What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-12-22 compared with 2021-12-20 · 203 added, 320 removed, 365 unchanged (59% of the section changed)

9 unchanged sentences

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.

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

1 unchanged sentence

The increase was attributable to a $34.5 million

or 56.8%, increase in investment securities and a $13.5 million, or 21.8%, increase in cash and cash equivalents, partially offset by

a $17.8 million, or 3.0%, decrease in loans receivable, net of allowance for loan loss.

The increase in cash and investments resulted

from a $21.5 million increase in deposits during the year ended September 30, 2021 as well as a $30.9 million net reduction in PPP loan

balances to $25.1 million at September 30, 2021 from $56.0 million at September 30, 2020.

Stockholders’ equity increased $40.8 million,

increase, or 5.9%, to $619.8 million in loans receivable, net of allowance of loss and a $30.3 million increase, or 42.9%, to $100.9 million

in investment securities, partially offset by a $44.3 million decrease in cash and cash equivalents.

Stockholders’ equity increased

$861,000, or 0.9%, to $98.5 million at September 30, 2022 from $97.6 million at September 30, 2021.

The increase in stockholders’ equity

was primarily attributable to $37.4 million raised from the Company’s stock offering/second step conversion, net of offering costs,

as well as the Company’s results of operations and for the year ended September 30, 2021.

The increase in stockholders’

equity was primarily attributable to the Company’s results of operations for the year ended September 30, 2022, partially offset

by stock repurchases dividends paid and other comprehensive loss.

On July 21, 2022, the Company announced a stock repurchase program of

up to 5% of its outstanding shares of common stock, or 354,891 shares.

The Company repurchased 352,697 shares at an average price of $12.90

per share through September 30, 2022, reducing outstanding shares to 6,745,128.

In addition, during the year ended September 30, 2022,

the Company paid dividends totaling $0.21 per share.

Total deposits increased $27.9

million, or 3.5%, to $639.8 million during the year ended September 30, 2021.

The growth in deposits during the twelve months ended September

30, 2021 occurred in non-interest checking account balances, which increased $18.4 million, or 11.3%, to $182.0 million, in savings account

balances, which increased $6.8 million, or 9.1%, to $81.7 million, and in interest-bearing checking account balances, which increased

$5.9 million, or 9.0% to $71.3 million.

Offsetting these increases was a $9.5 million, or 7.5%, decrease in certificates of deposit (including

individual retirement accounts), to $116.9 million, and a $125,000, or 0.1%, decrease in money market account balances to $187.9 million.

million, or 4.4%, to $667.7 million during the year ended September 30, 2022 from $639.8 million at September 30 2021.

The growth in deposits

during the twelve months ended September 30, 2022 occurred in money market account balances, which increased $34.3 million, or 18.3%,

to $222.2 million, in interest-bearing checking account balances, which increased $27.3 million, or 38.3% to $98.6 million, in non-interest

checking account balances, which increased $442,000, or 0.2%, to $182.4 million, and in savings account balances, which increased $126,000,

or 0.2%, to $81.9 million.

Offsetting these increases was a $34.3 million, or 29.3%, decrease in certificates of deposit (including individual

retirement accounts), to $82.6 million.

The Company’s net income

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the year ended September 30, 2021.

The increase in net income was due to higher net interest and dividend income and higher non-interest

income, partially offset by higher non-interest expenses.

The increase in net income was due to higher net interest and dividend income, lower provisions for

loan losses, and lower non-interest expenses, partially offset by lower non-interest income.

Throughout fiscal 2023, we expect

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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.

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

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greater than the allowances we have established, which could have a material negative effect on our financial results.

For the fiscal year ended September

30, 2022 and through the fiscal year ending September 30, 2023, we followed and will follow the incurred loss methodology for determining

our allowance for loan loss.

We intend to adopt the CECL standard for determining the amount of our allowance for credit loss beginning

October 1, 2023.

Deferred Income Taxes.

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to be realized and therefore do not have a valuation allowance.

Impact of the Coronavirus/COVID-19

During 2020 and continuing into

2021, the extraordinary impact of the COVID-19 pandemic has created an unprecedented environment for consumers and businesses alike.

protect our employees and customers from potential exposure to the virus, all Magyar Bank lobbies and operational areas continue to observe

best practice protocols to limit exposure and/or spread of the virus.

To assist our loan customers,

Magyar Bank has offered loan payment deferrals to borrowers unable to make their contractual payments due to COVID-19.

Loan payments are

deferred until the contractual maturity of the loan.

Deferral requests are considered on a case-by-case basis and are initially approved

for a three-month period for principal and interest payments or for interest-only payments depending on the borrower’s circumstances.

An additional three-month period is available for businesses that remain unable to operate and for consumers unable to make their mortgage

or home equity payments due to COVID-19.

Additional deferrals were considered for businesses experiencing a prolonged impact from the

COVID-19 pandemic, such as the accommodation and food service industries.

Magyar Bank’s loan portfolio does not have a significant

exposure to the travel or entertainment industry.

Through September 30, 2021, we

had modified 284 loans aggregating $150.9 million for the deferral of principal and/or interest payments.

Of these loans, 56 loans totaling

$28.1 million repaid their deferred payments in full and 227 loans aggregating $121.4 million had resumed making their contractual loan

One loan totaling $1.4 million was past its deferral period and delinquent at September 30, 2021.

The Company was not deferring

any additional loan payments due to the COVID-19 pandemic at September 30, 2021.

Details with respect to loans with deferred payments

as of September 30, 2021 and 2020 are as follows:

Number of Loans

Weighted Average

Interest Rate

September 30, 2021

(Dollars in thousands)

One-to-four family residential real estate

Commercial real estate

Home equity lines of credit

Commercial business

September 30, 2020

One- to four-family residential real estate (1)

Commercial real estate

Home equity lines of credit

Commercial business

(1) Includes home equity loans.

The Bank participated in the PPP

to provide liquidity using the SBA platform to small businesses and self-employed individuals to maintain their staff and operations through

the COVID-19 pandemic.

This liquidity is in the form of a loan, 100% guaranteed by the SBA, that is forgivable provided the funds are

used on qualifying payroll costs, and to a lesser extent, rent, utilities and interest on qualifying mortgage payments.

The loans bear

a fixed rate of 1.0% and loan payments are deferred for the first 10 months following the covered period, which is eight to twenty-four

weeks following the date the loan is made.

We originated 350 “First Draw” loans totaling $56.0 million through June 30, 2021

for which we received $2.0 million in origination fees from the SBA.

These fees are being amortized over the contractual term of the loans,

years for loans originated prior to June 4, 2020 and

five years for loans originated June 5, 2020 or later.

Through September 30, 2021, all First Draw loans totaling $56.0 million had been

On December 27, 2020 the Economic

Aid to Hard-Hit Small Businesses, Nonprofits, and Venues (“Economic Aid Act”) was signed into law, extending the SBA’s

authority to guarantee “Second Draw” PPP loans, under generally the same terms and conditions available under the First Draw

program, through March 31, 2021, subsequently extended by the Paycheck Protection Program Extension Act of 2021 to May 31, 2021.

to qualify for a Second Draw PPP loan, an applicant must have experienced a revenue reduction of at least 25% in 2020 relative to 2019.

As of September 30, 2021, the Company originated 212 PPP loans totaling $35.3 million under the Economic Aid Act to its eligible customers,

for which it received $1.5 million in origination fees from the SBA.

These fees are being amortized over the contractual term of the loans,

which is five years, or until the loan is repaid.

The Economic Aid Act also expanded the eligible expenditures for which a business could

use PPP proceeds for and provided for a simplified forgiveness application for PPP loans $150,000 or less.

Through September 30, 2021,

101 loans totaling $10.2 million had been forgiven by the SBA, leaving 111 PPP loans totaling $25.1 million outstanding at September 30,

The Board of Governors

of the Federal Reserve System created the Paycheck Protection Program Lending Facility (“PPPLF”) to facilitate lending by

eligible financial institutions to small businesses under the PPP.

Under the PPPLF, the Federal Reserve Bank of New York provided advances

with a fixed interest rate of 0.35% to Magyar Bank on a non-recourse basis, taking PPP loans as collateral.

In addition, the Federal Deposit

Insurance Corporation allows Magyar Bank to neutralize the effect of PPP loans financed under the PPPLF on Tier 1 leverage capital ratios.

The Bank repaid all $36.9 million in PPPLF advances to the Federal Reserve Bank during the year ended September 30, 2021 that were used

to fund First Draw PPP loans.

The Bank did not utilize the PPPLF to fund its Second Draw PPP loans.

The health of the banking industry

is highly correlated with that of the economy.

The temporary and/or partial closures of non-essential businesses in our local and national

economies increases the likelihood of recession, which typically results in an increased level of credit losses.

Accordingly, our provisions

for loan losses have increased and will be closely monitored throughout the pandemic.

In addition to utilizing quantitative loss factors,

the Company considers qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics,

the adequacy of the underlying collateral, and the financial strength of the borrower.

The impact of the COVID-19 pandemic on the performance

of our loan portfolio in future quarters is unknown, however all of these factors are likely to be affected by the COVID-19 pandemic.

Comparison of Financial Condition

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assets increased $24.6 million, or 3.2%, to $798.5 million during the year ended September 30, 2022 compared with $774.0 million at September

The increase was attributable to a $25.6 million, or 56.8%, increase in investment securities and a $13.5 million, or 21.8%,

increase in cash and cash equivalents, offset by a $17.8 million, or 3.0%, decrease in loans receivable, net of allowance for loan loss.

The increase in cash and investments resulted from a $21.5 million increase in deposits during the year ended September 30, 2021 as well

as a $30.9 million net reduction in PPP loan balances to $25.1 million at September 30, 2021 from $56.0 million at September 30, 2020.

The change was attributable to a $34.5 million, or 5.9%, increase in loans receivable, net of allowance of loss, to $619.8 million

and a $30.3 million, or 42.9%, increase in investment securities to $100.9 million, partially offset by a $44.3 million decrease in cash

and cash equivalents.

Stockholders’ equity increased $861,000, or 0.9%, to $98.5 million at September 30, 2022 from $97.6 million

at September 30, 2021.

Loans Receivable.

loan receivable decreased $16.7 million, or 2.7%, to $594.6 million at September 30, 2021 from $611.3 million at September 30, 2020.

loans receivable at September 30, 2021 were comprised of $280.8 million (47.2%) in commercial real estate loans, $203.0 million (34.2%)

in one- to four- family residential mortgage loans, $68.7 million (11.6%) in commercial business loans (including $25.1 million in PPP

loans), $20.4 million (3.4%) in construction loans, and $21.7 million (3.6%) in home equity lines of credit and other loans.

receivable at September 30, 2020 were comprised of $248.1 million (40.6%) in commercial real estate loans, $210.4 million (34.4%) in one-

to four- family residential mortgage loans, $101.0 million (16.5%) in commercial business loans (including $56.0 million in PPP loans),

$28.2 million (4.6%) in construction loans, and $23.5 million (3.9%) in home equity lines of credit and other loans.

loan receivable increased $34.3 million, or 5.8%, to $628.9 million at September 30, 2022 from $594.6 million at September 30, 2021.

occurred in commercial real estate loans, which increased $61.9 million, or 22.1%, to $342.8 million and in one-to four-family residential

mortgage loans (including home equity lines of credit), which increased $12.1 million, or 5.5%, to $233.1 million.

Offsetting these increases

were decreases in commercial business loans, which decreased $34.0 million, or 49.5%, to $34.7 million, in construction loans, which decreased

$5.1 million, or 25.2%, to $15.2 million and in other consumer loans, which decreased $621,000, or 16.6%, to $3.1 million.

the reduction of commercial business loans were the repayment of $25.1 million in PPP loans.

Total loans receivable at September

30, 2022 were comprised of $342.8 million (54.5%) in commercial real estate loans, $214.4 million (34.1%) in one- to four- family residential

mortgage loans, $34.7 million (5.5%) in commercial business loans, $15.2 million (2.4%) in construction loans, and $21.8 million (3.5%)

in home equity lines of credit and other loans.

For comparison, total loans receivable at September 30, 2021 were comprised of $280.8

million (47.2%) in commercial real estate loans, $203.0 million (34.2%) in one- to four- family residential mortgage loans, $68.7 million

(11.6%) in commercial business loans (including $25.1 million in PPP loans), $20.4 million (3.4%) in construction loans, and $21.7 million

(3.6%) in home equity lines of credit and other loans.

Total non-performing loans decreased

$5.3 million, or 65.3%, to $2.8 million at September 30, 2022 from $8.2 million at September 30, 2021.

At September 30, 2021 our OREO

consisted of one commercial real estate property totaling $268,000 and one assemblage of approved real estate lots/land totaling $368,000.

The ratio of non-performing loans to total loans was 1.4% at September 30, 2021 compared to 1.6% at September 30, 2020.

Once a loan is deemed non-performing,

the value of the collateral securing the loan must be assessed, which is typically done by obtaining an updated third-party appraisal.

To the extent that the current appraised value of collateral is insufficient to cover a collateral-dependent loan, the Company reduces

the balance of the loan via a charge to the allowance for loan loss.

Non-performing loans secured by

one-to four-family residential properties, including home equity lines of credit and other consumer loans, increased $247,000, or27.3%,

to $1.2 million at September 30, 2021 from $905,000 at September 30, 2020.

Magyar Bank had begun foreclosure proceedings on the properties

securing these loans at September 30, 2021.

During the year ended September 30, 2021, there were no charge-offs against the allowance

for loan loss for residential real estate loans while $1,000 was recovered from prior year charge-offs.

Non-performing commercial real

estate loans decreased $1.1 million, or 51.4%, to $1.1 million at September 30, 2021 from $2.2 million at September 30, 2020.

had begun foreclosure proceedings on the properties securing these loans at September 30, 2021.

During the year ended September 30, 2021

there was one charge-off totaling $51,000 against the allowance for loan loss and no recoveries of prior year charge-offs.

Non-performing commercial business

loans decreased $118,000, or 8.0%, to $1.3 million at September 30, 2021 from $1.5 million at September 30, 2020.

Magyar Bank had begun

foreclosure proceedings on the collateral securing the $1.3 million loan at September 30, 2021.During the year ended September 30, 2021,

there were no charge-offs, but there were $96,000 in recoveries from a prior year charge-off.

The ratio of non-performing loans

to total loans was 0.5% at September 30, 2022 compared to 1.4% at September 30, 2021.

There were no non-performing loans

secured by one-to four-family residential properties, including home equity lines of credit and other consumer loans, at September 30,

2022, compared with $1.2 million at September 30, 2021.

During the year ended September 30, 2022, there were no charge-offs against the

allowance for loan loss for residential real estate loans while $1,000 was recovered from prior year charge-offs.

There were no non-performing commercial

real estate loans at September 30, 2022, compared with $1.1 million at September 30, 2021.

During the year ended September 30, 2022 there

were no charge-offs against the allowance for loan loss and for commercial real estate loans while $53,000 was recovered from prior year

There were no non-performing commercial

business loans at September 30, 2022, compared with $1.3 million at September 30, 2021.

During the year ended September 30, 2022 there

were no charge-offs against the allowance for loan loss for commercial business loans and there were no recoveries from prior year charge-offs.

Non-performing construction loans

decreased $561,000, or 10.9%, to $4.6 million at September 30, 2021 from $5.1 million at September 30, 2020.

Magyar Bank had begun foreclosure

proceedings on the properties securing these loans at September 30, 2021.

During the year ended September 30, 2021, there were no charge-offs

or recoveries on construction loans.

decreased $1.7 million, or 38.1%, to $2.8 million at September 30, 2022 from $4.6 million at September 30, 2021.

Magyar Bank had begun

foreclosure proceedings on the properties securing these loans at September 30, 2022.

During the year ended September 30, 2022, there

were no charge-offs or recoveries on construction loans.

The ratio of non-performing loans

and troubled debt restructurings to total loans receivable decreased to 0.53% at September 30, 2022 from 1.43% at September 30, 2021.

The allowance for loan losses increased $1.7 million to $8.1 million, or 99.0% of non-performing loans, at September 30, 2021 compared

with $6.4 million, or 65.8% of non-performing loans, at September 30, 2020.

The allowance for loan losses increased $358,000 to $8.4 million, or 297.5% of non-performing loans at September 30, 2022 compared with

$8.1 million, or 99.0% of non-performing loans, at September 30, 2021.

Provisions for loan loss during the year ended September 30, 2022

2021 were $1.6 million while net recoveries were $46,000, compared with a provision of $1.7 million and net charge-offs of $154,000 for

the prior year period.

were $304,000 while net recoveries were $54,000, compared with a provision of $1.6 million and net recoveries of $46,000 for the prior

The allowance for loan losses was 1.34% and 1.36% of gross loans outstanding at September 30, 2022 and 2021, respectively.

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The decrease was attributable

to $6.9 million in principal repayments, $5.0 million in bonds called, and unrealized losses of $293,000, partially offset by purchases

totaling $10.6 million during the year ended September 30, 2021.

to $1.9 million in principal repayments and unrealized losses of $1.7 million.

There were no purchases of securities available-for-sale

during the year ended September 30, 2022.

Securities held-to-maturity increased

1 unchanged sentence

The increase was the result

of $38.9 million in security purchases, partially offset by $9.7 million in principal repayments and $2.0 million in bonds called during

the year ended September 30, 2021.

of $41.1 million in security purchases, partially offset by $7.0 million in principal repayments and the amortization of $112,000 in net

premiums paid during the year ended September 30, 2022.

Bank-Owned Life Insurance.

The cash surrender value of life insurance held for directors and officers of Magyar Bank increased $317,000, or 2.3%, to $14.3 million

The cash surrender value of life insurance held for directors and officers of Magyar Bank increased $3.4 million, or 23.6%, to $17.7 million

at September 30, 2022 from $14.3 million at September 30, 2021.

The increase was entirely due to the increase in cash surrender value

of the policies, as the Company did not purchase any new bank-owned life insurance policies during the year ended September 30, 2021.

The Company purchased new policies on officers of the Bank totaling $3.0

million and recorded an increase in the cash surrender value of the policies totaling $372,000 during the twelve months ended September

Other Real Estate Owned.

OREO decreased $2.0 million, or 75.5%, to $636,000 at September 30, 2021 from $2.6 million at September 30, 2020.

was due to the sale of four properties totaling $2.3 million, in addition to valuation allowances and other net reductions totaling $205,000.

Offsetting these decreases were two additions totaling $547,000 during the year, both of which were sold.

The Company recorded $337,000

and $371,000 in valuation allowances against its OREO during the year ended September 30, 2021 and 2020, respectively, based on updated

appraisals or executed contracts of sale.

Further declines in real estate values may result in a charge to expense in the future.

OREO at September 30, 2021 consisted

of one commercial real estate property totaling $268,000 and an assemblage of approved real estate lots/land totaling $368,000.

the properties are listed for sale.

The Bank is determining the proper course of action for its OREO, which may include holding the properties

until the real estate market improves, marketing the properties for individual sale, or selling properties to an investor and/or developer.

OREO decreased $355,000, or 55.8%, to $281,000 at September 30, 2022 from $636,000 at September 30, 2021 due to the sale of two

properties during the year.

The Company’s OREO was reduced to one commercial real estate property totaling $281,000 that was under

contract of sale at September 30, 2022.

which include noninterest-bearing demand deposits, interest-bearing demand deposits, money market deposits, savings deposits and time

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The increase in deposits during the

twelve month ended September 30, 2021 occurred in non-interest checking account balances, which increased $18.4 million, or 11.3%, to

$182.0 million, in savings account balances, which increased $6.8 million, or 9.1%, to $81.7 million, and in interest-bearing checking

account balances, which increased $5.9 million, or 9.0% to $71.3 million.

twelve month ended September 30, 2022 occurred in money market account balances, which increased $34.3 million, or 18.3%, to $222.2 million,

in interest-bearing checking account balances, which increased $27.3 million, or 38.3% to $98.6 million, in non-interest checking account

balances, which increased

$442,000, or 0.2%, to $182.4 million, and in savings

account balances, which increased $126,000, or 0.2%, to $81.9 million.

Offsetting these increases was a $34.3 million, or 29.3%, decrease

in certificates of deposit (including individual retirement accounts), to $116.9 million, and a $125,000, or 0.1%, decrease in money market

account balances to $187.9 million.

Deposits accounted for 82.7% of assets and 109.3% of net loans receivable at September 30, 2021 compared

with 82.0% of assets and 102.5% of net loans receivable at September 30, 2020, respectively.

Commercial and consumer deposit

inflows were higher during this period from PPP loan disbursements, government stimulus programs, lower spending and customers’

preferences for liquidity during the ongoing COVID-19 pandemic.

At September 30, 2021, the Company

held $6.0 million in brokered certificates of deposit, compared with $9.4 million at September 30, 2020.

The $3.4 million decrease resulted

from the repayment of $7.4 million in matured deposits, offset by one new $4.0 million during the year ended September 30, 2021.

in certificates of deposit (including individual retirement accounts), to $82.6 million.

Included in certificates of deposit were $6.0

million in brokered certificates of deposit at September 30, 2022 and 2021.

The Company’s deposit strategy

in 2021 focused on growing its non-interest checking account balances and reducing the overall cost of its interest-bearing accounts to

offset declines in market interest rates.

in 2022 focused on growing its non-interest checking account balances and reducing the overall cost of its interest-bearing liabilities

to offset rising market interest rates.

Borrowed Funds.

decreased $7.7 million, or 33.1%, to $15.6 million at September 30, 2022 from $23.4 million at September 30, 2021.

The decrease was primarily

due to the repayment of all $36.9 million in Paycheck PPPLF advances to the Federal Reserve Bank during the year ended September 30, 2021

that were used to fund Round 1 PPP loans.

FHLBNY advances decreased $7.1 million to $23.4 million at September 30, 2021 from $30.5 million

at September 30, 2020 as deposit inflows were used to repay maturing term advances.

The decrease was due

to the repayment of maturing long-term FHLBNY advances.

Stockholders’ Equity.

Stockholders’ equity increased $40.8 million, or 71.8%, to $97.6 million at September 30, 2021 from $56.9 million at September

The increase in stockholders’ equity was primarily attributable to $37.4 million raised from the Company’s stock

offering/second step conversion, net of offering costs, as well as the Company’s results of operations and for the year ended September

The Company’s book value

per share increased $3.98 during the year to $13.76 at September 30, 2021, based on total equity of $97.6 million and 7,097,825 shares

The Company’s book value per share was $9.78 at September 30, 2020, based on total equity of $56.9 million and 5,810,746

Stockholders’ equity increased $861,000, or 0.9%, to $98.5 million at September 30, 2022 from $97.6 million at September

The increase was attributable to the Company’s net income from operations totaling $7.9 million, partially offset by $4.5

million in share repurchases, $1.4 million in dividends paid, and $1.2 million in other comprehensive losses.

The Company’s book

value per share increased to $14.60 at September 30, 2022 from $13.76 at September 30, 2021, based on total equity of $98.5 million and

6,745,128 shares outstanding.

2 unchanged sentences

Company’s net income increased $1.8 million, or 29.4%, to $7.9 million during the year ended September 30, 2022 compared with $6.1

million for the year ended September 30, 2020 due to higher net interest and dividend income and higher non-interest income, partially

offset by higher non-interest expenses.

million for the year ended September 30, 2021 due to higher net interest and dividend income, lower

provisions for loan losses, and lower non-interest expenses, partially offset by lower non-interest income.

Net Interest and Dividend

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September 30, 2021.

Interest and dividend income increased $1.6 million, or 5.9%, to $28.5 million while interest expense decreased $2.6

million, or 46.7%, to $2.9 million.

Interest and dividend income increased $975,000, or 3.4%, to $29.5 million at September 30, 2022 from $28.5 million

at September 30, 2021, while interest expense decreased $457,000, or 15.5%, to $2.5 million at September 30, 2022 from $2.9 million at

September 30, 2021.

The Company’s net interest margin increased eight basis points to 3.61% for the year ended September 30, 2022

from 3.53% for the year ended September 30, 2021.

Average Balance Sheet.

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Interest income includes fees that we consider adjustments to yields.

For the Year Ended September

the Year Ended September 30,

(Dollars In Thousands)

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September 30,

Increase (decrease)

Increase (decrease) due

(In thousands)

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Interest and Dividend Income.

Interest and dividend income increased $1.6 million, or 5.9%, to $28.5 million for the year ended September 30, 2021 from $26.9 million

for the year ended September 30, 2020.

The average balance of interest-earnings assets between the two periods increased $79.5 million,

or 12.3%, to $724.6 million from $645.1 million, while the yield on such assets decreased 22 basis points to 3.94% for the year ended

September 30, 2021 from 4.16% for the year ended September 30, 2020.

Interest and dividend income increased $975,000, or 3.4%, to $29.5 million for the year ended September 30, 2022 from $28.5 million for

the year ended September 30, 2021.

The average balance of interest-earnings assets between the two periods increased $23.0 million, or

3.2%, to $747.7 million from $724.6 million, while the yield on such assets increased 1 basis point to 3.95% for the year ended September

30, 2022 from 3.94% for the year ended September 30, 2021.

The increase in yield on the Company’s

assets was attributable to 1) the reinvestment of repaid Paycheck Protection Program (“PPP”) loans (earning 1.0%) into higher

yielding commercial real estate loans, 2) the receipt of $681,000 in prior period interest income during the year ended September 30,

2022 from previously non-performing loans, and 3) higher market interest rates, which increased the yield on the Company’s interest-earning

deposits with banks.

Offsetting these increases was a $1.2 million decrease in PPP loan fees recognized, which totaled $836,000 during

the twelve months ended September 30, 2022 compared with $2.0 million for the twelve months ended September 30, 2021.

Interest income on loans increased

$1.9 million, or 7.5%, to $27.5 million for the year ended September 30, 2021 from $25.6 million for the year ended September 30, 2020,

while the average balance of loans increased $43.0 million, or 7.6%, to $605.2 million from $562.2 million.

The average yield on such

loans was 4.55% at September 30, 2021 and 2020.

The recognition of PPP loans fees totaling $2.0 million during the year ended September

30, 2021, compared with $335,000 for the year ended September 30, 2020, accounted for the majority of the increase in interest income

between periods.

$290,000, or 1.1%, to $27.8 million for the year ended September 30, 2022 from $27.5 million for the year ended September 30, 2021, while

the average balance of loans decreased $4.5 million, or 0.8%, to $600.6 million from $605.2 million.

The average yield on such loans increased

nine basis points to 4.64% at September 30, 2022 from 4.55% for the year ended September 30, 2021.

Interest earned on investment

securities, including interest earned on deposits but excluding FHLBNY stock, decreased $291,000, or 24.8%, to $882,000 for the year ended

September 30, 2021 from $1.2 million for the same period prior year.

The decrease was attributable to a 70 basis point decrease in the

average yield on investment securities and interest earned on deposits to 0.75% from 1.45%, partially offset by a $36.6 million, or 45.3%,

increase in the average balance of

investment securities and interest earning deposits

to $117.5 million from $80.9 million during the year ended September 30, 2021.

securities, including interest earned on deposits but excluding FHLBNY stock, increased $702,000, or 79.6%, to $1.6 million for the year

ended September 30, 2022 from $882,000 for fiscal 2021.

The increase was attributable to a 35 basis point increase in the average yield

on investment securities and interest earned on deposits to 1.10% from 0.75%, and a $27.9 million, or 23.8%, increase in the average balance

of investment securities and interest earning deposits to $145.5 million from $117.5 million during the year ended September 30, 2022.

Interest Expense.

expense decreased $2.6 million, or 46.7%, to $2.9 million for the year ended September 30, 2021 from $5.5 million for the year ended September

The average balance of interest-bearing liabilities increased $23.7 million, or 4.9%, to $510.7 million from $487.0 million

between the two periods while the cost of such liabilities decreased 55 basis points to 0.58% for the year ended September 30, 2021 from

1.13% for the same period prior year due to the lower market interest rate environment.

expense decreased $457,000, or 15.5%, to $2.5 million for the year ended September 30, 2022 from $2.9 million for the year ended September

The average balance of interest-bearing liabilities decreased $21.3 million, or 4.2%, between the two periods while the cost

of such liabilities decreased seven basis points to 0.51% for the year ended September 30, 2022 compared with the prior year period.

market interest rates were primarily responsible for the drop in the cost of the Company’s interest-bearing liabilities for the

year ended September 30, 2022.

The average balance of interest-bearing

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while the average cost of such deposits decreased 5 basis points to 0.44% from 0.49%.

Interest expense on deposits decreased $2.5 million,

Interest expense on deposits decreased $217,000,

or 9.5%, to $2.1 million for the year ended September 30, 2022 from $2.3 million for the year ended September 30, 2021.

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$240,000, or 36.7%, to $414,000 for the year ended September 30, 2022 from $654,000 for the year ended September 30, 2021.

cost of borrowings decreased 23 basis points to 1.39% for the year ended September 30, 2021 from 1.62% for the year ended September 30,

2020 while the average balance of borrowings increased $1.6 million to $47.2 million for the year ended September 30, 2021 from $45.6

cost of borrowings increased 86 basis points to 2.25% for the year ended September 30, 2022 from 1.39% for the year ended September 30,

2021 while the average balance of those borrowings decreased $28.8 million to $18.4 million for the year ended September 30, 2022 from

$47.2 million the prior year.

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The provision for loan losses

decreased $37,000 to $1.6 million for the year ended September 30, 2021 compared to $1.7 million for the year ended September 30, 2020.

There were net recoveries of $46,000 during the year ended September 30, 2021 compared with net charge-offs of $154,000 for the year ended

September 30, 2020.

decreased $1.3 million, or 81.3%, to $304,000 for the year ended September 30, 2022 compared to $1.6 million for the year ended September

The lower provisions resulted from lower qualitative adjustment factors to the historical loss rates in fiscal 2022 compared

with the prior year as well as lower balances in higher risk segments of the loan portfolio.

There were net recoveries of $54,000 during

the year ended September 30, 2022 compared with net recoveries of $46,000 for the year ended September 30, 2021.

Other Income.

income increased $1.7 million, or 98.7%, to $3.4 million during the year ended September 30, 2021 compared with $1.7 million the prior

Higher fees for other customer services, gains from the sale of loans, interest rate swap fees, and service charges accounted for

the increase.

Fees for other customer services

increased to $777,000 from fees earned from the Bank’s assistance with its local government’s Small Business Relief Grant

The program was designed to assist small local businesses impacted by the COVID-19 pandemic.

The Company received a fee of 3.0%

of the grants it assisted with processing.

The Bank sells the guaranteed

portion of its SBA loans in the secondary market.

During the year ended September 30, 2021, $6.4 million in loans were sold, generating

$749,000 in gains compared with sales of $3.6 million and $317,000 in gains for the twelve months ended September 30, 2020.

The Bank began offering a commercial

loan swap product through a correspondent bank during its fiscal year 2021.

During the twelve months ended September 30, 2021 the Company

originated three commercial swap loans totaling $20.4 million, which generated $313,000 in interest rate swap fees.

The Bank assesses service charges

for a variety of loan and deposit services.

These services were negatively impacted by the COVID-19 induced economic shut-down during

our fiscal year 2020.

The re-opening of the economy in turn increased the services and correspondent service charges the Bank receives.

In addition, the Bank received more prepayment penalties from commercial loan payoffs.

Accordingly, service charges increased $242,000,

or 26.9%, to $1.1 million for the year ended September 30, 2021, compared with $901,000 for the year ended September 30, 2020.

income decreased $694,000, or 20.4%, to $2.7 million during the twelve months ended September 30, 2022 compared to $3.4 million for the

twelve months ended September 30, 2021.

Fees for other customer services decreased to $0 for fiscal 2022 from $777,000 for fiscal 2021,

during which the Company received a fee of three percent of the Small Business Relief Grants it assisted with processing.

Higher gains from the sale of

SBA loans helped offset lower interest rate swap fees between periods.

The Bank sells the guaranteed portion of its SBA loans in the secondary

During the year ended September 30, 2022, $9.5 million in loans were sold, generating $925,000 in gains compared with sales of

$6.4 million and $749,000 in gains for the twelve months ended September 30, 2021.

During the twelve months ended September 30, 2022,

the Company generated $76,000 in interest rate swap fees compared with $313,000 for the year ended September 30, 2021.

Other Expenses.

expenses increased $289,000, or 1.6%, to $18.6 million for the year ended September 30, 2021 compared to $18.4 million for the year ended

September 30, 2020.

Higher compensation and benefit expenses, higher professional fees and higher other expenses were partially offset

by lower OREO expenses, lower data processing expenses, and lower FDIC insurance assessments.

Compensation and benefit expenses

increased $336,000, or 3.3%, to $10.6 million for the year ended September 30, 2021 from $10.3 million for the year ended September 30,

Higher incentive accruals and employee benefit expenses accounted for the increase, partially offset by lower compensation expense

due to lower staffing levels.

Professional fees include legal

and consulting fees related to the collection and foreclosure of non-performing assets.

These fees increased $161,000, or 10.3%, to $1.7

million for the year ended September 30, 2021, compared with $1.6 million for the year ended September 30, 2020.

In addition, other expenses

increased $165,000, or 11.4%, to $1.6 million for the year ended September 30, 2021, compared with $1.4 million for the year ended September

The increases were primarily attributable to temporary prior year reductions related to the COVID-19 pandemic in areas such

as marketing and business development, contributions, and operating costs.

Offsetting the higher expenses

were lower OREO expenses, data processing expenses, and FDIC insurance assessments.

OREO expenses decreased $274,000, or 54.9%, to $225,000

from lower valuation allowances, higher gains on sales, and fewer properties compared with the prior year.

Data processing expenses decreased

$61,000, or 10.4%, to $528,000 from the extension and reduction in cost of the Bank’s core services provider contract.

FDIC insurance

assessments decreased $57,000, or 11.9%, to $422,000 from higher capital levels resulting from the Company’s stock offering completed

in July of 2021 as well as higher income from operations and lower levels of non-performing assets.

expenses decreased $381,000, or 2.0%, to $18.3 million compared to $18.6 million for the year ended September 30, 2021.

The decrease was

primarily attributable to professional fees, which decreased $657,000, or 38.2%, due to lower legal and consulting fees related to the

collection and foreclosure of non-performing loans.

Loan servicing expenses and FDIC

deposit insurance premiums decreased $212,000 and $207,000, respectively, from lower levels of non-performing loans and the Company’s

higher capital levels.

Partially offsetting these decreases were higher compensation and marketing and business development expenses.

Compensation and benefit expense increased $411,000, or 3.9%, due to annual merit increases, fewer open positions within the Bank, and

higher incentive plan accruals.

Marketing and business development expenses increased $221,000, or 97.8%, as the Bank is celebrating its

100 year anniversary with increased events and advertising, while business development opportunities increased as the COVID pandemic restrictions

Income Tax Expense.

The Company recorded tax expense of $3.3 million on income of $11.2 million for the year ended September 30, 2022 compared with tax expense

of $920,000 on income of $3.1 million for the year ended September 30, 2020.

of $2.6 million on income of $8.7 million for the year ended September 30, 2021.

The higher income tax expense resulted from a $2.5 million

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mortgage loans, and by originating and retaining variable-rate home equity and short-term and medium-term fixed-rate commercial business

We began offering a commercial loan swap product in our fiscal year 2021 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.

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.

By following these strategies, we believe that we are well-positioned

to react to changes in market interest rates.

Net Interest Income Analysis.

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Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity

targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as

unanticipated contingencies.

We seek to maintain a liquidity ratio of 5.0% of assets or greater.

The liquidity ratio is calculated by

determining the sum of the difference between liquid assets (cash and unpledged investment securities) and short-term liabilities (estimated

30-day deposit outflows), plus our borrowing capacity from the FHLBNY and dividing the sum by total assets.

At September 30, 2021, our

liquidity ratio was 20.8% of assets.

targets and strategies in

order to ensure that sufficient liquidity

exists for meeting the borrowing needs of our customers as well as unanticipated contingencies.

We seek to maintain a liquidity ratio

of 5.0% of assets or greater.

The liquidity ratio is calculated by determining the sum of the difference between liquid assets (cash and

unpledged investment securities) and short-term liabilities (estimated 30-day deposit outflows), plus our borrowing capacity from the

FHLBNY and dividing the sum by total assets.

At September 30, 2022, our liquidity ratio was 16.6% of assets.

We regularly adjust our

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Securities classified as available-for-sale, which provide additional sources of liquidity from sales, totaled $9.2 million

at September 30, 2020 compared with $14.6 at September 30, 2020.

at September 30, 2022 compared with $12.9 million at September 30, 2021.

At September 30, 2022, we also had the ability to borrow $138.9 million

from the FHLBNY compare with $141.8 million at September 30 2021.

from the FHLBNY compared with $151.2 million at September 30 2021.

On that date, we had an aggregate of $15.6 million in advances outstanding

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are the origination of loans and the purchase of investment securities.

We originated $159.0 million in loans (including $35.3 million

in PPP loans) and we purchased $49.5 million of investment securities for the year ended September 30, 2021.

Comparatively, we originated

$145.9 million in loans (including $56.0 million in PPP loans) and purchased $19.8 million of investment securities for the year ended

September 30, 2020.

We originated $159.2 million in loans and we purchased $41.1 million

of investment securities for the year ended September 30, 2022.

Comparatively, we originated $159.0 million in loans (including $35.3

million in PPP loans) and purchased $49.5 million of investment securities for the year ended September 30, 2021.

Financing activities consist

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million for the year ended September 30, 2021.

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.

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

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to various regulatory capital requirements, (see “Supervision and Regulation-Federal Banking Regulation-Capital Requirements”).

As of September 30, 2021, Magyar Bank’s Tier 1 capital as a percentage of the Bank's average assets was 10.18% and the total qualifying

capital as a percentage of risk-weighted assets was 16.99%.

As of September 30, 2022, Magyar Bank’s Tier 1 capital as a percentage of the Bank’s average assets was 11.13% and the total

qualifying capital as a percentage of risk-weighted assets was 16.47%.

Bank-owned life insurance is a

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis