the carrying values, weighted average yields and maturities of our held to maturity securities portfolio at December 31, ~~2018~~2019. Our held to maturity securities portfolio is carried at amortized cost. This table shows contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities of the securities held by us may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. Callable securities pose reinvestment risk because we may not be able to reinvest the proceeds from called securities at an equivalent or higher interest rate.

	At December 31, 2018
	At December 31, 2019
	One Year or Less				One to Five Years				Five to Ten Years				More than Ten Years				Total Investment Securities
	Carrying Value		Average Yield		Carrying Value		Average Yield		Carrying Value		Average Yield		Carrying Value		Average Yield		Carrying Value		Average Yield		Market Value
	(Dollars in thousands)
U.S. Government Agency Obligations	$	~~2,000~~—	~~1.29~~—	%	$	—	—	%	$	3,000	32.9098	%	$	3,000	43.1527	%	$	86,000	3.3412	%	$	76,~~993~~013
Mortgage-Backed Securities:
Government National Mortgage Association	—		—		54		3.6412		—		—		—		—		$	54	3.6412		54
Federal Home Loan Mortgage Corporation	1—		~~1.77~~—		63		43.4278		21,~~122~~700		1.8476		111,771		42.2061		$	23,~~140~~474	12.8619		23,~~080~~470
Federal National MortgageAssociation	~~896~~1,151		13.4449		1511,~~553~~363		2.7363		~~1,119~~880		1.9694		45,~~223~~579		32.0286		$	2118,~~791~~973	2.6972		2119,~~694~~240
Corporate bonds	—1,500		—3.01		~~1,500~~—		~~3.35~~—		1,000		31.2459		4,000		42.0069		$	6,500	32.7360		56,~~764~~077
State and political subdivisions	~~161~~171		1.2040		~~697~~705		1.6378		~~182~~—		~~2.00~~—		—		—		$	~~1,040~~876	1.6371		~~1,033~~892
Total	$	32,~~058~~822	13.3311	%	$	1712,~~761~~075	2.7458	%	$	76,~~423~~580	2.8831	%	$	1114,~~234~~350	32.6787	%	$	3935,~~476~~827	2.9269	%	$	3835,~~569~~696

The following table sets forth the carrying value of our held to maturity securities portfolio at the dates indicated. All securities are classified as held to maturity and, therefore, are shown at amortized cost.

	At December 31,
	2018		2017
	2019		2018
	(In thousands)
U.S. Government Agency Obligations	$	86,000	$	58,~~500~~000
Government National Mortgage Association	54		65
Federal Home Loan Mortgage Corporation	23,~~140~~474		2,~~589~~140
Federal National Mortgage Association	2118,~~791~~973		21,~~244~~791
Corporate bonds	6,500		76,~~012~~500
State and political subdivisions	~~1,040~~876		1,~~196~~040
Certificates of deposits	—		935
Total securities held to maturity	$	35,827	$	39,476
Total securities held to maturity	$	39,476	$	38,482

Sources of Funds

General. Deposits are our major source of funds for lending and other investment purposes. To the extent that our loan originations may exceed the funding available from deposits, we have borrowed funds from the Federal Home Loan Bank ("FHLB") to supplement the amount of funds for lending and funding daily operations.

In addition, we derive funds from loan and mortgage‑backed securities principal repayments, interest, and proceeds from the maturity and call of investment securities. Loan and securities payments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by pricing strategies and money market conditions .

Deposits. Our current deposit products include checking and savings accounts, certificates of deposit and fixed or variable rate individual retirement accounts (IRAs). Deposit account terms vary, primarily as to the required minimum balance amount, the amount of time, if any, that the funds must remain on deposit and the applicable interest rate. Our savings account menu includes regular passbook, statement, money market and club accounts. We also offer a six-level tiered savings account. Our certificates of deposit currently range in terms from 6 months to 10 years. Our IRAs are available with the same maturities as certificates of deposit accounts, with the exception of the 30 month term. We offer a two year certificate of deposit that permits the depositor to increase the interest rate to the current two year rate once during the term.

Deposits are obtained primarily from within New Jersey. The Bank may utilize brokered deposits and a listing service as funding sources. As of December 31, ~~2018~~2019 the Bank had $2621.54 million in listing service deposits. Premiums or incentives for opening accounts are sometimes offered. Periodically we select particular certificate of deposit maturities for promotion in connection with asset/liability management and interest rate risk concerns.

The determination of deposit and certificate interest rates is based upon a number of factors, including: (1) need for funds based on loan demand, current maturities of deposits and other cash flow needs; (2) a current survey of a selected group of competitors' rates for similar products; (3) economic conditions; and (4) business plan projections.

A large percentage of our deposits are in certificates of deposit. The inflow of certificates of deposit and the retention of such deposits upon maturity are significantly influenced by general interest rates and money market conditions, making certificates of deposit traditionally a more volatile source of funding than core deposits. Our liquidity could be reduced if a significant amount of certificates of deposit maturing within a short period of time were not renewed. To the extent that such deposits do not remain with us, they may need to be replaced with borrowings which could increase our cost of funds and negatively impact our net interest rate spread and our financial condition.

The following table sets forth the distribution of average deposits for the periods indicated and the weighted average nominal interest rates for each period on each category of deposits presented.

	For the Year Ended December 31,
	2018						2017						2016
	2019						2018						2017
	Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate		Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate		Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate
	(Dollars in thousands)
Non-interest-bearing demand	$	4147,~~746~~228	910.8288	%	—	%	$41,746	~~42,312~~	109.9582	%	—	%	$	3442,~~026~~312	1110.3895	%	—	%
Interest-bearing demand	~~153~~140,~~367~~208		3632.0630		01.8219		~~119~~153,~~096~~367		3036.8206		0.4482		71119,~~843~~096		2430.0282		0.2844
Savings	~~105~~99,~~623~~391		2422.8490		0.5274		105,~~444~~623		2724.2884		0.2652		~~103~~105,~~570~~444		3427.6328		0.2226
Certificates of deposit	~~124~~147,~~556~~253		2933.2892		1.6395		~~119~~124,~~618~~556		3029.9528		1.3863		89119,~~609~~618		2930.9795		1.2038
Total deposits	$	~~425~~434,~~292~~080	100.00	%	1.0037	%	$	~~386~~425,~~470~~292	100.00	%	01.7100	%	$	~~299~~386,~~048~~470	100.00	%	0.5071	%

The following table sets forth certificates of deposit classified by interest rate categories as of the dates indicated.

	At December 31,
	2018				2017				2016
	2019				2018				2017
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Interest Rate:
Under – 1.00%	$	1711,~~760~~874	147.7060	%	$	2517,~~133~~760	2014.2170	%	$	4325,~~795~~133	4220.2621	%
1.00% - 1.99%	5361,~~118~~970		4339.9569		7053,~~750~~118		5643.9095		4370,~~223~~750		4156.7190
2.00% - 2.99%	4981,~~368~~554		4052.8523		2649,~~536~~368		2140.3485		1226,~~160~~536		1121.7434
3.00% - 3.99%	~~570~~756		0.4748		~~645~~570		0.5247		~~728~~645		0.7052
4.00% - 4.99%	39—		~~0.03~~—		~~332~~39		0.2703		~~884~~332		0.8527
5.00% - 5.99%	—		—		~~943~~—		~~0.76~~—		~~2,837~~943		20.7476
Total	$	~~120~~156,~~855~~154	100.00	%	$	~~124~~120,~~339~~855	100.00	%	$	~~103~~124,~~627~~339	100.00	%

The following table sets forth the amount and maturities of certificates of deposit at December 31, ~~2018~~2019.

	Amount DueYear Ended December 31,
	2019		2020		2021		2022		2023		After 2023		Total
	2020		2021		2022		2023		2024		After 2024		Total
	(Dollars in thousands)
Interest Rate:
Under - 1.00%	$	1610,~~033~~485	$	1,~~723~~385	$	—4	$	4—	$	—	$	—	$	1711,~~760~~874
1.00% - 1.99%	1937,~~370~~527		1016,~~683~~713		166,~~119~~263		~~5,767~~707		~~534~~290		~~644~~470		5361,~~117~~970
2.00% - 2.99%	447,~~101~~852		2126,~~678~~180		154,~~828~~641		42,~~781~~403		~~2,415~~55		~~566~~423		4981,~~369~~554
3.00% - 3.99%	~~247~~239		~~323~~—		—		—		—517		—		~~570~~756
4.00% - 4.99%	39		—		—		—		—		—		39
Total	$	96,103	$	44,278	$	10,908	$	3,110	$	862	$	893	$	156,154
Total	$	39,790	$	34,407	$	31,947	$	10,552	$	2,949	$	1,210	$	120,855

The following table shows the amount of the Company's certificates of deposit of $100,000 or more by time remaining until maturity as of December 31, ~~2018~~2019.

	Certificates of Deposit
	(In thousands)
Remaining Time Until Maturity:
Within three months	$	410,~~657~~861
Three through six months	1040,~~668~~754
Six through twelve months	621,~~834~~604
Over twelve months	5539,~~004~~574
Total	$	77112,~~163~~793

Borrowings. To supplement our deposits as a source of funds for lending or investment, we have borrowed funds in the form of advances from the FHLB of New York ("FHLB of NY"). At December 31, ~~2018~~2019, our collateralized borrowing limit with the FHLB of NY was $~~149~~173.96 million and our outstanding borrowings with the FHLB of NY totaled $9451.36 million . Information regarding our total borrowings as of December 31, ~~2018~~2019 is set forth in the following table.

	At December 31, 2018
	At December 31, 2019
	Balance		Rate		Maturity
	(Dollars in thousands)
Total Borrowings:
Overnight Advance	$	6623,~~600~~900	21.6081	%	January 2, ~~2019~~2020
Five year fixed rate advance	$	2,675	1.79	%	July 6, 2020
Three year fixed rate advance	$	5,000	1.75	%	September 8, 2020
Three year fixed rate advance	$	10,000	2.27	%	November 23, 2020
Four year fixed rate advance	$	5,000	1.89	%	September 8, 2021
Five year fixed rate advance	$	5,000	2.01	%	September 8, 2022
	$	9451,~~275~~575

A summary of short-term borrowings for ~~2018~~2019, ~~2017~~2018 and ~~2016~~2017 is set forth in the following table.

	For Years ended December 31,
	2018			2017			2016
	2019			2018			2017
	(Dollars in thousands)
Overnight Advance at Period End	$	6623,~~600~~900		$	—66,600		$	—
Maximum amount outstanding at any month end during period	6667,~~600~~400			3266,~~500~~600			—32,500
Average amounts outstanding during period	4045,~~373~~799			1440,~~849~~373			~~107~~14.849
Weighted Average Interest Rate	2.2851		%	12.2228		%	01.6422		%

Advances from the FHLB of NY are typically secured by the FHLB stock and a portion of our residential mortgage loans and by other assets, mainly securities which are obligations of or guaranteed by the U.S. government. Additional information regarding our borrowings is included under Note 87 to our consolidated financial statements beginning on page F-1 .

Subsidiary Activity

The Company has no direct subsidiaries other than the Bank. The Bank has one wholly owned subsidiary, Millington Savings Service Corp., formed in 1984. The service corporation is currently inactive.

Regulation and Supervision

The Bank and the Company operate in a highly regulated industry. This regulation establishes a comprehensive framework of activities in which they may engage and is intended primarily for the protection of the Deposit Insurance Fund and depositors. Set forth below is a brief description of certain laws that relate to the regulation of the Bank and the Company. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.

Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of assets and the adequacy of the allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, ~~including changes in the regulations governing mutual holding companies,~~ could have a material adverse impact on the Company and the Bank. The adoption of regulations or the enactment of laws that restrict the operations of the Bank and/or the Company or impose burdensome requirements upon one or both of them could reduce their profitability and could impair the value of the Bank's franchise, resulting in negative effects on the trading price of the Company's common stock.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) was enacted. EGRRCPA provided targeted regulatory relief to institutions of all sizes. For community banks and their holding companies, the most significant provisions include (i) an increase in the limit for applicability of the Small Bank Holding Company Policy Statement from $1 billion to $3 billion in total

assets; (ii) an extension of the period between examinations from 12 months to 18 months for well managed institutions; (iii) the end of the Volcker Rule for most community banks; (iv) the establishment of a Community Bank Leverage Ratio, which, if satisfied, would satisfy all applicable capital requirements; (v) Home Mortgage Disclosure Act (“HMDA”) relief for institutions originating fewer than 500 closed-end or 500 open-end in each of the preceding two calendar years provided the institutions also have a CRA rating of satisfactory or better; (vi) changes to the definition of a “brokered deposit” under the FDIC regulations; (vii) the creation of a safe harbor under the “ability to pay” rules and definition of “qualified mortgage” and (viii) various other regulatory relief provisions. EGRRCPA also made significant changes affecting larger institutions including an immediate increase in the threshold for being deemed a systemically important financial institution (“SIFI”) from $50 billion in total assets to $100 billion with the threshold to be further increased to $250 billion in total assets 18 months after enactment of EGRRCPA. While certain of the provisions were immediately effective, others require rulemaking with such rules in various stages of being finalized.

Holding Company Regulation

General. The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the "BHC Act"), and is regulated by the Board of Governors of the Federal Reserve System (the "Federal Reserve"). The Federal Reserve has enforcement authority over the Company and the Company's non-bank subsidiaries which also permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank. This regulation and oversight is intended primarily for the protection of the depositors of the Bank and not for shareholders of the Company.

authority over the Company and the Company's non-bank subsidiaries which also permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank. This regulation and oversight is intended primarily for the protection of the depositors of the Bank and not for shareholders of the Company.

As a bank holding company, the Company is required to file with the Federal Reserve an annual report and any additional information as the Federal Reserve may require under the BHC Act. The Federal Reserve will also examine the Company and its subsidiaries.

Under the BHC Act, the Company must obtain the prior approval of the Federal Reserve before it may acquire control of another bank or bank holding company, merge or consolidate with another bank holding company, acquire all or substantially all of the assets of another bank or bank holding company, or acquire direct or indirect control of any voting shares of any bank or bank holding company if, after such acquisition, the Company would directly or indirectly own or control more than 5% of such shares.

~~Subsidiary~~ ~~banks~~Federal ofstatutes aimpose ~~bank~~restrictions ~~holding~~on ~~company~~the ~~are~~ability ~~subject~~of toa ~~certain~~bank ~~restrictions~~holding ~~imposed~~company byand ~~the~~its ~~BHC~~nonbank ~~Act~~subsidiaries onto obtain extensions of credit tofrom ~~the~~its subsidiary bank, ~~holding~~on ~~company~~the orsubsidiary ~~any~~bank’s ~~of its subsidiaries, on~~ investments in the stock or ~~other~~ securities of the ~~bank~~ holding company ~~or its subsidiaries~~, and on the subsidiary bank’s taking of ~~such~~the holding company’s stock or securities as collateral for loans to any borrower. ~~Furthermore,~~A ~~under amendments to the BHC Act and regulations of the Federal Reserve, a~~ bank holding company and its subsidiaries are ~~prohibited~~also prevented from engaging in certain ~~tie-in~~tying arrangements in connection with any extension of credit ~~or provision of credit or providing any property or services. Generally~~, ~~this provision provides that a bank may not extend credit,~~ lease or ~~sell~~sale of property, or ~~furnish~~furnishing ~~any service to a customer on the condition that the customer provide additional credit or service to the bank, to the bank holding company, or to any other subsidiary~~ of ~~the~~services ~~bank~~by ~~holding company or on~~ the ~~condition that the customer not obtain other credit or service from a competitor of the bank, the bank holding company, or any~~ subsidiary ~~of the~~ bank.

Extensions of credit by the Bank to executive officers, directors, and principal shareholders of the Bank or any affiliate thereof, including the Company, are subject to Section 22(h) of the Federal Reserve Act, which among other things, generally prohibits loans to any such individual where the aggregate amount exceeds an amount equal to 15% of a bank's unimpaired capital and surplus, plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral.

Source of Strength Doctrine. A bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the policy of the Federal Reserve that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve regulations, or both.

Non-Banking Activities. The business activities of the Company, as a bank holding company, are restricted by the BHC Act. ~~Under~~In general, the BHC Act and the Federal Reserve'’s ~~bank~~regulations ~~holding~~limit ~~company~~the ~~regulations,~~nonbanking ~~the~~activities ~~Company~~permissible ~~may~~for ~~only~~bank ~~engage~~holding ~~in,~~companies orto ~~acquire~~those oractivities ~~control~~that ~~voting~~the ~~securities~~Federal orReserve ~~assets~~has ofdetermined ato ~~company~~be ~~engaged~~so ~~in,~~closely ~~(1)~~related to banking or managing or controlling banks ~~and~~to ~~other~~be ~~subsidiaries~~a ~~authorized~~proper ~~under~~incident ~~the~~thereto. ~~BHC~~These ~~Act~~include ~~and~~any ~~(2)~~incidental ~~any~~activities ~~BHC~~necessary ~~Act~~to ~~activity~~carry on those activities, as well as a lengthy list of activities that the Federal Reserve has determined to be so closely related to ~~banking~~the orbusiness ~~managing~~of orbanking ~~controlling~~as ~~banks~~ to be a proper incident thereto. ~~These~~In ~~include~~addition, ~~any~~a ~~incidental~~bank ~~activities~~holding ~~necessary~~company that has elected to ~~carry~~be ona ~~those~~financial ~~activities~~holding company may engage in, asor ~~well~~acquire asand retain shares of companies engaged in, a ~~lengthy~~broader ~~list~~range of activities that are considered (i) “financial in nature” (as defined by the Gramm-Leach-Bliley Act of 1999 and Federal Reserve ~~has~~regulations) or incidental to such financial activities (as determined by the Federal Reserve in consultation with the Secretary of the Treasury), or (ii) complementary to bea sofinancial ~~closely~~activity ~~related~~and do not pose a substantial risk to the ~~business~~safety and soundness of depository institutions or the financial system generally. These activities include, among other things, securities underwriting, dealing and market-making, sponsoring mutual funds and investment companies, insurance underwriting and agency activities, and merchant banking asThe Company has not submitted notice to the Federal Reserve of its intent to be deemed a ~~proper~~financial ~~incident~~holding ~~thereto~~company.

~~Financial~~Regulatory ~~Modernization~~Capital Requirements. The ~~Gramm-Leach-Bliley~~Federal ~~Act~~Reserve ~~permits~~has ~~greater~~adopted ~~affiliation~~capital ~~among~~adequacy ~~banks,~~guidelines ~~securities~~pursuant ~~firms,~~to ~~insurance~~which ~~companies,~~it ~~and~~assesses ~~other~~the ~~companies~~adequacy ~~under a new type~~ of ~~financial~~capital ~~services~~in ~~company~~examining ~~known~~and assupervising a ~~"financial~~bank holding company." Aand ~~financial~~in ~~holding~~analyzing ~~company~~applications ~~essentially~~to isit aunder ~~bank~~the ~~holding~~BHC ~~company~~Act. ~~with~~The ~~significantly~~Federal ~~expanded~~Reserve’s ~~powers.~~capital ~~Financial~~adequacy ~~holding~~guidelines ~~companies~~ are ~~authorized~~similar ~~by statute~~ to ~~engage~~those inimposed aon ~~number~~the ofBank ~~financial~~by ~~activities~~the ~~previously~~FDIC. ~~impermissible~~See ~~for~~“Regulation ~~bank~~of ~~holding~~the ~~companies,~~Bank ~~including~~-Regulatory ~~securities~~Capital ~~underwriting,~~Requirements.” ~~dealing~~The ~~and~~Federal ~~market~~Reserve, ~~making;~~however, ~~sponsoring~~has ~~mutual~~adopted ~~funds~~a ~~and~~policy ~~investment~~statement ~~companies;~~that ~~insurance~~exempts ~~underwriting~~bank ~~and~~holding ~~agency;~~companies ~~and~~with ~~merchant~~less ~~banking~~than ~~activities~~$3.0 ~~The~~billion ~~Act~~in ~~also~~consolidated ~~permits~~assets ~~the~~that ~~Federal~~are ~~Reserve~~not ~~and~~engaged ~~the~~in ~~Treasury~~significant ~~Department~~non-banking toor ~~authorize~~off-balance ~~additional~~sheet activities ~~for~~and ~~financial~~that ~~holding~~do ~~companies~~not ifhave ~~they~~a ~~are~~material ~~"financial~~amount inof ~~nature"~~debt or ~~"incidental"~~equity tosecurities ~~financial~~registered ~~activities.~~with Athe ~~bank~~SEC ~~holding~~from ~~company~~its ~~may~~regulatory ~~become~~capital arequirements ~~financial~~as ~~holding~~long ~~company~~as iftheir itbank ~~and~~subsidiaries ~~each~~are ~~of its subsidiary banks is~~ well capitalized. ~~and~~The ~~well~~Federal ~~managed,~~Reserve ~~and~~may ~~each~~apply of its ~~subsidiary~~regulatory ~~banks~~capital ~~has~~standards at ~~least~~its adiscretion ~~"satisfactory"~~to ~~CRA~~any ~~rating.~~bank ~~A financial~~ holding company, ~~must~~regardless ~~provide~~of ~~notice~~asset tosize, ~~the~~if ~~Federal~~such ~~Reserve~~action ~~within~~is 30warranted ~~days~~for ~~after~~supervisory ~~commencing activities previously determined by statute or~~ purposes.

by the Federal Reserve and Department of the Treasury to be permissible. The Company has not submitted notice to the Federal Reserve of its intent to be deemed a financial holding company.

Regulatory Capital Requirements. The Federal Reserve has adopted capital adequacy guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHC Act. The Federal Reserve's capital adequacy guidelines are similar to those imposed on the Bank by the FDIC. See "Regulation of the Bank -Regulatory Capital Requirements." The Federal Reserve, however, has adopted a policy statement that exempts bank holding companies with less than $3.0 billion in consolidated assets that are not engaged in significant non-banking or off-balance sheet activities and that do not have a material amount of debt or equity securities registered with the SEC from its regulatory capital requirements as long as their bank subsidiaries are well capitalized, such bank holding companies need only maintain a pro forma debt to equity ratio of less than 1.0 in order to pay dividends and repurchase stock and to be eligible for expedited treatment on applications.

Federal Securities Law. The Company's common stock is registered under Section 12(b) of the Exchange Act, and the Company is subject to the periodic reporting and other requirements of Section 12(b) of the Exchange Act.

Acquisition of Control. Under the Change in Bank Control Act, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire "control" of a bank company. An acquisition of "control" can occur upon the acquisition of 10% or more of the voting stock of a bank holding company or as otherwise defined by the Federal Reserve. Under the Change in Bank Control Act, the Federal Reserve has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control is then subject to regulation as a bank holding company.

Regulation of the Bank

General. As a New Jersey chartered, FDIC-insured bank, the Bank is regulated by the New Jersey Department of Banking and Insurance and the FDIC. The Bank's operations are subject to extensive regulation, including restrictions or requirements with respect to loans to one borrower, the percentage of non-mortgage loans or investments to total assets, capital distributions, permissible investments and lending activities, liquidity, transactions with affiliates and community reinvestment. The Bank must file regulatory reports concerning its activities and financial condition, and must obtain regulatory approvals prior to entering into certain transactions, such as mergers with or acquisitions of other financial institutions. The New Jersey Department of Banking and Insurance and the FDIC regularly examine the Bank and prepare reports to the Bank's Board of Directors on deficiencies, if any, found in its operations. The regulatory authorities have substantial discretion to impose enforcement action on an institution that fails to comply with applicable regulatory requirements, particularly with respect to its capital requirements.

Federal Deposit Insurance. The ~~Bank's~~FDIC, ~~deposits~~through ~~are~~the ~~insured~~Deposit toInsurance ~~applicable~~Fund, ~~limits~~insures bydeposit ~~the~~accounts ~~FDIC.~~in ~~Under~~ the ~~Dodd-Frank~~Bank ~~Act,~~up ~~the~~to ~~maximum~~$250,000 ~~deposit~~per ~~insurance~~separately ~~amount~~insured ~~has~~deposit ~~been~~ownership ~~permanently~~right ~~increased~~or ~~from $100,000 to $250,000~~category.

The FDIC has adopted a risk-based premium system that provides for quarterly assessments based on an insured institution's ranking in one of four risk categories based on their examination ratings and capital ratios. The assessment base is the institution's average consolidated assets less average tangible equity. Insured banks with more than $1.0 billion in assets must calculate quarterly average assets based on daily balances while smaller banks and newly chartered banks may use weekly averages. In the case of a merger, the average assets of the surviving bank for the quarter must include the average assets of the merged institution for the period in the quarter prior to the merger. Average assets are reduced by goodwill and other intangibles. Average tangible equity equals Tier 1 capital. For institutions with more than $1.0 billion in assets, average tangible equity is calculated on a weekly basis while smaller institutions may use the quarter-end balance. 16

~~Effective~~The ~~July 1, 2016, the~~ FDIC ~~amended~~assesses ~~its assessment regulations for established banks (generally, an institution that has been federally~~ insured ~~for~~depository atinstitutions ~~least five years as of the last day of any quarter for which it is being assessed) with less than $10 billion in assets~~ to ~~replace~~maintain the previous risk categories with updated financial ratios that are designed to better predict the risk of failure of insured institutions. The amended rules became effective during the first quarter after the designated reserve ratio of the Deposit Insurance Fund ~~reached 1~~.~~15%~~ Under ~~and will remain in effect until~~ the ~~designated~~FDIC’s ~~reserve~~risk-based ~~ratio~~assessment ~~reaches~~system, ~~2.0%. The amended regulations set a maximum rate that~~ banks ~~rated CAMELS 1 or 2 may be charged and a minimum rate~~ that ~~CAMELS~~are 3,deemed 4to ~~and 5 banks may~~ be ~~charged.~~less ~~Under~~risky ~~the~~pay ~~amended~~lower ~~rules, the FDIC uses a bank's weighted average CAMELS component ratings and the following financial measures to determine~~ assessments:. ~~Tier~~Assessments 1for ~~leverage~~institutions ~~ratio;~~with ~~ratio of net income before taxes to total~~ assets; ~~ratio~~ of ~~non-performing~~less ~~loans~~than to$10 ~~gross~~billion ~~assets; and ratio~~ of ~~other real estate owned to gross~~ assets~~. In addition~~, ~~assessments~~such ~~take~~as ~~into~~the ~~consideration core deposits to total assets~~Bank, ~~one-year~~are ~~asset~~based ~~growth~~on ~~and~~financial ~~a loan mix index. The loan mix index~~ measures ~~the~~and ~~extent~~supervisory toratings ~~which~~derived afrom ~~bank's~~statistical ~~total~~modeling ~~assets~~estimating ~~include higher risk loans. To calculate~~ the ~~loan~~probability ~~mix index, each category~~ of ~~loan~~failure ~~in the bank's portfolio (other than credit card loans) is divided by the bank's total assets to determine the percentage~~ of ~~assets~~an ~~represented by that loan category. Each percentage is then multiplied by that loan category'~~institution’s ~~historical~~failure ~~weighted~~within ~~average~~three industry-wide charge-off rate. The sum of these numbers determines the loan mix index value for that bank. The amended regulations are intended to be revenue neutral to the FDIC but to shift premium payments to higher risk institutions. A companion regulation assessed banks over $10 billion in assets at higher rates for two years ~~in accordance with the requirements of the Dodd-Frank Act~~.

InBy ~~addition~~FDIC rule effective April 1, ~~all~~2011, ~~FDIC-insured~~the ~~institutions~~deposit ~~are~~insurance ~~required~~assessment torange ~~pay~~was ~~assessments~~set at 2.5 to ~~the~~45 ~~FDIC~~basis topoints ~~fund~~of ~~interest~~total ~~payments~~assets onless ~~bonds~~tangible ~~issued~~equity. In byconjunction with the ~~Financing~~Deposit ~~Corporation~~Insurance ~~("FICO")~~Fund’s reserve ratio reaching 1.15%, aneffective ~~agency~~July of1, 2016, the ~~Federal~~assessment ~~government~~range ~~established~~was toreduced ~~recapitalize~~for ~~the~~insured ~~Federal~~institutions ~~Savings~~of ~~and~~less ~~Loan~~than ~~Insurance~~$10 billion of total assets to 1.5 basis points to 30 basis points.

17The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC was required to achieve the 1.35% ratio by September 30, 2020. The law required insured institutions with assets of $10 billion or more to fund the increase from 1.15% to 1.35% and, effective July 1, 2016, such institutions were subjected to a surcharge to achieve that goal. The 1.35% ratio was reached effective September 30, 2018. As a result, the surcharges ceased and institutions with less than $10 billion of assets received credits for assessment payments made that contributed to achieving the 1.35% ratio. The Dodd-Frank Act also eliminated the 1.5% statutory maximum ratio for the Deposit Insurance Fund and delegated to the FDIC the authority to set a maximum ratio. The FDIC has established a long-term target reserve ratio of 2.0% for the Deposit Insurance Fund, and it is expected that the current deposit insurance assessment structure will continue until the target reserve ratio is attained.

~~Corporation~~Regulatory Capital Requirements. The ~~FICO~~FDIC ~~assessment~~has ~~rates~~promulgated capital adequacy requirements for state-chartered banks that, ~~which~~like the Bank, are ~~determined~~not ~~quarterly,~~members ~~averaged~~of 0the Federal Reserve System.~~385%~~ ofEffective ~~insured~~January ~~deposits~~1, on2015, anthe ~~annualized~~capital ~~basis~~adequacy requirements were substantially revised to conform them to the international regulatory standards agreed to by the Basel Committee on Banking Supervision in ~~2018~~the accord often referred to as "Basel III". The ~~These~~current ~~assessments~~capital ~~will~~rules ~~continue~~apply ~~until~~to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are not subject to the ~~FICO~~Federal ~~bonds~~Reserve's ~~mature~~Small inBank ~~2019~~Holding Company Policy Statement.

~~Regulatory~~Under ~~Capital~~the ~~Requirements~~FDIC's capital adequacy regulations, the Bank is required to meet four minimum capital standards: (1) "Tier 1" or "core" capital leverage ratio equal to at least 4% of total adjusted assets, (2) a common equity Tier 1 capital ratio equal to 4.5% ~~The~~of ~~FDIC~~risk-weighted ~~has~~assets, ~~promulgated~~(3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets, and (4) a total capital ~~adequacy~~ratio ~~requirements~~equal ~~for~~to ~~state~~8% of total risk-~~chartered~~weighted ~~banks~~assets. ~~that~~Common equity Tier 1 capital is defined as common stock instruments, ~~like~~retained earnings, any common equity Tier 1 minority interest and, unless the ~~Bank~~bank has made an "opt-out" election, ~~are~~accumulated ~~not~~other ~~members~~comprehensive income, net of ~~the~~goodwill ~~Federal~~and ~~Reserve~~certain ~~System~~other intangible assets. ~~Effective~~Tier ~~January~~1 or core capital is defined as common equity Tier 1 capital plus certain qualifying subordinated interests and grandfathered capital instruments. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, ~~2015~~which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, ~~the~~qualifying subordinated instruments and certain grandfathered capital ~~adequacy~~instruments. An institution's risk-based capital requirements ~~were~~are ~~substantially~~measured ~~revised~~against torisk-weighted ~~conform~~assets, ~~them~~which toequal the ~~international~~sum ~~regulatory~~of ~~standards~~each ~~agreed~~on-balance-sheet toasset byand the ~~Basel~~credit-equivalent ~~Committee~~amount onof ~~Banking~~each ~~Supervision~~off-balance-sheet initem ~~the~~after ~~accord~~being ~~often~~multiplied ~~referred~~by toan asassigned ~~"Basel~~risk ~~III"~~weight. ~~The~~ ~~final~~Risk ~~rule~~weightings ~~applies~~range from 0% for cash to ~~all~~100% ~~depository~~for ~~institutions~~property asacquired ~~well~~through asforeclosure, commercial loans, and certain other assets to ~~all~~150% ~~top-tier~~for ~~bank~~exposures ~~and~~that ~~savings~~are more than 90 days past due or are on nonaccrual status and ~~loan~~certain ~~holding~~commercial ~~companies~~real estate facilities that ~~are~~finance ~~not~~the ~~subject~~acquisition, development or construction of real property. Pursuant to the ~~Federal~~Economic ~~Reserve's~~Growth, ~~Small~~Regulatory ~~Bank~~Relief ~~Holding~~and ~~Company~~Consumer ~~Policy~~Protection ~~Statement~~Act (“EGRRCPA”), enacted in 2018, the federal banking agencies may only apply a heightened risk weight to a higher volatility commercial real estate exposure that constitutes a higher volatility commercial real estate acquisition, development or construction loan as defined in EGRRCPA and which was originated on or after January 1, 2015.

~~Under~~The ~~the FDIC's revised~~ capital ~~adequacy~~rules ~~regulations,~~require ~~the~~banks ~~Bank is required~~ to ~~meet~~maintain ~~four~~and ~~minimum~~covered ~~capital~~financial ~~standards:~~institution ~~(1)~~holding ~~"Tier~~companies 1"to ormaintain ~~"core"~~a capital ~~leverage~~conservation ~~ratio~~buffer ~~equal~~of to at least ~~4% of total adjusted assets, (~~2~~) a common equity Tier 1 capital ratio equal to 4~~.5% of risk-weighted assets, ~~(3)~~over aand ~~Tier~~above 1the minimum risk-based ~~ratio equal to 6% of risk-weighted assets, and (4) a total~~ capital ~~ratio~~requirements. ~~equal~~Institutions tothat 8%do ofnot ~~total~~maintain ~~risk-weighted~~the ~~assets.~~required ~~Common equity Tier 1~~ capital isbuffer ~~defined~~will asbecome ~~common~~subject ~~stock~~to ~~instruments,~~progressively ~~retained~~more ~~earnings,~~stringent ~~any~~limitations ~~common~~on ~~equity Tier 1 minority interest and, unless~~ the ~~bank~~percentage ~~has made an "opt-out" election, accumulated other comprehensive income, net~~ of ~~goodwill~~earnings ~~and~~that ~~certain~~can ~~other~~be ~~intangible~~paid ~~assets.~~out ~~Tier~~in 1dividends or ~~core~~used ~~capital~~for isstock ~~defined~~repurchases ~~as common equity Tier 1 capital plus certain qualifying subordinated interests~~ and ~~grandfathered~~on ~~capital~~the ~~instruments.~~payment ~~Total capital consists~~ of ~~Tier~~discretionary 1bonuses ~~capital~~to ~~plus~~senior ~~Tier~~executive 2management. orThe ~~supplementary~~ capital ~~items,~~buffer ~~which~~requirement ~~include~~effectively ~~allowances~~raise ~~for~~the ~~loan~~minimum ~~losses~~required ~~in an amount of up to 1.25% of~~ risk-~~weighted assets, qualifying subordinated instruments and certain grandfathered capital instruments. An institution's risk-~~based capital ~~requirements~~ratios are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight. Risk weightings range from 0% for cash to ~~100~~7% for ~~property~~Common ~~acquired~~Equity ~~through~~Tier ~~foreclosure,~~1 ~~commercial loans~~Capital, ~~and certain other assets to 150~~8.5% for ~~exposures~~Tier ~~that~~1 ~~are~~Capital ~~more than 90 days past due or are on nonaccrual status~~ and ~~certain commercial real estate facilities that finance the acquisition, development or construction of real property~~10. ~~Pursuant~~5% tofor ~~EGRRCPA,~~Total ~~the~~Capital ~~federal~~on ~~banking agencies may only apply~~ a ~~heightened~~fully ~~risk weight to a higher volatility commercial real estate exposure that constitutes a higher volatility commercial real estate acquisition, development or construction loan as defined~~ phased-in ~~EGRRCPA and which was originated on or after January 1, 2015~~basis.

In addition to higher capital requirements, the capital rules require banks to maintain and covered financial institution holding companies to maintain a capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements. Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement is being phased in over four years beginning January 1, 2016. The fully phased-in capital buffer requirement will effectively raise the minimum required risk-based capital ratios to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital on a fully phased-in basis.

In assessing an institution's capital adequacy, the FDIC takes into consideration not only these numeric factors but also qualitative factors, and has the authority to establish higher capital requirements for individual institutions where necessary.

EGRRCPA directs the federal banking agencies to develop a community bank leverage ratio of tangible capital to average total consolidated assets of between 8% and 10% as an alternative to the current leverage and risk-based capital rules for qualifying community banks and satisfying any other leverage or capital requirements to which they are subject. Qualifying community banks meeting the community bank leverage ratio would also be deemed well-capitalized for purposes of the prompt corrective action rules. A qualifying community bank is a depository institution or holding company with total consolidated assets of less than $10 billion that is not excluded from qualification by the federal banking regulators based on the institution’s risk profile. ~~Under~~The ~~regulations~~federal ~~proposed~~banking byagencies ~~the~~have ~~federal~~issued ~~banking~~a ~~agencies~~final rule, effective January 1, 2020, under which a qualifying community bank may opt in to the community bank leverage ratio framework if its community bank leverage ratio exceeds 9%. ~~The~~To ~~proposed~~date, ~~regulations~~the ~~would~~Bank ~~define~~has ~~tangible~~not ~~equity~~elected asto ~~total~~opt ~~bank~~into equity capital less: (i) accumulated other comprehensive income; (ii) intangible assets (other than mortgage servicing assets); and (iii) deferred tax assets (net of related valuation allowances) arising from net operating loss and tax credit carryforwards. Under the proposal, a qualifying community bank ~~must~~leverage ~~have~~ratio total off-balance sheet exposures (excluding derivatives other than credit derivatives and unconditionally cancellable commitments) of 25% of less of total consolidated assets, total trading assets and liabilities of 5% or less of total consolidated assets, mortgage servicing assets of 25% or less of tangible equity and temporary difference deferred tax assets of less than 25% of tangible equityframework.

Prompt Corrective Regulatory Action. Under applicable federal statutes, the federal bank regulatory agencies are required to take "prompt corrective action" with respect to institutions that do not meet specified minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the FDIC's prompt corrective action regulations, an institution is deemed to be "well capitalized" if it has a Total Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio of 8.0% or greater, a Common Equity Tier 1 risk-based capital ratio of 6.5% or better and a leverage ratio of 5.0% or greater. An institution is "adequately capitalized" if it has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, a Common Equity Tier 1 Capital Ratio of 4.5% or better and a Leverage Ratio of 4.0% or greater. An institution is "undercapitalized" if it has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital ratio of less than 6.0%, a Common Equity Tier 1 ratio of less than 4.5% or a Leverage Ratio of less than 4.0%. An institution is deemed to be "significantly undercapitalized" if it has a Total Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, a Common Equity Tier 1 ratio of less than 3.0% or a Leverage Ratio of less than 3.0%. An institution is considered to be "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%

1817

Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio of 8.0% or greater, a Common Equity Tier 1 risk-based capital ratio of 6.5% or better and a leverage ratio of 5.0% or greater. Under the final community bank leverage ratio regulations, a qualifying community bank will be deemed well capitalized if it maintains a community bank leverage ratio greater than 9.0%. In addition, a bank that has elected to use the community bank leverage ratio framework will continue to be considered well capitalized during a two-quarter grace period after its leverage ratio falls below 9.0%, provided that the leverage ratio remains above 8.0%.

An institution is "adequately capitalized" if it has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, a Common Equity Tier 1 Capital Ratio of 4.5% or better and a Leverage Ratio of 4.0% or greater. An institution is "undercapitalized" if it has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital ratio of less than 6.0%, a Common Equity Tier 1 ratio of less than 4.5% or a Leverage Ratio of less than 4.0%. An institution is deemed to be "significantly undercapitalized" if it has a Total Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, a Common Equity Tier 1 ratio of less than 3.0% or a Leverage Ratio of less than 3.0%. An institution is considered to be "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%

The prompt corrective action regulations provide for the imposition of a variety of requirements and limitations on institutions that fail to meet the above capital requirements. In particular, the FDIC may require any non-member bank that is not "adequately capitalized" to take certain action to increase its capital ratios. If the non-member bank's capital is significantly below the minimum required levels of capital or if it is unsuccessful in increasing its capital ratios, the bank's activities may be restricted.

~~Under~~At ~~the~~December 31, ~~proposed community bank leverage ratio regulations~~2019, athe ~~qualifying~~Bank ~~community~~qualified ~~bank~~as ~~would be deemed:~~ "well capitalized" ifunder itthe ~~has~~prompt acorrective ~~community~~action ~~bank leverage ratio greater than 9%; adequately capitalized if its community bank leverage ratio is 7~~rules.5% or greater; undercapitalized if its community bank leverage ratio is less than 7.5% and significantly undercapitalized if its community bank leverage ratio is less than 6%. A qualifying community bank will continue to be treated as critically undercapitalized if it has a ratio of tangible equity to total assets of 2% or less.

At December 31, 2018, the Bank qualified as "well capitalized" under the prompt corrective action rules.

Community Reinvestment Act. Under the Community Reinvestment Act, every insured depository institution, including the Bank, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community. The Community Reinvestment Act requires the depository institution's record of meeting the credit needs of its community to be assessed and taken into account in the evaluation of certain applications by such institution, such as a merger or the establishment of a branch office by the Bank. An unsatisfactory Community Reinvestment Act examination rating may be used as the basis for the denial of an application. The Bank received a "satisfactory" rating in its most recent Community Reinvestment Act examination.

Transactions with Related Parties. The Bank is subject to the Federal Reserve’s Regulation W, which implements statutory restrictions on transactions between a bank and its affiliates and incorporates the Federal Reserve’s interpretations and exemptions under Sections 23A and 23B of the Federal Reserve Act. Section 23A and Regulation W generally place limits on the amount of a bank’s loans or extensions of credit to, investments in, or certain other transactions with affiliated companies, and on the amount of advances to third parties collateralized by the securities or obligations of affiliated companies. In addition, Section 23B and Regulation W generally require a bank’s transactions with its affiliates to be on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.

The Bank is also subject to restrictions under Section 22(h) of the Federal Reserve Act on its extensions of credit to executive officers, directors, certain principal shareholders and their related interests. Such extensions of credit must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

Federal Home Loan Bank System. The Bank is a member of the FHLB of NY, which is one of twelve regional federal home loan banks. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by financial institutions and proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members pursuant to policies and procedures established by its board of directors.

As a member, the Bank is required to purchase and maintain stock in the FHLB of NY in an amount equal to the greater of 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of its outstanding FHLB advances. The FHLB imposes various limitations on advances such as limiting the amount of certain types of real estate related collateral to 30% of a member's capital and limiting total advances to a member.

The FHLB is required to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of FHLB dividends paid and could continue to do so in the future. In addition, these requirements could result in the FHLB imposing a higher rate of interest on advances to their members.

Item 1A. Risk Factors

Not applicable as the Company is a "smaller reporting company."

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

At December 31, ~~2018~~2019, our investment in property and equipment, net of depreciation and amortization, totaled $8.20 million, including leasehold improvements and construction in progress. The following table lists our offices.

1918

Office Location	Year FacilityOpened		Leased orOwned
Millington Main Office1902 Long Hill RoadMillington, NJ	1994	(1)	Owned
RiverWalk Branch Office675 Martinsville RoadBasking Ridge, NJ	2005	(2)	Leased
Martinsville Branch Office1924 Washington Valley RoadMartinsville, NJ	2006		Leased
Bernardsville Branch Office122 Morristown RoadBernardsville, NJ	2008		Owned
Lending Office Office25 Independence RoadWarren, NJ	2017		Leased
Lending Office25 Independence RoadWarren, NJ	2017		Leased

__________________


(1)	The Bank's main office opened in 1911 in Millington, New Jersey. The Bank moved into its current main office in 1994.


(2)	The Bank's first branch office opened in 1998 in Liberty Corner, New Jersey. This office was relocated in 2005.

Item 3. Legal Proceedings

The Bank, from time to time, is a party to routine litigation which arises in the normal course of business, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans, and other issues incident to our business. There were no lawsuits pending or known to be contemplated against the Company or the Bank at December 31, ~~2018~~2019 that would have a material effect on operations or income.

Item 4. Mine Safety Disclosures

Not applicable

2019

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information. The Company's common stock trades on the NASDAQ Stock Market under the symbol "MSBF". The table below shows the reported high and low closing prices of common stock reported by NASDAQ and dividends declared during the periods indicated.

	High		Low		Dividends
2017
Quarter ended March 31, 2017	$	16.95	$	14.25	$	—
Quarter ended June 30, 2017	$	18.00	$	16.25	$	—
Quarter ended September 30, 2017	$	18.26	$	17.10	$	0.425
Quarter ended December 31, 2017	$	18.00	$	17.20	$	—
2018
Quarter ended March 31, 2018	$	18.35	$	17.50	$	—
Quarter ended June 30, 2018	$	21.50	$	17.95	$	0.445
Quarter ended September 30, 2018	$	21.66	$	20.40	$	—
Quarter ended December 31, 2018	$	20.70	$	17.41	$	0.460
2019
Quarter ended March 31, 2019	$	18.70	$	17.45	$	—
Quarter ended June 30, 2019	$	18.15	$	14.40	$	—
Quarter ended September 30, 2019	$	16.92	$	15.35	$	0.500
Quarter ended December 31, 2019	$	18.00	$	14.91	$	—

Dividends. Declarations of dividends by the Board of Directors depend on a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, and general economic as well as stock market conditions. The timing, frequency and amount of dividends are determined by the Board of Directors.

Stockholders. As of March 15 13, ~~2019~~2020, there were approximately 454 shareholders of record of the Company's common stock. This number does not include brokerage firms, banks and registered clearing agents acting as nominees for an indeterminate number of beneficial ("street name") owners.

(b) Use of Proceeds.

Not applicable

On December 17, 2018, the Company announced that isit ~~has~~had approved a stock repurchase plan to purchase up to 273,150 shares of the Company's common stock. In connection with the repurchase plan, the Company entered into a Rule 10b5-1 plan with Keefe, Bruyette & Wood, a Stifel Company. The following table shows shares repurchased during the quarter ended December 31, ~~2018~~2019.

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) that may be purchased Under the Plans or Programs
October 1-October 31,2018	30,000	$	18.47	516,916	20,163
October 1-October 31,2019	16,102	$	16.08	273,150	—
November 1-November 30, 2018	—	—		—	20,163
November 1-November 30, 2019	—	—		—	—
December 1-December 31, 2018	94,111	$	18.03	73,948	199,202
December 1-December 31, 2019	—	$	—	—	—
Total	~~124~~16,~~111~~102	$	1816.2508	~~590~~273,~~864~~150	~~199,202~~—

Item 6. Selected Financial Data

Not applicable as the Company is a smaller reporting company.

2120

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects the Company's consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with the Company's consolidated financial statements and accompanying notes thereto beginning on page F‑1 following Item 16 of this Form 10-K.

Critical Accounting Policies

Our accounting policies are integral to understanding the results reported and are described in Note 2 to our consolidated financial statements beginning on page F-1. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates. A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for loan losses.

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level by management which represents the evaluation of known and probable incurred losses in the loan portfolio at the consolidated balance sheet date that are reasonable to estimate. Management's periodic evaluation of the adequacy of the allowance is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, the composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examinations.

The Company's loan portfolio is comprised of the following segments: residential mortgage, commercial real estate, construction, commercial and industrial and consumer. Some segments of the Company's loan receivable portfolio are further disaggregated into classes which allow management to more accurately monitor risk and performance. Accordingly, the methodology and allowance calculation includes the segmentation of the total loan portfolio.

The residential mortgage loan segment is disaggregated into two classes: one-to-four family loans, which are primarily first liens, and home equity loans, which consist of first and second liens. The commercial real estate loan segment includes owner and non-owner occupied loans which have medium risk based on historical experience with these types of loans. The construction loan segment is further disaggregated into two classes: one-to-four family owner-occupied, which includes land loans, whereby the owner is known and there is less risk, and other, whereby the property is generally under development and tends to have more risk than the one-to-four family owner-occupied loans. The commercial and industrial loan segment consists of loans made for the purpose of financing the activities of commercial customers. The commercial and industrial loans carry a mix of loans secured by real estate and unsecured lines of credit some of which are for high net worth individuals. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts.

The allowance consists of specific, general and unallocated components. The specific component is related to loans that are classified as impaired. For loans classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class and is based on historical loss experience adjusted for qualitative factors. These qualitative risk factors include:


1.	Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.


2.	National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans.


3.	Nature and volume of the portfolio and terms of loans.


4.	Experience, ability, and depth of lending management and staff.


5.	Volume and severity of past due, classified and nonaccrual loans as well as and other loan modifications.


6.	Quality of the Company's loan review system, and the degree of oversight by the Company's Board of Directors.


7.	Existence and effect of any concentrations of credit and changes in the level of such concentrations.


8.	Effect of external factors, such as competition and legal and regulatory requirements.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation.

The unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

2221

Loans the terms of which are modified are classified as TDRs if, in connection with the modification, the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a reduction in interest rate below market rate given the associated credit risk, or an extension of a loan's stated maturity date. Nonaccrual TDRs are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as TDRs are designated as impaired until they are ultimately repaid in full or foreclosed and sold.

Once the determination has been made that a loan is impaired, impairment is measured by comparing the recorded investment in the loan to one of the following:(a) the present value of expected cash flows (discounted at the loan's effective interest rate), (b) the loan's observable market price or (c) the fair value of collateral adjusted for expected selling costs. The method is selected on a loan by loan basis with management primarily utilizing the fair value of collateral method.

The estimated fair values of the real estate collateral are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

The estimated fair values of non-real estate collateral, such as accounts receivable, inventory and equipment, are determined based on the borrower's financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Overview

Our primary business is attracting deposits from the general public and using those deposits, together with funds generated from operations, principal repayments on securities and loans and borrowed funds, for our lending and investing activities. Our loan portfolio consists of one-to-four-family residential real estate mortgages, commercial real estate mortgages, construction loans, commercial and industrial loans, home equity loans and lines of credit, and other consumer loans. We also invest in U.S. Government obligations and mortgage-backed securities and, to a lesser extent, corporate bonds.

We reported net income of $4.81 million for the year ended December 31, ~~2018~~2019 as compared to a net income of $24.78 million for ~~2017~~2018. Net income for ~~2017~~2019 was affected by ~~the~~an ~~$678,000~~increase ~~charge~~in weprofessional ~~took~~expenses inassociated ~~connection~~ with ~~the~~increased ~~revaluation~~audit ofscope ~~our deferred tax assets. As a result of the enactment of the Tax Cuts~~ and ~~Jobs~~identification ~~Act effective December 22, 2017, corporate tax rates were reduced thereby resulting in a reduction in the in the value~~ of ~~our~~material ~~deferred tax assets~~weakness. ~~This~~ ~~charge was taken as part of the provision for income taxes.~~

Net interest income for ~~2018~~2019 was updown approximately $~~1.9 million~~382,000, or 112.9313%, as compared to ~~2017~~2018. For the year ended December 31, ~~2018~~2019, interest income increased by $31.92 million, or 195.8418%, while interest expense increased by $21.06 million, or 5629.6549%, as compared to ~~2017~~2018. Non-interest expense increased by $~~680~~908,000, or 67.0866%, while non-interest income ~~decreased~~increased by $22174,000, or 221.6875%, for the same comparative period. The net interest rate spread decreased in ~~2018~~2019 to 32.0891%, compared to 3.1508% for ~~2017~~2018, mainly as a result of increased competition for deposits ~~forced~~caused an increase in deposit rates paid.

Total assets were $~~584~~593.51 million at December 31, ~~2018~~2019, a 31.8147% increase compared to $~~563~~584.05 million at December 31, ~~2017~~2018. The increase in assets occurred primarily as the result of a $286.97 million increase in ~~loans~~cash ~~receivable,~~and ~~net~~cash equivalents, anand ~~increase~~a of $25.67 million increase in ~~FHLB~~loans ~~stock~~receivable, ~~and~~net, anoffset ~~increase~~by a decrease of $13.06 million in securities held to maturity. Deposits were $~~420~~472.68 million at December 31, ~~2018~~2019, compared to $~~448~~420.96 million at December 31, ~~2017~~2018. FHLB advances were $9451.36 million at December 31, ~~2018~~2019 compared to $3794.73 million at December 31, ~~2017~~2018.

Stockholders' equity at December 31, ~~2018~~2019 was $6665.64 million compared to our stockholders' equity at December 31, ~~2017~~2018 of $7366.06 million. The Company had net income of $4.81 million for the year ended December 31, ~~2018~~2019. The decline in shareholders' equity was primarily due to the repurchase of ~~373~~199,~~948~~202 shares of common stock at a total cost of $63.73 million and bythe declaration of a $52.06 million ~~used to pay two special dividends to shareholders~~dividend. Our return on average equity for the year ended December 31, ~~2018~~2019 was 6.8819% compared to 36.6788% for the year ended December 31, ~~2017~~2018.

Comparison of Financial Condition at December 31, ~~2018~~2019 and ~~2017~~2018

2322

General. Total assets at December 31, ~~2018~~2019 were $~~584~~593.51 million versus $~~563~~584.05 million at December 31, ~~2017~~2018 with the increase primarily attributable ~~mainly~~ to ~~continued~~an increase in cash and cash equivalents and loan growth. During the year ended December 31, ~~2018~~2019, the Company experienced growth of $286.97 million, or 656.1038%, in ~~loans~~cash ~~receivable,~~and ~~net~~cash equivalents and aof $25.67 million, or ~~123~~1.1814%, ~~increase~~ in ~~FHLB~~loans ofreceivable, ~~New York stock~~net. Securities held to maturity ~~increased~~decreased $~~994,000~~3.6 million primarily as a result of the purchase of $910.0 million in securities offset by maturities and principal repayments, while FHLB of New York stock decreased $1.9 million, or 40.12%. Other assets ~~decreased~~increased $~~422,000~~2.0 million primarily due to the ~~decrease~~recording inof ~~deferred~~the ~~tax~~new ~~assets.~~lease accounting standard. Deposits decreased by $2852.32 million while FHLB advances ~~increased~~decreased by $5642.67 million.

The ratio of average interest-earning assets to average-interest bearing liabilities was 120.2142% for the year ended December 31, ~~2018~~2019 as compared to ~~124~~120.7321% for the year ended December 31, ~~2017~~2018.

Loans. Loans receivable, net, increased $285.97 million, or 61.1014%, from $~~473~~502.43 million at December 31, ~~2017~~2018 to $~~502~~508.30 million at December 31, ~~2018~~2019. The Bank's ~~commercial~~construction ~~and multi-family real estate~~ loan portfolio ~~grew~~increased byapproximately $1518.90 million, ordue ~~8.10%,~~to ~~since~~new ~~December 31~~projects, ~~2017.~~while ~~The~~the commercial and ~~industrial~~multi-family real estate loan portfolio ~~increased~~grew by $3514.18 million, or 476.8398%, onsince ~~continued strong loan demand~~December 31, ~~while the construction loan portfolio decreased approximately $14~~2018.~~1 million due to the completion of projects.~~ The residential mortgage portfolio, consisting of one-to-four family residential loans and home equity loans, decreased $1613.9 million to $~~167~~153.8 million from $~~184~~167.8 million, while commercial and industrial loans decreased $7.5 million as of year-end ~~2017~~2018. All remaining portfolios were consistent with prior year-end levels.

Securities. The securities held to maturity portfolio totaled $3935.58 million at December 31, ~~2018~~2019 compared to $3839.5 million at December 31, ~~2017~~2018. Maturities, calls and principal repayments during ~~2018~~2019 totaled $713.96 million and $910.0 million in securities were purchased compared to $6.7.9 million of maturities, calls and principal repayments and $19.20 million in purchases during ~~2017~~2018.

Deposits. Total deposits at December 31, ~~2018~~2019 ~~decreased~~increased to $~~420~~472.68 million from $~~448~~420.96 million at December 31, ~~2017~~2018. Overall, deposits ~~decreased~~increased by $2852.32 million with non-interest bearing balances increasing by $91.82 million and interest-bearing deposits ~~decreasing~~increasing $3850.19 million since December 31, ~~2017~~2018, as the Company focused on deposit pricing and the development of deeper commercial and small business relationships.

Borrowings. Total borrowings were $9451.36 million at December 31, ~~2018~~2019 compared to $3794.73 million at December 31, ~~2017~~2018. ~~During the year, we had a maturity of a $10.0 million advance at a rate of 3.46%.~~ Overnight advances with the FHLB of New York at December 31, ~~2018~~2019 were $6623.69 million compared to ~~none~~$66.6 million at December 31, ~~2017~~2018.

Equity. Stockholders' equity was $6665.64 million at December 31, ~~2018~~2019 compared to $7366.06 million at December 31, ~~2017~~2018, a decrease of $61.43 million or 81.7491%. The decrease in shareholders' equity was primarily due to the repurchase of ~~373~~199,~~948~~202 shares of common stock at a total cost of $63.73 million and the ~~payment~~declaration of ~~two~~a ~~special dividends to shareholders for an aggregate amount of~~ $52.06 million dividend. This reduction was partially offset by a $4.81 million increase in retained earnings related to net income.

Comparison of Operating Results for the Years Ended December 31, ~~2018~~2019 and ~~2017~~2018

General. Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. It is a function of the average balances of loans and investments versus deposits and borrowed funds outstanding in any one period and the yields earned on those loans and investments and the cost of those deposits and borrowed funds. Our results of operations are also affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income includes service fees and charges, and income on bank owned life insurance. Non-interest expense includes salaries and employee benefits, occupancy and equipment expense and other general and administrative expenses such as service bureau fees and advertising costs.

The Company reported net income of $4.81 million for December 31, ~~2018~~2019 compared to net income of $24.78 million for the year ended December 31, ~~2017~~2018, representing ana ~~increase~~decrease of $~~2.1~~732,000 ~~million~~ or 7715.6314%. This ~~increase~~decrease was largely driven by aan ~~$1.9 million~~ increase in ~~net~~ non-interest ~~income~~expense of $908,000 and a decrease ~~in the provision for loan losses~~ of $~~945~~382,000. in net interest income. Offsetting this was ana ~~increase~~decrease in ~~non-interest~~the ~~expense~~provision for loan losses of $~~680~~240,000, and aan ~~decrease~~increase of $22174,000 in non-interest income. Income tax expense ~~increased~~decreased $43144,000 for the year ended December 31, ~~2018~~2019 versus ~~2017~~2018 ~~due to the increase in pre-tax income offset by a decrease in the corporate tax rate~~ as a result of ~~the~~lower ~~passage of the Tax Cuts and Jobs Act on December 22, 2017 which significantly reduced corporate tax rates~~earnings.

Net Interest Income. Net interest income for the year ended December 31, ~~2018~~2019 totaled $17.96 million compared to $1617.09 million for the year ended December 31, ~~2017~~2018. Interest income for the year ended December 31, ~~2018~~2019 was $2324.36 million compared to $1923.53 million for the year end December 31, ~~2017~~2018, while interest expense increased by $21.06 million to $57.40 million from $5.4 million the same period a year earlier.

Average earning assets increased $647.38 million, or 131.3344%, to $~~546~~554.53 million year over year while the average yield on interest earning assets increased by 0.2316% to 4.2743% for the year ended December 31, ~~2018~~2019. The result of those variances was an increase in interest income of $31.92 million for the year ended December 31, ~~2018~~2019 compared to the year ended December 31, ~~2017~~2018. Interest income for the year ended December 31, ~~2018~~2019 was $2324.36 million compared to $1923.53 million for the year end December 31, ~~2017~~2018. Interest income on loans receivable grew by $31.70 million to $2223.0 million mainly due to an increase in loan ~~volume~~rate. Average loans were $~~495~~502.72 million and $~~429~~495.87 million for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively. The average yield on loans increased by .1815% which ~~also~~ contributed to the increase in interest income from loans. Average securities held to maturity declined by $12.71 million to $3937.98 million from $4139.69 million. The average rate earned on the portfolio increased 0.2415% to 2.6782% from 2.4367% for the prior year. Overall, the decreased volume combined with the increased rate resulted in ana ~~increase~~decrease of $541,000 in interest income from securities. Other interest-earning assets, consisting of our Federal Reserve account, FHLB stock and other interest-bearing deposits with other financial institutions, increased by $3,5 million on average, to $14.4 million for the year ended December 31, 2019 compared with $10.9 million for the year ended December 31, 2018. Partnered with this increase was an increase

in the average yield from 2.94% to 3.37%. This increase in rate was largely attributed to larger balances held at the Federal Reserve Bank earning an average rate of 2.13%. The combined impact was an increase in interest income on other interest-earning assets of $164,000.

Total interest expense increased by $1.6 million to $7.0 million for the year ended December 31, 2019 as a result of higher rates. Overall, average interest-bearing liabilities increased $5.7 million, or 1.3%, to $460.3 million for the year ended December 31, 2019 as compared to $454.6 million for the year ended December 31, 2018. Interest expense on certificates of deposit increased $848,000 as average balances were approximately $22.7 million higher for the year ended 2019 period totaling $147.3 million compared to $124.6 million for the year ended December 31, 2018. The average cost of certificates of deposit increased by 0.32%. Savings accounts averaged $99.4 million for the year ended December 31, 2019 versus $105.6 million for the year ended December 31, 2018. The 0.22% increase in the average rate was the primary reason for the $187,000 increase in interest expense for these accounts in 2019 as compared to the same period in 2018. Interest demand and money market accounts on average decreased $13.2 million to $140.2 million, while interest expense increased $413,000 for the year ended December 31, 2019. The average interest rate paid on these accounts rose 0.37% to 1.19% from 0.82% as a result of larger balance accounts earning a higher rate of interest. Interest expense on FHLB advances rose by $144,000 to $1.7 million from $1.6 million a year earlier. The average cost of advances increased by 0.12% to 2.32% from 2.20% . Average FHLB advances were $73.5 million for the year ended December 31, 2019 versus $71.1 million for the year ended December 31, 2018.

The Company's net interest spread and margin declined over the periods and were 2.91% and 3.17%, respectively for the year ended December 31, 2019 compared to 3.08% and 3.28%, respectively for the year ended December 31, 2018.

Provision for Loan Losses. The loan loss provision for the year ended December 31, 2019 was $0 compared to $240,000 for the year ended December 31, 2018. The Company's management reviews the level of the allowance for loan losses on a quarterly basis based on a variety of factors including, but not limited to, (1) the risk characteristics of the loan portfolio, (2) current economic conditions, (3) actual losses previously experienced, (4) the Company's level of loan growth and (5) the existing level of reserves for loan losses that are probable and estimable. This analysis resulted in a lower provision for loan loss being required for the period ended December 31, 2019. The decrease in the level of provision for loan loss primarily reflects other credit metrics generally improving year over year. There was a stabilization of the quantitative and qualitative factors during the year ended December 31, 2019 and December 31, 2018. The Company had $4,000 in charge-offs and $71,000 in recoveries for the year ended December 31, 2019 compared to $8,000 in charge-offs and $9,000 in recoveries for the year ended December 31, 2018. The Company had $3.1 million in non-performing loans as of December 31, 2019, compared to $4.1 million at December 31, 2018. The allowance for loan losses as a percentage of total loans was 1.08% for December 31, 2019 and December 31, 2018, respectively, while the allowance for loan losses as a percentage of non-performing loans increased to 184.11% at December 31, 2019 from 136.83% at December 31, 2018. Non-performing loans to total loans were 0.59% at December 31, 2019 compared to 0.81% at December 31, 2018. Net charge-offs to average loans outstanding ratios were 0.00% for the year ended December 31, 2019 and December 31, 2018. While management believes the allowance for loan losses is adequate for the risk in the loan portfolio, there can be no assurance that future increases may not be necessary.

Non-Interest Income. This category includes fees derived from checking accounts, ATM transactions, debit card use and other fees. It also includes increases in the cash-surrender value of our bank owned life insurance. Overall, non-interest income was $974,000 for the year ended December 31, 2019 compared to $800,000 for the year ended December 31, 2018, an increase of $174,000 or 21.75%.

Income from fees and service charges totaled $346,000 for the year ended December 31, 2019 compared to $334,000 for the year ended December 31, 2018, an increase of $12,000 or 3.59%. The increase was attributable to higher volume in services fees charged during the year.

Income on bank owned life insurance was $554,000 and $388,000 for the years ended December 31, 2019 and 2018, while other non-interest income was $74,000 and $78,000 for the years ended December 31, 2019 and 2018, respectively. Bank owned life insurance increased as a result of a death benefit recorded during the year.

Non-Interest Expenses. Total non-interest expenses increased by $908,000, or 7.66%, during the year ended December 31, 2019 and totaled $12.8 million as compared to $11.9 million for the year ended December 31, 2018.

Salaries and employee benefits expense increased by $96,000, or 1.44%, to $6.8 million for the year ended December 31, 2019 compared to $6.7 million for the year ended December 31, 2018. Salary and benefits increased due to normal increases in salaries and benefits expenses.

Directors' compensation expense totaled $524,000 for the year ended December 31, 2019 compared to $490,000 for the year ended December 31, 2018, representing an increase of $34,000 or 6.94% as one director was added during the year.

Occupancy and equipment expense decreased by $30,000, or 1.92%, to $1.5 million for the year ended December 31, 2019 compared to $1.6 million for the same period a year earlier.

Service bureau fees increased by $228,000, or 65.71%, to $575,000 for the year ended December 31, 2019 compared to $347,000 for the year ended December 31, 2018 as a result of a reduction in the Company's relationship credit that had completed during the year.

FDIC assessment expense decreased $111,000, or 52.61%, to $100,000 for the year ended December 31, 2019 compared to $211,000 for the same period a year earlier. The reduction in expense was related to an FDIC credit received for the past two quarters.

~~FHLB~~Professional ~~stock~~services ~~and other interest-bearing deposits with other financial institutions,~~ increased by $~~166~~685,000 ontotaling ~~average, to~~ $102.94 million for the year ended December 31, ~~2018~~2019 compared with $101.7 million for the year ended December 31, ~~2017~~2018. ~~Partnered~~The ~~with this~~ increase ~~was~~is anassociated ~~increase~~with inincreased ~~the~~audit ~~average~~scope ~~yield~~and ~~from~~identification ~~1.78% to 2.94%. This increase in rate was largely attributed to larger balances held at the Federal Reserve Bank earning an average rate~~ of ~~1.26%.~~material ~~The combined impact was an increase in interest income on other interest-earning assets of $129,000~~weakness.

~~Total~~Other non-interest expense ~~increase~~totaled by $~~2.0~~831,000 ~~million to $5.4 million~~ for the year ended December 31, ~~2018 as a result of increased volumes~~2019, ~~and higher rates. Overall, average interest-bearing liabilities increased $68.0 million, or 17.6%, to $454.6 million for the year ended December 31, 2018 as~~ compared to $~~386.6 million for the year ended December 31~~813, ~~2017. Interest expense on certificates of deposit increased $382,~~000 ~~as average balances were approximately $5.0 million higher~~ for the year ~~ended 2018 period totaling $124.6 million compared to $119.6 million for the year ended December 31~~earlier, ~~2017. The~~reflecting average cost of certificates of deposit increased by 0.25%. Savings accounts averaged $105.6 million for the year ended December 31, 2018 versus $105.4 million for the year ended December 31, 2017. The 0.26% increase in the average rate was the primary reason for the $271,000 increase in interest expense for these accounts in 2018 as compared to the same period in 2017. Interest demand and money market accounts on average grew $34.3 million to $153.4 million which resulted in an increase ~~in interest expense~~ of $~~731~~18,000 ~~for the year ended December 31~~, ~~2018. The~~or ~~average interest rate paid on these accounts rose 0~~2.3821% ~~to 0.82% from 0.44% as a result of a mixture of larger balance accounts earning a higher rate of interest and the volume of deposits. Interest expense on FHLB advances rose by $568~~,~~000~~ todue ~~$1.6 million from $996,000 a year earlier. The average cost of advances decreased by 0.15%~~ to ~~2.20%~~various ~~from~~expense ~~2.35%~~category ~~as a result of one long-term borrowing maturing during the year costing 3~~increases.~~46%.~~ ~~Average FHLB advances were $71.1 million for the year ended December 31, 2018 versus $42.4 million for the year ended December 31, 2017 which was the cause of the increase in interest expense.~~

Income Taxes. The ~~Company's~~income ~~net~~tax ~~interest~~expense ~~spread~~for ~~and~~the ~~margin~~year ~~declined~~ended ~~over~~December 31, ~~the~~2019 ~~periods~~was ~~and~~$1.7 ~~were~~million, 3or 28.089% ~~and~~of 3income before taxes as compared to income tax expense of $1.288 million, or 27.2%, ~~respectively~~of the reported income before income taxes, for the year ended December 31, 2018. The ~~compared~~increase toin ~~3.15%~~tax ~~and~~rate ~~3.33%,~~was ~~respectively~~primarily ~~for~~attributable to the ~~year~~tax ~~ended~~true-up ~~December 31,~~from ~~2017~~2018.

~~Provision~~Average ~~for~~Balance ~~Loan Losses~~ Sheet. The ~~loan~~following ~~loss~~tables ~~provision~~set ~~for~~forth ~~the~~certain ~~year~~information ~~ended December 31, 2018 was $240,000 compared to $1.2 million~~ for the year ended December 31, ~~2017. The~~2019 Company's management reviews the level of the allowance for loan losses on a quarterly basis based on a variety of factors including, but not limited to, (1) the risk characteristics of the loan portfolio, (2) current economic conditions, (3) actual losses previously experienced, (4) the Company's level of loan growth and ~~(5) the existing level of reserves for loan losses that are probable and estimable. This analysis resulted in a lower provision for loan loss being required for the period ended December 31,~~ 2018. The ~~decrease~~average inyields the level of provision for loan loss primarily reflects lower loan growth year-over-year in addition to other credit metrics generally improving year over year. There was a stabilization of the quantitative and ~~qualitative~~costs ~~factors~~are ~~during~~derived ~~the~~by ~~year~~dividing ~~ended~~interest ~~December 31,~~income ~~2018~~ and ~~December 31,~~expense ~~2017. The~~by ~~Company had $8,000 in charge-offs and $9,000 in recoveries for~~ the ~~year~~average ~~ended~~daily ~~December 31,~~balance ~~2018 compared to $255,000 in charge-offs and $8,000 in recoveries for the year ended December 31, 2017. The Company had $4.1 million in non-performing loans as~~ of ~~December 31,~~assets ~~2018, compared to $4.1 million at December 31, 2017. The allowance for loan losses as a percentage of total loans was 1.09%~~ and ~~1.08% at December 31~~liabilities, ~~2018 and December 31, 2017,~~ respectively, ~~while the allowance~~ for loan losses as a percentage of non-performing loans increased to 136.83% at December 31, 2018 from 130.99% at December 31, 2017. Non-performing loans to total loans were 0.80% at December 31, 2018 compared to 0.83% at December 31, 2017. Net charge-offs to average loans outstanding ratios were 0.00% for the ~~year~~periods ~~ended December 31, 2018 compared to 0~~presented.06% for the year ended December 31, 2017. While management believes the allowance for loan losses is adequate for the risk in the loan portfolio, there can be no assurance that future increases may not be necessary.

Non-Interest Income. This category includes fees derived from checking accounts, ATM transactions, debit card use and other fees. It also includes increases in the cash-surrender value of our bank owned life insurance. Overall, non-interest income was $800,000 for the year ended December 31, 2018 compared to $822,000 for the year ended December 31, 2017, a decrease of $22,000 or 2.68%.



	Year Ended December 31,
	2019							2018
	Average Balance			Interest Earned/ Paid		Average Yield/ Cost		Average Balance			Interest Earned/ Paid		Average Yield/ Cost
Interest-earning assets:
Loans receivable ⁽¹⁾	$	502,186		$	23,007	4.58	%	$	495,719		$	21,960	4.43	%
Securities	37,787			1,064		2.82	%	39,893			1,065		2.67	%
Other interest-earning assets ⁽²⁾	14,367			484		3.37	%	10,885			320		2.94	%
Total interest-earning assets	554,340			24,555		4.43	%	546,497			23,345		4.27	%
Non-interest-earning assets	22,698							22,435
Total assets	$	577,038						$	568,932
Interest-bearing liabilities:
Interest demand & money market demand	$	140,208		1,670		1.19	%	$	153,367		1,257		0.82	%
Savings and club deposits	99,391			735		0.74	%	105,623			548		0.52	%
Certificates of deposit	147,253			2,877		1.95	%	124,556			2,029		1.63	%
Total interest-bearing deposits	386,852			5,282		1.37	%	383,546			3,834		1.00	%
FHLB of New York advances	73,473			1,708		2.32	%	71,064			1,564		2.20	%
Total interest-bearing liabilities	460,325			6,990		1.52	%	454,610			5,398		1.19	%
Non-interest-bearing deposits	47,228							41,746
Other non-interest-bearing liabilities	3,194							2,345
Total liabilities	510,747							498,701
Stockholders' equity	66,291							70,231
Total liabilities and stockholders' equity	$	577,038						$	568,932
Net interest income/net interest rate spread ⁽³⁾				$	17,565	2.91	%				$	17,947	3.08	%
Net interest margin ⁽⁴⁾						3.17	%						3.28	%
Ratio of interest-earning assets to interest-bearing liabilities	120.42		%					120.21		%

Income from fees and service charges totaled $334,000 for the year ended December 31, 2018 compared to $342,000 for the year ended December 31, 2017, a decrease of $8,000 or 2.34%. The decrease was attributable to lower volume in services fees charged during the year.

Income on bank owned life insurance was $388,000 and $413,000 for the years ended December 31, 2018 and 2017, while other non-interest income was $78,000 and $67,000 for the years ended December 31, 2018 and 2017, respectively.

Non-Interest Expenses. Total non-interest expenses increased by $680,000, or 6.08%, during the year ended December 31, 2018 and totaled $11.9 million as compared to $11.2 million for the year ended December 31, 2017.

Salaries and employee benefits expense increased by $433,000, or 6.94%, to $6.7 million for the year ended December 31, 2018 compared to $6.2 million for the year ended December 31, 2017. Salary and benefits increased due to an increase in incentive compensation as well as normal increases in salaries and benefits expenses and additions to staff.

Directors' compensation expense totaled $490,000 for the year ended December 31, 2018 compared to $743,000 for the year ended December 31, 2017, representing a decrease of $253,000 or 34.05%. The decrease was primarily due to the expense recorded in the 2017 period for the termination of the director retirement plan as described in Note 12.

Professional services increased $383,000 totaling $1.7 million for the year ended December 31, 2018 compared with $1.3 million for the year ended December 31, 2017. The increase is primarily attributable to costs associated with our Sarbanes-Oxley implementation.

Occupancy and equipment expense decreased by $56,000, or 3.46%, to $1.6 million for the year ended December 31, 2018 compared to $1.6 million for the same period a year earlier.

Service bureau fees increased by $118,000, or 51.53%, to $347,000 for the year ended December 31, 2018 compared to $229,000 for the year ended December 31, 2017 as a result of a reduction in the Company's relationship credit that declines every year.

Other non-interest expense totaled $813,000 for the year ended December 31, 2018, compared to $794,000 for the year earlier, reflecting an increase of $19,000, or 2.39%, due to various expense category increases.

Income Taxes. The income tax expense for the year ended December 31, 2018 was $1.8 million, or 27.2% of income before taxes as compared to income tax expense of $1.8 million, or 39.4%, of the reported income before income taxes, for the year ended December 31, 2017. The increase in income tax expense and the decrease in the effective tax rate was attributable to a larger proportion of pre-tax income being taxable and the revaluation of the Company's deferred tax asset as a result of the passage of the Tax Cuts and Jobs Act on December 22, 2017 which significantly reduced corporate tax rates. As a result, the Company recorded an additional tax provision of $678,000 for the revaluation for the year ended December 31, 2017.

In addition, certain directors, executive officers and directors emeriti executed options to purchase 212,468 shares of common stock at a per share exercise price of $9.4323. In lieu of issuing shares of common stock upon the exercise of such options, the Company made a cash payment to such optionees equal to the excess of the closing price of the common stock on the Nasdaq Stock Market on August 4, 2017 of $17.30 over the per share exercise price of such options of $9.4323 multiplied by the number of options being exercised. An aggregate of $1.7 million was paid to the optionees. The transaction resulted in a $406,000 tax benefit to the Company for the year ended December 31, 2017.

Average Balance Sheet. The following tables set forth certain information for the year ended December 31, 2018 and 2017. The average yields and costs are derived by dividing interest income and expense by the average daily balance of assets and liabilities, respectively, for the periods presented.

	Year Ended December 31,
	2018							2017
	AverageBalance			InterestEarned/Paid		AverageYield/Cost		AverageBalance			InterestEarned/Paid		AverageYield/Cost
Interest-earning assets:
Loans receivable (1)	$	495,719		$	21,960	4.43	%	$	429,848		$	18,278	4.25	%
Securities	39,893			1,065		2.67	%	41,613			1,011		2.43	%
Other interest-earning assets (2)	10,885			320		2.94	%	10,719			191		1.78	%
Total interest-earning assets	546,497			23,345		4.27	%	482,180			19,480		4.04	%
Non-interest-earning assets	22,435							24,087
Total assets	$	568,932						$	506,267
Interest-bearing liabilities:
Interest demand & money market demand	$	153,367		1,257		0.82	%	$	119,096		526		0.44	%
Savings and club deposits	105,623			548		0.52	%	105,444			277		0.26	%
Certificates of deposit	124,556			2,029		1.63	%	119,618			1,647		1.38	%
Total interest-bearing deposits	383,546			3,834		1.00	%	344,158			2,450		0.71	%
FHLB of New York advances	71,064			1,564		2.20	%	42,414			996		2.35	%
Total interest-bearing liabilities	454,610			5,398		1.19	%	386,572			3,446		0.89	%
Non-interest-bearing deposits	41,746							42,312
Other non-interest-bearing liabilities	2,345							3,308
Total liabilities	498,701							432,192
Stockholders' equity	70,231							74,075
Total liabilities and stockholders' equity	$	568,932						$	506,267
Net interest income/net interest rate spread (3)				$	17,947	3.08	%				$	16,034	3.15	%
Net interest margin (4)						3.28	%						3.33	%
Ratio of interest-earning assets to interest-bearing liabilities	120.21		%					124.73		%

________________


(1)	Non-accruing loans have been included, and the effect of such inclusion was not material. The allowance for loan losses is excluded, while construction loans in process and deferred fees are included.


(2)	Includes FHLB of New York stock at cost and term deposits with other financial institutions.


(3)	Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.


(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

Rate/Volume Analysis. The following table reflects the sensitivity of our interest income and interest expense to changes in volume and in prevailing interest rates during the periods indicated. Each category reflects the: (1) changes in volume (changes in volume multiplied by past rate); (2) changes in rate (changes in rate multiplied by past volume); and (3) net change. The net change attributable to the combined impact of volume and rate has been allocated proportionally to the absolute dollar amounts of change in each.

	Year Ended December 31,2018 vs. 2017Increase (Decrease)
	Volume			Due toRate		Net
Interest and dividend income:
Loans receivable	$	2,878		804		3,682
Securities	(14		)	68		54
Other interest-earning assets	2			127		129
Increase in total interest income	2,866			999		3,865
Interest expense:
Interest demand and money market accounts	183			548		731
Savings and club	—			271		271
Certificates of deposit	70			312		382
Total interest-bearing deposits	253			1,131		1,384
FHLB of New York advances	576			(8	)	568
Increase in total interest expense	829			1,123		1,952
Change in net interest income	$	2,037		(124	)	1,913



	Year Ended December 31, 2019 vs. 2018 Increase (Decrease)
	Volume			Due to Rate		Net
Interest and dividend income:
Loans receivable	$	292		755		1,047
Securities	(29		)	28		(1	)
Other interest-earning assets	113			51		164
Increase in total interest income	376			834		1,210
Interest expense:
Interest demand and money market accounts	(25		)	438		413
Savings and club	(6		)	193		187
Certificates of deposit	408			440		848
Total interest-bearing deposits	377			1,071		1,448
FHLB of New York advances	55			89		144
Increase in total interest expense	432			1,160		1,592
Change in net interest income	$	(56	)	(326	)	(382	)

Liquidity, Commitments and Capital Resources

The Bank must be capable of meeting its customer obligations at all times. Potential liquidity demands include funding loan commitments, cash withdrawals from deposit accounts and other funding needs as they present themselves. Accordingly, liquidity is measured by our ability to have sufficient cash reserves on hand, at a reasonable cost and/or with minimum losses.

Senior management is responsible for managing our overall liquidity position and risk and is responsible for ensuring that our liquidity needs are being met on both a daily and long-term basis. The Financial Review Committee, comprised of senior management and chaired by the President and Chief Executive Officer is responsible for establishing and reviewing our liquidity procedures, guidelines, and strategy on a periodic basis.

Our approach to managing day-to-day liquidity is measured through our daily calculation of investable funds and/or borrowing needs to ensure adequate liquidity. In addition, senior management constantly evaluates our short-term and long-term liquidity risk and strategy based on current market conditions, outside investment and/or borrowing opportunities, short and long-term economic trends, and anticipated short and long-term liquidity requirements. The Bank's loan and deposit rates may be adjusted as another means of managing short and long-term liquidity needs. We do not at present participate in derivatives or other types of hedging instruments to meet liquidity demands, as we take a conservative approach in managing liquidity.

At December 31, ~~2018~~2019, the Bank had outstanding commitments to originate loans of $1415.24 million, unused lines of credit of $7486.14 million (including $1413.53 million for home equity lines of credit and $5973.31 million for commercial lines of credit), and standby letters of credit of $~~159~~513,000. Certificates of deposit scheduled to mature in one year or less at December 31, ~~2018~~2019, totaled $3996.81 million.

The Bank had contractual obligations related to the long-term operating leases for the two branch and one operations center location that it leases (Loan Production Office, RiverWalk and Martinsville). For additional information regarding the Bank's lease commitments as of December 31, ~~2018~~2019, see Note 109 to our consolidated financial statements beginning on page F-1.

The Bank has access to cash through borrowings from the FHLB, as needed, to meet its day-to-day funding obligations. At December 31, ~~2018~~2019, its total loans to deposits ratio was ~~119~~107.4346%. At December 31, ~~2018~~2019, the Bank's collateralized borrowing limit with the FHLB was $~~149~~173.96 million, of which $9451.36 million was outstanding. As of December 31, ~~2018~~2019, the Bank also had a $13.0 million line of credit with a financial institution for an unsecured line of credit (which is a form of borrowing) that it could access if necessary.

Consistent with its goals to operate a sound and profitable financial organization, the Bank actively seeks to maintain its status as a well-capitalized institution in accordance with regulatory standards. As of December 31, ~~2018~~2019, the Company and the Bank exceeded all applicable regulatory capital requirements. See Note 8 to our consolidated financial statements beginning at page F-1 for more information about the Company and the Bank's regulatory capital compliance.

regulatory capital requirements. See Note 9 to our consolidated financial statements beginning at page F-1 for more information about the Company and the Bank's regulatory capital compliance.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance-sheet risk in the normal course of our business of investing in loans and securities as well as in the normal course of maintaining and improving the Bank facilities. These financial instruments include significant purchase commitments such as commitments to purchase investment securities or mortgage-backed securities and commitments to extend credit to meet the financing needs of our customers. At December 31, 2018, our significant off-balance sheet commitments consisted of commitments to originate loans of $14.2 million, unused lines of credit of $74.1 million (including $14.5 million for home equity lines of credit and $59.3 million for commercial lines of credit) and standby letters of credit of $159,000.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. Since a number of commitments typically expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. For additional information regarding our outstanding lending commitments at December 31, 2018, see Note 13 to our consolidated financial statements beginning on page F-1.26

to meet the financing needs of our customers. At December 31, 2019, our significant off-balance sheet commitments consisted of commitments to originate loans of $15.4 million, unused lines of credit of $86.4 million (including $13.3 million for home equity lines of credit and $73.1 million for commercial lines of credit) and standby letters of credit of $513,000.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. Since a number of commitments typically expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. For additional information regarding our outstanding lending commitments at December 31, 2019, see Note 13 to our consolidated financial statements beginning on page F-1.

Impact of Inflation

The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturities of our assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation on earnings, as distinct from levels of interest rates, is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.

Recent Accounting Pronouncements

Note 2 to the consolidated financial statements is incorporated herein by reference.

Quarterly Results of Operations

Three months ended

12/31/~~2018~~2019

9/30/~~2018~~2019

6/30/~~2018~~2019

3/31/~~2018~~2019

12/31/~~2017~~2018

9/30/~~2017~~2018

6/30/~~2017~~2018

3/31/~~2017~~2018

(In Thousands, Except Per Share Data)

Interest income

6,~~003~~101

6,~~175~~179

56,~~738~~167

56,~~429~~108

56,~~377~~003

56,~~083~~175

45,~~727~~738

45,~~293~~429

Interest expense

1,~~544~~711

1,~~420~~838

1,~~307~~756

1,~~127~~685

1,~~052~~544

~~893~~1,420

~~803~~1,307

~~698~~1,127

Net Interest Income

4,~~459~~390

4,~~755~~341

4,~~431~~411

4,~~302~~423

4,~~325~~459

4,~~190~~755

34,~~924~~431

34,~~595~~302

Provision for loan losses

—

60—

90—

~~200~~—

~~490~~60

~~300~~90

~~195~~90

Net Interest Income after Provision for Loan Losses

4,~~459~~390

4,~~695~~341

4,~~341~~411

4,~~212~~423

4,~~125~~459

34,~~700~~695

34,~~624~~341

34,~~400~~212

Non-interest income

~~198~~381

~~190~~199

~~208~~204

~~204~~190

~~211~~198

~~205~~190

~~219~~208

~~187~~204

Non-interest expenses

23,~~911~~077

32,~~064~~919

2,~~899~~906

23,~~987~~867

2,~~824~~911

23,~~822~~064

2,~~818~~899

2,~~717~~987

Income before Income Taxes

1,~~746~~694

1,~~821~~621

1,~~650~~709

~~1,429~~746

1,~~512~~746

1,~~083~~821

1,~~025~~650

~~870~~1,429

Income tax expense (benefit)

~~491~~443

~~506~~505

~~407~~487

~~407~~232

~~1,240~~491

~~(86~~506

)

~~293~~407

~~321~~407

Net Income

1,~~255~~251

1,~~315~~116

1,~~243~~222

~~1,022~~514

~~272~~1,255

1,~~169~~315

~~732~~1,243

~~549~~1,022

Earnings per share:

Basic

0.2425

0.2522

0.2324

0.1910

0.0524

0.2125

0.1323

0.1019

Diluted

0.2425

0.2422

0.2324

0.1910

0.0524

0.2124

0.1323

0.1019

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Management of Interest Rate Risk and Market Risk

Qualitative Analysis. Because the majority of our assets and liabilities are sensitive to changes in interest rates, a significant form of market risk for us is interest rate risk, or changes in interest rates.

We derive our income mainly from the difference or "spread" between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the larger the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.

Quantitative Analysis. The following table presents the Bank's economic value of equity ("EVE") as of December 31, 2018. The Bank outsources its interest rate risk modeling and the EVE values in this table were calculated by an outside consultant, based on information provided by the Bank. This analysis shows:27

Changes inInterest Rates(base points)	% Changein PretaxNet Interest Income	EconomicValue ofEquity
+400	(1.00)%	11.80%
+300	(0.50)%	12.60%
+200	—%	13.50%
+100	0.30%	14.40%
0	—	15.10%
-100	-1.80%	15.30%

market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.

Quantitative Analysis. The following table presents the Bank's economic value of equity ("EVE") as of December 31, 2019. The Bank outsources its interest rate risk modeling and the EVE values in this table were calculated by an outside consultant, based on information provided by the Bank. This analysis shows:



Changes in Interest Rates (base points)	% Change in Pretax Net Interest Income	Economic Value of Equity
+400	4.30%	12.00%
+300	3.60%	12.80%
+200	2.80%	13.60%
+100	1.70%	14.30%
0	(-)%	14.60%
-100	(3.60)%	14.50%
-200	(9.60)%	14.40%

________________

(1) The -200bp scenario was not disclosed due to the low prevailing interest rate environment

Future interest rates or their effect on EVE or net interest income are not predictable. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, prepayments, and deposit run-offs, and should not be relied upon as indicative of actual results. Certain shortcomings are inherent in this type of computation. Although certain assets and liabilities may have similar maturity or periods of repricing, they may react at different times and in different degrees to changes in the market interest rates. The interest rate on certain types of assets and liabilities, such as demand deposits and savings accounts, may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable rate mortgages, generally have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayments and early withdrawal levels could deviate significantly from those assumed in making calculations set forth above. Additionally, an increased credit risk may result as the ability of many borrowers to service their debt may decrease in the event of an interest rate increase.

Notwithstanding the discussion above, the quantitative interest rate analysis presented above indicates that a rapid increase or decrease in interest rates would adversely affect our net interest margin and earnings.

Item 8. Financial Statements and Supplementary Data

The Company's consolidated financial statements are contained in this Annual Report on Form 10‑K immediately following Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule l3a-l5(e) promulgated under the Securities Exchange Act of 1934, as amended) as of December 31, ~~2018~~2019. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective as of December 31, ~~2018 were not effective because of the material weaknesses described below~~2019.

Notwithstanding the material weaknesses described below, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, believes that the audited consolidated financial statements contained in this Annual Report on Form 10-K fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the fiscal years presented in conformity with GAAP. In addition, the material weaknesses described below did not result in the restatements of any of our audited or unaudited consolidated financial statements or disclosures for any previously reported periods.

(b) Internal Control Over Financial Reporting

1. Management's Annual Report on Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a- 15(f). The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

~~Our~~Under ~~management~~supervision ~~under~~and with the ~~direction~~participation of ~~the~~management, ~~audit~~including ~~committee~~our principal executive officer and principal financial officer, we conducted an ~~assessment~~evaluation of the effectiveness of ~~the~~our ~~system of~~ internal control over financial reporting asbased ofon ~~December 31, 2018 using~~ the ~~criteria~~framework ~~set forth~~ in ~~the report of the Treadway Commission’s Committee on Sponsoring Organizations (“COSO”) -~~ Internal Control - Integrated Framework (~~2013~~1992). ~~Based~~issued onby ~~that~~the ~~assessment,~~Committee ~~our~~of ~~management~~Sponsoring ~~believes~~Organizations ~~that, as~~ of ~~December 31, 2018,~~ the ~~Company’s~~Treadway ~~internal~~Commission. ~~control~~Based ~~over~~on ~~financial~~our ~~reporting~~evaluation ~~was~~under ~~not effective based on~~ the ~~COSO~~framework ~~criteria because management identified certain material weaknesses~~ in ~~the~~Internal ~~system~~Control-Integrated ~~of internal control over financial reporting. A material weakness is a control deficiency~~Framework, ormanagement ~~combination~~concluded ofthat ~~control~~our ~~deficiencies, in~~ internal control over financial reporting, ~~such~~was ~~that~~effective ~~there~~as ~~is a reasonable possibility that a material misstatement~~ of ~~the~~December ~~annual~~31, ~~or interim financial statements will not be prevented or detected on a timely basis~~2019.

~~Management~~Remediation ~~identified~~of ~~the~~Material ~~following material weaknesses:~~Weaknesses

AAs ~~material~~previously ~~weakness~~disclosed in ~~internal~~Item ~~controls~~9A ~~related~~Controls ~~to the design, implementation,~~ and ~~effectiveness~~Procedures ~~of certain information technology general controls. In the fourth quarter of 2018, management identified an issue~~ in ~~internal control related to~~ the ~~design,~~Annual ~~implementation~~Report ~~and effectiveness of certain information technology general controls (“ITGCs”) in the area of user access as some employees had access to systems that, based~~ on ~~their~~Form ~~job~~10-K ~~functions,~~for ~~they should not. Management also identified that there was a formal process in place to periodically review user access to~~ the ~~various~~year ~~information~~end ~~technology~~December ~~systems and to document the granting~~31, ~~revoking or modifying user access however additional levels of precision are required to make this an effective process. In addition~~2018, management ~~was~~identified ~~not~~five ~~formally documenting its review of security logs for financially significant systems. These deficiencies in aggregate constitute a~~ material ~~weakness.~~weaknesses ~~The Company believes that these deficiencies were largely a result of system access that enabled certain employees to serve~~ in ~~multiple~~internal ~~capacities~~control torelated ~~best serve customers. While no material misstatements~~ to the ~~financial statements have been identified as a result of this material weakness, this material weakness is being addressed as described below.~~following:

A material weakness in internal controls ~~over~~related ~~the processing and approving of department level journal entries. In the fourth quarter of 2018, management identified a material weakness in the processing and approving of journal entries~~ to the ~~general ledger and online transaction entries due to improper user provisioning and system~~ design~~. Specifically~~, ~~certain employees had authority to post entries to the general ledger and customer accounts without a system in place to review all such entries. In addition~~implementation, ~~employees with access to a secondary system used to prepare financial statements~~ and ~~facilitate~~effectiveness the Company’s electronic filings with the SEC had the ability to alter data imported to the reporting application from the core system without a system in place to review such changes. While the Company had in place a system of ~~dual~~certain ~~review~~information ~~for~~technology ~~financial~~general ~~statements and footnotes, there was not a formal process in place to validate the completed financial statements to the core system rather than the system used to prepare the statements.~~controls

A material weakness in internal controls over ~~loan data within~~ the ~~loan~~processing ~~accounting~~and ~~system.~~approving ~~In the fourth quarter~~ of ~~2018,~~department ~~management~~level ~~determined~~journal that while it had in place controls for a review of loans posted to the loan accounting system by an individual independent of the recording function to ensure the loans exist and are accurately recorded, the controls did not require the post-closing review be to a system-generated loan report to ensure all loans were subject to the control. With respect to changes made to a loan after it has been closed, management determined that there was not a formal review of the changes.entries

A material weakness in internal controls over ~~deposit~~loan data within the ~~deposit~~loan accounting system. In the fourth quarter of 2018, management determined a material weakness with respect to its internal controls over deposit data within the deposit accounting system. While the Company had in place a documented checklist of items to be completed when a new account was opened, it did not have in place a system of dual review of such documentation nor did it have a system of dual review of subsequent changes to deposit accounts.

A material weakness in internal controls over ~~the~~deposit ~~allowance~~data ~~for~~within ~~loan loss calculation. In~~ the ~~third~~deposit ~~quarter~~accounting of 2018, the Bank implemented a dual review procedure for the allowance for loan loss calculation. While these reviews are being performed, the reviewer failed to document that the review had been traced back to the original source documents to ensure proper loan classifications and other factors that could affect the calculation of the allowance for loan losses. In addition, for three quarters in 2018, management had improperly pooled TDR impaired loans for purposes of allowance for loan losses calculation rather than applying an expected cash flow or collateral method, which has been determined to not be material to the current and prior year financial results.system

30A material weakness in internal controls over the allowance for loan loss calculation

~~The~~Management, ~~aggregation~~with ~~of material weaknesses described above resulted in an entity level material weakness in~~ the ~~design~~oversight ~~and monitoring~~ of ~~internal~~the ~~controls~~audit ~~over financial reporting as of December 31~~committee, ~~2018.~~had ~~These~~taken ~~material~~the ~~weaknesses~~following ~~did~~steps ~~not~~starting ~~result~~ in ~~any changes to the Company’s financial results for the year ended December 31,~~ 2018.:

This annual report contains an audit report of our independent registered public accounting firm regarding internal control over financial reporting pursuant to the rules of the SEC.

Remediation Efforts

Management, with the oversight of the audit committee, has taken the following steps starting in 2018, and will continue to take steps that management and the audit committee believe will remediate the material weaknesses. As part of these steps:


•	Management reviewed the material weaknesses with our audit committee and the appropriate levels of management.


•	Management enhanced and implemented systemic controls over information technology processing including the periodic, precise review of user access rights and a formalized precise process for granting and revoking user access.

• Management ~~has~~ added staff and redefined roles to address segregation of duties issues. Specifically an IT Manager joined the ~~firm~~Company in March 2019 and duties and abilities within Loan and Deposit Operations were adjusted to account for segregation of duties. ~~Management requires and documents dual control over journal entries and implements a process to ensure that all transactions are subject to this control.~~

• Management ~~implemented~~required aand ~~formal~~documented ~~review~~dual ~~process~~control over ~~loan~~journal entries and ~~deposit~~implemented ~~data~~a ~~maintenance~~process ~~and~~to ~~requires~~ensure that ~~such~~all ~~reviews~~transactions bewere ~~made~~subject ~~utilizing core system generated reports and other core system tools available~~ to ~~the~~this ~~Company~~control.

• Management ~~will~~implemented ~~implement~~ a ~~checklist~~formal toreview ~~further~~process ~~support~~over loan and ~~augment~~deposit ~~review~~data ~~processes~~maintenance and required that such asreviews ~~the~~be ~~allowance~~made ~~for~~utilizing ~~loan~~core ~~losses~~system generated reports and other ~~significant~~core ~~estimates~~system tools available to the Company.

• Management ~~believes~~implemented ~~that~~a ~~these~~checklist ~~changes~~to ~~have~~further support and ~~will~~augment ~~contribute significantly to~~ the ~~remediation~~review ofprocess for the ~~material~~allowance ~~weaknesses~~for inloan ~~internal control over financial reporting that were in existence as of December 31, 2018~~losses. ~~Additional changes may be implemented if determined necessary.~~

~~Although~~During ~~the~~2019, ~~Company’s~~management ~~remediation~~implemented ~~efforts~~the ~~are~~previously ~~well~~disclosed ~~underway~~remediation ~~and~~plan. During ~~are~~the ~~expected~~fourth toquarter beof ~~completed~~2019, inwe ~~the~~completed ~~near~~our ~~future,~~testing of the ~~Company’s~~operating ~~material~~effectiveness ~~weaknesses~~of ~~will~~the ~~not~~implemented becontrols ~~considered~~and ~~remediated~~found ~~until~~them ~~new~~to ~~internal~~be ~~controls~~effective. As ~~are operational for~~ a ~~period~~result, ofwe ~~time~~have ~~and~~concluded ~~are~~the ~~tested,~~material ~~and~~weakness ~~management~~has ~~concludes~~been ~~that~~remediated ~~these~~as ~~controls~~of ~~are~~December ~~operating~~31, ~~effectively~~2019.



/s/ Michael A. Shriner		/s/ John S. Kaufman
Michael A. Shriner		John S. Kaufman
President and Chief Executive Officer		First Vice President and Chief Financial Officer

2. Report of Independent Registered Public Accounting Firm

The effectiveness of the Company's internal control over financial reporting at December 31, ~~2018~~2019 has been audited by Crowe LLP, an independent registered public accounting firm as stated in its report filed as part of the financial statements included within beginning on pages F-1. Such report is incorporated herein by reference.

3. Changes in Internal Control over Financial Reporting

Except as noted above, no change in the Company's internal controls over financial reporting (as defined in Rule l3a-l5(f) promulgated under the Securities Exchange Act of 1934, as amended) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

~~The~~Board ~~information in the sections captioned "Proposal I – Election~~ of Directors," "Section 16(a) Beneficial Ownership Compliance" and "Corporate Governance" in the Company's Proxy Statement for its 2018 Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein by reference.

The Company’s ~~has~~articles ~~adopted~~of aincorporation ~~Code~~require ofthat ~~Ethics~~the ~~that~~Board ~~applies~~of toDirectors ~~its~~be ~~principal~~divided ~~executive~~into ~~officer~~three classes, ~~principal~~as ~~financial~~nearly ~~officer~~equal in number as possible, ~~principal~~each ~~accounting~~class ~~officer~~to orserve ~~controller~~for ora ~~persons~~three-year ~~performing~~period, ~~similar~~with ~~functions. The~~approximately ~~Code~~one-third of ~~Ethics~~the ~~has~~directors ~~been~~elected ~~posted~~each onyear. Directors ~~the~~serve ~~Company's~~until ~~website~~their successors have been elected and ~~may~~qualified. beThe ~~found~~Board atof ~~www~~Directors currently consists of ten members.~~millingtonbank.com/about-us/investor-relations.~~

~~There~~Set ~~have~~forth ~~been~~below nois ~~material~~information ~~changes~~about in the ~~procedures~~Company’s byand ~~which~~the ~~security~~Bank’s ~~holders~~directors ~~may~~and ~~recommend~~executive ~~nominees~~officers. Each todirector ~~the~~currently ~~Company's~~serves ~~Board~~as ofa ~~Directors~~director ~~since the date~~ of the Company's ~~last~~and ~~proxy~~the ~~statement mailed to its stockholders~~Bank.



Name and Positions with Company	Age ⁽¹⁾	Year First Elected or Appointed as Director of the Company ⁽²⁾	Current Term to Expire	Shares of Common Stock Beneficially Owned ⁽¹⁾⁽³⁾	Percent of Class ⁽⁴⁾
		DIRECTORS

Michael A. Shriner President, Chief Executive Officer and Director	55	1999	2021	112,509 ⁽⁵⁾	2.16%
Robert C. Andersen Director	56	2018	2022	34,220 ⁽⁶⁾	*
W. Scott Gallaway Director and Chairman	74	2000	2022	33,067 ⁽⁷⁾	*
Robert D. Vollers Director	61	2016	2022	27,252 ⁽⁸⁾	*
Anthony M. Bruno, Jr. Director	65	2019	2020	--	*
H. Gary Gabriel Director	52	2018	2020	8,320 ⁽⁹⁾	*
Lawrence B. Seidman Director	72	2016	2020	614,553 ⁽¹⁰⁾	11.84%
Milena Schaefer Director	44	2019	2020	--	*
Gary T. Jolliffe Director	76	1992	2021	97,555 ⁽¹¹⁾	1.88%
Raymond Vanaria Director	61	2016	2021	98,767 ⁽¹²⁾	1.90%
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Robert G. Russell, Jr. Executive Vice President and Chief Operating Officer	53	N/A	N/A	28,238 ⁽¹³⁾	*
Nancy E. Schmitz Senior Vice President, Chief Credit Officer and Corporate Secretary	64	N/A	N/A	29,934 ⁽¹⁴⁾	*
John J. Bailey Executive Vice President, Chief Lending Officer	65	N/A	N/A	24,140 ⁽¹⁵⁾	*
John Kaufman First Vice President and Chief Financial Officer	37	N/A	N/A	7,981 ⁽¹⁶⁾	*

__________________

* Less than 1.0% of shares outstanding.

(1) As of March 13, 2020.


(2)	For Directors Gallaway, Shriner, and Jolliffe, this is the date that they first served as a director of the Bank. They each became a director of the Company upon its formation in 2014.

(3)

Includes stock held in joint tenancy; stock owned as tenants in common; stock owned or held by a spouse or other member of the individual’s household; stock allocated through certain employee benefit plans of the Company; stock in which the individual either has or shares voting and/or investment power and shares which the individual has the right to acquire at any time within 60 days of the Record Date. Each person or relative of such person whose shares are included herein exercises sole or shared voting and dispositive power as to the shares reported. Excludes shares for which certain officers or directors may be deemed to have voting power by virtue of serving as the 401(k) plan administrative committee.


(4)	In calculating the percentage ownership of an individual or group, the number of shares outstanding is deemed to include any share which the individual or group has the right to acquire through the exercise of options or otherwise within 60 days of the Record Date.


(5)	Includes 17,465 shares allocated to Mr. Shriner’s account under the ESOP. Includes 21,600 shares which Mr. Shriner has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(6)	Includes 4,220 shares which Mr. Andersen has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(7)	Includes 6,333 shares which the Mr. Gallaway has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(8)	Includes 6,333 shares which Mr. Vollers has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(9)	Includes 4,220 shares which Mr. Gabriel has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(10)	Includes 6,333 shares which Mr. Seidman has the right to acquire pursuant to the exercise of options within 60 days of the Record Date. Mr. Seidman has agreed with the Federal Reserve Bank of New York that the maximum number of shares that he may vote at the Meeting will be 9.9% of the outstanding shares (513,306 shares).


(11)	Includes 6,333 shares which Mr. Jolliffe has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(12)	Includes 6,333 shares which Mr. Vanaria has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(13)	Includes 1,850 shares allocated to Mr. Russell’s account under the ESOP. Includes 12,000 shares which Mr. Russell has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(14)	Includes 7,866 shares allocated to Ms. Schmitz’s account under the ESOP. Includes 12,000 shares which Ms. Schmitz has the right to acquire pursuant to the exercise of options within 60 days of the Record Date.


(15)	Includes 1,573 shares allocated to Mr. Bailey’s account under the ESOP. Includes 12,000 shares which Mr. Bailey has the right to acquire upon the exercise of options within 60 days of the Record Date.


(16)	Includes 837 shares allocated to Mr. Kaufman’s account under the ESOP. Includes 4,800 shares which Mr. Kaufman has the right to acquire upon the exercise of options within 60 days of the Record Date.

Biographical Information

Set forth below is the business experience for the past five years of each of the directors and executive officers of the Company. These biographies contain information regarding the person’s service as a director, business experience, other directorships at any point during the last five years with any other public companies, information regarding involvement with certain types of proceedings, if applicable, and the experience, qualifications, attributes or skills that hat qualify them to serve on the Board.

Michael A. Shriner has been the President and Chief Executive Officer of the Company and the Bank since 2012. He has been employed by the Bank since 1987 and became a vice president in 1990, a senior vice president in 1997, the executive vice president in 2002 and the chief operating officer in 2006 until 2012. He was appointed to the Board of Directors in 1999. Mr. Shriner currently serves as a member of the Enterprise Risk Management Committee with the New Jersey Bankers Association. He has previously served as chairman of the Mortgage Steering Committee of the New Jersey League of Community Bankers and was a member of the Residential Lending and Affordable Housing Committee, Consumer Lending and CRA Committee and Operations and Technology Committee. Mr. Shriner is a graduate of The National School of Banking (Fairfield University). He also serves as a trustee for HomeSharing, Inc. a non-profit organization located in central New Jersey. Mr. Shriner’s 30 years of banking experience, knowledge of the Bank and the Company and leadership skills make him an integral part of the Board of Directors.

Robert C. Andersen is owner and President of RC Andersen LLC, a New Jersey-based general contracting firm which services the industrial real estate market in the Northeast and Denver. He has owned and operated RC Andersen since 2006. Prior to that, he was Vice President of a New Jersey-based general contracting firm with which he was with for 10 years, and, prior to that, he was with various New York City general contracting and subcontracting firms. Prior to that, he worked as a structural engineer. Mr. Andersen’s extensive experience with commercial real estate construction makes him a valuable addition to the Board of Directors.

W. Scott Gallaway has served as the Chairman of the Boards of Directors of the Company and the Bank since 2012, and as a director since 2000. He founded Gallaway Associates, a real estate brokerage and appraisal firm in 1975 and sold the brokerage portion to RE/MAX Alliance in 2000. From 2012 to 2015, he was an equity partner with RE/MAX Alliance Realtors of Basking Ridge and spent many years as a broker, salesperson and licensed appraiser in the State of New Jersey. Mr. Gallaway is Past President of the Somerset County Board of Realtors, the Northern New Jersey Chapter of Homes for Living, the New Jersey Chapter of Certified Residential Brokers (CRB), and the Bernardsville Rotary Club. He has also served as Third District Vice President of the New Jersey Association of Realtors and Charter Scoutmaster of Troop 150, BSA, Bernardsville, N.J. He has also served on the Board of Directors of the Patriots Path Council, BSA and the Somerset Hills YMCA. Mr. Gallaway is Past Master of Congdon Overlook Lodge F&AM and Past President of the Masters, Wardens and Past Masters Association of the Eleventh District of New Jersey. Mr. Gallaway was honored as “Outstanding Citizen Volunteer of the Year” by the Borough of Bernardsville in 1993. Mr. Gallaway’s real estate and appraisal experience and his stature in the community have made him a valuable member of the Board of Directors.

Robert D. Vollers was appointed to the Boards of Directors of the Company and the Bank effective January 1, 2016 upon the retirement of E. Haas Gallaway. Mr. Vollers is Managing Director/Partner of Heritage Guild Companies which operates three retail firearms and archery stores and a training academy. He is also Managing Member/Partner of eight Stowaway Self Storage Facilities located in New Jersey, Pennsylvania and New York. Mr. Vollers is Chairman of the board of directors and a significant shareholder of Vollers Inc. and Vollers Excavating, a large site improvement company operating in New Jersey, Pennsylvania and New York since 1949. Mr. Vollers served in various capacities in Vollers Excavating and Vollers Inc. including serving as Chief Executive Officer from 2004-2015. Mr. Vollers is a licensed realtor and has been for over 30 years. Mr. Vollers previously served as a Regional Director of Team Capital Bank, a de novo bank formed in 2005 which was acquired in 2014 by Provident Financial Services, Inc. Mr. Vollers’ significant business experience along with his prior services as a bank director make him a valuable member to the Board.

Anthony M. Bruno serves as Chief Operating Officer of PF Compass, a firm specializing in the provision and management of employee benefit plans, a position he has held since July 2016. Prior to joining PF Compass, Mr. Bruno was employed by Valley National Corporation and its wholly owned subsidiary Valley National Bank serving as President of Wealth Management and Insurance Services and First Senior Vice President of Valley National Bank, positions he held from July 2008 to June 2016. From 1995 until its sale in 2008 to Valley National Corporation,

Mr. Bruno was a founding director and held numerous bank positions including Chairman, President and Chief Executive Officer of Greater Community Bank and Greater Community Bancorp. Mr. Bruno’s years of experience as a banker make him a valuable addition to the Board of Directors.

H. Gary Gabriel serves as Vice Chairman of the Metropolitan Area Capital Markets Group in Cushman & Wakefield's East Rutherford, New Jersey office where he is responsible for managing, underwriting and marketing investment properties for sale in the suburban markets surrounding New York City. He has been with Cushman & Wakefield since 1994. Prior to joining Cushman & Wakefield, Mr. Gabriel served as an associate with the Edward S. Gordon Company and, prior to that, he was employed by the Broadway Bank and Trust Company and Midlantic Bank. As an officer at both banks, his primary responsibility was the restructure and collection of non-performing real estate loans. Mr. Gabriel’s in-depth knowledge of the real estate market in which we operate, together with his prior banking experience, make him a valuable addition to the Board of Directors.

Lawrence B. Seidman serves as Manager of Seidman and Associates, LLC and related investment groups located in Parsippany, New Jersey, the principal business of which includes investments in financial institutions since 1995. Mr. Seidman formerly served on the board of Stonegate Bank from January 2009 to September 2018, ASB Bancorp Inc. and its wholly owned subsidiary, Asheville Savings Bank from February 2016 to September 2018, Center Bancorp, Inc. from May 2007 to July 2014 and Naugatuck Valley Financial Corporation from November 2014 to January 2016. Mr. Seidman’s many years of banking experience, both as a director and as an investor, make him an extremely valuable member of the Board of Directors.

Milena Schaefer is the Senior Vice President - Strategy and Operations for PVH Corp., one of the largest global apparel companies that owns brands such as Calvin Klein, Tommy Hilfiger and Van Heusen. She assumed her current position in 2017 but has served in various other capacities with PVH Corp. since 2008. Ms. Schaefer’s expertise with e-commerce initiatives, analytics and her management experience make her a valuable addition to the Board of Directors.

Gary T. Jolliffe served as President and Chief Executive Officer of the Company and the Bank until his retirement on December 31, 2011. Mr. Jolliffe joined the Bank in 1986 as its executive vice president and was appointed as its president in 1990. In 1992, he was also appointed to the position of chief executive officer and became a director. Mr. Jolliffe was a member of the Board of Governors of the New Jersey League of Community Bankers from 1999 through 2007 serving in numerous positions, including chairman of the New Jersey League of Community Bankers from 2004 to 2005. Mr. Jolliffe is a past member of the Board of Trustees of Freedom House Foundation, Glen Gardner, New Jersey. After 30 years as a member of the Bernardsville Rotary Club where he held the positions of director, president, vice president and treasurer, Mr. Jolliffe is now an honorary member. Mr. Jolliffe’s more than 50 years of banking experience, including nearly 32 years with the Bank and the Company, combined with his knowledge of the communities make him an integral member of our Board of Directors.

Raymond Vanaria is a member of the certified public accounting firm, Malesardi, Quackenbush, Swift & Company LLC, a firm he joined in 1983. Mr. Vanaria specializes in individual and corporate taxation, auditing and small business consulting. From July 1, 2014 to January 22, 2016, Mr. Vanaria served on the Board of Directors of ConnectOne Bancorp, headquartered in Englewood Cliffs, New Jersey and Chairman of the Audit Committee. Prior to the merger of Center Bancorp with ConnectOne Bancorp, he was Vice Chairman of the Board of Center Bancorp and served as Chairman of the Audit Committee and Compliance Committee as well as serving as a member of its Loan Committee, Risk Committee and Strategic Planning Committee. Mr. Vanaria’s professional experience as a certified public accountant qualify him to be an audit committee financial expert, and together with his previous bank director experience make him a valuable member of the Board.

Executive Officers Who Are Not Directors:

Robert G. Russell, Jr. serves as Executive Vice President and Chief Operating Officer of the Bank. Prior to being hired by the Bank in January 2015, Mr. Russell served as President and Chief Executive Officer of NJM Bank from 2013 up to its merger with Spencer Savings Bank. Prior to serving as President, Mr. Russell had served as Chief Financial and Investment Officer of NJM Bank from 2003 to 2013. During his time at NJM he was also largely responsible for the strategic planning of the organization. Mr. Russell has been in the financial industry for over 25 years, primarily with commercial banks and savings banks and has been a Morris County resident for the last 20 years.

Nancy E. Schmitz joined Millington Bank in 1997 as a Commercial Lending Officer and Corporate Secretary. She was promoted to Vice President - Lending in 2006 and to Senior Vice President and Chief Credit Officer in 2015. Ms. Schmitz was previously employed by Lloyds Bank California for six years, where she completed a formal bank training program in Lending. She also worked at HomeFed Bank, headquartered in San Diego, California in the National Accounts group and with Imperial Corporation of America in their San Diego Corporate Banking Group. She also was a volunteer with the US Agency for International Development in the Republic of Kyrgyzstan.

John J. Bailey joined the Bank in February 2015 and serves as Executive Vice President and Chief Lending Officer. Previously, Mr. Bailey was Senior Vice President - Credit Administration at Union Center National Bank from December 2012 up to its merger in July 2014 with ConnectOne Bank. Prior to joining Union Center National Bank, Mr. Bailey was Managing Member and owner of Bailey Financial Consulting, LLC, a provider of consulting services to commercial banks. Mr. Bailey has been in the financial services industry for over 25 years, primarily with commercial banks and savings banks. He served on the Board of Directors of Colonial Financial Services, Inc., Vineland, New Jersey from June 2011 up to its sale to Cape Bancorp, Inc. in March 2015.

John Kaufman joined the Company in 2015 and serves as First Vice President and Chief Financial Officer. Prior to being hired by the Company, Mr. Kaufman served as Controller of American Heritage Federal Credit Union from July 2013 to September 2015. He has also

worked for GCF Bank from June 2012 to July 2013 and, prior to that, Wilmington Savings Fund Society. Mr. Kaufman has been in the financial industry for over 15 years, primarily with savings banks.

Item 11. Executive Compensation

~~The information contained in the sections captioned "~~Executive Compensation~~" and "Director Compensation" in the Proxy Statement is incorporated herein by reference.~~

Summary Compensation Table. The following table sets forth the cash and non-cash compensation awarded to or earned during the years ended December 31, 2019 and 2018, by the Chief Executive Officer and the three other most highly compensated executive officers whose total compensation (exclusive of non-qualified deferred compensation earnings) during the fiscal year ended December 31, 2019 exceeded $100,000 for services rendered in all capacities to the Company and the Bank. We refer to these individuals in this proxy statement as the “named executive officers.” There were no awards of restricted stock or stock options to any of the named executive officers in either 2019 or 2018 nor did any named executive officer receive non-equity incentive plan compensation or non-qualified deferred compensation earnings.



Name and Principal Position	Year	Salary	Bonus	All Other Compensation		Total

Michael A. Shriner President, Chief Executive Officer and Director	2019 2018	$332,947 323,250	$60,000 54,378	$37,025 67,667	⁽¹⁾	$429,972 445,295

Robert G. Russell, Jr. Executive Vice President and Chief Operating Officer	2019 2018	$237,930 231,000	$63,402 65,000	$26,031 27,795	⁽²⁾	$327,363 323,795

Nancy E. Schmitz Senior Vice President and Corporate Secretary	2019 2018	$181,857 175,560	$50,920 49,901	$21,840 35,172	⁽³⁾	$254,617 261,633

John Bailey Executive Vice President and Chief Credit Officer	2019 2018	$198,522 192,740	$55,586 58,015	$22,986 28,239	⁽⁴⁾	$277,986 278,994

_____________________


(1)	For the year ended December 31, 2019, consists of $920 for life insurance, $8,400 for an employer contribution to the 401(k) plan, reimbursement of auto expenses of $8,738, the value of shares allocated to Mr. Shriner’s account under the ESOP in the amount of $14,326, a cash allocation under the ESOP of $225 and cash dividends received on restricted stock awards of $4,416.


(2)	For the year ended December 31, 2019, consists of $277 for life insurance, $8,400 for an employer contribution to the 401(k) plan, the value of shares allocated to Mr. Russell’s account under the ESOP in the amount of $14,326, a cash allocation under the ESOP of $28 and cash dividends received on restricted stock awards of $3,000.


(3)	For the year ended December 31, 2019, consists of $1,367 for life insurance, $5,450 for an employer contribution to the 401(k) plan, the value of shares allocated to Ms. Schmitz’s account under the ESOP in the amount of $11,918, a cash allocation under the ESOP of $105 and cash dividends received on restricted stock awards of $3,000.


(4)	For the year ended December 31, 2019, consists of $723 for life insurance, $5,949 for an employer contribution to the 401(k) plan, the value of shares allocated to Mr. Bailey’s account under the ESOP in the amount of $13,290, a cash allocation under the ESOP of $24 and cash dividends received on restricted stock awards of $3,000.

Outstanding Equity Awards at Fiscal Year End. The following tables set forth information on an award-by-award basis with respect to options and restricted stock awards held at December 31, 2019 by each of the named executive officers, as well as the value of such awards held by such persons at the end of the fiscal year.

Option Awards

Stock Awards

Number of

Market

Securities

Number of

Value of

Underlying

Shares or Units

Shares or

Unexercised

Option

Of Stock That

Units of

Options

Exercise

Expiration

Have Not

Stock

Name

Exercisable (1)

Unexercisable (1)

Price ($)

Date

Vested

Not Vested (2)

Michael A. Shriner

21,600

14,400

13.04

6/6/26

8,832

158,976

Robert G. Russell, Jr.

12,000

8,000

13.04

6/6/26

6,000

108,000

Nancy E. Schmitz

12,000

8,000

13.04

6/6/26

6,000

108,000

John Bailey

12,000

8,000

13.04

6/6/26

6,000

108,000

_____________


(1)	On June 7, 2016, each of the named executive officers received a grant of options to purchase shares of Common Stock as well as a grant of shares of restricted stock. Both the options and the restricted stock grants vest in increments of 20% on each of the five anniversaries of the date of grant beginning on June 7, 2017.


(2)	Represents value of unvested shares of restricted stock held by the named executive officer using the closing price of the Common Stock of $18.00 on December 31, 2019.

Split Dollar Life Insurance Agreement. The Bank has entered into Life Insurance Agreements with Mr. Shriner, Mr. Russell, Ms. Schmitz and Mr. Bailey. The Life Insurance Agreements for Mr. Shriner and Ms. Schmitz provide a death benefit equal to the following: if the executive is: (i) employed by the Bank at the time of his or her death, (ii) has retired from employment with the Bank after completion of not less than twenty (20) years of service with the Bank, or (iii) has retired from employment with the Bank and at such date of retirement the sum of the executive’s age and years of service equals not less than 70, then the executive’s beneficiary is entitled to payment of an amount equal to 200% of the executive’s highest annual base salary (not including bonus, equity compensation, deferred compensation or any other forms of compensation) in effect at the Bank at any time during the three calendar years prior to the date of retirement or death of the executive. The Life Insurance Agreements for Mr. Russell and Mr. Bailey provide a death benefit equal to 300% of the executive’s annual base salary in effect immediately preceding such executive’s death, but only if the executive is still employed by the Bank at the time of his death. The current death benefit for Mr. Shriner, Mr. Russell, Ms. Schmidt and Mr. Bailey is approximately $692,530, $742,341, $619,389 and $378,260, respectively.

For Mr. Shriner and Ms. Schmitz, if a change in control of the Bank shall occur prior to the executive’s termination of employment or retirement, then the death benefit coverage shall remain in effect until the executive’s death, unless the agreement is otherwise terminated pursuant to its terms prior to such date of a change in control.

Millington Bank Savings Plan (the “401(k) Plan”). The 401(k) Plan is a tax-qualified defined contribution savings plan for the benefit of all eligible employees. Pursuant to the 401(k) Plan, employees may also voluntarily elect to defer between 1% and 80% of their compensation as 401(k) savings under the 401(k) Plan, not to exceed applicable limits under federal tax laws. The 401(k) Plan also provides for matching contributions up to a maximum of 50% of the first 6% of a person’s salary for each participant. Employee contributions are immediately fully vested. Matching contributions are vested after three years of service. Each participant has an individual account under the 401(k) Plan and may direct the investment of his or her account among a variety of investment options or vehicles available.

Employee Stock Ownership Plan. The Bank has established the Millington Bank ESOP for the exclusive benefit of participating employees of the Bank. Participating employees are salaried, full-time employees who have completed at least one year of service and have attained the age of 21. Benefits may be paid either in shares of the common stock or in cash. Contributions to the ESOP and shares released from the suspense account will be allocated annually among participants on the basis of compensation. Participants become vested in their ESOP benefits at the rate of twenty percent per year of service beginning after two years of service and are fully vested in their accounts upon six years of service. Employment service before the adoption of the ESOP is credited for the purposes of vesting. Contributions to the ESOP by the Bank are discretionary, but are anticipated to be sufficient in amount necessary for the ESOP to meet the debt service obligations on the ESOP loan.

In connection with MSB Financial - Federal’s minority stock offering in 2007, the ESOP borrowed funds from MSB Financial - Federal and used those funds to purchase 202,342 shares of MSB Financial - Federal common stock for the ESOP. The purchased shares served as collateral for the loan. In connection with the conversion of MSB Financial - Federal’s mutual holding company in 2015, the ESOP purchased

150,663 shares of Company Common Stock and received 230,609 shares of Company Common Stock in exchange for the shares of MSB Financial - Federal it held. The new shares were financed by a loan from the Company and the existing ESOP loan was combined with this loan. The loan is being repaid principally through quarterly contributions to the ESOP by the Bank over the 20-year loan term. The loan is currently scheduled to be paid off on June 30, 2035. Shares purchased by the ESOP are held in a suspense account for allocation among the participants’ accounts as the loan is repaid on a pro-rata basis.

Contributions to the ESOP and shares released from the suspense account in an amount proportional to the repayment of the ESOP loan will be allocated to each eligible participant’s plan account, based on the ratio of each participant’s compensation to the total compensation of all eligible participants. Vested benefits will be payable generally upon the participants’ termination of employment, and will be paid in the form of Common Stock. Pursuant to FASB ASC Topic 718-40, we are required to record a compensation expense each year in an amount equal to the fair market value of the shares released from the suspense account.

Executive Agreements

The Bank is party to Change in Control Agreements with each of the named executive officers. Each of the Change in Control agreements provides that if the named executive officer’s employment is terminated without just cause or if the named executive officer terminates for “good reason” as defined in the Change in Control agreement within twenty-four months following a change in control, the named executive officer will be paid a lump sum payment amount equal to approximately three times his five year average annual compensation in the case of Mr. Shriner and two times their respective five year average annual compensation in the case of Mr. Russell, Ms. Schmitz and Mr. Bailey. Each of the Change in Control agreements provides that the payment will be reduced to the extent necessary so that no payment made under the agreement, when aggregated with all other payments to the individual will constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code. Such change in control agreements have a two year term, subject to the Board reviewing and approving extensions of such term annually. If change in control payments had been made under the Change in Control agreements as of December 31, 2019, the payments would have equaled approximately $1,460,507, $534,851, $495,293 and $485,788 to Mr. Shriner, Mr. Russell, Ms. Schmitz and, Mr. Bailey, respectively.

Director Compensation

The following table sets forth information regarding the compensation of the Company’s directors for the fiscal year ended December 31, 2019. Mr. Shriner also serves as a director, and his compensation is detailed under “Executive Compensation.” He does not receive any separate compensation for service as a director. There were no grants of restricted stock to any director during the fiscal year ended December 31, 2019.



Director ⁽¹⁾	Board Fees ($)	Option Awards ($) ⁽²⁾	All Other Compensation ($) ⁽³⁾	Total ($)

Robert C. Andersen	44,000	0	0	44,000
Tony Bruno	40,500	0	0	40,500
H. Gary Gabriel	44,000	0	0	44,000
Gary T. Jolliffe	44,000	0	867	44,867
W. Scott Gallaway	86,000	0	867	86,867
Milena Schaefer	44,000	0	0	44,000
Lawrence Seidman	44,000	0	0	44,000
Raymond Vanaria	45,500	0	0	45,450
Robert D. Vollers	46,000	0	0	46,000

___________________

(1)

As of December 31, 2019, Directors Jolliffe, Gallaway, Seidman, Vanaria and Vollers each held options to purchase 10,556 shares of Common Stock at a per share exercise price of $13.04 ($13.29 in the case of Mr. Seidman) which grants vest in increments of 20% on each of the five anniversaries of the date of grant. As of December 31, 2019, Directors Andersen and Gabriel each held options to purchase 5,278 shares of Common Stock at a per share exercise price of $17.30 as well as options to purchase 5,278 shares of Common Stock at a per share exercise price of $17.65. Directors Schaefer and Bruno don’t hold any options. These options vest in increments of 20% on each of the five anniversaries of the date of grant.


(2)	No Option Awards were made in 2019


(3)	For the year ended December 31, 2019: All Other Compensation consists of dividends paid on restricted stock awards of $866.50 for each of Directors Jolliffe and Gallaway. The other directors do not hold restricted stock awards.

Board Fees. Directors currently are compensated only for their service as directors of the Bank, and no additional compensation is paid for serving on the board of the Company. For the year ended December 31, 2019, the Bank paid a fee of $3,500 per board meeting. The Chairman of the Board of Directors was paid a fee of $7,000 per board meeting. The board has regular meetings on a monthly basis for a total of 12 meetings per year. Directors who serve on the Audit Committee and/or the Compensation Committee also received an additional payment of $500 per meeting. The Chairmen of the Audit Committee and the Compensation Committee received a payment of $1,000 per meeting.

Emeritus Director Program. On November 18, 2016, Ferdinand J. Rossi announced his retirement from the Board of Directors of the Company and the Bank with such retirement effective as of December 31, 2016. Mr. Rossi has agreed to continue his service to the Company after his retirement in the capacity as an Emeritus Director. Mr. Rossi has entered into an agreement with the Company detailing his duties as an Emeritus Director and the compensation to be received which will consist solely of the continued vesting of his previously-granted restricted stock awards during the term of his service as an Emeritus Director. Mr. Rossi has agreed that all previously granted but unvested stock option awards were forfeited as of the date of his retirement. Upon his retirement from the Board effective January 31, 2018, Thomas G. McCain entered into a similar agreement to serve as an Emeritus Director which provides for the continued vesting of his restricted stock awards and the forfeiture of all unvested option grants.

Related Party Transactions

No directors, executive officers or their immediate family members were engaged, directly or indirectly, in transactions with the Company or any subsidiary during any of the two years ended December 31, 2019 or 2018 that exceeded $120,000 (excluding loans with Millington Bank).

Millington Bank makes loans to its officers, directors and employees in the ordinary course of business. All directors and employees are offered a 25 to 50 basis point reduction on interest rates for consumer loans or primary residence mortgage loans. Such loans do not include more than the normal risk of collectability or present other unfavorable features. Set forth below is a schedule of all loans to directors and executive officers for which a discount on the interest rate has been given:



Name and Nature of Relationship of Related Person	Net Interest Rate	Largest Amount Outstanding Year Ended 12/31/2019	Balance as of 12/31/2019	Amount of Principal Repaid	Secured or Not Secured

W. S. Gallaway Director	3.25%	$162,604.59	$150.539.77	$12,064.82	Secured
Gary T. Jolliffe Director	3.75%	$140,803.78	$133,725.86	$7,077.92	Secured
Michael A. Shriner President and CEO/Director	8.25%	$1,250.00	-0-	$1,250.00	Unsecured
Michael A. Shriner President and CEO/Director	2.75%	$192,351.91	$174,205.16	$18,146.75	Secured
Michael A. Shriner President and CEO/Director	4.25%	$75,000.00	-0-	$75,000.00	Secured
Nancy E. Schmitz Senior Vice President	8.25%	-0-	-0-	-0-	Unsecured

Loans shown with a zero current balance represent home equity lines of credit (secured) or overdraft protection lines of credit (unsecured) on which there was no activity during the fiscal year ended December 31, 2019. All loans were approved through the normal underwriting process.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


(a)	Security Ownership of Certain Beneficial Owners.

The following table sets forth, as of March 2, 2020, certain information ~~contained~~as into those persons who were known to be the ~~section~~beneficial ~~captioned~~owners ~~"Principal~~of ~~Holders~~more than five percent (5%) of ~~our~~the Company’s outstanding shares of Common Stock" inand as to the ~~Proxy~~shares ~~Statement~~of isCommon ~~incorporated~~Stock ~~herein~~beneficially owned by ~~reference~~all executive officers and directors of the Company as a group.



Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership ⁽¹⁾		Percent of Shares of Common Stock Outstanding ⁽²⁾
Lawrence B. Seidman 100 Misty Lane Parsippany, NJ 07054	614,553	⁽³⁾	11.54%

Millington Bank Employee Stock Ownership Plan and Trust 1902 Long Hill Road Millington, New Jersey 07946	284,900	⁽⁴⁾	5.49%

All directors and executive officers as a group (14 persons)	1,219,041	⁽⁵⁾	23.51%

____________

(1) For purposes of this table, a person is deemed to be the beneficial owner of shares of Common Stock if he or she has or shares voting or investment power with respect to such shares or has a right to acquire beneficial ownership at any time within 60 days from March 2, 2020. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. Except as otherwise noted, ownership is direct, and the named persons or group exercise sole voting and investment power over the shares of the Common Stock.

(2) In calculating the percentage ownership of an individual or group, the number of shares outstanding is deemed to include any shares which the individual or group have the right to acquire through the exercise of options or otherwise within 60 days of March 2, 2020.

(3) Includes 6,333 shares which Mr. Seidman has the right to acquire pursuant to the exercise of options within 60 days of March 2, 2020. Mr. Seidman has agreed with the Federal Reserve Bank of New York that the maximum number of shares that he may vote at the Meeting will be 9.9% of the outstanding shares (513,306 shares).

(4) The ESOP trustee, Pentegra Trust Company, will vote all unallocated shares of the Common Stock held by the ESOP and all allocated shares for which no voting instructions are received in the same proportion it has received timely voting instructions “for” or “against” a matter from the ESOP participants with respect to shares previously allocated to participant accounts under the ESOP, subject to the exercise of its fiduciary duties.

(5) Includes 33,134 shares allocated to the accounts of executive officers under the ESOP. Includes 102,505 shares which the directors and executive officers have the right to acquire pursuant to the exercise of options within 60 days of March 2, 2020. Includes 614,553 shares owned by Director Seidman but which he has agreed not to vote at any meeting of shareholders. Excludes shares for which certain officers or directors may be deemed to have voting power by virtue of serving as the 401(k) plan administrative committee.


(b)	Security Ownership of Management.

32The information required by this Item is set forth above under the caption "Item 10. Directors, Executive Officers and Corporate Governance of this Form 10-K."

The information contained in the sections captioned "Principal Holders of our Common Stock" and "Proposal I – Election of Directors" in the Proxy Statement is incorporated herein by reference.

(c)Changes in Control. Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

(d)Securities Authorized for Issuance Under Equity Compensation Plans. Set forth below is information as of December 31, ~~2018~~2019 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.

	Equity Compensation Plan Information
	(A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	(B) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		(C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))
Equity compensation plansapproved by shareholders:
2016 Stock Compensationand Incentive Plan	185,003	$	13.56	85,985
Total	185,003	$	13.27	85,985



	Equity Compensation Plan Information
	(A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	(B) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		(C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))
Equity compensation plans approved by shareholders:
2016 Stock Compensation and Incentive Plan	185,003	$	13.56	85,985
Total	185,003	$	13.56	85,985

Item 13. Certain Relationships and Related Transactions, and Director Independence

~~The~~Director ~~information~~Independence ~~contained in the sections captioned "Related Party Transactions" and "Corporate Governance" in the Proxy Statement is incorporated herein by reference.~~

The Board of Directors has determined that all directors with the exception of Michael A. Shriner are considered independent under the independence standards of The Nasdaq Stock Market. In determining which directors are independent, the Board of Directors considered the deposit and other relationships described under “Related Party Transactions” but determined these relationships did not affect their independence. Except as disclosed, all loans and deposits made or accepted were on substantially the same terms that would be granted to other customers with similar credit or deposit balances. There are no members of the Audit Committee, Compensation Committee or Nominating Committee who do not meet the independence standards of The Nasdaq Stock Market for membership on such committees.

Meetings and Committees of the Board of Directors

The Board of Directors conducts its business through meetings of the Board and through activities of its committees. The Board maintains an Audit Committee, an Asset/Liability Management Committee, an Asset Quality Committee, a Compensation Committee and a Nominating Committee. During the year ended December 31, 2019, the Board of Directors held 12 meetings. No director attended fewer than 75% of the total meetings of the Board and committees on which such director served during the year ended December 31, 2019.

The Audit Committee, a standing committee, was comprised during the year ended December 31, 2019 of Directors Raymond Vanaria (Chairman), W. Scott Gallaway, Robert C. Andersen, Tony Bruno and Gary T. Jolliffe. Each of the members of the Audit Committee is an independent director. Raymond J. Vanaria serves as the “audit committee financial expert.” The committee has the authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. The Audit Committee recommends the engagement of independent auditors, receives the internal and independent audit reports and recommends appropriate action. The Audit Committee met four times during the year ended December 31, 2019.

The Board of Directors has reviewed, assessed the adequacy of and approved a formal written charter for the Audit Committee, a copy of which can be found on the Company’s website at www.millingtonbank.com/about-us/investor-relations.

The Compensation Committee, a standing committee, was comprised of Directors Robert Vollers (Chairman), H. Gary Gabriel, Milena Schaefer and Lawrence B. Seidman during the year ended December 31, 2019. Each of the members of the Compensation Committee is an independent director within the requirements of Nasdaq. This committee meets at least annually to review management’s recommendations for management salaries and bonuses. The Compensation Committee met four times during the year ended December 31, 2019. The Compensation Committee operates under a formal written charter, a copy of which can be found on the Company’s website at www.millingtonbank.com/about-us/investor-relations. The Compensation Committee is responsible for establishing the compensation philosophy, developing compensation guidelines, establishing (or recommending to the entire Board of Directors) the compensation of the Chief Executive Officer and the other executive officers. No executive officer participates with respect to decisions on his or her compensation. The Compensation Committee may retain, at its discretion, compensation consultants to assist it in making compensation related decisions although none were utilized in 2019.

The Compensation Committee’s goal is to determine appropriate compensation levels that will enable the Company to: (i) attract, retain and motivate an experienced, competent executive management team; (ii) reward the executive management team for the enhancement of stockholder value based on our annual performance and the market price of our stock; (iii) provide compensation rewards that are adequately balanced between short-term and long-term performance goals; and (iv) maintain compensation levels that are competitive with other financial institutions, particularly those comparable in asset size and market area.

The Compensation Committee considers a number of factors in their decisions regarding executive compensation, including, but not limited to, the level of responsibility and performance of the individual executive officers and the overall performance of the Company. The Compensation Committee also considers the recommendations of the Chief Executive Officer with respect to the compensation of executive officers and on matters of compensation philosophy, plan design and general guidelines for employee compensation. However, the Chief Executive Officer does not vote on and is not present for any discussion of his own compensation

Director Nomination Process

During the year ended December 31, 2019, the Nominating Committee, a standing committee, was comprised of Directors Robert C. Andersen, W. Scott Gallaway, H. Gary Gabriel, Gary T. Jolliffe, Lawrence B. Seidman, Milena Schaefer, Raymond Vanaria and Robert Vollers. The Nominating Committee recommends to the full Board of Directors persons for selection as the Board’s nominees for election as directors. The Committee met one (confirmed) time during the year ended December 31, 2019. Members of the Nominating Committee who are nominees did not participate in their selection as nominees. Each member of the committee is an independent director. The responsibilities of the members of the Nominating Committee are set forth in a charter, a copy of which can be found on the Company’s website at www.millingtonbank.com/about-us/investor-relations.

The Company does not pay fees to any third party to identify or evaluate or assist in identifying or evaluating potential nominees. The process for identifying and evaluating potential nominees of the Board includes soliciting recommendations from directors and officers of the Company and the Bank. Additionally, the Board will consider persons recommended by stockholders of the Company in selecting nominees of the Board for election as directors. In the Board’s selection of nominees of the Board, there is no difference in the manner of evaluation of potential nominees who have been recommended by directors or officers of the Company and the Bank versus evaluation of potential nominees who have been recommended by stockholders. The Committee seeks nominees with excellent decision-making ability, business experience, personal integrity and reputation, who are knowledgeable about the business activities and market areas in which the Company and the Bank engage. The Board does not have a specific policy regarding diversity of board nominees although it may consider diversity in market knowledge, experience, background, employment and other factors in selecting nominees.

To be considered in the Committee’s selection of individuals the Committee recommends to the Board for selection as the Board’s nominees, recommendations from stockholders must be received by the Company at the principal executive office of the Company not less than ninety (90) days before the date of the meeting; provided, however, that if less than one hundred (100) days’ notice or prior disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder’s notice shall set forth (i) as to each person whom such stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the Company’s books, of such stockholder, (B) the class and number of shares of the Company’s capital stock that are beneficially owned by such stockholder, and (C) a statement disclosing (1) whether such stockholder or any nominee thereof is acting with or on behalf of any other person and (2) if applicable, the identity of such person.

Stockholder Communications

The Board of Directors does not have a formal process for stockholders to send communications to the Board. In view of the infrequency of stockholder communications to the Board of Directors, the Board does not believe that a formal process is necessary. Written communications received by the Company from stockholders are shared with the full Board no later than the next regularly scheduled Board meeting. The Board of Directors does not have a formal written policy regarding director attendance at annual meetings. However, the Board encourages directors to attend all annual meetings. All but one of the members of the Board of Directors attended the 2018 Annual Meeting.

Board Leadership Structure

Director Michael A. Shriner serves as President and Chief Executive Officer of the Company and Director W. Scott Gallaway serves as Chairman of the Board. The Board of Directors has determined that the separation of the offices of Chairman of the Board and Chief Executive Officer and President will enhance Board independence and oversight. Moreover, the separation of the Chairman of the Board and Chief Executive Officer and President will allow the Chief Executive Officer and President to better focus on his growing responsibilities of running the Company, enhancing stockholder value and expanding and strengthening our franchise while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management.

Board’s Role in the Risk Management Process

We face a number of risks, including credit risk, cybersecurity risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of the risks the Company faces, while the Board, as a whole and through its committees, in particular the Audit Committee, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. In addition, the Board has appointed a Chief Risk Officer who reports to the Board at least quarterly and more frequently if needed on risk management issues. Other members of senior management attend the Board meetings and are available to address any questions or concerns raised by the Board on risk management and any other matters. The Chairman of the Board and independent members of the Board work together to provide strong, independent oversight of the Company’s management and affairs through its standing committees and, when necessary, special meetings of independent directors.

Item 14. Principal Accounting Fees and Services

The information contained in the section captioned "Proposal II – Ratification of the Appointment of the Independent Registered Public Accounting Firm" in the Proxy Statement is incorporated herein by reference.39

33Independent Registered Public Accounting Firm

The Company’s independent registered public accounting firm, or principal accountant, for the year ended December 31, 2019 was Crowe LLP. The Audit Committee of the Board of Directors of the Company has re-appointed Crowe as the Company’s independent registered public accounting firm for the year ended December 31, 2020. The appointment of Crowe as the Company’s independent registered public accounting firm for the year ended December 31, 2020 is subject to ratification of such appointment by our stockholders.

Principal Accounting Fees and Services

The Securities and Exchange Act of 1934, as amended, requires all auditing services and non-audit services provided by an issuer’s independent auditor to be pre-approved by the issuer’s audit committee. The Company’s Audit Committee has adopted a policy of approving all audit and non-audit services prior to the service being rendered. All of the services provided by Crowe, were approved by the Audit Committee prior to the service being rendered.

Audit Fees. The fees incurred by the Company for audit services provided by Crowe for the fiscal years ended December 31, 2019 and 2018, respectively, were $429,018 and $892,135, respectively. These fees include professional services rendered for the audit of the Company’s annual consolidated financial statements and review of consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services normally provided in connection with statutory and regulatory filings, including administrative and out-of-pocket expenses.

Audit Related Fees. The Company did not incur any audit-related fees for services provided by Crowe reasonably related to the performance of the audits for the fiscal year ended December 31, 2019 and 2018.

Tax Fees. The fees incurred by the Company for services provided by Crowe related to the preparation of state and federal tax returns for the fiscal years ended December 31, 2019 and 2018, respectively were $19,000 and $18,000, respectively.

All Other Fees. The Company did not incur any other fees payable to Crowe for the fiscal years ended December 31, 2019 or 2018.

PART IV

Item 15. Exhibits, Financial Statement Schedules


(1)	The following financial statements and the reports of independent registered public accounting firms appear in this Annual Report on Form 10-K immediately after this Item 15:

Report of Independent Registered Accountant ~~Report of Crowe LLP, Independent Registered Accountant Regarding Internal Controls Report of BDO USA, LLP~~ Consolidated Statements of Financial Condition as of December 31, ~~2018~~2019 and December 31, ~~2017~~2018 Consolidated Statements of Income For the Years Ended December 31, ~~2018~~2019 and December 31, ~~2017~~2018 Consolidated Statements of Comprehensive Income For the Years Ended December 31, ~~2018~~2019 and December 31, ~~2017~~2018 Consolidated Statements of Changes in Stockholder's Equity Years Ended December 31, ~~2018~~2019 and December 31, ~~2017~~2018 Consolidated Statements of Cash Flows Years Ended December 31, ~~2018~~2019 and December 31, ~~2017~~2018 Notes to Consolidated Financial Statements


(2)	All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.


(3)	The following exhibits are filed as part of this report:

3.1	Articles of Incorporation of MSB Financial Corp. *
3.2	Bylaws of MSB Financial Corp. **
4	Stock Certificate of MSB Financial Corp.*
4.1	Stock Certificate of MSB Financial Corp.*
4.2	Description of Capital Stock of MSB Financial Corp.
10.1	Change in Control Agreement with Michael A. Shriner ***
10.2	Change in Control Agreement with Robert G. Russell, Jr. ***
10.3	Change in Control Agreement with Nancy E. Schmitz ***
10.4	Change in Control Agreement with John J. Bailey ***
10.5	Change in Control Agreement with John Kaufman ***
10.6	Form of Executive Life Insurance Agreement ****
10.7	MSB Financial Corp. 2008 Stock Compensation and Incentive Plan, As Amended and Restated******
10.8	Millington Bank Directors Deferred Compensation Plan*****
10.9	MSB Financial Corp. 2016 Equity Incentive Plan*******
21	Subsidiaries of the Registrant
23.1	Consent of ~~BDO~~Crowe ~~USA,~~ LLP
23.2	Consent of Crowe LLP
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document ********
101.SCH	XBRL Schema Document ********
101.CAL	XBRL Calculation Linkbase Document ********
101.LAB	XBRL Labels Linkbase Document ********
101.PRE	XBRL Presentation Linkbase Document ********

(Footnotes on following page)

________________

3441



*	Incorporated by reference to the Registrant's Form S-1 Registration Statement File No. 333-202573)
**	Incorporated by reference to the Annual Report on Form 10-K of MSB Financial Corp., (the predecessor corporation) for the fiscal year ended June 30, 2014 and filed on September 26, 2014.
***	Incorporated by reference to the Current Report on Form 8-K dated April 16, 2018 and filed on April 20, 2018
****	Incorporated by reference to MSB Financial Corp.'s (the predecessor) Registration Statement on Form S-1 (File No. 333-137294)
*****	Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 21, 2015 and filed on December 28, 2015
******	Incorporated by reference to the Form S-8 Registration Statement (File No. 333-164264) of the predecessor corporation.
*******	Incorporated by reference to the Registrant's Form S-8 Registration Statement (File No. 333-213834).
********	Submitted as Exhibits 101 to this Form 10-K are documents formatted in XBRL (Extensible Business Reporting Language).

Item 16. Summary

Not applicable

3542

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 as of March 29 13, ~~2019~~2020.



MSB FINANCIAL CORP.
By:	/s/ Michael A. Shriner
	Michael A. Shriner
	President and Chief Executive Officer
	(Duly Authorized Representative)

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below on March 29 13, ~~2019~~2020 by the following persons on behalf of the registrant and in the capacities indicated.

/s/ Michael A. Shriner /s/ W. Scott Gallaway Michael A. ShrinerPresident, Chief Executive Officer and Director W. Scott GallawayChairman of the Board and Director /s/ Anthony Bruno /s/ Gary T. Jolliffe Anthony BrunoDirector Gary T. JolliffeDirector /s/ H. Gary Gabriel /s/ Lawrence B. Seidman H. Gary GabrielDirector Lawrence B. SeidmanDirector /s/ Milena Schaefer /s/ Raymond J. Vanaria Milena SchaeferDirector Raymond J. VanariaDirector /s/ Robert D. Andersen /s/ Robert D. Vollers Robert D. AndersenDirector Robert D. VollersDirector /s/ John S. Kaufman John S. KaufmanFirst Vice President & Chief Financial Officer(Principal Financial and Accounting Officer)

Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors

MSB Financial Corp. and Subsidiaries

Millington, New Jersey

Opinion on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated ~~statement~~statements of financial condition of MSB Financial Corp. and Subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of income, ~~comprehensive income,~~ changes in stockholders’ equity, and cash flows for ~~year~~the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the "financial statements"). InWe ~~our~~also ~~opinion,~~have audited the ~~financial~~Company’s ~~statements~~internal ~~present~~control ~~fairly,~~over ~~in all material respects, the~~ financial ~~position~~reporting ~~of the Company~~ as of December 31, ~~2018~~2019, ~~and~~based ~~the~~on ~~results~~criteria ofestablished ~~their~~in ~~operations~~Internal ~~and~~Control ~~their~~- ~~cash~~Integrated ~~flows~~Framework: ~~for~~(2013) ~~year~~issued ~~ended~~by ~~December~~the ~~31,~~Committee ~~2018,~~of inSponsoring ~~conformity~~Organizations ~~with~~of ~~accounting principles generally accepted in~~ the ~~United~~Treadway ~~States~~Commission ~~of America~~(COSO).

WeIn ~~also~~our ~~have~~opinion, ~~audited~~the financial statements referred to above present fairly, in ~~accordance~~all ~~with~~material respects, the ~~standards~~financial position of the ~~Public~~ Company ~~Accounting~~as ~~Oversight~~of ~~Board~~December (31, 2019 and 2018, and the results of their operations and their cash flows for the years ended December 31, 2019 and 2018 in conformity with accounting principles generally accepted in the United States) ~~(“PCAOB”)~~of America. Also, in our opinion, the Company’s maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2018~~2019, based on criteria established in Internal Control –- Integrated Framework: (2013) issued by ~~the Committee of Sponsoring Organizations of the Treadway Commission (~~COSO~~) and our report dated March 29, 2019 expressed an adverse opinion~~.

Basis for ~~Opinion~~Opinions

~~These~~The Company’s management is responsible for these financial statements, ~~are~~for maintaining effective internal control over financial reporting, and for its assessment of the ~~responsibility~~effectiveness of internal control over financial reporting, included in the ~~Company's~~accompanying ~~management.~~Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company'’s financial statements and an opinion on the Company’s internal control over financial reporting based on our ~~audit~~audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audit~~audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud~~. Our audit included performing procedures to assess the risks of material misstatement of the financial statements~~, ~~whether due to error or fraud,~~ and ~~performing~~whether ~~procedures~~effective ~~that~~internal ~~respond~~control toover ~~those~~financial ~~risks.~~reporting ~~Such~~was ~~procedures~~maintained ~~included examining, on a test basis, evidence regarding the amounts and disclosures~~ in ~~the~~all ~~financial~~material ~~statements~~respects. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~/s/~~Our ~~Crowe~~audits ~~LLP~~of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

We have served as the Company's auditor since 2018.

New York, New York

March 29, 2019

Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors

MSB Financial Corp. and Subsidiaries

Millington, New Jersey

Opinion on Internal Control over Financial Reporting

We have audited MSB Financial Corp. and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effects of the material weakness discussed in the following paragraph, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework: (2013) issued by COSO.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's report:

• Material weakness in internal controls related to the design, implementation, and effectiveness of certain information technology general controls.

• Material weakness in internal controls over the processing and approving of department level journal entries.

• Material weakness in internal controls over loan data within the loan accounting system.

• Material weakness in internal controls over deposit data within the deposit accounting system.

• Material weakness in internal controls over the allowance for loan loss calculation.

• Material weakness at the entity level in the design and monitoring of internal controls over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, 2018, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the year ended December 31, 2018, and the related notes (collectively referred to as the "financial statements") and our report dated March 29, 2019 expressed an unqualified opinion. We considered the material weakness identified above in determining the nature, timing, and extent of audit procedures applied in our audit of the 2018 financial statements, and this report on Internal Control over Financial Reporting does not affect such report on the financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Crowe LLP

We have served as the Company's auditor since 2018.

New York, New York

March 2913, ~~2019~~2020

Report of Independent Registered Public Accounting Firms




MSB Financial Corp. and Subsidiaries

Consolidated Statements of Financial Condition
	At December 31, 2019			At December 31, 2018
(Dollars in thousands, except per share amounts)
Cash and due from banks	$	1,296		$	1,558
Interest-earning demand deposits with banks	17,157			10,242
Cash and Cash Equivalents	18,453			11,800
Securities held to maturity (fair value of $35,696 and $38,569, respectively)	35,827			39,476
Loans receivable, net of allowance for loan losses of $5,722 and $5,655, respectively	508,022			502,299
Premises and equipment	8,020			8,180
Federal Home Loan Bank of New York stock, at cost	2,848			4,756
Bank owned life insurance	14,480			14,585
Accrued interest receivable	1,650			1,615
Other assets	3,786			1,789
Total Assets	$	593,086		$	584,500
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	47,935		$	46,690
Interest bearing	424,817			373,889
Total Deposits	472,752			420,579
Advances from Federal Home Loan Bank of New York	51,575			94,275
Advance payments by borrowers for taxes and insurance	722			749
Other liabilities	2,662			2,251
Total Liabilities	527,711			517,854
Stockholders' Equity
Preferred stock, par value $0.01; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, par value $0.01; 49,000,000 shares authorized; 5,184,914 and 5,389,054 issued and outstanding at December 31, 2019 and December 31, 2018, respectively	52			54
Paid-in capital	41,857			44,726
Retained earnings	24,989			23,498
Unearned common stock held by ESOP (168,538 and 179,464 shares, respectively)	(1,523		)	(1,632		)
Total Stockholders' Equity	65,375			66,646
Total Liabilities and Stockholders' Equity	$	593,086		$	584,500
See notes to consolidated financial statements.

Stockholders and Board of Directors

MSB Financial Corp.

Millington, New Jersey

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial condition of MSB Financial Corp. (the “Company”) and Subsidiaries as of December 31, 2017, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2017, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we were required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

We served as the Company's auditor from 2013 to 2018.

Woodbridge, New Jersey

March 2, 2018

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
	At December 31, 2018			At December 31, 2017
(Dollars in thousands, except per share amounts)
Cash and due from banks	$	1,558		$	2,030
Interest-earning demand deposits with banks	10,242			20,279
Cash and Cash Equivalents	11,800			22,309
Securities held to maturity (fair value of $38,569 and $38,255, respectively)	39,476			38,482
Loans receivable, net of allowance for loan losses of $5,655 and $5,414, respectively	502,299			473,405
Premises and equipment	8,180			8,698
Federal Home Loan Bank of New York stock, at cost	4,756			2,131
Bank owned life insurance	14,585			14,197
Accrued interest receivable	1,615			1,607
Other assets	1,789			2,211
Total Assets	$	584,500		$	563,040
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	46,690		$	36,919
Interest bearing	373,889			411,994
Total Deposits	420,579			448,913
Advances from Federal Home Loan Bank of New York	94,275			37,675
Advance payments by borrowers for taxes and insurance	749			686
Other liabilities	2,251			2,741
Total Liabilities	517,854			490,015
Stockholders' Equity
Preferred stock, par value $0.01; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, par value $0.01; 49,000,000 shares authorized; 5,389,054 and 5,768,632 issued and outstanding at December 31, 2018 and December 31, 2017, respectively	54			58
Paid-in capital	44,726			51,068
Retained earnings	23,498			23,641
Unallocated common stock held by ESOP (179,464 and 190,390 shares, respectively)	(1,632		)	(1,742		)
Total Stockholders' Equity	66,646			73,025
Total Liabilities and Stockholders' Equity	$	584,500		$	563,040
See notes to consolidated financial statements.

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Income
	Year Ended December 31,
	2018		2017
(in thousands except per share amounts)
Interest Income
Loans receivable, including fees	$	21,960	$	18,278
Securities held to maturity	1,065		1,011
Other	320		191
Total Interest Income	23,345		19,480
Interest Expense
Deposits	3,834		2,450
Borrowings	1,564		996
Total Interest Expense	5,398		3,446
Net Interest Income	17,947		16,034
Provision for Loan Losses	240		1,185
Net Interest Income after Provision for Loan Losses	17,707		14,849
Non-Interest Income
Fees and service charges	334		342
Income from bank owned life insurance	388		413
Other	78		67
Total Non-Interest Income	800		822
Non-Interest Expenses
Salaries and employee benefits	6,673		6,240
Directors compensation	490		743
Occupancy and equipment	1,564		1,620
Service bureau fees	347		229
Advertising	33		24
FDIC assessment	211		184
Professional services	1,730		1,347
Other	813		794
Total Non-Interest Expenses	11,861		11,181
Income before Income Taxes	6,646		4,490
Income Tax Expense	1,811		1,768
Net Income	$	4,835	$	2,722
Earnings per share:
Basic	$	0.90	$	0.49
Diluted	$	0.90	$	0.48
See notes to consolidated financial statements.



	F- 2

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
Consolidated Statements of Income
	Year Ended December 31,
(Dollars in thousands)	2018		2017
	2019		2018
Net income	$	4,835	$	2,722
(in thousands except per share amounts)
Other comprehensive income, net of tax
Interest Income
Defined benefit pension plans:
Loans receivable, including fees	$	23,007	$	21,960
Actuarial loss arising during period, net of tax of $- and$- for year ended December 31, 2018 and 2017, respectively	—		—
Securities held to maturity	1,064		1,065
Reclassification adjustment for prior service cost included in net income, net of tax of $- and $- for the year ended December 31, 2018 and 2017, respectively [Note A]	—		—
Other	484		320
Reclassification adjustment for net actuarial loss included in net income, net of tax of $- and ($81) for the year ended December 31, 2018 and 2017, respectively [Note B]	—		122
Total Interest Income	24,555		23,345
Other comprehensive income	—		122
Interest Expense
Comprehensive income	$	4,835	$	2,844
Deposits	5,282		3,834
Borrowings	1,708		1,564
Total Interest Expense	6,990		5,398
Net Interest Income	17,565		17,947
Provision for Loan Losses	—		240
Net Interest Income after Provision for Loan Losses	17,565		17,707
Non-Interest Income
Fees and service charges	346		334
Income from bank owned life insurance	554		388
Other	74		78
Total Non-Interest Income	974		800
Non-Interest Expenses
Salaries and employee benefits	6,769		6,673
Directors compensation	524		490
Occupancy and equipment	1,534		1,564
Service bureau fees	575		347
Advertising	21		33
FDIC assessment	100		211
Professional services	2,415		1,730
Other	831		813
Total Non-Interest Expenses	12,769		11,861
Income before Income Taxes	5,770		6,646
Income Tax Expense	1,667		1,811
Net Income	$	4,103	$	4,835
Earnings per share:
Basic	$	0.81	$	0.90
Diluted	$	0.80	$	0.90
See notes to consolidated financial statements.

Note A: The gross amount of prior service cost amortization is recorded in Directors' Compensation. The related tax impact is recorded in income tax expense.

Note B: The gross amount of actuarial (gain) loss amortization is recorded in Directors' Compensation, $0 and $203, respectively. The related tax expense is recorded in income tax expense.

See notes to consolidated financial statements.



	F- 3

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
	CommonStock			Paid-InCapital			RetainedEarnings			UnallocatedCommonStockHeld by ESOP			~~AccumulatedOtherComprehensive Loss~~TotalStockholders'Equity			~~TotalStockholders'Equity~~
(Dollars in thousands)
Balance - December 31, 2016	$	57		$	51,809		$	23,370		$	(1,929	)	$	(122	)	$	73,185
Balance - December 31, 2017	$	58		$	51,068		$	23,641		$	(1,742	)	$	73,025
Net income	—			—			24,~~722~~835			—			4,835			~~2,722~~
Other comprehensive income, net of tax													122			122
Allocation of ESOP stock	—			219			—			110			329
Allocation of ESOP stock				78						187						265
Repurchased stock (390,089 shares)	(4		)	(7,026		)	—			—			(7,030		)
Repurchased stock (218,631 shares)	(2		)	(3,785		)										(3,787		)
Exercise of stock options (10,511 shares)	—			137			—			—			137
Exercise of stock options (273,081 shares)	3			2,575												2,578
Stock-based compensation	—			328			—			—			328
Stock-based compensation				391												391
Cash paid for common stock dividend ($0.905 per share)	—			—			(4,978		)	—			(4,978		)
Cash paid for common stock dividend ($0.425 per share)							(2,451		)							(2,451		)
Balance - December 31, 2018	$	54		$	44,726		$	23,498		$	(1,632	)	$	66,646
Balance - December 31, 2017	$	58		$	51,068		$	23,641		$	(1,742	)	$	—		$	73,025
Net income	—			—			4,103			—			4,103
Net income							4,835									4,835
Allocation of ESOP stock	—			151			—			109			260
Allocation of ESOP stock				219						110						329
Repurchased stock (199,202 shares and 4,938 restricted)	(2		)	(3,347		)	—			—			(3,349		)
Repurchased stock (390,089 shares)	(4		)	(7,026		)										(7,030		)
Stock-based compensation	—			327			—			—			327
Exercise of stock options (10,511 shares)				137												137
Cash paid for common stock dividends ($0.50 per share)	—			—			(2,612		)	—			(2,612		)
Stock-based compensation				328												328
Balance - December 31, 2019	$	52		$	41,857		$	24,989		$	(1,523	)	$	65,375
Cash paid for common stock dividends ($0.905 per share)							(4,978		)							(4,978		)
See notes to consolidated financial statements.
Balance - December 31, 2018	$	54		$	44,726		$	23,498		$	(1,632	)	$	—		$	66,646
See notes to consolidated financial statements.



	F- 4

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
	Year EndedDecember 31,
(Dollars in thousands)	~~2018~~2019			~~2017~~2018
Cash Flows from Operating Activities
Net income	$	4,~~835~~103		$	24,~~722~~835
Adjustments to reconcile net income to net cash provided by operating activities:
Net (accretion) of securities premiums and discounts and deferred loan fees and costs	(~~118~~181		)	(~~137~~118		)
Depreciation and amortization of premises and equipment	~~573~~559			~~556~~573
Stock-based compensation and allocation of ESOP stock	~~657~~587			~~654~~657
Provision for loan losses	~~240~~—			~~1,185~~240
Deferred income taxes	~~293~~(191		)	~~513~~293
Income from bank owned life insurance	(~~388~~554		)	(~~413~~388		)
Increase in accrued interest receivable	(835		)	(~~229~~8		)
Decrease (increase) in other assets	129			(204		)
Decrease in other assets	64			129
(Decrease) increase in other liabilities	(490		)	251
Decrease in other liabilities	(800		)	(490		)
Net Cash Provided by Operating Activities	53,~~723~~552			45,~~898~~723
Cash Flows from Investing Activities
Activity in held to maturity securities:
Purchases	(89,~~969~~961		)	(18,~~182~~969		)
Maturities, calls and principal repayments	713,~~898~~556			67,~~727~~898
Net increase in loans receivable	(54,406		)	(44,873		)
Net decrease (increase) in loans receivable	3,279			(54,406		)
Purchased participation loans	(7,096		)	(80,535		)
Purchased loans	(11,300		)	(7,096		)
Proceeds from participations/sale of loans	32,563			19,039
Proceeds from sales of loans	2,533			32,563
Purchase of bank premises and equipment	(55399		)	(~~297~~55		)
Purchase of Federal Home Loan Bank of New York stock	(2714,~~356~~697		)	(1627,~~404~~356		)
Redemption of Federal Home Loan Bank of New York stock	2416,~~731~~605			1524,~~706~~731
Net Cash Used by Investing Activities	(~~32,690~~384		)	(~~101~~32,~~819~~690		)
Cash Flows from Financing Activities
Net (decrease) increase in deposits	(28,334		)	86,614
Net increase (decrease) in deposits	52,173			(28,334		)
Advances from Federal Home Loan Bank of New York	~~66,600~~—			2566,~~000~~600
Repayment of advances from Federal Home Loan Bank of New York	(1042,~~000~~700		)	(10,000		)
Increase (decrease) in advance payments by borrowers for taxes and insurance	63			(106		)
(Decrease) increase in advance payments by borrowers for taxes and insurance	(27		)	63
Cash dividends paid to stockholders	(42,~~978~~612		)	(24,~~451~~978		)
Net exercise of options and repurchase of shares	~~(53~~—		)	(~~1,672~~53		)
Proceeds from exercise of stock options	—			571
Repurchase of common stock	(3,349		)	(6,840		)
Repurchase of common stock	(6,840		)	(108		)
Net Cash Provided by Financing Activities	3,485			16,458
Net Cash Provided by Financing Activities	16,458			97,848
Net increase (decrease) in Cash and Cash Equivalents	6,653			(10,509		)
Net (decrease) increase in Cash and Cash Equivalents	(10,509		)	927
Cash and Cash Equivalents – Beginning	11,800			22,309
Cash and Cash Equivalents – Beginning	22,309			21,382
Cash and Cash Equivalents – Ending	$	18,453		$	11,800
Cash and Cash Equivalents – Ending	$	11,800		$	22,309
See notes to consolidated financial statements.



	F- 5

MSB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
	Year EndedDecember 31,
(Dollars in thousands)	~~2018~~2019		~~2017~~2018
Supplementary Cash Flows Information
Interest paid	$	56,~~407~~991	$	35,~~423~~407
Income taxes paid	$	12,~~436~~077	$	1,~~016~~436
Loan receivable transferred to other real estate	$	—	$	—
Supplemental noncash disclosures
Lease liabilities arising from obtaining right-of-use assets	$	1,211	$	—
See notes to consolidated financial statements.



	F- 6

Note 1 – Organization and Business

MSB Financial Corp. (the "Company") is a Maryland-chartered corporation organized in 2014 to be the successor to MSB Financial Corp., a federal corporation ("Old MSB") upon completion of the second-step conversion of Millington Bank (the "Bank") from the two-tier mutual holding company structure to the stock holding company structure. MSB Financial, MHC (the "MHC") was the former mutual holding company for Old MSB prior to completion of the second-step conversion. In conjunction with the second-step conversion, each of the MHC and Old MSB ceased to exist. The second-step conversion was completed on July 16, 2015 at which time the Company sold 3,766,592 shares of its common stock (including 150,663 shares purchased by the Bank's employee stock ownership plan) at $10.00 per share for gross proceeds of approximately $37.7 million. Expenses related to the stock offering totaled $1.5 million and were netted against proceeds. As part of the second-step conversion, each of the outstanding shares of common stock of Old MSB held by persons other than the MHC were converted into 1.1397 shares of Company common stock with cash paid in lieu of fractional shares. As a result, a total of 2,187,242 additional shares were issued in the second-step conversion. As a result of the second-step conversion, all share and per share information has subsequently been revised to reflect the 1.1397 exchange ratio unless otherwise noted.

The Company's principal business is the ownership and operation of the Bank. The Bank is a New Jersey-chartered stock savings bank and its deposits are insured by the Federal Deposit Insurance Corporation. The primary business of the Bank is attracting retail deposits from the general public and using those deposits together with funds generated from operations, principal repayments on securities and loans and borrowed funds, for its lending and investing activities. The Bank's loan portfolio primarily consists of one-to-four family and home equity residential loans, commercial real estate loans, commercial loans, and construction loans. It also invests in U.S. government obligations and mortgage-backed securities. The Bank is regulated by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. The Board of Governors of the Federal Reserve System (the "Federal Reserve") regulates the Company as a bank holding company.

The primary business of Millington Savings Service Corp (the "Service Corp"), the Bank's wholly-owned subsidiary, was the ownership and operation of a single commercial rental property. This property was sold during the year ended June 30, 2007. Currently the Service Corp is inactive.

Note 2 - Summary of Significant Accounting Policies

Basis of Consolidated Financial Statement Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, the Bank and the Bank's wholly owned subsidiary, the Service Corp. All significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash and amounts due from depository institutions and interest-bearing deposits with banks with original maturities of six months or less.

Securities

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt securities that are bought and held principally for the purpose of being sold in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt securities not classified as trading securities or as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of applicable income taxes, reported in a separate component of stockholders' equity. The Company had no trading or available for sale securities as of December 31, ~~2018~~2019 and ~~2017~~2018.

~~Beginning~~Equity ~~in 2018, equity~~ investments are measured at fair value with changes in fair value recognized in net income. The Company had no equity investments with changes in fair value recorded in net income atfor the years ended December 31, 2019 and 2018.

Individual securities are considered impaired when their fair value is less than amortized cost. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are "temporary" or "other-than-temporary" in accordance with applicable accounting guidance. Accordingly, the Company accounts for temporary impairments based upon a security's classification as trading, available for sale or held to maturity. Temporary impairments on available for sale securities are recognized, on a tax-effected basis, through other comprehensive income (loss) with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Temporary impairments of held to maturity securities are not recognized in the consolidated financial statements; however, information concerning the amount and duration of impairments on held to maturity securities is disclosed in the notes to the consolidated financial statements. The carrying value of securities held in the trading portfolio is adjusted to fair value through earnings on a monthly basis.



	F- 7

Note 2 - Summary of Significant Accounting Policies (Continued)

Other-than-temporary impairments on securities that the Company has decided to sell or will more likely than not be required to sell prior to the full recovery of their fair value to a level equal to or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components. The credit-related impairment generally represents the amount by which the present value of the cash flows expected to be collected on the debt security falls below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. Credit-related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred taxes, in other comprehensive income (loss).

The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value of a security has been lower than the cost, and the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company also assesses its intent with regard to selling or holding each security as well as any conditions which may require the sale of security prior to the recovery of fair value to a level which equals or exceeds amortized cost.

Discounts and premiums on securities are accreted/amortized to maturity by use of the level-yield method. Gain or loss on sales of securities is based on the specific identification method.

Concentration of Risk

The Bank's lending activities are concentrated in loans secured by real estate located in the State of New Jersey.

Loans Receivable

Loans are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts based on the effective interest method.

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management's estimate of probable incurred losses in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management's estimate of probable incurred losses in its unfunded loan commitments and is recorded in other liabilities, when required, on the consolidated statement of financial condition. The allowance for credit losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. All, or part, of the principal balance of loans receivable that are deemed uncollectible are charged against the allowance for loan losses when management determines that the repayment of that amount is highly unlikely. Any subsequent recoveries are credited to the allowance for loan losses. Non-residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company's three year loan loss experience, known and probable incurred losses in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, the composition of the loan portfolio, current economic conditions and other relevant factors.

This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

For additional detail regarding the allowance for loan losses, see Note 4 to the Consolidated Financial Statements.

Other Real Estate Owned ("OREO")

Other real estate owned represents real estate acquired through formal foreclosure or by taking possession of the real estate and is initially recorded at the lower of cost or fair value, less estimated selling costs establishing a new cost basis. Write-downs required at the time of acquisition are charged to the allowance for loan losses. Thereafter, the Company maintains an allowance for decreases in the property's estimated fair value, through charges to earnings. Such charges are included in other non-interest expense along with any additional property maintenance. There was no OREO at December 31, ~~2018~~2019 and ~~2017~~2018. We may obtain physical possession of residential and commercial real estate collateralizing consumer and commercial mortgage loans via foreclosure or in-substance repossession. As of December 31, ~~2018~~2019, we had consumer loans with a carrying value of $~~708~~773,000 collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Premises and Equipment



	F- 8

Note 2 - Summary of Significant Accounting Policies (Continued)

Premises and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost, less accumulated depreciation and amortization. Depreciation and amortization charges are computed on the straight-line method over the following estimated useful lives:



	Years
Building and improvements	5 - 50
Furnishings and equipment	3 – 7
Leasehold improvements	Shorter of useful life or term of lease

Significant renewals and betterments are capitalized to the premises and equipment account. Maintenance and repairs are charged to operations in the year incurred. Rental income is netted against occupancy costs in the consolidated statements of income.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank ("FHLB") system to hold restricted stock of its district's FHLB according to a predetermined formula based on advances available and outstanding. The restricted stock is carried at cost. Management's determination of whether these shares are impaired is based on an assessment of the ultimate recoverability of its cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge was necessary related to the FHLB restricted stock during the years ended December 31, ~~2018~~2019 and ~~2017~~2018.

Bank Owned Life Insurance

Bank owned life insurance is carried at net cash surrender value. The change in the net cash surrender value is recorded as a component of non-interest income.

Defined Benefit Plans

In accordance with applicable guidance prescribed in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715, "Compensation – Retirement Benefits", the Company recognizes the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in the consolidated statement of financial condition, with changes in the funded status recorded through other comprehensive income (loss) in the year in which those changes occur. The funded status of the plan is calculated using actuarial concepts which involve making assumptions regarding discount rate, mortality, expected rate of compensation increases and others.

Stock-based Compensation Plans

In accordance with FASB ASC 718, "Compensation – Stock Compensation", the Company recognizes compensation expense for the total of the fair value of all share-based compensation awards granted over the requisite service periods. In addition, ASC 718 requires that cash flow activity be reported on a financing rather than an operating cash flow basis for the benefits, if any, of realized tax deductions in excess of previously recognized tax benefits on compensation expense.

Advertising

The Company expenses advertising and marketing costs as incurred.

Income Tax Expense

The Company and its subsidiaries file a consolidated federal income tax return. Federal income taxes are allocated based on the contribution of their respective income or loss to the consolidated income tax return. Separate state income tax returns are filed.

Federal and state income taxes have been provided for these consolidated financial statements on the basis of reported income. The amounts reflected on the income tax returns differ from these provisions due principally to temporary differences in the reporting of certain items of income and expense for financial reporting and income tax reporting purposes. Deferred income taxes are recorded to recognize such temporary differences.

The Company follows the provisions of FASB ASC 740, "Income Taxes", formerly FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes ("FIN48"). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company's evaluation under ASC 740, no significant income tax uncertainties have been identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2019 and 2018. The Company's policy is to recognize interest and penalties on unrecognized



	F- 9

Note 2 - Summary of Significant Accounting Policies (Continued)

tax benefits in income tax expense in the consolidated statement of income. The Company did not recognize any interest and ~~expense~~penalties for ~~financial~~the ~~reporting~~years ended December 31, 2019 and ~~income~~2018. The tax ~~reporting~~years ~~purposes.~~subject ~~Deferred~~to ~~income~~examination ~~taxes~~by the taxing authorities are ~~recorded~~the toyears ~~recognize~~ended ~~such~~December 31, ~~temporary~~2019, ~~differences~~2018, 2017 and 2016.

The Company follows the provisions of FASB ASC 740, "Income Taxes", formerly FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes ("FIN48"). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company's evaluation under ASC 740, no significant income tax uncertainties have been identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2018 and 2017. The Company's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the consolidated statement of income. The Company did not recognize any interest and penalties for the years ended December 31, 2018 and 2017. The tax years subject to examination by the taxing authorities are the years ended December 31, 2018, 2017, 2016 and 2015.

Off-Balance Sheet Credit-Related Financial Instruments

In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under lines of credit. Such financial instruments are recorded when they are funded.

Earnings per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding, exclusive of the Employee Stock Ownership Plan ("ESOP") shares not yet committed to be released. Diluted earnings per share is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable (such as stock options) or which could be converted into common stock, if dilutive, using the treasury stock method.

The following table shows the computation of basic and diluted earnings per share:

	Year Ended December 31,
(In Thousands, Except Per Share Data)	~~2018~~2019		~~2017~~2018
Numerator:
Net income	$	4,~~835~~103	$	24,~~722~~835
Denominator:
Weighted average common shares	5,~~351~~096		5,~~550~~351
Dilutive potential common shares	4931		9549
Weighted average fully diluted shares	5,~~400~~127		5,~~645~~400
Earnings per share:
Basic	$	0.9081	$	0.4990
Dilutive	$	0.9080	$	0.4890
Outstanding common stock equivalents having no dilutive effect	—		—

Other Comprehensive Income

Other comprehensive income includes benefit plan's amounts recognized under ASC 715, "Compensation-Retirement Benefits". This item of other comprehensive income reflects, net of tax, prior service costs and unrealized net losses that had not been recognized in the consolidated financial statements prior to the implementation of ASC 715 along with actuarial losses arising during the current period.

Recent Accounting Pronouncements

In ~~May~~February ~~2014~~2016, the FASB issued ~~Accounting Standards Update (~~ASU) No. ~~2014~~2016-92, "~~Revenue~~Leases" ~~from Contracts with Customers~~ (~~ASU~~Topic ~~2014-9~~842)",. ~~which~~This ~~supersedes~~ASU ~~nearly~~revises ~~all~~the ~~existing~~method ~~revenue~~for ~~recognition~~lessee ~~guidance~~accounting. ~~under~~Under ~~GAAP. The~~the ~~core~~new ~~principle~~guidance, oflessees ~~ASU~~will ~~2014-9~~be isrequired to recognize ~~revenues~~a ~~when~~right-of-use ~~promised~~asset ~~goods~~and ora ~~services~~lease ~~are~~liability ~~transferred~~for toall ~~customers~~leases. inThe annew ~~amount~~lease ~~that~~guidance ~~reflects~~also simplified the ~~consideration~~accounting tofor ~~which~~sale anand ~~entity~~leaseback ~~expects~~transactions primarily due to bethe ~~entitled~~recognition ~~for~~of ~~those~~lease ~~goods~~assets orand ~~services~~lease liabilities. ASU ~~2014~~2016-92 ~~defines~~is aeffective ~~five-step~~for ~~process~~the tofirst ~~achieve~~interim ~~this~~period ~~core~~within ~~principle~~annual ~~and,~~periods inbeginning ~~doing~~after soDecember 15, ~~more~~2018, ~~judgment~~with ~~and~~early ~~estimates~~adoption ~~may~~permitted. beThe standard is required ~~within~~to ~~the~~be ~~revenue~~adopted ~~recognition~~using ~~process~~the ~~than~~modified ~~are~~retrospective ~~required~~transition ~~under~~approach for leases existing ~~GAAP~~at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The ~~FASB~~adoption ~~also~~of ~~subsequently issued~~ASC ~~ASUs~~842 ~~Nos.~~resulted ~~2016-8,~~in ~~2016-10,~~the ~~2016-12,~~recognition ~~2016-20~~of ~~and~~a ~~2017~~right-5of-use to(ROU) ~~augment,~~asset ~~amend~~of $1.2 million and ~~clarify~~a ~~the~~lease ~~original~~liability ~~pronouncement~~of $1. ~~The~~2 ~~Company~~million ~~evaluated~~on ~~all~~our Consolidated Statements of ~~its~~Financial ~~revenue~~Condition. ~~streams~~The ~~and~~Company ~~determined~~has ~~that~~elected to apply the ~~majority~~package of ~~its~~practical ~~revenue~~expedients isallowed ~~derived~~by ~~from~~the ~~financial~~new ~~instruments~~standard ~~that~~under ~~are~~which ~~scoped~~the ~~out. In~~Company ~~addition,~~need ~~non-interest~~not ~~revenue~~reassess ~~streams~~whether ~~were~~any ~~evaluated,~~expired ~~including~~contracts ~~deposit~~are ~~and~~leases ~~service~~or ~~charges~~contain ~~and~~leases, ~~interchange~~the ~~fees. The~~ Company ~~adopted~~need ~~ASU~~not ~~2014-9~~reassess onthe ~~January~~lease 1,classification ~~2018~~for ~~and~~any itexpired ~~did~~or ~~not~~existing ~~materially~~lease, ~~change~~and the ~~timing~~Company ofneed ~~recognition~~not ofreassess ~~our~~initial ~~current~~direct ~~revenue~~costs ~~sources. Accordingly,~~for noany ~~cumulative~~existing ~~effect~~leases. ~~adjustment~~The ~~was~~Company ~~recorded~~has ~~under~~also ~~the~~elected ~~modified~~not ~~retrospective~~to ~~transition~~restate ~~method~~comparative periods.

FIn June 2016, the FASB issued ASU No. 2016-13, 10"Measurement of Credit Losses on Financial Instruments." This ASU requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument. The standard is effective for public companies in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim or annual period provided that the entire standard is adopted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements. We have taken steps to begin preparations for implementation, such as evaluating changes to our current loss recognition model and have selected an outside professional company's model to begin loading our data into and determining next steps. On October 16, 2019, the FASB voted to a delay the effective date of ASU 2016-13 for SEC filers who are smaller reporting companies (like the Company) and public entities that are not SEC filers and nonpublic entities. For these entities, the effective date for implementation of ASU 2016-13 has been deferred to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Note 2 - Summary of Significant Accounting Policies (Continued)

In January 2016, the FASB issued ASU No. 2016-1, "Financial Instruments - Overall." The guidance in this ASU among other things, (1) requires equity investments with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminates the requirement for public businesses entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) requires an entity to present separately in other comprehensive income the portion of the change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (7) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance effective January 1, 2018, did not have a material impact on our consolidated financial statements, but did change the disclosure requirements in Note 15 - Fair Value Measurements.

In February 2016, the FASB issued ASU No. 2016-2, "Leases" (Topic 842). This ASU revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability for all leases. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily due to the recognition of lease assets and lease liabilities. ASU 2016-2 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of ASC 842 will result in the recognition of a right-of-use (ROU) asset of $1.3 million and a lease liability of $1.3 million on our Consolidated Statements of Financial Condition. We will provide additional detail to our leases disclosures on a prospective basis, beginning in the first quarter of 2019.

In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments." This ASU requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument. The standard is effective for public companies in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in the interim or annual period provided that the entire standard is adopted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements. We have taken steps to begin preparations for implementation, such as evaluating changes to our current loss recognition model and evaluating the potential use of outside professionals for an updated model.

Note 3 - Securities Held to Maturity

The amortized cost of securities held to maturity and their fair values are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
December 31, 2019:
U.S. Government agencies	$	6,000	$	13	$	—	$	6,013
Mortgage-backed securities	22,451		300		37		22,714
Corporate bonds	6,500		2		425		6,077
State and political subdivisions	876		16		—		892
	$	35,827	$	331	$	462	$	35,696
December 31, 2018:
U.S. Government agencies	$	8,000	$	11	$	18	$	7,993
Mortgage-backed securities	23,936		142		299		23,779
Corporate bonds	6,500		—		736		5,764
State and political subdivisions	1,040		—		7		1,033
	$	39,476	$	153	$	1,060	$	38,569
December 31, 2017:
U.S. Government agencies	$	5,500	$	—	$	42	$	5,458
Mortgage-backed securities	23,839		263		207		23,895
Corporate bonds	7,012		6		243		6,775
State and political subdivisions	1,196		1		5		1,192
Certificates of deposits	935		1		1		935
	$	38,482	$	271	$	498	$	38,255

FAll mortgage-backed 11securities at December 31, 2019 and 2018 have been issued by FNMA, FHLMC or GNMA and are secured by 1-4 family residential real estate.

The amortized cost and fair value of securities held to maturity at December 31, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



(In thousands)	Amortized Cost		Fair Value
U.S. Government agencies:
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five through ten years	3,000		3,011
Due thereafter	3,000		3,002
	6,000		6,013
Mortgage-backed securities
Due within one year	1,151		1,153
Due after one year through five years	11,370		11,552
Due after five through ten years	2,580		2,565
Due thereafter	7,350		7,444
	22,451		22,714
Corporate Bonds
Due within one year	1,500		1,502
Due after one year through five years	—		—
Due after five years through ten years	1,000		956
Due thereafter	4,000		3,619
	6,500		6,077
State and political subdivisions
Due within one year	171		171
Due after one year through five years	705		721
Due after five years through ten years	—		—
	876		892
	$	35,827	$	35,696



	F- 10

Note 3 - Securities Held to Maturity (Continued)

~~All~~There ~~mortgage-backed~~were no sales of securities atheld to maturity during the years ended December 31, 2019 and 2018. At December 31, 2019 and ~~2017~~2018, ~~have~~securities ~~been~~held ~~issued~~to bymaturity ~~FNMA,~~with ~~FHLMC~~a orfair ~~GNMA~~value of approximately $3 million and ~~are~~$2 ~~secured~~million, byrespectively, ~~1-4~~were ~~family~~pledged ~~residential~~to ~~real~~secure ~~estate~~public funds on deposit.

The amortized cost and fair value of securities held to maturity at December 31, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)	Amortized Cost		Fair Value
U.S. Government agencies:
Due within one year	$	2,000	$	1,982
Due after one year through five years	—		—
Due after five through ten years	3,000		3,002
Due thereafter	3,000		3,009
	8,000		7,993
Mortgage-backed securities
Due within one year	898		891
Due after one year through five years	15,563		15,539
Due after five through ten years	3,241		3,150
Due thereafter	4,234		4,199
	23,936		23,779
Corporate Bonds
Due within one year	—		—
Due after one year through five years	1,500		1,487
Due after five years through ten years	1,000		910
Due thereafter	4,000		3,367
	6,500		5,764
State and political subdivisions
Due within one year	161		160
Due after one year through five years	697		692
Due after five years through ten years	182		181
	1,040		1,033
	$	39,476	$	38,569

There were no sales of securities held to maturity during the years ended December 31, 2018 and 2017. At December 31, 2018 and 2017, securities held to maturity with a fair value of approximately $2 million and $1 million, respectively, were pledged to secure public funds on deposit.

The following table provides the gross unrealized losses and fair value of securities in an unrealized loss position, by the length of time that such securities have been in a continuous unrealized loss position:

F- 12



	Less than 12 Months				More than 12 Months				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(In thousands)
December 31, 2019:
U.S. Government agencies	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities	1,716		8

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