SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-K
☑ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2025
OR
☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-51726
Magyar Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
(732)342-7600
(Issuer’s Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act.
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 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
If an emerging growth company, indicate by check mark if the registrant has elected not to use 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price of the Common Stock as of March 31, 2025 was $90.0 million. As of December 15, 2025, there were 6,477,991 outstanding shares of the registrant’s Common Stock,
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy Statement for the Annual Meeting of Stockholders to be held on February 11, 2026 (Part III)
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Annual Report On Form 10-K
For The Fiscal Year Ended
September 30, 2025
Table Of Contents
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PART I
Forward Looking Statements
We have included or incorporated by reference in this Annual Report on Form 10-K, and from time to time our management may make, statements that may constitute “forward-looking statements” within the meaning of the safe harbour provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements include statements other than historical information or statements of current condition and may relate to our future plans and objectives and results, as well as statements about the objective and effectiveness of our risk management and liquidity policies, statements about trends in or growth opportunities for our business, statements about our future status, and activities or reporting under U.S. banking and financial regulation. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed below and under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
General
Magyar Bancorp, Inc. (the “Company”) is a Delaware-chartered corporation which owns 100% of the outstanding shares of common stock of Magyar Bank (the “Bank”). At September 30, 2025, Magyar Bancorp, Inc. had consolidated assets of $997.7 million, total deposits of $814.3 million and stockholders’ equity of $118.8 million. Magyar Bancorp, Inc. has not engaged in any significant business activity other than owning all of the shares of common stock of Magyar Bank. The executive office of Magyar Bancorp, Inc. is located at 400 Somerset Street, New Brunswick, New Jersey 08901, and its telephone number is (732) 342-7600.
Magyar Bank is a New Jersey-chartered savings bank headquartered in New Brunswick, New Jersey that was originally founded in 1922. We conduct business from our main office located at 400 Somerset Street, New Brunswick, New Jersey, and our seven branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Edison and Martinsville, New Jersey. The telephone number at our main office is (732) 342-7600 and our website is located at www.magbank.com. Information on our website is not and should not be considered a part of this Annual Report.
Our principal business consists of attracting retail deposits from the general public in the areas surrounding our main office in New Brunswick, New Jersey and our branch offices located in Middlesex and Somerset Counties, New Jersey, and investing those deposits, together with funds generated from operations and wholesale funding, in commercial real estate loans, residential mortgage loans, commercial business loans, Small Business Administration (“SBA”) loans, home equity loans, home equity lines of credit, construction and land loans and investment securities. Our revenues are derived principally from interest on loans and securities; our investment securities consist primarily of mortgage-backed securities and U.S. Government and government-sponsored enterprise obligations. We also generate revenues from fees and service charges. Our primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities. We are subject to comprehensive regulation and examination by the New Jersey Department of Banking and Insurance (“NJDBI”) and the Federal Deposit Insurance Corporation (“FDIC”).
Market Area
We are headquartered in New Brunswick, New Jersey, and our primary deposit market area is concentrated in the communities surrounding our headquarters branch and our branch offices located in Middlesex and Somerset Counties, New Jersey. Our primary lending market area is broader than our deposit market area and includes all of New Jersey.
The economy of our primary market area is largely urban and suburban with a broad economic base that is typical for counties surrounding the New York metropolitan area. The median household income in Middlesex and Somerset Counties ranks among the highest in the nation.
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Most of our customers are individuals and small to medium-sized businesses which are dependent upon the regional economy. Adverse changes in economic and business conditions in the Bank’s markets could adversely affect the Bank’s borrowers, their ability to repay their loans and to borrow additional funds, and consequently the Bank’s financial condition and performance. Most of the Bank’s loans are secured by real estate located in New Jersey. A decline in local economic conditions could adversely affect the values of such real estate. Consequently, a decline in local economic conditions may have a greater effect on the Bank’s earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.
Competition
We face intense competition within our market area both in making loans and attracting deposits. Our market area has a high concentration of financial institutions including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. According to the Federal Deposit Insurance Corporation’s annual Summary of Deposit report, on June 30, 2025, our market share of deposits was 1.39% and 0.69% in Middlesex and Somerset Counties, respectively. Our market share of deposits was 1.52% and 0.38%, respectively, at June 30, 2024.
Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.
Lending Activities
Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing primarily in and around central and northern New Jersey. We primarily originate commercial and residential real estate loans, and to a lesser extent home equity lines of credit, commercial business and construction and land loans.
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan, for the years ended September 30, 2025 and 2024.
Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
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The following table sets forth the scheduled repayments of fixed-rate and adjustable-rate loans at September 30, 2025 that are contractually due after September 30, 2026.
One-to Four-Family Residential Loans. We originate residential mortgage loans, most of which are secured by properties located in our primary market area and most of which we hold in portfolio. At September 30, 2025, $242.5 million, or 28.2% of our total loan portfolio, consisted of residential mortgage loans. Generally, residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio more than 80%.
Generally, all residential mortgage loans are underwritten according to Federal Home Loan Mortgage Corporation (“Freddie Mac”) guidelines, policies and procedures. Historically, we have not originated a significant number of loans for the purpose of reselling them in the secondary market.
We also originate home equity loans secured by residences located in our market area. The underwriting standards we use for home equity loans include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan.
At September 30, 2025, we had $145.0 million of fixed-rate residential mortgage loans, which represented 59.8% of our total residential mortgage loan portfolio. At September 30, 2025, our largest fixed-rate residential mortgage loan was $9.8 million. The loan was performing in accordance with its contractual repayment terms at September 30, 2025.
At September 30, 2025, adjustable-rate residential mortgage loans totaled $97.4 million, or 40.2% of our total residential mortgage loan portfolio. The largest adjustable-rate residential mortgage loan was for $2.6 million. The loan was performing in accordance with its contractual repayment terms at September 30, 2025.
Commercial Real Estate Loans. We also originate commercial real estate loans, most of which are secured by properties located in our primary market area. At September 30, 2025, $533.2 million, or 62.1%, of our total loan portfolio consisted of these types of loans. Commercial real estate loans are generally secured by five-or-more-unit apartment buildings, industrial properties and properties used for business purposes such as small office buildings, warehouses and retail facilities. We generally originate adjustable-rate commercial real estate loans with a maximum term of 25 years with adjustable-rate periods every five years. The maximum loan-to-value ratio for our commercial real estate loans is 75%, based on the appraised value of the property.
We consider a number of factors when we originate commercial real estate loans. During the underwriting process we evaluate the business qualifications and financial condition of the borrower, including credit history, profitability of the property being financed, as well as the value and condition of the mortgaged property securing the loan. When evaluating the business qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, we consider the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service) to ensure it is at least 120% of the monthly debt service.
Loans secured by commercial real estate generally are larger than residential mortgage loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate.
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Construction and Land Loans. We also originate construction and land acquisition loans for the development of one-to four-family homes, apartment buildings and commercial properties. Construction and land loans are generally offered to experienced local developers operating in our primary market area and to individuals for the construction of their personal residences. At September 30, 2025, our construction and land loans totaled $29.3 million, or 3.4% of total loans.
Construction and land loans generally have a maximum term of 24 months. We provide financing for land acquisition, site improvement and hard construction costs. Land acquisition loans are limited to 50% of the sale price or appraised value of the land, whichever is lower. Site improvement loans are limited to 100% of the bonded site improvement costs. Construction loans are limited to 75% of the lesser of the contract sale price or appraised value of the property.
Construction and land lending is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction and land loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance funds beyond the amount originally committed to protect the value of the property. Additionally, if our estimate of the value of the completed property is inaccurate, our construction and land loan may exceed the value of the collateral. The advantages of construction lending are that the market is typically less competitive than standard mortgage products, the interest rate typically charged is a variable rate, which permits the Bank to protect against sudden changes in its costs of funds, the interest rate is typically higher to reflect the higher degree of credit risk, and the origination fees charged by the Bank to its customers can be amortized over the shorter term of a construction loan, typically, one to two years, which permits the Bank to recognize fees as income over a shorter period of time.
Home Equity Loans and Lines of Credit and Other Loans. We originate home equity lines of credit secured by residences located in our market area. At September 30, 2025, these loans totaled $31.8 million, or 3.7% of our total loan portfolio. The underwriting standards we use for home equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan. The maximum combined (first and second mortgage liens) loan-to-value ratio for home equity lines of credit is 80%. Home equity lines of credit have adjustable rates of interest, indexed to the prime rate, as reported in The Wall Street Journal, with terms of up to 25 years.
We also originate loans secured by the common stock of publicly traded companies, provided their shares are listed on the New York Stock Exchange or the NASDAQ Stock Market. Stock-secured loans are interest-only and are offered for terms up to twelve months and for adjustable rates of interest indexed to the prime rate, as reported in The Wall Street Journal. The loan amount is not to exceed 70% of the value of the stock securing the loan at any time. At September 30, 2025, stock-secured and other loans totaled $1.6 million, or 0.2% of our total net loan portfolio.
Commercial Business Loans. We make commercial business loans primarily in our market area to a variety of professionals, sole proprietorships and small and mid-sized businesses. Our commercial business loans include term loans and revolving lines of credit. At September 30, 2025, our commercial business loans totaled $20.0 million, or 2.3% of total loans.
The maximum term of a commercial business loan is 25 years. Such loans are generally used for longer-term working capital purposes such as purchasing equipment or furniture. Commercial business loans are made with either adjustable or fixed rates of interest.
Included in commercial business loans are SBA 7(a) loans, on which the SBA provides guarantees of up to 75% of the principal balance (85% for loans under $150,000). These loans are made for the purposes of providing working capital and financing the purchase of equipment, inventory or commercial real estate, and may be made inside or outside the State of New Jersey. At September 30, 2025, $17.6 million, or 96.0% of the Company’s SBA loan balances, were to businesses located in the State of New Jersey. Generally, an SBA 7(a) loan has a deficiency in its credit profile that would not allow the borrower to qualify for a traditional commercial loan, which is why the government provides the guarantee. The deficiency may be a higher loan to value ratio, lower debt service coverage ratio or weaker personal financial guarantees. In addition, many SBA 7(a) loans are for start-up businesses where there is no history of financial information. Finally, many SBA borrowers do not have an ongoing and continuous banking relationship with the Bank, but merely work with the Bank on a single transaction. We generally sell the guaranteed portions of these SBA loans in the secondary market.
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Commercial business loans generally have greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to repay the loan from his or her employment income, and which are secured by real property with ascertainable value, commercial business loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the repayment of commercial business loans may depend substantially on the success of the borrower’s business. As such the performance of these types of loans may be particularly sensitive to local and/or national economic conditions. Further, any collateral securing commercial business loans may depreciate over time, may be difficult to appraise and may fluctuate in value. We try to minimize these risks through our underwriting standards.
Loans to One Borrower and Concentration of Loans. The maximum amount of loans to one borrower is limited by our Board-established loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $18.6 million. At September 30, 2025, our largest loan was a $12.8 million commercial real estate loan to finance the purchase and operation of a nursing and rehabilitation home in Edison, New Jersey. The loan was performing in accordance with its terms at September 30, 2025.
The size of loans which the Bank can offer to potential borrowers is less than the size of loans which many of the Bank’s competitors with larger capitalization are able to offer. The Bank may engage in loan participations with other banks for loans in excess of the Bank’s legal lending limits. However, no assurance can be given that such participations will be available at all or on terms which are favorable to the Bank and its customers.
The Bank has established policies to determine and monitor concentrations of credit risk and to maintain discipline in lending practices with a focus on portfolio diversification.
Asset Quality
We commence collection efforts when a loan becomes 15 days past due with system-generated reminder notices. Subsequent late charge and delinquent notices are issued, and the account is monitored on a regular basis thereafter. Personal, direct contact with the borrower is attempted early in the collection process as a courtesy reminder and later to determine the reason for the delinquency and to safeguard our collateral. When a loan is more than 60 days past due, the credit file is reviewed and, if deemed necessary, information is updated or confirmed and collateral re-evaluated. We make every effort to contact the borrower and develop a plan of repayment to cure the delinquency. Loans are placed on non-accrual status when they are delinquent for more than 90 days. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received.
A summary report of all loans 30 days or more past due is provided to the Board of Directors on a monthly basis. If no repayment plan is in process, the file is referred to counsel for the commencement of foreclosure and/or other collection efforts.
Non-Performing Assets. Non-accrual loans are loans on which the accrual of interest has ceased. Loans are generally placed on non-accrual status if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more. Interest accrued but not collected at the date a loan is placed on non-accrual status, is reversed and charged against interest income. Subsequent cash receipts are applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate collectability of principal and interest. Loans are returned to an accrual status when the borrower’s ability to make periodic principal and interest payments has returned to normal (i.e., brought current with respect to principal or interest or restructured) and the paying capacity of the borrower and/or the underlying collateral is deemed sufficient to cover principal and interest.
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The following table sets forth the amounts and categories of our non-accrual assets at September 30, 2025 and 2024.
A loan is considered individually evaluated when it has been modified for a borrower in financial distress or when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Individually evaluated loans that have been modified are measured based on the present value of expected future discounted cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent.
We record cash receipts on individually evaluated loans that are non-performing as a reduction to principal before applying amounts to interest or late charges unless specifically directed by the Bankruptcy Court to apply payments otherwise.
Delinquent Loans. The following table sets forth certain information with respect to our loan portfolio delinquencies for the years ended September 30, 2025 and 2024. Loans delinquent more than three months, or 90 days are generally classified as non-accrual loans.
Real Estate Owned. Real estate we acquire as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned (“OREO”) until sold. When property is acquired, it is recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value result in charges to expense after acquisition.
At September 30, 2025, we held one commercial real estate property totaling $2.2 million, a decrease of $1.5 million, or 41.8%, compared to two residential single-family and one commercial real estate properties totaling $3.7 million at September 30, 2024.
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Allowance for Credit Losses
Financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses (“ACL”) reflects management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.
ACL on Loans. The Company maintains its ACL on loans at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Balance Sheet. The ACL is a valuation reserve established and maintained by charges against income. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. The ACL is an estimate of expected credit losses that considers our historical loss experience, the weighted average expected lives of loans, current economic conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.
The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We individually evaluate loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, or (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: (1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are reduced to consider expected disposition costs when appropriate. A charge-off is recorded when the estimated fair value of the loan is less than the loan balance.
ACL on Unfunded Loan Commitments. The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The ACL on unfunded loan commitments is included in accounts payable and other liabilities in the Company’s Consolidated Balance Sheets and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur, the amount of funding that will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
The following table sets forth activity in our ACL on loans for the years ended September 30, 2025 and 2024.
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Allocation of ACL on Loans. The following table sets forth the ACL on loans allocated by loan category and the percent of the allowance to the total allowance at September 30, 2025 and 2024, as well as additional information with respect to net loan charge-offs by category. The ACL on loans allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
Investments
Our Board of Directors has adopted our Investment Policy, which determines the types of securities in which we may invest. While general investment strategies are developed by the Board Asset and Liability Committee, the execution of specific actions rests primarily with our President and our Chief Financial Officer. They are responsible for ensuring the guidelines and requirements included in the Investment Policy are followed. They are authorized to execute transactions that fall within the scope of the established Investment Policy up to $5.0 million per transaction individually or $10.0 million per transaction jointly. Investment transactions more than $10.0 million must be approved by the Board Asset and Liability Committee. Investment transactions are reviewed and ratified by the Board of Directors at their regularly scheduled meetings.
Our investments portfolio may include U.S. Treasury obligations, debt and equity securities issued by various government-sponsored enterprises, including Fannie Mae and Freddie Mac, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment-grade corporate debt instruments, and municipal debt securities. In addition, we may invest in equity securities subject to certain limitations and not more than Magyar Bank’s Tier 1 capital.
The Investment Policy requires that securities transactions be conducted in a safe and sound manner, and purchase and sale decisions be based upon a thorough analysis of each security to determine its quality and inherent risks and fit within our overall asset/liability management objectives. The analysis must consider the effect of an investment or sale on our risk-based capital and prospects for yield and appreciation.
Portfolio Maturities and Yields. The maturities and weighted average yields of the investment debt securities portfolio and the mortgage-backed securities portfolio at September 30, 2025 and 2024 are summarized in the following tables. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. The weighted average yield is determined using a yield calculated from the contractual interest rate adjusted for the amortization/accretion of premium/discount paid to purchase the security, if any, expected to be recognized during its average life. Yields on tax-exempt obligations have been computed on a tax-equivalent basis.
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Sources of Funds
General.Deposits have traditionally been the primary source of funds used for our lending and investment activities. We obtain certificates of deposit primarily through our branch network and to a lesser extent via the brokered CD market. We also use borrowings, primarily Federal Home Loan Bank advances, to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management and to manage our cost of funds. Additional sources of funds include principal and interest payments from loans and securities, loan and security prepayments and maturities, income on other earning assets and stockholders’ equity. While cash flows from loans and securities payments can be relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.
Deposits.Our deposits are generated primarily from customers within our primary market area. We offer a selection of deposit accounts, including demand accounts, NOW accounts, money market accounts, savings accounts, retirement accounts and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. We also accept brokered deposits when attractive rates and terms are available. At September 30, 2025, we had $57.3 million in brokered certificate of deposits.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.
The following table sets forth the distribution of total deposit accounts, by account type, at September 30, 2025 and 2024.
At September 30, 2025 and 2024, the aggregate deposits in amounts greater than $250 thousand, which is the maximum amount for federal deposit insurance, were $351.0 million and $380.0 million, respectively. The estimated amounts of deposits that were neither insured nor collateralized were $127.9 million and $114.7 million at September 30, 2025 and 2024, respectively. We had no deposits that were uninsured for any reason other than being more than the maximum amount for federal deposit insurance.
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The following table sets forth the maturity of certificates of deposits with individual account balances exceeding $250 thousand for the years ended September 30, 2025 and 2024.
At September 30, 2025, $80.6 million of our certificates of deposit had maturities of one year or less. We monitor activity on these accounts and, based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity.
Subsidiary Activities
The Company’s only subsidiary is the Bank. The Bank holds three subsidiaries as described below.
Magyar Investment Company is a New Jersey investment corporation subsidiary for the purpose of buying, selling and holding investment securities. The income earned on Magyar Investment Company’s investment securities are subject to a lower state tax than that assessed on income earned on investment securities maintained at Magyar Bank.
Hungaria Urban Renewal, LLC is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose of acquiring and developing Magyar Bank’s main office. In 2006, Magyar Bank acquired a 100% interest in Hungaria Urban Renewal, LLC, which has no other business other than owning Magyar Bank’s main office site. As part of a tax abatement agreement with the City of New Brunswick, Magyar Bank’s main office will remain in Hungaria Urban Renewal, LLC’s name.
Magyar Service Corporation, a New Jersey corporation, is a wholly owned subsidiary of Magyar Bank. Magyar Service Corporation offers Magyar Bank customers and others a complete range of non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers.
Employees and Human Capital Resources
On September 30, 2025 we employed 91 full-time employees and seven part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.
Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a high-level service provider. We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees. In addition, nearly all of our employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns associate and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our associates. At September 30, 2025, 36% of our current staff had been with us for ten years or more.
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SUPERVISION AND REGULATION
Magyar Bank is a New Jersey-chartered savings bank, and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) under the Deposit Insurance Fund (“DIF”). Magyar Bank is subject to extensive regulation, examination and supervision by the Commissioner of the New Jersey Department of Banking and Insurance (the “Commissioner”) as the issuer of its charter, and by the FDIC as deposit insurer and its primary federal regulator. Magyar Bank must file reports with the Commissioner and the FDIC concerning its activities and financial condition, and it must obtain regulatory approval prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions and opening or acquiring branch offices. The Commissioner and the FDIC conduct periodic examinations to assess Magyar Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the DIF and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
Magyar Bancorp, Inc., as a bank holding company controlling Magyar Bank, is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), the rules and regulations of the Federal Reserve Bank (the “FRB”) under the BHCA the provisions of the New Jersey Banking Act of 1948 (the “New Jersey Banking Act”), and the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies. Magyar Bank and Magyar Bancorp, Inc. are required to file reports with and otherwise comply with the rules and regulations of the FRB and the Commissioner. Magyar Bancorp, Inc. is required to file certain reports with, and otherwise comply with, the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
Any change in such laws and regulations, whether by the Commissioner, the FDIC, the Federal Reserve Board or through legislation, could have a material adverse impact on Magyar Bank and Magyar Bancorp, Inc. and their operations and stockholders.
Certain of the laws and regulations applicable to Magyar Bank and Magyar Bancorp, Inc. are summarized below. These summaries do not purport to be complete and are qualified in their entirety by reference to such laws and regulations.
New Jersey Banking Regulation
Activity Powers. Magyar Bank derives its lending, investment and other activity powers primarily from the applicable provisions of the New Jersey Banking Act and its implementing regulations.
Loans-to-One-Borrower Limitations. With certain specified exceptions, a New Jersey-chartered savings bank may not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the bank’s capital funds. A savings bank may lend an additional 10% of the bank’s capital funds if secured by collateral meeting the requirements of the New Jersey Banking Act. Magyar Bank currently complies with applicable loans-to-one-borrower limitations.
Dividends.Under the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital stock only to the extent that the payment of the dividend would not impair the capital stock of the savings bank. In addition, a stock savings bank may not pay a dividend unless the savings bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively, the payment of the dividend would not reduce the surplus. Federal law may also limit the amount of dividends that may be paid by Magyar Bank. See “Federal Banking Regulation-Prompt Corrective Action” below.
Minimum Capital Requirements. Regulations of the Commissioner impose on New Jersey-chartered depository institutions, including Magyar Bank, minimum capital requirements similar to those imposed by the FDIC on insured state banks. See “Federal Banking Regulation-Capital Requirements.”
Examination and Enforcement. The NJDBI may examine Magyar Bank whenever it deems an examination advisable. The NJDBI examines Magyar Bank at least every three years. The Commissioner may order any savings bank to discontinue any violation of law or unsafe or unsound business practice and may direct any director, officer, attorney or employee of a savings bank engaged in an objectionable activity, after the Commissioner has ordered the activity to be terminated, to show cause at a hearing before the Commissioner why such person should not be removed. The Commissioner also has authority to appoint a conservator or receiver for a savings bank under certain circumstances such as insolvency or unsafe or unsound condition to transact business.
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Federal Banking Regulation
Capital Requirements. Federal regulations require FDIC-insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio, and a Tier 1 capital to total assets leverage ratio.
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one-to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
At September 30, 2025, Magyar Bank’s common equity Tier 1 capital to risk-based assets ratio was 14.70%, total capital to risk-based assets ratio was 15.79%, and Tier 1 capital to total assets leverage ratio was 11.41%. At September 30, 2024, Magyar Bank’s common equity Tier 1 capital to risk-based assets ratio was 14.75%, total capital to risk-based assets ratio was 15.85%, and Tier 1 capital to total assets leverage ratio was 11.11%.
Prompt Corrective Action. Federal bank regulatory authorities are required to take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the applicable statute establishes five capital categories. 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 leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is deemed to be “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 leverage ratio of 4.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater. An institution is deemed to be “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 leverage ratio of less than 4.0% or a common equity Tier 1 capital ratio of less than 4.5%. 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 leverage ratio of less than 3.0% or a common equity Tier 1 capital ratio of less than 3.0%. An institution is deemed to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. Effective March 31, 2020, qualifying community banking organizations that elect to use the Community Bank Leverage Ratio framework and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements to be deemed well-capitalized. At September 30, 2025, Magyar Bank met all of the requirements to be considered well capitalized for regulatory capital purposes.
Undercapitalized institutions are subject to a variety of mandatory supervisory measures including the requirement to file a capital plan for the FDIC’s approval and dividend restrictions as well as other discretionary actions by the regulator.
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Federal Home Loan Bank System. Magyar Bank is a member of the Federal Home Loan Bank system, which consists of eleven regional federal home loan banks, each subject to supervision and regulation by the Federal Housing Finance Agency. The federal home loan banks provide a central credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending. Magyar Bank, as a member of the FHLBNY, is required to purchase and hold shares of capital stock in the FHLBNY in specified amounts.
As of September 30, 2025, Magyar Bank was in compliance with these requirements.
Enforcement.The FDIC has extensive enforcement authority over insured savings banks, including Magyar Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations, unsafe or unsound practices or non-compliance with agency conditions or agreements.
Deposit Insurance. The DIF insures deposits at FDIC-insured financial institutions such as Magyar Bank generally up to a maximum of $250 thousand per separately insured depositor for each account ownership category.
Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other risk factors. Rates are based on each institution’s risk category and certain specified risk adjustments. Institutions deemed to be less risky pay lower rates while institutions deemed riskier pay higher rates. Assessment rates (inclusive of possible adjustments) currently range from 2.5 to 32 basis points of each institution’s total assets less tangible capital.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or condition imposed by the FDIC. The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to termination of its deposit insurance.
Brokered Deposits. Applicable law and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” or, upon application to and a waiver from the FDIC, “adequately capitalized.” Less-than-well-capitalized banks also are subject to restrictions on the interest rates that they may pay on deposits. The characterization of deposits as “brokered” may result in the imposition of higher deposit assessments on such deposits. The FDIC’s brokered deposit regulations provide a limited exception for reciprocal deposits for banks that are well managed and well capitalized (or adequately capitalized and have obtained a waiver from the FDIC as mentioned above). Under the limited exception, qualified banks can exempt from treatment as “brokered” deposits up to $5 billion or 20% of the institution’s total liabilities in reciprocal deposits.
Transactions with Affiliates of Magyar Bank. Magyar Bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W promulgated by the FRB. An affiliate includes, among other things, a company that controls, is controlled by, or is under common control with an insured depository institution, such as Magyar Bancorp, Inc. In general, “covered transactions,” as defined by these authorities, between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements. In this regard, covered transactions between an insured depository institution and its affiliates are limited to 10% of the institution’s capital stock and surplus for transactions with any one affiliate, and 20% of the institution’s capital stock and surplus for transactions in the aggregate with all affiliates. Collateral of specific types and in specified amounts ranging from 100% to 130% of the amount of the transaction must usually be provided by affiliates for a savings bank to engage in a credit transaction with them. In addition, “covered transactions” with affiliates must be on terms and conditions consistent with safe and sound banking practices and generally may not involve low-quality assets. Transactions with affiliates must generally be on terms and under circumstances that are substantially the same, or at least as favorable to the institution, as comparable transactions involving non-affiliates. Magyar Bank is currently in compliance with these requirements.
Prohibitions Against Tying Arrangements. Banks are subject to the prohibitions of 12 U.S.C. § 1972 on certain tying arrangements. A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.
Community Reinvestment Act. All FDIC-insured institutions have a responsibility under the Community Reinvestment Act (“CRA”) and related regulations to help meet the credit needs of their communities, including low-and moderate-income neighborhoods. In connection with its examination of a state-chartered savings bank, the FDIC is required to assess the institution’s record of compliance with the CRA.
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An institution’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities. We received an “Satisfactory” CRA rating in our most recently completed federal examination, which was conducted by the FDIC in 2025.
The Bank Secrecy Act and USA PATRIOT Act. The Bank Secrecy Act (“BSA”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) require Magyar Bank to implement a compliance program to detect and prevent money laundering, terrorist financing, and illicit crime. Together, the BSA and USA PATRIOT Act require Magyar Bank to implement internal controls, conduct customer due diligence, maintain records, and file reports, among other things. The USA PATRIOT Act also required the federal banking agencies to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application. Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with the BSA, USA PATRIOT Act, and regulations implemented thereunder.
Cybersecurity.The federal banking agencies have adopted rules providing for notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the rules require a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.
Consumer Protection. Magyar Bank is subject to federal and state fair lending laws. The federal Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. In addition, Magyar Bank is subject to other federal and state laws designed to protect consumers and prohibit unfair, deceptive or abusive business practices, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the way financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services. Further, the Consumer Financial Protection Bureau has broad authority to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties. The failure to comply with these laws could result in enforcement actions by the federal banking agencies, as well as other federal regulatory agencies and the Department of Justice.
Privacy Regulations. Federal regulations generally require that Magyar Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, Magyar Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. Except as otherwise required or permitted by law, Magyar Bank is prohibited from disclosing such information. Magyar Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.
Loans to a Bank’s Insiders
Federal Regulation. A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any entities controlled by any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and its implementing regulations. Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to member banks, which is comparable to the loans-to-one-borrower limit applicable to Magyar Bank’s loans. See “New Jersey Banking Regulation—Loans-to-One Borrower Limitations.” All loans by a bank to all insiders and insiders’ related interests in the aggregate may not exceed the bank’s unimpaired capital and unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the greater of $25 thousand or 2.5% of the bank’s unimpaired capital and surplus, and in no event more than $100 thousand. Federal regulation also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors of the bank, with any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed the greater of $25 thousand or 5% of the bank’s unimpaired capital and surplus. Generally, loans to an insider or insider’s related interests must be made on substantially the same terms as, and follow credit underwriting procedures that are not less stringent than, those that are prevailing at the time for comparable transactions with other persons.
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An exception is made to some of the otherwise-applicable requirements for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to employees of the bank and that does not give any preference to insiders of the bank over other employees of the bank.
In addition, federal law prohibits extensions of credit to a bank’s insiders and their related interests by any other institution that has a correspondent banking relationship with the bank, unless such extension of credit is on substantially the same terms as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavourable features.
New Jersey Regulation. Provisions of the New Jersey Banking Act impose conditions and limitations on the liabilities to a savings bank of its directors and executive officers and of corporations and partnerships controlled by such persons, that are comparable in many respects to the conditions and limitations imposed on the loans and extensions of credit to insiders and their related interests under federal law, as discussed above. The New Jersey Banking Act also provides that a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions of the New Jersey Banking Act.
Federal Reserve System
Savings banks, such as Magyar Bank, are authorized to borrow from the Federal Reserve Bank “discount window.” Magyar Bank is deemed by the FRB to be generally sound and thus is eligible to obtain secondary credit from its FRB. Generally, secondary credit is extended on a very short-term basis to meet the liquidity needs of the institution. Loans must be secured by acceptable collateral and carry a rate of interest above the Federal Open Market Committee’s federal funds target rate.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. We have policies, procedures and systems designed to comply with this Act and its implementing regulations, and we review and document such policies, procedures and systems to ensure continued compliance.
Holding Company Regulation
Federal Regulation. Magyar Bancorp, Inc. is regulated as a bank holding company. Bank holding companies are subject to examination, regulation and periodic reporting under the BHCA, as administered by the FRB. Bank holding companies are generally subject to consolidated capital requirements established by the FRB, but those under $3.0 billion in consolidated assets remain exempt from consolidated regulatory capital requirements, unless the FRB determines otherwise in particular cases.
Regulations of the FRB provide that a bank holding company must serve as a source of strength to any of its subsidiary banks and must not conduct its activities in an unsafe or unsound manner. The Dodd-Frank Act codified the source of strength policy and required the promulgation of implementing regulations. Under the prompt corrective action provisions of the Dodd-Frank Act, a bank holding company parent of an undercapitalized subsidiary bank would be directed to guarantee, within limitations, the capital restoration plan that is required of an undercapitalized bank. See “Federal Banking Regulation—Prompt Corrective Action.” If an undercapitalized bank fails to file an acceptable capital restoration plan or fails to implement an accepted plan, the FRB may prohibit the bank holding company parent of the undercapitalized bank from paying any dividend or making any other form of capital distribution without the prior approval of the FRB.
As a bank holding company, Magyar Bancorp, Inc. is required to obtain the prior approval of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior FRB approval is required for Magyar Bancorp, Inc. to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after giving effect to such acquisition, it would, directly or indirectly, own or control more than 5% of any class of voting shares of such bank or bank holding company.
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Under federal law, depository institutions are liable to the FDIC for losses suffered or anticipated by the FDIC in connection with the default of a commonly controlled depository institution or any assistance provided by the FDIC to such an institution in danger of default. This law would be applicable potentially to Magyar Bancorp, Inc. if it ever acquired as a separate subsidiary a depository institution in addition to Magyar Bank.
In connection with the mutual-to-stock conversion of Magyar Bancorp, MHC, “eligible account holders” and “supplemental eligible account holders” received an interest in liquidation accounts maintained by the Company and Magyar Bank in an aggregate amount equal to (a) Magyar Bancorp, MHC’s ownership interest in the Company’s total stockholders’ equity as of the date of the latest Statement of Balance Sheet included in the offering prospectus for the conversion plus; (b) the value of the net assets of Magyar Bancorp, MHC as of the date of the latest Statement of Balance Sheet of Magyar Bancorp, MHC before the consummation of the conversion (excluding its ownership of the Company). The Company and Magyar Bank hold the liquidation accounts for the benefit of eligible account holders and supplemental eligible account holders who continue to maintain deposits in Magyar Bank after the conversion. The liquidation accounts are intended to preserve for eligible account holders and supplemental eligible account holders who continue to maintain their deposit accounts with Magyar Bank a liquidation interest in the residual net worth, if any, of Magyar Bank (after the payment of all creditors, including depositors to the full extent of their deposit accounts) in the event of a liquidation of (a) the Company and Magyar Bank or (b) Magyar Bank.
New Jersey Regulation. Under the New Jersey Banking Act, a company owning or controlling a savings bank is regulated as a bank holding company. The New Jersey Banking Act defines the terms “company” and “bank holding company” as such terms are defined under the BHCA. Each bank holding company controlling a New Jersey-chartered bank or savings bank must file certain reports with the Commissioner and is subject to examination by the Commissioner.
Acquisition of Magyar Bancorp, Inc. Under federal law and under the New Jersey Banking Act, no person may acquire control of Magyar Bancorp, Inc. without first obtaining approval of such acquisition of control by the FRB and the Commissioner.
Federal Securities Laws. Magyar Bancorp, Inc. common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Magyar Bancorp, Inc. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
Not required for smaller reporting companies.
Not applicable.
The Board of Directors and Information Security Officer are responsible for overseeing the Information Security Program. The Board of Directors receives reports from, and oversees, IT Risk Assessment, Cybersecurity Risk Assessment, Annual IT Program Status Report, Vendor Management Risk Assessment, and Internal Vulnerability Reports and current Cyber Events briefings. The Board of Directors also makes budgeting, procedure, and policy decisions designed and intended to improve the Company’s residual risk.
The Technology and Security Committee consists of the Company’s senior management, the IT Management, and business unit management. The primary function of the Technology and Security Committee is to perform Strategic Planning, discuss hardware and software replacement, new projects, current cybersecurity threats, and ongoing cybersecurity issues and threats. The IT Director provides an IT status report to the Board of Directors on a monthly basis.
The Company has adopted an Incident Response Plan (the “Plan”) to monitor, detect, mitigate and remediate cybersecurity incidents. The Plan requires that business unit management have a working knowledge of the Company’s Information Security Program and Incident Response Policies. Pursuant to the Plan, the IT Director identifies information owners for sensitive customer information and creates an incident response team. Each Department Manager, upon notification of a potential unauthorized access, manipulation of data or theft of any item identified under the Gramm-Leach-Bliley Act (the “GLBA”) Inventory and Asset Classification, is responsible for further assessing the situation in order to document the suspected or actual breach and forward the appropriate documentation to IT Management. The documentation of the suspected or actual incident includes the following:
(a) Identify the nature and scope of the incident;
(b) Identify the information systems affected;
(c) Identify the types of customer information potentially affected.
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Once the Incident Response Team has determined that unauthorized access, manipulation of data or theft of any item identified under GLBA Inventory and Asset Classification has occurred, Executive Management, the Information Security Officer, the Compliance Officer and the Information Technology Management must be contacted immediately.
If theft of any item identified under GLBA Inventory and Asset Classification has occurred, and it cannot be determined what specific information was included on the Asset, the Asset is treated as if it contained sensitive customer information and Senior Management, the Information Security Officer, the Compliance Officer and Information Technology Management must be contacted immediately. If Management declares an incident or if there is a confirmed theft or loss of customer information, appropriate regulatory authorities, law enforcement, and legal counsel are notified.
During the fiscal year ended September 30, 2025, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, its business strategy, results of operations, or financial condition.
The following table provides certain information with respect to our offices as of September 30, 2025:
The net book value of our premises, land and equipment was approximately $12.2 million and $12.5 million at September 30, 2025 and 2024, respectively.
For information regarding Magyar Bancorp, Inc.’s investment in mortgages and mortgage-related securities, see “Item 1. Business” herein.
In the ordinary course of business, we are a party to various legal actions which are incidental to the operation of our business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability as of September 30, 2025 is believed to be immaterial to our consolidated financial position, results of operations and cash flows.
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PART II
The Company declared five dividends totaling $0.29 per share paid to common shareholders during the year ended September 30, 2025. In the future, the Company intends to continue to pay a regular quarterly cash dividend. In determining whether and in what amount to pay a cash dividend, the Board will continue to consider several factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that cash dividends will continue to be paid or that, if paid, will not be reduced. For more information on regulatory restrictions regarding the payment of dividends, see “Item 1- Business- Supervision and Regulation- New Jersey Banking Regulation-Dividends.”
Other than its employee stock ownership plan, Magyar Bancorp, Inc. does not have any equity compensation plans that were not approved by stockholders. The following table sets forth information with respect to the Company’s equity compensation plans.
On April 17, 2025 the Company completed its fourth stock repurchase program announced December 8, 2022, with all 337,146 shares repurchased at an average price of $12.23. On May 22, 2025 the Company announced the authorization of its fifth stock repurchase program pursuant to which the Company intends to repurchase up to 5% of its outstanding shares, or up to 323,547 shares. The Company’s intended use of the repurchased shares is for general corporate purposes. The timing of the repurchases will depend on certain factors including, but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital. The Company held 617,797 shares of treasury stock at September 30, 2025.
The Company did not repurchase any shares of its common stock during the three months ended September 30, 2025.
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Overview
The Company is a Delaware-chartered stock holding company whose most significant business activity is ownership of 100% of the common stock of Magyar Bank. Magyar Bank’s principal business is attracting retail deposits from the general public and investing those deposits, together with funds generated from operations, principal repayments on loans and securities and borrowed funds, into one-to four-family residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans and construction loans. Our results of operations depend primarily on our net interest income, which is the difference between the interest we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, the timing of the placement of interest-earning assets and interest-bearing liabilities, and the prepayment rate on our mortgage-related assets. Other factors that may affect our results of operations are general and local economic and competitive conditions, government policies and actions of regulatory authorities.
During the year ended September 30, 2025, the Company’s total assets grew $45.8 million, or 4.8%, to $997.7 million from $951.9 million at September 30, 2024. The increase was attributable to a $77.2 million increase in loans receivable, offset by an $18.5 million decrease in total cash and cash equivalents, a $7.0 million decrease in investment securities, a $4.3 million decrease in bank owned life insurance and a $1.6 million decrease in other real estate owned.
Total deposits increased $17.6 million, or 2.2%, to $814.3 million and stockholders’ equity increased $8.3 million, or 7.5%, to $118.8 million during the year ended September 30, 2025 compared with $796.7 million and $110.5 million for the year ended September 30, 2024, respectively.
The Company’s net income increased $2.0 million, or 25.4%, to $9.8 million during the year ended September 30, 2025 compared with net income of $7.8 million for the year ended September 30, 2024 from higher net interest income, partially offset by higher provisions for credit loss, other expenses and income tax expense.
Throughout fiscal year 2026, we expect to continue increasing our commercial real estate and commercial business loans while managing non-interest expenses in an effort to increase profitability of the Company.
Our business operations are subject to risks and uncertainties that could materially affect our operating results. The extent of such impact will depend on future developments, which are highly uncertain. There continues to be various other risks and uncertainties that could impact the Company’s businesses and future results, such as changes to the U.S. economic condition, market interest rates, the Federal Reserve Board’s monetary policy, other government policies, and actions of regulatory agencies.
Comparison of Financial Condition at September 30, 2025 and 2024
Total Assets. Total assets increased $45.8 million, or 4.8%, to $997.7 million compared with $951.9 million at September 30, 2024. The increase was attributable to a $77.2 million increase in loans receivable, net of deferred loan costs, offset by an $18.5 million decrease in total cash and cash equivalents, a $7.0 million decrease in investment securities, a $4.3 million decrease in bank owned life insurance and a $1.6 million decrease in other real estate owned.
Loans Receivable. Total loans receivable increased $77.7 million, or 9.9%, to $858.9 million during the year ended September 30, 2025 from $781.2 million at September 30, 2024. The growth during the year occurred in commercial real estate loans, which increased $71.9 million, or 15.6%, to $533.2 million, in construction and land loans, which increased $6.6 million, or 28.9%, to $29.3 million, and in one-to four-family residential mortgage loans (including home equity lines of credit), which increased $3.3 million, or 1.2%, to $274.2 million. Offsetting these increases were declines in commercial business loans, which decreased $4.0 million, or 16.5%, to $20.1 million and in other consumer loans, which decreased $116 thousand, or 5.2%, to $2.1 million.
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Given the significance of commercial real estate (“CRE”) loans to our total loan portfolio, the following table further disaggregates these loans by occupied status and by collateral type as of September 30, 2025 and 2024:
The Company obtains an appraisal of the real estate collateral securing a CRE loan prior to originating the loan. The appraised value is used to calculate the ratio of the outstanding loan balance to the value of the real estate collateral, or loan-to-value ratio (“LTV”). The original appraisal is used to monitor the LTVs within the CRE portfolio unless an updated appraisal is received, which may happen for a variety of reasons including, but not limited to, payment delinquency, additional loan requests using the same collateral, and loan modifications. The following table presents the ranges in the LTVs of our CRE loans at September 30, 2025 and 2024:
As of September 30, 2025 and 2024, non-owner occupied commercial real estate loans (as defined by regulatory guidance) to total risk-based capital were estimated at approximately 267% and 270%, respectively. Management believes that Magyar Bank has implemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which include monitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions.
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Our asset quality with respect to commercial real estate loans has remained strong despite recent economic and market conditions. As of September 30, 2025 and 2024, we had $0 and $116 thousand of non-performing commercial real estate loans, respectively. Such amounts totaled 0.00% and 0.03% of total commercial real estate loans as of September 30, 2025 and 2024, respectively.
Total non-performing loans increased $219 thousand, or 94.4%, to $451 thousand at September 30, 2025 from $232 thousand at September 30, 2024. Non-performing loans consisted of four loans secured by one-to four family properties totaling $451 thousand. The ratio of non-performing loans to total loans was 0.05% at September 30, 2025 compared to 0.03% at September 30, 2024.
Allowance for Credit Losses. The allowance for credit losses on loans increased $802 thousand to $8.4 million at September 30, 2025 compared to $7.5 million at September 30, 2024. The increase was attributable to provisions for credit loss totaling $653 thousand and net loan recoveries totaling $149 thousand during the year. For comparison, the Company recorded provisions for credit loss totaling $182 thousand and net loan recoveries totaling $69 thousand during the year ended September 30, 2024.
Investment Securities. At September 30, 2025, investment securities totaled $88.4 million, reflecting a $7.0 million, or 7.3%, decrease from September 30, 2024. Investment securities at September 30, 2025 consisted of $65.6 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $9.4 million in U.S. government-sponsored enterprise debt securities, $9.8 million in corporate notes, $3.4 million in municipal bonds and $174 thousand in “private-label” mortgage-backed securities.
Bank-Owned Life Insurance. Bank owned life insurance (“BOLI”) decreased $4.3 million, or 18.4%, to $19.0 million at September 30, 2025 from the surrender of policies totaling $5.0 million, partially offset by increases in the cash surrender value of the retained policies totaling $673 thousand.
The Company began restructuring $7.9 million of its BOLI portfolio in August 2024 to increase the yield on the portfolio to higher market interest rates. The portfolio restructure increased the crediting rate on the restructured BOLI policies from 2.24% (3.20% tax-equivalent yield) to 4.67% (6.67% tax-equivalent yield).
Other Real Estate Owned. Other real estate owned decreased $1.6 million, or 41.8%, to $2.2 million at September 30, 2025. The Company sold two properties totaling $1.8 million for a net gain of $229 thousand and reduced the carrying value on its remaining property through a $57 thousand write down during the year ended September 30, 2025.
Deposits.Total deposits increased $17.6 million, or 2.2%, to $814.3 million at September 30, 2025. The growth in deposits during the year occurred in certificates of deposit (including individual retirement accounts) which increased $50.3 million, or 31.5%, to $210.0 million, in interest-bearing checking account balances, which increased $17.0 million, or 11.6% to $163.8 million, and in savings account balances, which increased $1.6 million, or 3.0%, to $54.4 million. Offsetting these increases were declines in money market account balances, which decreased $35.6 million, or 11.7%, to $268.9 million and in non-interest checking account balances, which decreased $15.6 million, or 11.7%, to $117.2 million.
Included in the Company’s total deposits was an estimated $127.9 million that was not collateralized and exceeded the FDIC’s insurance coverage limit of $250,000 at September 30, 2025 compared to $114.7 million at September 30, 2024.
The Company’s deposit strategy in 2025 focused on retaining deposits and managing the overall cost of its interest-bearing liabilities. As part of its strategy to increase deposits and lower its occupancy expense, the Company closed its branch office in Bridgewater, New Jersey and opened a new retail branch office in Martinsville, New Jersey.
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Borrowed Funds. Borrowings increased $20.5 million, or 71.7%, to $49.1 million at September 30, 2025 from $28.6 million at September 30, 2024. Long-term advances from the Federal Home Loan Bank of New York were utilized to match fund commercial real estate loan originations.
Stockholders’ Equity. Stockholders’ equity increased $8.3 million, or 7.5%, to $118.8 million at September 30, 2025 from $110.5 million at September 30, 2024. The increase was attributable to the Company’s net income from operations totaling $9.8 million, partially offset by $1.8 million in dividends paid and $844 thousand in share repurchases. In addition, other comprehensive income and stock-based compensation expense increased the Company’s equity by $1.2 million. The Company’s book value per share increased to $18.34 at September 30, 2025 from $16.98 at September 30, 2024.
Comparison of Operating Results for the Years Ended September 30, 2025 and 2024
Net Income. The Company’s net income increased $2.0 million, or 25.4%, to $9.8 million during the year ended September 30, 2025 compared with $7.8 million for the year ended September 30, 2024 from higher net interest income, partially offset by higher provisions for credit loss, other expenses and income tax expense. Earnings per share increased to $1.57 for the year ended September 30, 2025 from $1.23 for the year ended September 30, 2024.
Net Interest and Dividend Income. Net interest and dividend income increased $3.9 million, or 14.0%, to $31.9 million during the year ended September 30, 2025 compared to $28.0 million for the year ended September 30, 2024.
The Company’s net interest margin increased 20 basis points to 3.34% for the year ended September 30, 2025 from 3.14% for the year ended September 30, 2024. The increase was attributable to a $63.9 million, or 7.2%, increase in the average balance of interest-earning assets to $954.6 million for the year ended September 30, 2025 from $890.7 million for the year ended September 30, 2024,
Average Balance Sheet. The following table presents certain information regarding our financial condition and net interest income for the years ended September 30, 2025 and 2024. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities. We derived the yields and costs by dividing income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we consider adjustments to yields. Interest income on loans includes loan fees, but such amounts were not material for the years ended September 30, 2025 or 2024.
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Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by average volume). The volume column shows the effects attributable to changes in volume (changes in average volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were no out-of-period adjustments excluded from the table below
Interest and Dividend Income. Interest and dividend income increased $6.1 million, or 12.6%, to $54.7 million for the year ended September 30, 2025 from $48.6 million for the year ended September 30, 2024. The average balance of interest-earnings assets between the two periods increased $63.9 million, or 7.2%, to $954.6 million from $890.8 million, while the yield on such assets increased 28 basis points to 5.73% for the year ended September 30, 2025 from 5.45% for the year ended September 30, 2024.
Interest income on loans increased $6.8 million, or 15.8%, to $49.9 million for the year ended September 30, 2025 from $43.1 million for the year ended September 30, 2024, while the average balance of loans increased $79.1 million, or 10.8%, to $813.5 million from $734.4 million. The average yield on such loans increased 27 basis points to 6.14% at September 30, 2025 from 5.87% for the year ended September 30, 2024 from higher interest income on loan originations and on adjustable-rate commercial term loans repricing higher.
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Interest earned on investment securities, including interest earned on deposits but excluding FHLBNY stock, decreased $670 thousand, or 12.8%, to $4.6 million for the year ended September 30, 2025 from $5.2 million for the year ended 2024. The decrease was attributable to a nine-basis point decrease in the average yield on investment securities and interest earned on deposits to 3.32% from 3.41%, and $15.7 million decrease in the average balance of investment securities and interest earning deposits to $138.4 million from $154.1 million during the year ended September 30, 2025.
Interest Expense. Interest expense increased $2.2 million, or 10.7%, to $22.8 million for the year ended September 30, 2025 from $20.6 million for the year ended September 30, 2024. The average balance of interest-bearing liabilities increased $91.0 million, or 13.8%, to $748.9 million for the year ended September 30, 2025 from $657.9 million for the year ended September 30, 2024, while the average cost on such interest-bearing liabilities decreased eight basis points to 3.05% for the year ended September 30, 2025 compared with 3.13% for the year ended September 30, 2024. Lower short-term market interest rates were primarily responsible for the lower cost of the Company’s interest-bearing liabilities for the year ended September 30, 2025.
The average balance of interest-bearing deposits increased $84.6 million, or 13.5%, to $713.7 million for the year ended September 30, 2025 from $629.1 million for the year ended September 30, 2024 while the average cost on such interest-bearing deposits decreased nine basis points to 3.05% from 3.14%. As a result, the cost of interest-bearing deposits increased $2.0 million, or 10.3%, to $21.7 million for the year ended September 30, 2025 compared with $19.7 million for the year ended September 30, 2024.
Interest expense on borrowings increased $182 thousand, or 20.9%, to $1.1 million for the year ended September 30, 2025 from $872 thousand for the year ended September 30, 2024. The average cost of borrowings decreased 2 basis points to 3.00% for the year ended September 30, 2025 from 3.02% for the year ended September 30, 2024 while the average balance of those borrowings increased $6.3 million to $35.2 million for the year ended September 30, 2025 from $28.9 million the prior year.
Provision for Credit Losses. The provision for credit losses increased $312 thousand, or 346.7%, to $402 thousand for the year ended September 30, 2025 compared with $90 thousand for the year ended September 30, 2024. In addition to the provisions, the Company recorded $149 thousand and $69 thousand in net loan recoveries for the year ended September 30, 2025 and 2024, respectively.
The increase in provisions for credit loss for the year ended September 30, 2025 resulted from growth in the Company’s loan portfolio, specifically in higher expected loss rate segments such as commercial real estate and commercial construction loans. While total loan growth was lower for the current fiscal year period compared to our 2024 fiscal year, the provisions increased comparatively, due to higher balances of lower risk loans and lower balances of higher risk loans in addition to lower adjustments to the historical loss for all loan categories for improving economic conditions during the prior year period.
Offsetting the increase in provision for credit loss for loans was a $251 thousand reduction in the Company’s allowance for credit loss for unfunded construction loan commitments, which declined by $9.3 million to $5.9 million at September 30, 2025 from $15.2 million at September 30, 2024.
Other Income. Other income increased $100 thousand, or 2.8%, to $3.7 million during the year ended September 30, 2025 compared with $3.6 million for the year ended September 30, 2024.
The Company’s service charges increased $304 thousand, or 26.8%, to $1.4 million during the year ended September 30, 2025 compared with $1.1 million for the year ended September 30, 2024 from higher commercial loan prepayment fees, loans fees earned and late charges. Income on bank owned life insurance increased $240 thousand, or 55.4% to $673 thousand during the year ended September 30, 2025 compared with $433 thousand for the year ended September 30, 2024 from the restructure of $7.9 million in policies beginning in the 2024 fiscal year. In addition, the Company recorded $179 thousand in interest rate swap fees compared with none for the prior year.
Offsetting these increases were lower net gains from the sale of assets. The Company’s gains on other real estate and SBA loans were $229 thousand and $1.1 million, respectively, during the year ended September 30, 2025 compared with $1.3 million and $599 thousand, respectively, during the year ended September 30, 2024.
Other Expenses. Other expenses increased $1.0 million, or 4.9%, to $21.4 million from $20.4 million for the year ended September 30, 2024 due primarily to higher compensation and occupancy expenses.
Compensation and employee benefit expenses increased $893 thousand, or 7.6%, due to annual merit increases, higher medical insurance costs and higher incentive plan accruals. In addition, occupancy expenses increased $188 thousand, or 5.7%, to $3.5 million, due to lease termination expenses related to the closure of the Bank’s Bridgewater office during the year.
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Partially offsetting these increases were lower professional and data processing expenses, which declined $89 thousand and $71 thousand, respectively, due to lower collection costs for non-performing loans and one-time credits used to offset core processing fees.
Income Tax Expense. Income tax expense increased $732 thousand, or 22.1%, to $4.0 million for the year ended September 30, 2025 from $3.3 million for the year ended September 30, 2024. The increase was attributable to higher pre-tax income, which increased $2.7 million, or 24.4%, to $13.8 million during the year ended September 30, 2025 compared with $11.1 million for the year ended September 30, 2024.
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, which consist primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established a Board Asset and Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior management monitors the level of interest rate risk on a regular basis, and the Board Asset and Liability Committee meets at least on a quarterly basis to review our asset/liability policies and interest rate risk position.
We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset-liability management, we seek to manage our exposure to interest rate risk by originating and retaining adjustable-rate loans in the residential, construction and commercial real estate loan portfolios, by using alternative funding sources, such as advances from the FHLBNY, to “match fund” longer-term residential and commercial mortgage loans, and by originating and retaining variable-rate home equity and short-term and medium-term fixed-rate commercial business loans. We also offer a commercial loan swap product that allows the Bank to receive floating-rate interest loan payments while its borrowers pay a fixed rate of interest on their loans. We have also increased money market account deposits as a percentage of our total deposits. Money market accounts offer a variable rate based on market indications. By following these strategies, we believe that we are well-positioned to react to changes in market interest rates.
Net Interest Income Analysis. The table below sets forth, as of September 30, 2025, the estimated changes in our Net Interest Income (“NII”) for each of the next two years that would result from the designated instantaneous changes in interest rates. These estimates require making certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly due to timing, magnitude and frequency of interest rate changes and changes in market conditions. Further, certain shortcomings are inherent in the methodology used in the interest rate risk measurement. Modeling changes in net interest income requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
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Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, FHLBNY borrowings and maturities and sales of investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset and Liability Committee is responsible for establishing and monitoring our liquidity targets and strategies to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies. We seek to maintain Day 1 available liquidity of at least 25% of non-contractual funding, defined as total deposits, less brokered deposits, collateralized municipal deposits, and any other contractual funding outstanding. At September 30, 2025, our Day 1 availability was 46.6% of non-contractual funding.
We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short-and intermediate-term securities. Our cash flows are derived from operating activities, investing activities and financing activities as reported in our consolidated Statements of Cash Flows included in our consolidated Financial Statements.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2025, cash and cash equivalents totaled $7.1 million compared with $25.6 million at September 30, 2024. Securities classified as available-for-sale, which provide additional sources of liquidity from sales, totaled $21.2 million at September 30, 2025 compared with $15.6 million at September 30, 2024.
At September 30, 2025, we had the ability to borrow $319.9 million from the FHLBNY compared with $272.3 million at September 30 2024. At September 30, 2025, we had an aggregate of $49.1 million in advances outstanding and $135.0 million in municipal letters of credit outstanding with the FHLBNY leaving $164.1 million as our remaining borrowing capacity. We also had the ability to borrow $77.5 million from the FRBNY at September 30 2025 compared with $9.1 million at September 30 2024. The Company did not have any borrowings outstanding with the FRBNY at September 30, 2025 or 2024.
At September 30, 2025, we had $49.1 million in loan origination commitments outstanding and $80.7 million in unused lines of credit to borrowers. Certificates of deposit due within one year of September 30, 2025 totaled $80.6 million, or 9.90% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including replacement deposits and FHLBNY advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit (including individual retirement accounts and brokered certificate deposit accounts) due on or before September 30, 2026. We believe, however, that based on past experience a significant portion of our certificates of deposit (including individual retirement accounts and brokered certificate deposit accounts) will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Our primary investing activities are the origination of loans and the purchase of investment securities. We originated $162.7 million in loans and purchased $11.3 million of investment securities during the year ended September 30, 2025. Comparatively, we originated $161.1 million in loans and purchased $12.5 million of investment securities during the year ended September 30, 2024.
Financing activities consist primarily of activity in deposit accounts and FHLBNY advances. We experienced a net increase in total deposits of $17.6 million, or 2.2%, to $814.3 million for the year ended September 30, 2025 compared with a net increase in total deposits of $41.2 million, or 5.46%, to $796.7 million for the year ended September 30, 2024. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors.
Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBNY and FRBNY, which provide an additional source of funds. In addition to borrowings, the Bank has ability to raise deposits on the brokered market or through deposit listing services. At September 30, 2025, the Bank held $57.3 million in brokered deposits and $24.0 million from national deposit listing services.
Magyar Bank is subject to various regulatory capital requirements, (see “Supervision and Regulation-Federal Banking Regulation-Capital Requirements”). As of September 30, 2025, Magyar Bank’s Tier 1 capital as a percentage of the Bank’s average assets was 11.41% and the total qualifying capital as a percentage of risk-weighted assets was 15.79%.
Bank-owned life insurance is a tax-advantaged financing transaction that is used to offset employee benefit plan costs. Policies are purchased to insure the lives of directors and officers of Magyar Bank using a single premium method of payment. Magyar Bank is the owner and beneficiary of the policies and records tax-free income through cash surrender value accumulation. We have minimized our credit exposure by choosing carriers that are highly rated and limiting the concentration of any one carrier. The investment in bank-owned life insurance has no significant impact on our capital and liquidity.
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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Commitments.As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, standby letters of credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made by us. For additional information, see Note O “Commitments,” and Note P “Financial Instruments with Off-Balance-Sheet Risk” to our consolidated financial statements.
Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment.
Critical Accounting Policies
The Company’s accounting policies are more fully described in Note B - Summary of Significant Accounting Policies in the notes to the Consolidated Financial Statements. As disclosed in Note B, the preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Allowance for Credit Losses.
The allowance for credit losses is the amount estimated by management as necessary to cover expected credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for credit losses which is charged against income. In determining the allowance for credit losses, management makes significant estimates and has identified this policy as one of our most critical. Due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for credit losses, the methodology for determining the allowance for credit losses is considered a critical accounting policy by management.
As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans.
Management performs a quarterly evaluation of the adequacy of the allowance for credit losses. We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based on changes in economic and real estate market conditions.
The evaluation has a specific and general component. The specific component relates to loans that are delinquent or otherwise identified as having increased non-performance risk through the application of our loan review process and our loan grading system. All such loans are evaluated individually, with principal consideration given to the value of the collateral securing the loan and discounted cash flows. Specific impairment allowances are established as required by this analysis. However, the Bank’s Federal and State regulators generally require that the specific reserve against impaired collateral-dependent loans be charged-off, reducing the carrying balance of the loan and allowance for loan loss. The general component is determined by segregating the remaining loans into homogenous categories. We analyze the historical loss experience of each category, delinquency trends, general economic conditions and geographic and industry concentrations in establishing the general portion of the reserve. This analysis establishes factors that are applied to the loan groups to determine the amount of the general component of the allowance for credit losses.
The process of determining the level of the allowance for credit losses requires a high degree of judgment. To the extent actual outcomes differ from our estimates, additional provision for credit and lease losses may be required that would reduce future earnings.
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Table of Contents
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Magyar Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Magyar Bancorp, Inc. and subsidiary (the “Company”) as of September 30, 2025 and 2024; the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits 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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are 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 audits 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. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Allowance for Credit Losses (ACL) – Qualitative Adjustments
Description of the Matter
The Company’s loan portfolio totaled $857.4 million as of September 30, 2025, and the associated ACL was $8.4 million. As discussed in Notes B and E to the consolidated financial statements, determining the amount of the ACL requires significant judgment about the expected future losses. The ACL calculation is based on an average charge-off model, to identify a baseline expected loss reserve, which is then adjusted for certain qualitative conditions. Management applies these qualitative adjustments to the baseline reserve, to reflect changes in the environment, both internal and external, that are different from the conditions that existed during the historical loss calculation period.
We identified these qualitative adjustments within the ACL as a critical audit matter because they involve a high degree of subjectivity. While the determination of these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude of adjustments are highly subjective.
How we addressed the matter in our audit
The primary procedures we performed to address this critical audit matter included:
We have served as the Company’s auditor since 2023.
Cranberry Township, Pennsylvania
December 19, 2025
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MAGYAR BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Statements of Income
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Consolidated Statements of Comprehensive Income
(In Thousands)
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Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended September 30, 2025 and 2024
(In Thousands, Except for Share and Per-Share Amounts)
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Consolidated Statements of Cash Flows
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Notes to Consolidated Financial StatementsSeptember 30, 2025 and 2024
NOTE A - ORGANIZATION
The Company is a Delaware-chartered bank holding company. The Company owns 100% of the outstanding common stock of Magyar Bank (the “Bank”), a New Jersey-chartered stock savings bank. The Bank offers consumer and commercial banking services to individuals, businesses, and nonprofit organizations throughout the central New Jersey area through its administrative office in New Brunswick, New Jersey and seven full-service branch offices in Middlesex and Somerset Counties in New Jersey. The Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System. The Bank is supervised and regulated by the Federal Deposit Insurance Corporation (the “FDIC”) and the New Jersey Department of Banking and Insurance.
Magyar Investment Company, a New Jersey investment corporation subsidiary of the Bank, was formed in 2006 for the purpose of buying, selling and holding investment securities.
Magyar Service Corporation, a New Jersey corporation, is a wholly owned, non-bank subsidiary of the Bank. Magyar Service Corporation, which also operates under the name Magyar Financial Services, receives commissions from annuity and life insurance sales referred to a licensed, non-bank financial planner.
Hungaria Urban Renewal, LLC is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose of acquiring and developing the Bank’s new main office. The Bank owns a 100% interest in Hungaria Urban Renewal, LLC, which has no other business other than owning the Bank’s main office site.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.Basis of Financial Statement Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”) and predominant practices within the banking industry. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank, and its wholly-owned subsidiaries Magyar Investment Company, Magyar Service Corporation, and Hungaria Urban Renewal, LLC. All intercompany balances and transactions have been eliminated in the consolidated financial statements.
The Company has evaluated subsequent events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2025, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were available to be issued.
In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The principal estimates that are particularly susceptible to significant change in the near term relate to the allowance for credit losses and the deferred tax asset. The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, as well as current loan collateral values. However, actual losses on specific loans, which also are encompassed in the analysis, may vary from estimated losses.
The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.
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Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.
2.Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, time deposits with original maturities less than three months and overnight deposits.
3.Investment Securities and Allowance for Credit Losses
The Company classifies its investment securities into one of two portfolios: held to maturity or available for sale. 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 not classified 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 deferred income taxes, reported in the accumulated other comprehensive income (“AOCI”) component of stockholders’ equity. Equity securities, with certain exceptions, are measured at fair value with changes in fair value recognized in net income.
If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. 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. The Company accounts for temporary impairments based upon security classification as either available for sale or held to maturity. Temporary impairments on “available for sale” securities are recognized, on a tax-effected basis, through AOCI with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Conversely, the Company does not adjust the carrying value of “held to maturity” securities for temporary impairments.
Premiums and discounts on all securities are amortized or accreted to maturity by use of the level-yield method considering the impact of principal amortization and prepayments on mortgage-backed securities. Gain or loss on sales of securities is recognized on the specific identification method.
Allowance for Credit Losses on Held-to-Maturity Securities
The Company accounts for its held-to-maturity securities in accordance with Accounting Standards Codification 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost (“ASC 326”), which requires that the Company measure expected credit losses on held-to-maturity securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts.
The Company classifies its held-to-maturity debt securities into the following major security types: obligations of U.S. government agencies, obligations of U.S. government-sponsored enterprises, private label mortgage-backed securities, obligations of state and political subdivisions and corporate securities. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience of no losses, the Company determined that the expected credit losses on its held-to-maturity portfolio is not significant.
Accrued interest receivable on held-to-maturity securities totaling $188 thousand and $225 thousand as of September 30, 2025 and 2024, respectively, are included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, held-to-maturity securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.
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Allowance for Credit Losses on Available-for-Sale Securities
The Company measures expected credit losses on available-for-sale securities when the Bank intends to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income. For available-for-sale securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
The allowance for credit loss on available-for-sale securities is included within the recorded balance of securities available-for-sale on the Consolidated Balance Sheets. Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income. Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable on available-for-sale securities totaling $242 thousand and $162 thousand as of September 30, 2025 and 2024, respectively, are included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, available-for-sale securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.
4.Regulatory Stock, at Cost
Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to purchase and hold restricted stock of its district FHLB according to a predetermined formula. The Company invests in Federal Home Loan Bank of New York stock as required to support borrowing activities, as detailed in Note J to these consolidated financial statements. Although FHLB stock is an equity interest in a FHLB, it does not have a readily determinable fair value because its ownership is restricted and it lacks a market. FHLB stock can be sold back only at its par value of $100 per share and only to the FHLBs or to another member institution. Accordingly, the FHLB restricted stock is carried at cost, less any applicable impairment charges.
5.Loans and Allowance for Credit Losses
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, adjusted for net deferred loan fees and costs, and reduced by an allowance for credit losses. Interest on loans is accrued and credited to operations based upon the principal amounts outstanding. The allowance for credit losses (“ACL”) is established through a provision for possible loan losses charged to operations. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely.
Income recognition of interest is discontinued when, in the opinion of management, the collectability of such interest becomes doubtful. A loan is generally classified as non-accrual when the scheduled payment(s) due on the loan is delinquent for more than 90 days. When a loan is placed on non-accrual, all previously accrued and unpaid interest is reversed. Loan origination fees and certain direct origination costs are deferred and amortized over the life of the related loans as an adjustment to the yield on loans receivable using the effective interest method.
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Allowance for Credit Losses on Loans
The Company maintains its ACL on loans at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Balance Sheet. The Company established its allowance in accordance with the guidance included in Accounting Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”). The ACL is a valuation reserve established and maintained by charges against income. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. The ACL is an estimate of expected credit losses that considers our historical loss experience, the weighted average expected lives of loans, current economic conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.
Historical credit loss experience is the basis for the estimate of expected credit losses. We apply our historical loss rates to pools of loans with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method. The remaining contractual life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments. After consideration of the historical loss calculation, management applies qualitative adjustments to reflect qualitative changes not already reflected in the historical loss information. Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the United States Government Publishing Office. The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s historical loss patterns. The eight qualitative metrics include: changes in lending policies and procedures, changes in national and local economic conditions as well as business conditions, changes in the nature, complexity and volume of the portfolio, changes in the experience, ability and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in the value of collateral securing loans, changes in or the existence of credit concentrations; and changes in the legal and/or regulatory landscape. The adjustments are weighted for relevance before applying to each pool of loans. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on current conditions.
The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We individually evaluate loans that meet the following criteria: (1) when it is determined that foreclosure is probable; (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral; or (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: (1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are reduced to consider expected disposition costs when appropriate. A charge-off is recorded when the estimated fair value of the loan is less than the loan balance.
The Company has elected to exclude $5.3 million and $4.6 million of accrued interest receivable on loans as of September 30, 2025 and 2024, respectively, from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. Accrued interest on loans is reported in the accrued interest receivable line on the Consolidated Balance Sheets.
Allowance for Credit Losses on Unfunded Loan Commitments
The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on unfunded loan commitments is included in accounts payable and other liabilities in the Company’s Consolidated Balance Sheets and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur, the amount of funding that will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
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6.Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation, and include capitalized expenditures for new facilities, major betterments and renewals. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method based upon the estimated useful lives of the related assets for financial reporting purposes and using the mandated methods by asset type for income tax purposes. Leasehold improvements are depreciated using the straight-line method based upon the initial term of the lease.
The Company accounts for the impairment of long-lived assets in accordance with US GAAP, which requires recognition and measurement for the impairment of long-lived assets to be held and used or to be disposed of by sale. The Company had no impaired long-lived assets at September 30, 2025 and 2024.
7.Revenue Recognition
The Company recognizes revenue in the Consolidated Statements of Income as it is earned and when collectability is reasonably assured. The primary source of revenue is interest income from interest earning assets, which is recognized on the accrual basis of accounting using the effective interest method. The recognition of revenues from interest earning assets is based upon formulas from underlying loan agreements, securities contracts, or other similar contracts. Non-interest income is recognized on the accrual basis of accounting as services are provided or as transactions occur. Non-interest income includes earnings on bank-owned life insurance, deposit accounts, merchant services, ATM and debit card fees, mortgage banking activities, commercial loan prepayment penalties and other miscellaneous services and transactions.
The Company’s contracts with customers in the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”) are contracts for deposit accounts and contracts for non-deposit investment accounts through a third-party service provider. Both types of contracts result in non-interest income being recognized. The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM transaction fees, is included as a component of service charges on the Consolidated Statements of Income. The revenue resulting from non-deposit investment accounts is included as a component of other operating income on the Consolidated Statements of Income.
Revenue from contracts with customers included in service charges was $1.4 million and $1.1 million for the years ended September 30, 2025 and 2024, respectively. Revenue from contracts with customers included in other operating income was $58 thousand and $81 thousand for the years ended September 30, 2025 and 2024, respectively.
For our contracts with customers, we satisfy our performance obligations each day as services are rendered. For our deposit account revenue, we receive payment on a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from our third-party service provider as services are rendered.
8.Other Real Estate Owned
Real estate acquired through foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the date of acquisition or transfer, and subsequently at the lower of its net cost or fair value less estimated selling costs. Adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses. The carrying value of the individual property is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time a provision for losses on such real estate is charged to operations.
The Company accounts for gains on sales of other real estate owned under ASC 606, Revenue from Contracts with Customers, which uses a principles-based methodology. As it pertains to the criteria for determining how a contract should be accounted for under the new guidance, judgment is required in evaluating if: (a) a commitment on the buyer’s part exists; (b) collection is probable in circumstances where the initial investment is minimal; and (c) the buyer has obtained control of the asset, including the significant risks and rewards of the ownership. If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannot be recognized under the new guidance.
Operating expenses of holding real estate, net of related income, are charged against income as incurred. Losses on the disposition of real estate, including expenses incurred in connection with the disposition, are charged to operations.
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9.Pension and Postretirement Plans
The Company sponsors a qualified defined benefit pension plan and a supplemental executive retirement plan (“SERP”). The qualified defined benefit pension plan is funded with trust assets invested in a diversified portfolio of debt and equity securities. Accounting for pensions and other post-retirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. This involves extensive use of assumptions about inflation, investment returns, mortality, turnover, and discount rates. Among other factors, changes in interest rates, investment returns and the market value of plan assets can: (a) affect the level of plan funding; (b) cause volatility in the net periodic pension cost; and (c) increase our future contribution requirements. A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations. A significant increase in our contribution requirements with respect to our qualified defined benefit pension plan could have an adverse impact on our cash flow. Changes in the key actuarial assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and other postretirement benefit plan. See Note L, “Pension Plan,” and Note M, “Non-Qualified Compensation Plan” for information on these plans and the assumptions used.
10.Income Taxes
The Company and its subsidiaries file consolidated federal and state income tax returns. Income taxes are allocated based on the contribution of their respective income or loss to the consolidated income tax returns.
The Company records income taxes on the basis of reported income using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. To the extent that current available evidence about the future raises doubt about the realization of a deferred tax asset, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company follows the provisions of FASB ASC 740, which provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance 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 derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
At September 30, 2025 and 2024, no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No interest and penalties were recorded during the years ended September 30, 2025 and 2024. The tax years subject to examination by the taxing authorities are the years ended September 30, 2021 and forward.
11.Advertising Costs
The Company expenses advertising costs as incurred.
12.Earnings Per Share (“EPS”)
Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. The weighted average common shares outstanding include shares allocated to the Employee Stock Ownership Plan.
Diluted income per share is calculated by adjusting the weighted average common shares outstanding to reflect the potential dilution that could occur using the treasury stock method if securities or other contracts to issue common stock, such as stock options and unvested restricted stock, were exercised and converted into common stock. The resulting shares issued would share in the earnings of the Company. Shares issued and shares reacquired during the period are weighted for the portion of the period that they were outstanding. In periods of loss, dilution is not calculated and diluted loss per share is equal to basic loss per share.
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The following table presents a calculation of basic and diluted EPS for the years ended September 30, 2025 and 2024. Basic and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.
All options were anti-dilutive at September 30, 2024.
13.Comprehensive Income and Accumulated Other Comprehensive Loss
Comprehensive income includes net income as well as certain other items which result in a change to equity during the period. The other items allocated to comprehensive income, as well as the related income tax effects, for the years ended September 30, 2025 and 2024 were as follows:
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Details about the reclassification of accumulated other comprehensive loss components and the affected line item in the Consolidated Statements of Income for the years ended September 30, 2025 and 2024 were as follows:
The components of accumulated other comprehensive loss for the years ended September 30, 2025 and 2024 were as follows:
14.Bank-Owned Life Insurance
The Company has purchased Bank-Owned Life Insurance (“BOLI”) policies. BOLI involves the purchasing of life insurance by the Company on directors and officers of the Bank. The proceeds are used to help defray the costs of non-qualified compensation plans. The Company is the owner and beneficiary of the policies. BOLI is recorded on the Consolidated Balance Sheets at its cash surrender value and changes in the cash surrender value are recorded in other income in the Consolidated Statements of Income.
15.Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under commercial lines of credit. Such financial instruments are recorded when they are funded. The Company does not engage in the use of derivative financial instruments. See Note P, “Financial Instruments With Off-Balance Risk.”
16.Segment Reporting
Operating segments should be aggregated into one reportable segment if the operating segments have similar qualitative characteristics: (1) nature of business; (2) type of customer and services; (3) the nature of the regulatory environment; and (4) business markets and geographic locations.
The Company acts as an independent, community, financial services provider, and offers traditional banking and related financial services to individual, business and government customers. The Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and home equity loans; and the provision of other financial services.
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Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Company. As such, discrete financial information is not available, and segment reporting would not be meaningful. Although we have seven operational branches, they are all located in New Jersey; providing similar banking products and services to similar customers and markets; and under the same regulatory environment, so we have one reportable segment which is Magyar Bancorp, Inc. The chief operating decision maker (CODM) is the President & Chief Executive Officer of the Company.
17.New Accounting Pronouncements
In connection with the preparation of quarterly and annual reports in accordance with the Securities and Exchange Commission’s (“SEC”) Securities Exchange Act of 1934, SEC Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on financial statements when they are adopted in the future. There were no such standards at September 30, 2025.
On Dec. 14, 2023, the Financial Accounting Standards Board (FASB or Board) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 largely follows the proposed ASU issued earlier in 2023 with several important modifications and clarifications discussed below. ASU 2023-09 is effective for public business entities for annual periods beginning after Dec. 15, 2024 (October 1, 2025 for the Company) and effective for all other business entities one year later. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. It will impact the Company in its fiscal year 2026.
ASU 2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. For entities reconciling to the US statutory rate of 21%, this would generally require disclosing any reconciling items that impact the rate by 1.05% or more.
18.Subsequent Events
On October 30, 2025, the Company announced that its Board of Directors has approved a quarterly dividend of $0.08 per share, which will be paid on November 25, 2025 to stockholders of record as of November 13, 2025.
NOTE C – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM
The Company follows FASB ASC Section 718, Compensation-Stock Compensation (“ASC 718”), which covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is measured based on the fair value of the equity or liability instruments issued.
ASC 718 also requires the Company to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation for employees and outside directors within “compensation and employee benefits” in the Consolidated Statements of Income to correspond with the same line item as the cash compensation paid.
Stock options generally vest over a five-year service period and expire ten years from issuance. Management recognizes compensation expense for all option grants over the awards’ respective requisite service periods. The fair values of all option grants were estimated using the Black-Scholes option-pricing model. Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards.
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Restricted shares generally vest over a five-year service period on the anniversary of the grant date. Once vested, these awards are irrevocable. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted shares under the Company’s restricted stock plans. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.
The Company’s 2022 Equity Compensation Plan provided for grants of up to 391,000 shares to be allocated between incentive and non-qualified stock options and 156,400 of restricted stock awards to officers, employees and directors of the Company and Magyar Bank. At September 30, 2025, 293,200 options and 124,320 shares of restricted stock had been awarded from the plan.
The following is a summary of the status of the Company’s stock option activity and related information for the year ended September 30, 2025:
The following is a summary of the status and changes of the Company’s non-vested restricted shares as of September 30, 2025 and during the year then ended:
Stock option and stock award expenses included with compensation expense were $253 thousand and $367 thousand, respectively, for the year ended September 30, 2025. Stock option and stock award expenses included with compensation expense were $254 thousand and $392 thousand, respectively, for the year ended September 30, 2024.
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At September 30, 2025, total compensation cost not yet recognized for the Company’s unvested stock options and stock awards was $1.2million. The Company had no other stock-based compensation plans as of September 30, 2025 except as disclosed below.
The Company has an Employee Stock Ownership Plan (“ESOP”) for the benefit of employees who meet certain eligibility requirements. The ESOP trust purchases shares of common stock in the open market using proceeds of a loan from the Company. The loan bears a fixed interest rate of 3.25% with principal and interest payable annually in equal installments over 30 years and is secured by shares of the Company’s stock. The Bank makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company. As the debt is repaid, shares are released as collateral and allocated to qualified employees. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets. The Company accounts for its ESOP in accordance with ASC 718, “Employer’s Accounting for Employee Stock Ownership Plans.” As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.
The following table presents the components of the ESOP shares for the years ended September 30, 2025 and 2024:
At September 30, 2025, ESOP shares allocated to participants totaled 179,375. Unallocated ESOP shares held in suspense totaled 265,925 with an aggregate fair value of $4.6 million. The Company’s contribution expense for the ESOP was $187 thousand and $155 thousand for years ended September 30, 2025 and 2024, respectively.
On May 22, 2025 the Company announced the authorization of its fifth stock repurchase program pursuant to which the Company intends to repurchase up to an additional 5% of its outstanding shares, or up to 323,547 shares. The Company’s intended use of the repurchased shares is for general corporate purposes. The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital. The Company repurchased 20,000 shares of its common stock under this plan during the year ended September 30, 2025. At September 30, 2025, the Company held 617,797 shares in treasury that were repurchased at an average price of $12.69.
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NOTE D - INVESTMENT SECURITIES
The following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at September 30, 2025:
The following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held to-maturity at September 30, 2024:
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The contractual maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities available-for-sale at September 30, 2025 are summarized in the following table:
The contractual maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities held-to-maturity at September 30, 2025 are summarized in the following table:
There were no sales of securities during the years ended September 30, 2025 and 2024.
As of September 30, 2025 and 2024, investment securities having a carrying amount of approximately $10.9 million and $12.5 million, respectively, were pledged to secure public deposits.
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Details of available-for-sale securities with unrealized losses for which an allowance for credit losses has not been recorded at September 30, 2025 and 2024 are as follows:
The Company monitors the credit quality of held-to-maturity debt securities, primarily through their credit ratings by nationally recognized statistical ratings organizations, on a quarterly basis. At September 30, 2025, there were no non-performing held-to-maturity debt securities and no allowance for credit losses were required. The majority of the investment securities are explicitly or implicitly guaranteed by the United States government, and any estimate of expected credit losses would be insignificant to the Company.
The following table summarizes the amortized cost of held-to-maturity debt securities at September 30, 2025 and 2024, aggregated by credit quality indicator:
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The investment securities listed above may have fair values less than amortized cost and therefore contain unrealized losses. The Company evaluated these securities and determined that the decline in value was primarily related to fluctuations in the interest rate environment and were not related to any company or industry specific event.
The Company anticipates full recovery of amortized costs with respect to these securities. The Company does not intend to sell these securities and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery. For individual debt securities classified as available-for-sale, we determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors. If the decline in fair value is due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.
NOTE E - LOANS RECEIVABLE, NET
Loans receivable, net allowance for credit losses were comprised of the following:
Certain directors and executive officers of the Company have loans with the Bank. Such loans were made in the ordinary course of business at the Bank’s normal credit terms, including interest rate and collateralization, and do not represent more than a normal risk of collection. Total loans receivable from directors and executive officers, and affiliates thereof, were approximately $3.2 million at September 30, 2025 and $3.9 million at September 30, 2024. There were $372 thousand and $854 thousand in new loans or advances on existing lines of credit during the year ended September 30, 2025 and 2024, respectively. Total principal repayments and/or reductions due to retirements were approximately $163 thousand and $2.0 million for the year ended September 30, 2025 and 2024, respectively.
At September 30, 2025 and 2024, the Company was servicing loans for others amounting to approximately $56.7 million and $50.2 million, respectively. See Note J for additional information.
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The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The residential mortgage loan segment is further disaggregated into two classes: first lien, amortizing term loans, and the combination of second lien amortizing term loans and home equity lines of credit. The commercial loan segment is further disaggregated into three classes: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied, non-residential properties. The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Construction loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the loan. The commercial business loan segment consists of loans made for the purpose of financing the activities of commercial customers and consists of revolving lines of credit and loans partially guaranteed by the U.S. Small Business Administration. The consumer loan segment consists primarily of stock-secured installment loans but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.
Management uses a ten-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. All loans greater than three months past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Company’s Asset Review Committee performs monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse. Confirmation of the appropriate risk grade is performed by an external loan review company that semi-annually reviews and assesses loans within the portfolio. Generally, the external consultant reviews commercial relationships greater than $500 thousand and/or criticized relationships greater than $250 thousand. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.
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The following tables present the classes of the loan portfolio by origination year summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful for loans subject to the Company’s internal risk rating system and by performing status for all other loans as of September 30, 2025 and 2024.
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Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The Bank was not accruing interest on any loans delinquent 90 days or greater as of September 30, 2025 and 2024. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans for the periods presented:
The following table presents our non-accrual loans by loan type as of September 30, 2025 and 2024:
The following table identifies our non-performing, collateral dependent loans by collateral type as of September 30, 2025 and 2024:
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The ACL is maintained to absorb losses from the loan portfolio. Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL. Since loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ACL for loans individually evaluated for impairment.
The following tables set forth the allocation of the Bank’s ACL by loan category at the dates indicated. The portion of the ACL allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total ACL is a valuation allocation applicable to the entire loan portfolio. The Company generally charges off the collateral or discounted cash flow deficiency on all loans at 90 days past due and all loans rated substandard or worse that are 90 days past due.
The following table presents, by loan category, the changes in the ACL for the year ended September 30, 2025 and 2024.
During the year ended September 30, 2025, the changes in the ACL for each loan category were primarily due to fluctuations in the outstanding balance of each segment of loans collectively evaluated for impairment. Specifically, we experienced significant growth in our commercial real estate and construction portfolios, partially offset by contraction in our commercial business loans, which require higher provisions for credit loss, during the year ended September 30, 2025.
During the year ended September 30, 2025, the Company did not make any loan modifications to borrowers experiencing financial difficulty. There were two residential loans totaling $294 thousand that were in the process of foreclosure at September 30, 2025.
Total loans pledged as collateral for Federal Home Loan Bank of New York (“FHLBNY”) borrowings were $466.5 million and $410.6 million as of September 30, 2025 and 2024, respectively.
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NOTE F - PREMISES AND EQUIPMENTS
Premises and equipment consist of the following:
For the years ended September 30, 2025 and 2024, depreciation expense included in occupancy expense amounted to approximately $937 thousand and $890 thousand, respectively.
NOTE G - OTHER REAL ESTATE OWNED
The Company held $2.2 million of real estate owned properties at September 30, 2025 and $3.7 million at September 30, 2024. The Company sold two properties totaling $1.8 million and wrote down its remaining property by $57 thousand during the year ended September 30, 2025. Further declines in real estate values may result in increased foreclosed real estate expense in the future. Routine holding costs are charged to expense as incurred and improvements to real estate owned that enhance the value of the real estate are capitalized.
NOTE H - DEPOSITS
A summary of deposits by type of account follows:
Included in the Company’s deposits at September 30, 2025 were $57.3 million in brokered certificates of deposits and $24.0 million in certificates of deposits obtained through a national deposit listing service. At September 30, 2024 the Company had $29.6 million in brokered certificates of deposits and $20.0 million in certificates of deposits obtained through a national deposit listing service.
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At September 30, 2025, certificates of deposit (including retirement accounts and brokered certificate deposit accounts) have contractual maturities as follows (in thousands):
At September 30, 2025 and 2024, the time deposits of $250 thousand or more totaled approximately $94.8 million and 59.3 million, respectively. Related party deposits totaled $3.9 million and $3.2 million at September 30, 2025 and 2024, respectively.
NOTE I - BORROWINGS
1.Federal Home Loan Bank of New York Advances
Long term FHLBNY advances at September 30, 2025 and 2024 totaled $49.1 million and $28.6 million, respectively. The weighted average interest rates on advances outstanding at September 30, 2025 and 2024 were 3.26% and 2.90%, respectively. The advances were collateralized by unencumbered qualified assets consisting of one-to-four family residential and commercial real estate mortgage loans. Advances are made pursuant to several different credit programs offered from time to time by the FHLBNY.
Long term FHLBNY advances as of September 30, 2025 mature as follows (in thousands):
Additionally, the Company has established an Overnight Line of Credit arrangement with the FHLBNY. The total amount available under the line of credit is based on the amount of eligible collateral pledged to the FHLBNY. At September 30, 2025 and 2024, the Company had available credit from the FHLBNY totaling $135.9 million and $123.7 million, respectively. Information concerning short-term arrangement with the FHLBNY is summarized as follows:
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NOTE J - SERVICING POLICY
The Company originates and sells loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed by the SBA. The Company has sold loans on a service-retained basis and on a servicing-released basis. Loans sold with servicing retained and servicing released during the year ended September 30, 2025 were $19.0 million and $0, respectively. Loans sold with servicing retained and servicing released during the year ended September 30, 2024 were $6.4 million and $0, respectively. The Company accounts for sales in accordance with ASC 860, Transfers and Servicing. Upon sale, the receivables are removed from the balance sheet, mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale, if applicable, is recognized for the difference between the carrying value of the receivables and the sales proceeds, net of origination costs.
Gains on sales of loans, representing the difference between the total sales price received for the loans and the allocated cost of the loans, are recognized when loans are sold and delivered to the purchasers. Loans are accounted for as sold when control of the loan is surrendered. Control over the loans is deemed surrendered when: (a) the loans have been isolated from the Company; (b) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the loans; and (c) the Company does not maintain effective control over the loans through either: (a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before maturity; or (b) the ability to unilaterally cause the buyer to return specific loans.
The Company services one-to-four family residential mortgage loans and SBA 7(a) loans for investors in the secondary market, which are not included in the Consolidated Balance Sheets. The Company’s fee is a percentage of the principal balance and is recognized as income when received. At September 30, 2025 and 2024, the Company was servicing mortgage loans sold in the amount of $1.1 million and $1.4 million, respectively, and SBA loans sold in the amount of $39.8 million and $38.4 million, respectively. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing revenues and are included in other assets on the Consolidated Balance Sheets. Activity in loan servicing rights during the years ended September 30, 2025 and 2024 is summarized as follows:
Loan servicing rights are carried at the lower of amortized cost or fair value. Fair values are estimated using discounted cash flows based on the current market interest rate.
NOTE K - INCOME TAXES
The Company’s income tax expense is comprised of the following components for the years ended September 30, 2025 and 2024:
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A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2025 and 2024 is as follows:
The major sources of temporary differences and their deferred tax effect at September 30, 2025 and 2024 are as follows:
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and carry forwards are available.
There were no valuation allowances for the year ended September 30, 2025 and 2024. The Company has considered future market growth, forecasted earnings, future taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets. If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made.
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The Bank’s statutory income tax rate in the State of New Jersey was 9.0% for the years ending September 30, 2025 and 2024. The State of New Jersey has imposed a surtax on corporations earning New Jersey allocated income in excess of $10 million for the Company’s tax years ended September 30, 2025 and 2024. The surtax is set at a rate of 2.5% and is currently effective through 2029. Accordingly, the Company used an 11.5% State tax rate for the calculation of its State income tax expense for the years ended September 30, 2025 and 2024.
NOTE L - PENSION PLAN
The Company had a noncontributory defined benefit pension plan (the “Plan”) covering all eligible employees. On January 26, 2006, the Plan was frozen and amended to eliminate future benefit accruals after February 15, 2006.
The following table sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2025 and September 30, 2024.
The net pension (credit) cost for the years ended September 30, 2025 and 2024 included the following components:
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Current Asset Allocation
The Plan’s weighted-average asset allocations at September 30, 2025 and 2024, by asset category are as follows:
Expected Contributions
For the fiscal year ending September 30, 2026, the Company does not expect to make a contribution to the Plan.
Estimated Future Benefit Payments
The following benefit payments are expected to be paid as follows (in thousands):
Included in the funded status of the Plan at September 30, 2025 and 2024, are actuarial gain and losses of $42 thousand and $91 thousand, respectively. These amounts are included, net of related income tax effects of $13 thousand and $132 thousand, respectively, in the accumulated other comprehensive loss component of stockholders’ equity at September 30, 2025 and 2024.
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The following table presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC 820, Fair Value Measurements and Disclosure (“ASC 820”). Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note Q “Fair Value Disclosures” for further detail regarding fair value hierarchy.
Equity and debt securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).
NOTE M - NONQUALIFIED COMPENSATION PLAN
The Company maintains a Supplemental Executive Retirement Plan (“SERP”) for the benefit of its senior officers. In addition, the Company also adopted voluntary Deferred Income and Retirement Plans on behalf of its directors. The SERP provides the Company with the opportunity to supplement the retirement income of selected officers to achieve equitable wage replacement at retirement while the Deferred Income Plan provides participating directors with an opportunity to defer all or a portion of their fees into a tax deferred accumulation account for future retirement. The Director Retirement Plan enables the Company to reward its directors for longevity of service in consideration of their availability and consultation. The SERP is based upon achieving a total retirement benefit equal to a percentage of the participants’ final annual salary.
Under the Director Supplemental Retirement Income Plan (the “Plan”), directors that began service before 2002 are entitled to a benefit upon attainment of his/her benefit age. The directors will receive an annual amount in monthly installments based on his/her total Board and Committee fees in the twelve months prior to attainment of his/her benefit age. The amount will be 10% plus 2 1/2% for each year of service as a Director, with a minimum of 50%, provided the Director has served for at least five years, and a maximum of 60%. The maximum benefit increases for any Director serving as Chairman of the Board for at least five years to 75%.
The Company funds the plans through modified endowment contracts. Income recorded for the plans represents life insurance income as recorded based on the projected increases in cash surrender values of life insurance policies. As of September 30, 2025 and 2024, the Company’s life insurance contracts had cash surrender values of approximately $19.0 million and $23.3 million, respectively.
The Company is recording benefit costs so that the cost of each participant’s retirement benefits is being expensed and accrued over the participant’s active employment so as to result in a liability at retirement date equal to the present value of the benefits expected to be provided. The total expense for non-qualified retirement benefits recorded during the years ended September 30, 2025 and 2024 was $399 thousand and $384 thousand, respectively. Included in accounts payable and other liabilities at September 30, 2025 and 2024 were accrued retirement benefits totaling $1.2 million and $1.0 million, respectively, for these plans.
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NOTE N - 401(K) EMPLOYEE CONTRIBUTION PLAN
The Company has a defined contribution 401(k) plan covering all employees, as defined under the plan document. Employees may contribute to the plan, as defined under the plan document, and the Company can make discretionary contributions. The Company contributed $278 thousand and $255 thousand to the plan for the years ended September 30, 2025 and 2024 and is included in compensation and employee benefits in the accompanying Consolidated Statements of Income.
NOTE O - COMMITMENTS
1. Lease Commitments
Accounting Standard Update ASC 842, “Leases” requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset, measured at the present value of the future minimum lease payments, at the lease commencement date.
The Company has operating leases for five branch locations. Our leases have remaining lease terms of up to 10 years, some of which include options to extend the leases for up to 10 additional years. Operating leases are recorded as ROU assets and lease liabilities and are included within other assets and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.
Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate. The incremental borrowing rate used by the Company to value its operating leases is based on the interpolated term advance rate available from the FHLBNY, based on the remaining lease term.
The following table presents the balance sheet information related to our leases:
The following table summarizes the maturity of our remaining lease liabilities by year:
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Total rental expense, included in occupancy expense, was approximately $750 thousand and $809 thousand for the years ended September 30, 2025 and 2024, respectively.
2. Contingencies
The Company and its subsidiaries, from time to time, are a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.
NOTE P - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company may use derivative financial instruments, such as interest rate floors and collars, as part of its interest rate risk management. Interest rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a predetermined period of time if certain market interest rate thresholds are met. The Company considers the credit risk inherent in these contracts to be negligible. As of September 30, 2025 and 2024, the Company did not hold any interest rate floors or collars.
The Company is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, the Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Bank executes with a third-party financial institution, such that the Bank minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties and did not have a significant impact on fair value. The Company had $50 thousand and $0 in cash pledged for collateral on its interest rate swaps with financial institutions at September 30, 2025 and 2024, respectively.
The following table presents summary information regarding these derivatives for September 30, 2025 and 2024.
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At September 30, 2025 and 2024, the Company had outstanding commitments (substantially all of which expire within one year) to originate one-to four-family residential loans, construction loans, commercial real estate loans, commercial business loans and consumer loans.These commitments were comprised of fixed and variable rate loans.
NOTE Q - FAIR VALUE DISCLOSURES
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company’s securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, loans receivable and other real estate owned. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.
In accordance with ASC 820, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:
The Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.
Securities available-for-sale
The Company’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income (loss) in stockholders’ equity. The securities available-for-sale portfolio consists of U.S. government and government-sponsored enterprise obligations and mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.
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The following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a recurring basis at September 30, 2025 and 2024:
The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.
Other Real Estate Owned
Other real estate owned is carried at lower of cost or estimated fair value less disposal costs. The estimated fair value of the real estate is determined through current appraisals, and adjusted as necessary, by management, to reflect current market conditions. As such, other real estate owned is generally classified as Level 3. The Company sold two properties totaling $1.8 million and wrote down its remaining property by $57 thousand during the year ended September 30, 2025.
Collateral Dependent Individually Evaluated Loans
Collateral dependent individually evaluated loans are measured and reported at fair value through specific allocations of the allowance for credit losses based on the fair value of the underlying collateral. At September 30, 2025 and 2024 there were no collateral dependent loans with specific reserves.
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The following table provides the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a non-recurring basis at September 30, 2025 and 2024:
The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Company has utilized Level 3 inputs to determine fair value at September 30, 2025 and 2024:
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The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of September 30, 2025 and 2024. This table excludes financial instruments for which the carrying amount approximates fair value, which includes cash and cash equivalents, FHLBNY stock, bank owned life insurance, accrued interest receivable, interest and non-interest bearing demand, savings deposits, and accrued interest payable. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity. The Company’s bank-owned life insurance is not a marketable asset and may generally only be redeemed with the insurance company and is therefore not included in the table below.
NOTE R - REGULATORY CAPITAL
The Bank is required to maintain minimum amounts of capital to total “risk-weighted” assets, as defined by the banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As of September 30, 2025, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.
The following tables set forth the Company’s actual capital levels and the Bank’s actual and required capital levels under those measures:
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None.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in Magyar Bancorp, Inc.’s internal control over financial reporting during Magyar Bancorp, Inc.’s fourth quarter of fiscal year 2025 that has materially affected, or is reasonably likely to materially affect, Magyar Bancorp, Inc.’s internal control over financial reporting.
Report by Management on Internal Control over Financial Reporting
The management of Magyar Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Magyar Bancorp Inc.’s internal control system was designed to provide reasonable assurance to the Magyar Bancorp, Inc.’s management and board of directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Magyar Bancorp, Inc.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2025. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of September 30, 2025, the Company’s internal control over financial reporting was effective based on those criteria.
The Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to exemption rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
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PART III
Magyar Bancorp, Inc. has adopted a Code of Ethics that applies to Magyar Bancorp, Inc.’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics, and any amendments to and waivers from the Code of Ethics, will be posted on the Company’s website located at www.magbank.com. A copy of the Code will be furnished without charge upon written request to the Secretary, Magyar Bancorp, Inc., 400 Somerset Street, New Brunswick, New Jersey.
Information concerning directors and executive officers of Magyar Bancorp, Inc. is incorporated herein by reference from our definitive Proxy Statement related to our 2025 Annual Meeting of Stockholders (the “Proxy Statement”), specifically the section captioned “Proposal I - Election of Directors.”
Information concerning executive compensation is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Proposal I - Election of Directors.”
Information concerning security ownership of certain owners and management is incorporated herein by reference from our Proxy Statement, specifically the sections captioned “Security Ownership of Certain Beneficial Owners and Management” and “Proposal I - Election of Directors.”
Information concerning relationships and transactions is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Proposal I - Election of Directors - Transactions with Certain Related Persons.”
Information concerning principal accountant fees and services is incorporated herein by reference from our Proxy Statement, specifically the section captioned “Proposal II - Ratification of the Appointment of Independent Registered Public Accountants.”
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PART IV
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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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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