UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 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:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted posted 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, 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 Securities 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 Securities Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The number of shares outstanding of the issuer's common stock at May 1, 2025 was 6,470,948
MAGYAR BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
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
2
Consolidated Statements of Comprehensive Income
(In Thousands)
3
Consolidated Statements of Changes in Stockholders' Equity
For the Three and Six Months Ended March 31, 2025 and 2024
(In Thousands, Except for Share and Per-Share Amounts)
4
Consolidated Statements of Cash Flows
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Notes to Consolidated Financial Statements
(Unaudited)
NOTE A – BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Magyar Bancorp, Inc. (the “Company”), its wholly owned subsidiary, Magyar Bank (the “Bank”), and the Bank’s wholly owned subsidiaries Magyar Service Corporation, Hungaria Urban Renewal, LLC, and Magyar Investment Company. All material intercompany transactions and balances have been eliminated. The Company prepares its consolidated financial statements on the accrual basis and in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The unaudited information furnished herein reflects all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.
Operating results for the six months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025 or for any other period. The September 30, 2024 information has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete consolidated financial statements.
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of available-for-sale investment securities, the valuation of other real estate owned (“OREO”), and the assessment of realizability of deferred income tax assets.
The Company has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 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 issued.
NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS
In connection with the preparation of quarterly and annual reports in accordance with the Securities Exchange Act of 1934, Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on consolidated financial statements when they are adopted in the future.
Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” requires public entities to disclose detailed information about a reportable segment’s expenses on both an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments in ASU 2023-07 should be applied retrospectively to all periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is in the process of completing its analysis of ASU 2023-07 and expects to incorporate additional disclosures in the financial statements on adoption.
NOTE C - CONTINGENCIES
The Company, from time to time, is 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 as presented in this report.
NOTE D - EARNINGS PER SHARE
The following table presents a calculation of basic and diluted earnings per share for the three and six months ended March 31, 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.
6
Options to purchase281,200 shares of common stock at a weighted average strike price of $12.58 and 87,240 shares of restricted shares at a weighted average price of $12.62 were outstanding at March 31, 2025 and included in the calculation of diluted earnings per share. Options to purchase293,200 shares of common stock at a weighted average strike price of $12.58 and 124,320 shares of restricted shares at a weighted average price of $12.63 were outstanding at March 31, 2024 but were not included in the calculation of diluted EPS because they were anti-dilutive.
NOTE E – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM
The following is a summary of the status of the Company’s stock option activity and related information for the six months ended March 31, 2025:
The following is a summary of the status of the Company’s non-vested restricted shares for the six months ended March 31, 2025:
Stock option and stock award expenses included with compensation expense were $63 thousand and $85 thousand for the three months ended March 31, 2025 and $63 thousand and $98 thousand for the three months ended March 31, 2024, respectively.
Stock option and stock award expenses included with compensation expense were $127 thousand and $184 thousand for the six months ended March 31, 2025 and $127 thousand and $196 thousand for the six months ended March 31, 2024, respectively.
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At March 31, 2025, total compensation cost not yet recognized for the Company’s unvested stock options and stock awards was $1.6 million and will be recognized through September 2027. The Company had no other stock-based compensation plans as of March 31, 2025 except as disclosed below.
The Company maintains a stock repurchase plan pursuant to which the Company may repurchase up to 5% of its outstanding shares, or up to 337,146 shares, under which 334,222 shares had been repurchased at an average price of $12.13 through March 31, 2025. Under this stock repurchase program, 2,924shares of the 337,146 shares authorized remained available for repurchase as of March 31, 2025. The Company’s intended use of the repurchased shares is for general corporate purposes. The Company held treasury stock shares totaling 623,953 at March 31, 2025. 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 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 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 Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 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.
At March 31, 2025, ESOP shares allocated to participants totaled 186,940. Unallocated ESOP shares held in suspense totaled 278,163 with an aggregate fair value of $3.9 million. The Company's contribution expense for the ESOP was $44 thousand and $35 thousand for the three months ended March 31, 2025 and 2024, respectively, and $87 thousand and $84 thousand for the six months ended March 31, 2025 and 2024, respectively.
NOTE F – OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes net income as well as certain other items which result in a change to equity during the period. The Company recorded no reclassification adjustments during the three and six months ended March 31, 2025 and 2024. The components of other comprehensive income (loss) and the related income tax effects are as follows:
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NOTE G – 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 securities available-for-sale and the Company’s derivative assets and liabilities 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 OREO. 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 based 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 securities 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-sponsored mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides the Company with prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities in the Company’s portfolio. Various modeling techniques are used to determine pricing for Company’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.
Derivatives
The Bank executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. The fair values of such derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).
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.
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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 measured and reported at fair value through specific allocations of the allowance for credit losses based on the fair value of the underlying collateral.
The following tables provide the level of valuation assumptions used to determine the carrying value of the other real estate owned measured at fair value on a non-recurring basis at March 31, 2025 and September 30, 2024.
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The following tables present additional quantitative information about assets measured at fair value on a non-recurring basis and for which Company has utilized Level 3 inputs to determine fair value:
Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)
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 March 31, 2025 and September 30, 2024. For short-term financial assets such as cash and cash equivalents and accrued interest receivable, 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 being payable on demand and 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, therefore, is not included in the table below.
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NOTE H - INVESTMENT SECURITIES
The following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at March 31, 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 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 March 31, 2025 and September 30, 2024, 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 tables summarize the amortized cost of held-to-maturity debt securities at March 31, 2025 and September 30, 2024, aggregated by credit quality indicator:
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The contractual maturities of debt securities, municipal bonds and certain information regarding mortgage-backed securities available-for-sale at March 31, 2025 are summarized in the following table:
The contractual maturities of debt securities, municipal bonds and certain information regarding mortgage-backed securities held-to-maturity at March 31, 2025 are summarized in the following table:
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As of March 31, 2025 and September 30, 2024, investment securities having a carrying amount of approximately $12.2 million and $12.5 million, respectively, were pledged to secure public deposits.
NOTE I – UNREALIZED LOSSES ON INVESTMENT SECURITIES AVAILABLE-FOR-SALE
The Company recognizes an allowance for credit losses (“ACL”) on debt securities in earnings through a provision for credit losses while non credit-related impairment on debt securities not expected to be sold are recognized in other comprehensive income.
The Company reviews its investment portfolio on a quarterly basis for indications of credit losses. This review includes analyzing the extent to which the fair value has been lower than the amortized cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market. The Company evaluates its intent and ability to hold debt securities based upon its investment strategy for the particular type of security and its cash flow needs, liquidity position, capital adequacy and interest rate risk position. In addition, the risk of future credit losses may be influenced by prolonged recession in the U.S. economy, changes in real estate values and interest deferrals.
Investment securities with fair values greater than their amortized cost contain unrealized gains. Investment securities with fair values less than their amortized cost contain unrealized losses. Details of available-for-sale securities with unrealized losses at March 31, 2025 and September 30, 2024 are as following tables:
The investment securities listed above currently 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 ACL. Impairment that has not been recorded through an ACL is recorded through other comprehensive income, net of applicable taxes.
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NOTE J – LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES
Loans receivable, net were comprised of the following:
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 types: 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 types: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties. The construction and land 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 appropriate risk grading 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 adversely classified loans 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 March 31, 2025 and September 30, 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 March 31, 2025 and September 30, 2024. The following tables present the classes of the loan portfolio summarized by the aging categories of loans for the periods presented:
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The following tables present our non-accrual loans and the related ACL by loan type as of March 31, 2025 and September 30, 2024.
The following table identifies our non-performing, collateral dependent loans by collateral type as of March 31, 2025 and September 30, 2024:
An 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 individually evaluated loans.
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 allowance for credit losses 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.
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During the six months ended March 31, 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 portfolio and significant contraction in our construction loan balances during the six months ended March 31, 2025.
The Company’s ACL increased $179 thousand to $8.2 million, or 0.98% of total loan receivable during the six months ended March 31, 2025. Growth in loans receivable during the six months ended March 31, 2025 resulted in additional provisions for credit losses totaling $71 thousand and the Company recorded $108 thousand in net loan recoveries. The Company’s allowance for on-balance sheet credit losses increased to $7.9 million at March 31, 2025 from $7.5 million at September 30, 2024 while its reserve for off-balance sheet commitments decreased to $240 thousand at March 31, 2025 from $449 thousand at September 30, 2024.
During the six months ended March 31, 2025, there were no loans modified to borrowers experiencing financial difficulty.
There was one residential loan totaling $81 thousand that was in the process of foreclosure at March 31, 2025.
NOTE K - DEPOSITS
A summary of deposits by type of account are summarized as follows:
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Included in the Company’s deposits at March 31, 2025 were $33.1 million in brokered certificates of deposit and $20.1 million in certificates of deposit obtained through a national deposit listing service. Included in the Company’s deposits at September 30, 2024 were $29.6 million in brokered certificates of deposit and $20.0 million in certificates of deposit obtained through a national deposit listing service.
At March 31, 2025 and September 30, 2024, the aggregate deposits in amounts greater than $250 thousand, which is the maximum amount for federal deposit insurance, were $485.2 million and $380.0 million, respectively.
NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company may use derivative financial instruments, such as interest rate swaps and interest rate floors and caps, 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 March 31, 2025, 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 Company executes with a third-party financial institution, such that the Company 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 was not significant to the total fair value. The Company was not required to pledge any collateral for its interest rate swaps with financial institutions at March 31, 2025 and September 30, 2024.
The following table presents summary information regarding these derivatives as of March 31, 2025 and September 30, 2024.
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The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and are summarized in the below table. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
When used in this filing and in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases, “anticipate,” “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “projected,” “believes”, or similar expressions are intended to identify “forward looking statements.” Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those risks previously disclosed by the Company in Item 1A of its Annual Report on Form 10-K as may be supplemented by Quarterly Reports on Form 10-Q filed with the SEC, general economic conditions, changes in interest rates, regulatory considerations, competition, technological developments, retention and recruitment of qualified personnel, and market acceptance of the Company’s pricing, products and services, levels of uninsured deposits, and with respect to the loans extended by the Company and real estate owned, the following: risks related to the economic environment in the market areas in which the Bank operates, particularly with respect to the real estate market in New Jersey; the risk that the value of the real estate securing these loans may decline in value; and the risk that significant expense may be incurred by the Company in connection with the resolution of these loans.
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The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors, including regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investing activities, and competitive and regulatory factors, could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
Comparison of Financial Condition at March 31, 2025 and September 30, 2024
Total Assets.Total assets increased $69.9 million, or 7.3%, to $1.0 billion at March 31, 2025 from $951.9 million at September 30, 2024. The increase was attributable to higher balances of interest-earning deposits with banks and loans receivable.
Interest Earning Deposits. Total interest-earning deposits with banks increased $46.7 million, or 194.4%, to $70.7 million at March 31, 2025 from $25.6 million at September 30, 2024 from net deposit inflows during the six months ended March 31, 2025.
Loans Receivable.Total loans receivable increased $28.8 million, or 3.7%, to $809.0 million at March 31, 2025 from $780.2 million at September 30, 2024. The increase in total loans receivable during the six months ended March 31, 2025 occurred primarily in commercial real estate loans, which increased $33.9 million, or 7.4% to $495.2 million, or 61.1% of total loans. The Company also grew its one-to four-family residential real estate loans (including home equity lines of credit), which increased $3.8 million. Partially offsetting these increases were construction and land loans, which decreased $5.2 million, commercial business loans, which decreased $3.0 million and other loans, which decreased $483 thousand.
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 March 31, 2025:
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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 March 31, 2025:
As of March 31, 2025 and September 30, 2024, non-owner occupied commercial real estate loans (as defined by regulatory guidance) to total risk-based capital were estimated at approximately 268% 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.
The Company’s asset quality with respect to commercial real estate loans has remained strong despite recent economic and market conditions. As of March 31, 2025 and September 30, 2024, we had $0 and $116 thousand of non-performing commercial real estate loans, respectively.
Total non-performing loans decreased $151 thousand, or 65.1%, to $81 thousand at March 31, 2025 from $232 thousand at September 30, 2024. The ratio of non-performing loans to total loans decreased to 0.01% at March 31, 2025 from 0.03% at September 30, 2024.
The allowance for credit losses increased $179 thousand to $8.2 million, or 0.98% of total loans receivable, during the six months ended March 31, 2025. Growth in loans receivable during the six months ended March 31, 2025 resulted in additional provisions for credit losses totaling $71 thousand and the Company recorded $108 thousand in net loan recoveries. The Company’s allowance for on-balance sheet credit losses increased to $7.9 million at March 31, 2025 from $7.5 million at September 30, 2024 while its reserve for off-balance sheet commitments decreased to $240 thousand at March 31, 2025 from $449 thousand at September 30, 2024.
The allowance for on-balance sheet loan losses as a percentage of total loans was 0.98% at March 31, 2025 and 0.97% at September 30, 2024. Future increases in the allowance for credit losses may be necessary based on possible future increases in non-performing loans and charge-offs, the possible deterioration of collateral values, and the possible deterioration of the current economic environment.
Investment Securities.At March 31, 2025, investment securities totaled $94.0 million, reflecting a decrease of $1.4 million, or 1.5%, from $95.4 million at September 30, 2024. The decrease resulted from matured bonds totaling $4.5 million and payments from mortgage-backed securities totaling $3.8 million during the six months ended March 31, 2025. Offsetting these decreases were purchases of mortgage-backed securities totaling $6.9 million.
Investment securities at March 31, 2025 consisted of $68.8 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $14.5 million in U.S. government-sponsored enterprise debt securities, $7.1 million in corporate notes, $3.4 million in municipal bonds, and $183 thousand in “private-label” mortgage-backed securities. There was no allowance for credit losses for the Company’s investment securities at March 31, 2025 and September 30, 2024.
Bank Owned Life Insurance.Bank owned life insurance (“BOLI”) decreased $2.9 million, or 12.5%, to $20.4 million at March 31, 2025 from $23.3 million at September 30, 2024.
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In August 2024, the Company restructured approximately $7.9 million of its BOLI portfolio with the simultaneous purchase and surrender/exchange of BOLI policies. During the six months ended March 31, 2025, the Company received $3.2 million from policy surrenders and recorded a $329 thousand increase in the cash surrender value of the BOLI policies. The restructure increased the yield on the BOLI portfolio from 2.59% (3.71% tax-equivalent) to 3.26% (4.66% tax-equivalent) at March 31, 2025.
Deposits. Total deposits increased $61.0 million, or 7.7%, to $857.7 million at March 31, 2025 from $796.7 million at September 30, 2024.
The inflow in deposits occurred in interest-bearing checking accounts, which increased $30.3 million, or 20.6%, to $177.0 million, in money market accounts, which increased $22.5 million, or 7.4%, to $327.1 million, in certificates of deposit (including individual retirement accounts), which increased $6.1 million, or 3.8%, to $165.7 million, in savings accounts, which increased $1.7 million, or 3.2%, to $54.6 million and in non-interest bearing checking accounts, which increased $462 thousand, or 0.4%, to $133.3 million.
Included with total deposit at March 31, 2025 were $33.1 million in brokered deposits, compared with $29.6 million at September 30, 2024. The Company issued $3.8 million of five-year term certificates of deposit and had one redemption totaling $250 thousand during the six months ended March 31, 2025.
Uninsured deposits were approximately $169.3 million and $122.3 million at March 31, 2025 and September 30, 2024, respectively.
Borrowed Funds. Borrowings increased $5.3 million, or 18.7%, to $33.9 million at March 31, 2025 from $28.6 million at September 30, 2024.
During the six months ended March 31, 2025, the Company borrowed $6.9 million from the Federal Home Loan Bank of New York, of which $1.9 million was a zero-cost advance for a three-year term and a $5.0 million was a four-year advance with an initial rate of 4.468% and an embedded 5.0% SOFR interest rate cap. The borrowings were used to fund the Company’s loan growth and were offset by $1.5 million in principal repayment.
Stockholders’ Equity. Stockholders’ equity increased $3.7 million, or 3.4%, to $114.3 million at March 31, 2025 from $110.5 million at September 30, 2024. The increase was primarily due to the results from operations, partially offset by dividends paid totaling $0.15 per share and the repurchase of 37,486 shares during the six months ended March 31, 2025. The Company’s book value per share increased to $17.65 at March 31, 2025 from $16.98 at September 30, 2024.
Average Balance Sheets for the Three and Six Months Ended March 31, 2025 and 2024
The following tables present certain information regarding the Company’s financial condition and net interest income for the three and six months ended March 31, 2025 and 2024. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized 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 period indicated. Interest income includes fees that we consider adjustments to yields.
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(1) The average balance of loans receivable, net includes non-accrual loans.
(2) Interest income and yield are calculated using the Company's 21% federal tax rate.
(3) Includes passbook savings, money market passbook and club accounts.
(4) Includes interest-bearing checking and money market accounts.
(5) Includes certificates of deposits and individual retirement accounts.
(6) Calculated as annualized net interest income divided by average total interest-earning assets.
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Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024
Net Income. Net income increased $784 thousand, or 41.3%, to $2.7 million for the three-month period ended March 31, 2025 compared with net income of $1.9 million for the three months ended March 31, 2024. The increase was due to higher net interest income and other income, partially offset by higher other expenses.
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Net Interest and Dividend Income. Net interest and dividend income increased $953 thousand, or 13.8%, to $7.9 million for the three months ended March 31, 2025 from $6.9 million for the three months ended March 31, 2024. The increase was attributable to a 14-basis point increase in the Company’s net interest margin to 3.31% for the three months ended March 31, 2025 from 3.17% for the three months ended March 31, 2024.
Interest and Dividend Income. Interest and dividend income increased $1.6 million, or 13.5%, to $13.5 million for the three months ended March 31, 2025 compared with $11.9 million for the three months ended March 31, 2024. The increase was attributable to a 23-basis point increase in the yield on interest-earning assets to 5.68% for the three months ended March 31, 2025 from 5.45% for the three months ended March 31, 2024, as well as a $78.8 million, or 8.9%, increase in the average balance of interest-earning assets.
The average balance of loans receivable, net of allowance for credit losses, increased $76.6 million, or 10.5%, to $803.4 million during the three months ended March 31, 2025 from $726.8 million during the three months ended March 31, 2024, while the yield on loans receivable increased 24 basis points to 6.12% for the three months ended March 31, 2025 from 5.88% for the three months ended March 31, 2024. The higher average balance and yield accounted for a $1.6 million, or 15.1%, increase in loan interest income between periods.
Interest earned on investment securities, including interest-earning deposits and excluding FHLB stock, increased $12 thousand, or 0.9%, to $1.3 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The average balance of investment securities and interest-earning deposits increased by $1.9 million, or 1.2%, to $159.6 million for the three months ended March 31, 2025 from $157.7 million for the three months ended March 31, 2024 while the yield on such assets decreased 1 basis points to 3.40% for the three months ended March 31, 2025 from 3.41% for the three months ended March 31, 2024.
Interest Expense.Interest expense increased $651 thousand, or 13.0%, to $5.6 million for the three months ended March 31, 2025 from $5.0 million for the three months ended March 31, 2024. The average balance of interest-bearing liabilities increased $116.4 million, or 18.1%, to $758.9 million while the cost of interest-bearing liabilities decreased 13 basis points to 3.02% for the three months ended March 31, 2025 compared with 3.15% for the three months ended March 31, 2024.
The average balance of interest-bearing deposits increased $113.0 million, or 18.4%, to $726.7 million for the three months ended March 31, 2025 from $613.7 million for the three months ended March 31, 2024, while the average cost of such deposits decreased 13 basis points to 3.03% from 3.16%. As a result, interest paid on interest-bearing deposits increased $650 thousand, or 13.6%, to $5.4 million for the three months ended March 31, 2025 compared with $4.8 million for the three months ended March 31, 2024.
Interest paid on borrowings increased $1 thousand, or 0.5%, to $223 thousand for the three months ended March 31, 2025 from $222 thousand for the three months ended March 31, 2024. While the average balance of borrowings increased $3.3 million to $32.1 million for the three months ended March 31 2025 compared to $28.8 million for the three months ended March 31, 2025, the cost of the borrowings decreased by 31 basis points to 2.81% for the three months ended March 31, 2025 from 3.12% for the three months ended March 31, 2025.
Provision for Credit Losses. The Company recorded a net $30 thousand reduction to its allowance for credit losses for the three months ended March 31, 2025 compared to a $14 thousand provision during the three months ended March 31, 2024.
Provisions for on-balance sheet credit losses were $70 thousand from growth in total loans receivable during the quarter. The Company reduced its allowance for off-balance sheet credit losses by $100 thousand from a reduction in unfunded construction loan commitments during the quarter. Net recoveries from a previously charged-off commercial business loan totaled $5 thousand during the three months ended March 31,2025 compared with $65 thousand in net loan recoveries during the three months ended March 31, 2024.
Other Income. Other income increased $646 thousand, or 103.9%, to $1.3 million during the three months ended March 31, 2025 compared to $622 thousand for the three months ended March 31, 2024.
Higher other income was primarily due to higher gains from the sale of Small Business Administration (“SBA”) 7(a) loans, which increased $399 thousand, or 187.3%, to $612 thousand during the three months ended March 31, 2025 from $213 thousand during the three months ended March 31, 2024. The Company sold loans totaling $6.5 million during the three months ended March 31, 2025 compared with $2.2 million during the three months ended March 31, 2024.
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Service charges increased $191 thousand, or 65.0%, to $485 thousand during the three months ended March 31, 2025 from $294 thousand during the three months ended March 31, 2024. The Company recorded higher commercial loan prepayment charges, loan fees and late charges on loans during the three months ended March 31, 2025.
Income on bank-owned life insurance policies increased $71 thousand, or 78.0%, to $162 thousand during the three months ended March 31, 2025 from $91 thousand during the three months ended March 31, 2024. The higher income on bank owned life insurance resulted from the restructure of policies totaling $7.9 million during the quarter ended September 30, 2024.
Other Expenses. Other expenses increased $290 thousand, or 5.7%, to $5.4 million during the three months ended March 31, 2025 compared to $5.1 million for the three months ended March 31, 2024.
Compensation and benefit expense increased $218 thousand, or 7.2%, to $3.2 million during the three months ended March 31, 2025 from $3.0 million during the three months ended March 31, 2024. The increase was attributable to higher employee medical benefits and incentive accruals as well as annual merit increases.
Occupancy expenses increased $46 thousand, or 5.7%, to $849 thousand during the three months ended March 31, 2025 from $803 thousand during the three months ended March 31, 2024 due to higher seasonal snow and ice removal.
Other expenses increased $38 thousand, or 6.8%, to $600 thousand during the three months ended March 31, 2025 from $562 thousand during the three months ended March 31, 2024 primarily due to higher loan servicing costs.
Income Tax Expense.The Company recorded income tax expense of $1.1 million on pre-tax income of $3.8 million for the three months ended March 31, 2025, compared with $526 thousand on pre-tax income of $2.4 million for the three months ended March 31, 2024. The increase was driven by higher pre-tax income as well as changes in deferred tax items that lowered the Company’s tax expense during the three months ended March 31, 2024. The Company’s effective tax rate for the three months ended March 31, 2025 was 29.0% compared with 21.7% for the three months ended March 31, 2024.
Comparison of Operating Results for the Six Months Ended March 31, 2025 and 2024
Net Income. Net income increased $1.2 million, or 34.3%, to $4.8 million during the six-month period ended March 31, 2025 compared with $3.5 million for the six-month period ended March 31, 2024. The increase was due to higher net interest income, lower provisions for credit loss, and higher other income, partially offset by higher other expenses and income tax expense.
Net Interest and Dividend Income. Net interest and dividend income increased $1.1 million, or 8.1%, to $15.3 million for the six months ended March 31, 2025 from $14.2 million for the six months ended March 31, 2024. The increase was attributable to a $61.2 million, or 7.0%, increase in the average balance of interest-earning assets to $940.8 million for the six months ended March 31, 2025 from $879.6 million for the same period at March 31, 2024, as well as a 4-basis point increase in the Company’s net interest margin to 3.27% for the six months ended March 31, 2025 from 3.23% for the six months ended March 31, 2024.
Interest and Dividend Income. Interest and dividend income increased $2.9 million, or 12.6%, to $26.4 million for the six months ended March 31, 2025 from $23.5 million for the six months ended March 31, 2024. The increase was attributable to a 29-basis point increase in the yield on interest-earning assets to 5.64% for the six months ended March 31, 2025 from 5.35% for the six months ended March 31, 2024, as well as a $61.2 million, or 7.0%, increase in the average balance of interest-earning assets.
The average balance of loans receivable, net of allowance for credit losses, increased $79.7 million, or 11.1%, to $794.6 million during the six months ended March 31, 2025 from $714.9 million during the six months ended March 31, 2024, while the yield on loans receivable increased 27 basis points to 6.06% for the six months ended March 31, 2025 from 5.79% for the six months ended March 31, 2024. The higher average balance and yield accounted for a $3.4 million, or 16.4%, increase in loan interest income between periods.
Interest earned on investment securities, including interest-earning deposits and excluding FHLBNY stock, decreased $422 thousand, or 15.4%, to $2.3 million for the six months ended March 31, 2025 from $2.7 million for the six months ended March 31, 2024. The average balance of investment securities and interest-earning deposits decreased by $18.7 million, or 11.5%, to $143.7 million for the six months ended March 31, 2025 from $162.4 million for the six months ended March 31, 2024. Partially offsetting this decrease was a 15-basis point increase in the yield of such assets to 3.25% for the six months ended March 31, 2025 from 3.40% for the six months ended March 31, 2024.
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Interest Expense.Interest expense increased $1.8 million, or 19.3%, to $11.1 million for the six months ended March 31, 2025 compared with $9.3 million for the six months ended March 31, 2024. The average balance of interest-bearing liabilities increased $107.5 million, or 17.2%, to $743.3 million while the cost of interest-bearing liabilities increased 5 basis points to 3.03% for the six months ended March 31, 2025 compared with 2.98% for the six months ended March 31, 2024.
The average balance of interest-bearing deposits increased $105.9 million, or 17.7%, to $703.4 million for the six months ended March 31, 2025 from $597.5 million for the six months ended March 31, 2024, while the average cost of such deposits increased seven basis points to 3.04% from 2.97%. As a result, interest paid on interest-bearing deposits increased $1.8 million, or 20.6%, to $10.7 million for the six months ended March 31, 2025 from $8.9 million for the six months ended March 31, 2024.
Interest expense on borrowings decreased $26 thousand, or 5.7%, to $431 thousand for the six months ended March 31, 2025 from $457 thousand for the six months ended March 31, 2024. The cost of borrowings decreased 34 basis points to 2.80% for the six months ended March 31, 2025 compared with 3.14% for the six months ended March 31, 2024, while the average balance of borrowings increased $1.6 million, or 5.6%, to $30.8 million for the six months ended March 31, 2025 from $29.2 million for the six months ended March 31, 2024.
Provision for Credit Losses. The Company recorded provisions for credit losses of $71 thousand for the six months ended March 31, 2025 compared with $495 thousand for the six months ended March 31, 2024. Provisions for on-balance sheet credit losses were $279 thousand from growth in total loans receivable during the period. The Company reduced its allowance for off-balance sheet credit losses by $208 thousand from a reduction in unfunded construction loan commitments during the period. Net recoveries from previously charged-off commercial business loans totaled $108 thousand during the six months ended March 31, 2025 compared with $66 thousand in net loan recoveries during the six months ended March 31, 2024.
Other Income. Other income increased $994 thousand, or 80.7%, to $2.2 million during the six months ended March 31, 2025 compared to $1.2 million for the six months ended March 31, 2024.
Higher other income was primarily due to higher gains from the sale of SBA 7(a) loans and other real estate owned (“OREO”). Gains from the sale of SBA loans increased $506 thousand, or 148.0%, to $848 thousand during the six months ended March 31, 2025 from $342 thousand during the six months ended March 31, 2024. The Company sold loans totaling $8.9 million during the six months ended March 31, 2025 compared with $3.8 million during the six months ended March 31, 2024. The Company recorded a $224 thousand gain on the sale of one OREO property during the six months ended March 31, 2025 compared with no sales or gains during the six months ended March 31, 2024.
Service charges increased $210 thousand, or 35.2%, to $807 thousand during the six months ended March 31, 2025 from $597 thousand during the six months ended March 31, 2024. The Company recorded higher commercial loan prepayment charges, loan fees and late charges on loans during the six months ended March 31, 2025.
Income on bank-owned life insurance policies increased $143 thousand, or 76.9%, to $329 thousand during the six months ended March 31, 2025 from $186 thousand during the six months ended March 31, 2024. The higher income on bank owned life insurance resulted from the restructure of policies totaling $7.9 million during the quarter ended September 30, 2024.
Other Expenses. Other expenses increased $679 thousand, or 6.7%, to $10.8 million during the six months ended March 31, 2025 from $10.1 million during the six months ended March 31, 2024.
Compensation and benefit expense increased $452 thousand, or 7.7%, to $6.3 million during the six months ended March 31, 2025 from $5.9 million during the six months ended March 31, 2024. The increase was attributable to higher employee medical benefits and incentive accruals as well as annual merit increases.
Occupancy expenses increased $247 thousand, or 15.5%, to $1.8 million during the six months ended March 31, 2025 from $1.6 million during the six months ended March 31, 2024 due to lease termination expenses related to the closure of the Bank’s Bridgewater office in the Company’s first quarter as well as higher seasonal snow and ice removal during the six months ended March 31, 2025 compared with the six months ended March 31, 2024.
Income Tax Expense.The Company recorded tax expense of $1.9 million on pre-tax income of $6.7 million for the six months ended March 31, 2025, compared to $1.2 million on pre-tax income of $4.8 million for the six months ended March 31, 2024. The increase in income tax expense was driven by higher pre-tax income as well as changes in deferred tax items that lowered the Company’s tax expense during the six months ended March 31, 2024. The Company’s effective tax rate for the six months ended March 31, 2025 was 28.5% compared with 25.7% for the six months ended March 31, 2024.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company’s liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Company’s short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new deposits, other borrowings, and new advances from the FHLBNY. Based on eligible loan collateral pledged to the FHLBNY at March 31, 2025, we had an aggregate net borrowing capacity of $128.8 million. There has been no material adverse change during the six months ended March 31, 2025 in the ability of the Company and its subsidiaries to fund their operations.
At March 31, 2025, the Company had commitments outstanding under letters of credit totaling $785 thousand, commitments to originate loans totaling $24.1 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit totaling $83.0 million. There has been no material change during the current quarter ended March 31, 2025 in any of the Company’s other contractual obligations or commitments to make future payments.
Capital Requirements
At March 31, 2025, the Bank’s Tier 1 capital as a percentage of the Bank’s total assets was 10.90%, and total qualifying capital as a percentage of risk-weighted assets was 15.96%.
Item 3- Quantitative and Qualitative Disclosures about Market Risk
Not applicable to smaller reporting companies.
Item 4 – 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.
There has been no change in the Company's internal control over financial reporting during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II - OTHER INFORMATION
None.
There were no material changes to the risk factors relevant to the Company’s operations as described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024 filed with the U.S. Securities and Exchange Commission on December 19, 2024.
The following table reports information regarding repurchases of our common stock during the six months ended March 31, 2025.
None
Not applicable.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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