What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-12-15 compared with 2022-12-22 · 438 added, 606 removed, 993 unchanged (51% of the section changed)

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on Form 10-K.

and Reorganization of Magyar Bancorp, MHC

Prior to consummation of its mutual

to stock conversion in July 2021, Magyar Bancorp, MHC (the “MHC”) was the New Jersey-chartered mutual holding company of Magyar

Bancorp, Inc.

(the “Company”).

The MHC’s only business was the ownership of 55.0% of the issued shares of common stock

of the Company.

On February 25, 2021, the MHC adopted a Plan of Conversion and Reorganization (the “Plan”) pursuant to which

the MHC would undertake a “second-step” conversion and Magyar Bank, the Company’s wholly owned subsidiary, would reorganize

from the two-tier mutual holding company structure to the fully-public stock holding company structure.

The Plan received all required

regulatory, depositor and stockholder approval, and the conversion and offering were consummated on July 14, 2021 on which date the MHC

ceased to exist.

Pursuant to the Plan, (i) the

shares of the Company’s common stock held by persons other than the MHC (the shares held by the MHC were canceled) were converted

into new shares of the Company’s common stock based on an exchange ratio designed to preserve the percentage ownership interests

of such persons, and (ii) the Company offered and sold shares of common stock, representing the ownership interest of the MHC in the Company,

in a subscription offering.

In the stock offering, the Company raised gross proceeds of $39.1 million by selling 3,910,000 shares of common

stock at $10.00 per share.

Concurrent with the completion of the stock offering, each share of the Company’s common stock owned

by public stockholders (stockholders other than the MHC) was exchanged for 1.2213 new shares of Company common stock.

A total of 7,097,825

shares of common stock were issued and outstanding at September 30, 2021.

As a result of the second-step conversion, all share and per

share information prior to the reorganization was subsequently revised to reflect the 1.2213 exchange ratio, unless otherwise noted.

Magyar Bancorp, Inc.

The Company is a Delaware-chartered

corporation which owns 100% of the outstanding shares of common stock of Magyar Bank.

Magyar Bancorp, Inc.

has not engaged in any significant

business activity other than owning all of the shares of common stock of Magyar Bank.

At September 30, 2022, Magyar Bancorp, Inc.

consolidated assets of $798.5 million, total deposits of $667.7 million and stockholders’ equity of $98.5 million.

The executive

office of Magyar Bancorp, Inc.

is located at 400 Somerset Street, New Brunswick, New Jersey 08901, and its telephone number is (732) 342-7600.

(the “Company”)

is a Delaware-chartered corporation which owns 100% of the outstanding shares of common stock of Magyar Bank.

Magyar Bancorp, MHC was

the former mutual holding company for Magyar Bancorp, Inc.

prior to completion of the second-step conversion.

In conjunction with the

second-step conversion, Magyar Bancorp, MHC ceased to exist.

The second-step conversion was completed on July 14, 2021, at which time

the Company raised gross proceeds of $39.1 million by selling 3,910,000 shares of common stock at $10.00 per share.

Concurrent with the

completion of the stock offering, each share of the Company’s common stock owned by public stockholders (stockholders other than

the MHC) was exchanged for 1.2213 new shares of Company common stock.

At September 30, 2023, Magyar

Bancorp, Inc.

had consolidated assets of $907.3 million, total deposits of $755.5 million and stockholders’ equity of $104.8 million.

Magyar Bancorp, Inc.

is subject to regulation and examination by the Board of Governors of the Federal Reserve System (“FRB”)

and the New Jersey Department of Banking and Insurance (“NJDBI”).

has not engaged in any significant business activity other than owning all of the shares of common stock of Magyar

The executive office of Magyar Bancorp, Inc.

is located at 400 Somerset Street, New Brunswick, New Jersey 08901, and its telephone

number is (732) 342-7600.

Magyar Bancorp, Inc.

is subject to regulation and examination by the Board of Governors of the Federal Reserve

System (“FRB”) and the New Jersey Department of Banking and Insurance (“NJDBI”).

Magyar Bank is a New Jersey-chartered

savings bank headquartered in New Brunswick, New Jersey that was originally founded in 1922 as a New Jersey building and loan association.

In 1954, Magyar Bank converted to a New Jersey

savings and loan association, before converting to

a New Jersey savings bank charter in 1993.

We conduct business from our main office located at 400 Somerset Street, New Brunswick, New

Jersey, and our seven branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison,

The telephone number at our main office is (732) 342-7600 and our website is located at www.magbank.com.

In 1954, Magyar Bank converted to a New Jersey savings and loan association, before converting to a New Jersey savings bank charter in

We conduct business from our main office located at 400 Somerset Street, New Brunswick, New Jersey, and our seven branch offices

located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey.

The telephone number at our

main office is (732) 342-7600 and our website is located at www.magbank.com.

Information on our website is not and should not be considered

a part of this Annual Report.

Our principal business consists

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offices located in Middlesex and Somerset Counties, New Jersey, and investing those deposits, together with funds generated from operations

and wholesale funding, in residential mortgage loans, home equity loans, home equity lines of credit, commercial real estate loans, commercial

business loans, Small Business Administration (“SBA”) loans, construction loans and investment securities.

and wholesale funding, in commercial real estate loans, residential mortgage loans, commercial business loans, Small Business Administration

(“SBA”) loans, home equity loans, home equity lines of credit, construction loans and investment securities.

We also originate

consumer loans, which consist primarily of secured demand loans.

consumer loans, which

consist primarily of secured demand loans.

We originate loans primarily for our loan portfolio.

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loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

One-to-Four-Family

Lines of Credit

Due During the

Fiscal Years Ending

September 30,

(Dollars in thousands)

2038 and beyond

Commercial Business

Due During the

Fiscal Years Ending

September 30,

(Dollars in thousands)

2038 and beyond

One year or less

After one year through five years

After five years through 15 years

After 15 years

The following table sets forth

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Commercial business

Residential Mortgage

We originate residential mortgage loans, most of which are secured by properties located in our primary market area and

most of which we hold in portfolio.

At September 30, 2022, $214.4 million, or 34.1% of our total loan portfolio, consisted of residential

mortgage loans (including home equity loans).

Residential mortgage loan originations are generally obtained from our in-house loan representatives,

from existing or past customers, through advertising, and through referrals from attorneys, real estate brokers, and local builders and

are underwritten pursuant to Magyar Bank’s policies and standards.

Generally, residential mortgage loans are originated in amounts

up to 80% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with

a loan-to-value ratio in excess of 80%.

We generally will not make residential mortgage loans with a loan-to-value ratio in excess of

95%, which is the upper limit that has been established by the Board of Directors.

Mortgage loans have been primarily originated for terms

of up to 30 years.

Magyar Bank does not originate or purchase “sub-prime” (mortgages granted to borrowers whose credit history

is not sufficient to get a conventional mortgage) or option ARM mortgage loans.

At September 30, 2022, there were no non-performing residential

mortgage loans, and there were no charge-offs against the allowance for loan loss for impaired residential real estate loans while $1,000

was recovered from prior year charge-offs.

One-to Four-Family

Residential Loans.

We originate residential mortgage loans, most of which are secured by properties located in our primary market

area and most of which we hold in portfolio.

At September 30, 2023, $237.7 million, or 34.1% of our total loan portfolio, consisted of

residential mortgage loans (including home equity loans).

Residential mortgage loan originations are generally obtained from our in-house

loan representatives, from existing or past customers, through advertising, and through referrals from attorneys, real estate brokers,

and local builders and are underwritten pursuant to Magyar Bank’s policies and standards.

Generally, residential mortgage loans

are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance

required on loans with a loan-to-value ratio in excess of 80%.

We generally will not make residential mortgage loans with a loan-to-value

ratio in excess of 95%, which is the upper limit that has been established by the Board of Directors.

Mortgage loans have been primarily

originated for terms of up to 30 years.

Magyar Bank does not originate or purchase “sub-prime” (mortgages granted to borrowers

whose credit history is not sufficient to get a conventional mortgage) or option adjustable rate mortgage (“ARM”) mortgage

At September 30, 2023, there were $386,000 non-performing residential mortgage loans.

During the year ended September 30, 2023,

there were no charge-offs against the allowance for loan loss for impaired residential real estate loans while $4,000 was recovered from

prior year charge-offs.

We also originate home

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There were no fixed-rate mortgage loans sold to Freddie Mac during the year ended September 30, 2023 and there

were no loans were held for sale at September 30, 2022.

We generally do not purchase

residential mortgage loans, except for loans to low-income borrowers to enhance our Community Reinvestment Act performance.

no residential mortgage loans purchased during the year ended September 30, 2022.

We underwrite purchased residential mortgage loans using

the same criteria as if we were originating the loans.

were no loans held for sale at September 30, 2023.

We occasionally purchase

residential mortgage loans to augment our internal loan origination efforts.

During the year ended September 30, 2023 we purchased fixed-rate

and adjustable-rate residential mortgage loans totaling $13.3 million.

We underwrite purchased residential mortgage loans using the same

criteria as if we were originating the loans.

At September 30, 2023, we had $17.4 million of one-to four-family residential mortgage loans

that were serviced by other lenders.

At September 30, 2023,

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At September 30, 2023, our largest fixed-rate residential mortgage loan was $10.0 million.

The loan was performing in accordance with its

contractual repayment terms at September 30, 2022.

The loan was performing in accordance with

its contractual repayment terms at September 30, 2023.

We also offer adjustable-rate

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Due to historically low

interest rate levels, borrowers generally have preferred fixed-rate mortgage loans in recent years.

interest rate levels until recently, borrowers generally have preferred fixed-rate mortgage loans.

Adjustable-rate mortgage loans decrease

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adjustable-rate residential mortgage loan was for $2.3 million.

The loan was performing in accordance with its repayment terms at September

The loan was performing in accordance with its contractual repayment terms

at September 30, 2023.

In an effort to provide

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are originated using underwriting guidelines of U.S.

government-sponsored enterprises such as Federal Home Loan Mortgage Corporation (“Freddie

These loans are originated with maximum loan-to-value ratios of 95%.

government-sponsored enterprises such as Freddie Mac.

These loans are originated

with maximum loan-to-value ratios of 95%.

All residential mortgage

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of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to

a greater extent by adverse conditions in the

real estate market or the economy in general.

Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate.

a greater extent by adverse conditions in the real estate market or the economy in general.

Accordingly, the nature of these loans makes

them more difficult for management to monitor and evaluate.

The maximum amount of a commercial

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The loan was performing in accordance with its terms at September 30, 2023.

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 from commercial real estate loans, however there were $53,000 in recoveries received from prior year charge-offs.

There was one non-performing

commercial real estate loan totaling $2.2 million at September 30, 2023 compared with no non-performing commercial real estate loans at

September 30, 2022.

During the year ended September 30, 2023, there were no charge-offs against the allowance for loan loss or recoveries

for impaired commercial real estate loans.

Construction Loans.

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the property attains a 90% occupancy level.

The maximum amount of a construction

loan is limited by our loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $14.4 million.

30, 2022, our largest outstanding construction loan was a $2.8 million loan to finance the construction of a single-family home in Colts

Neck, New Jersey.

The loan has been past due greater than 90 days since the Bank declined to renew the loan upon its maturity in January

At September 30, 2022, the Bank was in the process of foreclosing on the real estate collateral securing the loan as well as pursuing

the personal guarantors of the loan.

At September 30, 2022, the $2.8 million loan was the only non-performing construction loan in the

Bank’s portfolio.

Interest income of $220,000 would have been recorded on this non-performing construction loan for the year ended

September 30, 2022, if it had been current in accordance with their original term.

During the year ended September 30, 2022, there were

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

Before making a commitment

to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser.

We generally also engage an

outside engineering firm to review and inspect each property before disbursement of funds during the term of a construction loan.

proceeds are disbursed after inspection based on the percentage of completion method.

We require a personal guarantee from each principal

of all of our construction loan borrowers.

The maximum amount of

a construction loan is limited by our loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $15.8 million.

At September 30, 2023, our largest outstanding construction loan was a $2.8 million loan to finance the construction of a hotel in New

The loan was performing in accordance with its contractual repayment terms at September 30, 2023.

There were two non-performing

construction loans totaled $2.5 million at September 30, 2023 compared with one non-performing construction loan totaled $2.8 million

at September 30, 2022.

During the year ended September 30, 2023, there were no charge-offs against the allowance for loan loss or recoveries

for impaired construction loans.

Construction lending is

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loans are SBA 7(a) loans, on which the SBA provides guarantees of up to 75% of the principal balance (85% for loans under $150,000).

loans are made for the purposes of providing working capital and financing the purchase of equipment, inventory or commercial real estate,

and may be made inside or outside the State of New Jersey.

Generally, an SBA 7(a) loan has a deficiency in its credit profile that would

not allow the borrower to qualify for a traditional commercial loan, which is why the government provides the guarantee.

The deficiency

may be a higher loan to value ratio, lower debt service coverage ratio or weak personal financial guarantees.

In addition, many SBA 7(a)

loans are for start-up businesses where there is no history of financial information.

Finally, many SBA borrowers do not have an ongoing

and continuous banking relationship with the Bank, but merely work with the Bank on a single transaction.

We generally sell the guaranteed

portions of these SBA loans in the secondary market.

When making commercial

business loans, we consider the financial strength of the borrower, our lending history with the borrower, the debt service capabilities

of the borrower, the projected cash flows of the business and the value and type of the collateral.

Commercial business loans generally

are secured by a variety of collateral, primarily accounts receivable, inventory, equipment, savings instruments and readily marketable

In addition, we generally require the business principals to execute personal guarantees.

These loans are made for the purposes of providing working capital and financing the purchase of equipment, inventory or commercial real

estate, and may be made inside or outside the State of New Jersey.

At September 30, 2023, $9.3 million, or 89.2% of the Company’s

SBA loan balances, were to businesses located in the State of New Jersey.

Generally, an SBA 7(a) loan has a deficiency in its credit

profile that would not allow the borrower to qualify for a traditional commercial loan, which is why the government provides the guarantee.

The deficiency may be a higher loan to value ratio, lower debt service coverage ratio or weak personal financial guarantees.

many SBA 7(a) loans are for start-up businesses where there is no history of financial information.

Finally, many SBA borrowers do not

have an ongoing and continuous banking relationship with the Bank, but merely work with the Bank on a single transaction.

sell the guaranteed portions of these SBA loans in the secondary market.

Commercial business loans

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We try to minimize these risks through our underwriting standards.

The Bank participated in the Paycheck

Protection Program (“PPP”), which was designed by the U.S.

Treasury under the Coronavirus Aid, Relief and Economic Security

Act of 2020 (the “CARES Act”) to provide liquidity using the SBA’s platform to small businesses and self-employed individuals

to maintain their staff and operations through the COVID-19 pandemic.

This liquidity was in the form of a loan, 100% guaranteed by the

SBA, that was forgivable provided the funds were 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 were deferred through the date that the SBA remits

the borrower’s loan forgiveness amount to the lender (or, if the borrower did not apply for loan forgiveness, 10 months after the

end of the borrower’s loan forgiveness covered period).

All 350 PPP loans totaling $56.0 million originated by the Company under

the CARES Act were fully forgiven and paid off.

The Economic Aid to Hard-Hit Small

Businesses, Nonprofits, and Venues (“Economic Aid Act”) extended the SBA’s authority to guarantee “Second Draw”

PPP loans, under generally the same terms and conditions available under the First Draw program.

In order 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.

Of the 212 Second Draw PPP

loans totaling $35.3 million originated by the Company, only one loan totaling $3,000 did not apply for forgiveness and was the only PPP

loan outstanding at September 30, 2022.

The loan is expected to be repaid over the contractual term of the loan, or five years.

The maximum amount of a

commercial business loan is limited by our loans-to-one-borrower limit, which is 15% of Magyar Bank’s capital, or $14.4 million.

At September 30, 2022, our largest commercial business loan was a $7.2 million loan to a company that provides janitorial services and

was secured by the accounts receivable of the company.

This loan was performing according to its repayment terms at September 30, 2022.

At September 30, 2022, there were no charge-offs against the allowance for loan loss for impaired commercial business loans and there

were no recoveries from prior year charge-offs.

The maximum amount of a commercial

business loan is limited by our loans-to-one-borrower limit, which is 15% of Magyar Bank’s capital, or $15.8 million.

30, 2023, our largest commercial business loan was a $4.8 million, and collateralized with cash deposits held at the Bank.

loan was performing according to its repayment terms at September 30, 2023.

There were no non-performing commercial real estate loans

at September 30, 2023 and 2022.

During the year ended September 30, 2023, there were two charge-offs totaling $488,000 against the allowance

for loan loss for impaired commercial business loans and no recoveries.

Home Equity Lines

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30, 2023, these loans totaled $17.0 million, or 2.4% of our total loan portfolio.

underwriting standards we use for home equity

lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet

existing obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan.

The maximum combined

(first and second mortgage liens) loan-to-value ratio for home equity lines of credit is 80%.

Home equity lines of credit have adjustable

rates of interest, indexed to the prime rate, as reported in The Wall Street Journal , with terms of up to 25 years.

The underwriting standards we use for home equity lines

of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing

obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan.

The maximum combined (first

and second mortgage liens) loan-to-value ratio for home equity lines of credit is 80%.

Home equity lines of credit have adjustable rates

of interest, indexed to the prime rate, as reported in The Wall Street Journal , with terms of up to 25 years.

The maximum amount of a

home equity line of credit loan is limited by our loans-to-one-borrower limit, which is 15% of Magyar Bank’s capital, or $15.8 million.

At September 30, 2022, our largest home equity line of credit loan was $1.1 million.

The loan was performing according to its terms at

September 30, 2022.

At September 30, 2022, there were no charge-offs to home equity lines of credit and there were no recoveries of any

prior year charge-offs.

At September 30, 2023, our largest home equity line of credit loan was $986,000.

The loan was performing according to its terms at September

During the year ended September 30, 2023, there were no charge-offs against the allowance for loan loss or recoveries for impaired

home equity lines of credit or other loans.

We also originate loans

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2023, loans totaling $2.2 million, or 0.3% of our loan portfolio, were secured by the common stock of Johnson & Johnson, a New York

Stock Exchange company that operates a number of facilities in our market area and employs a substantial number of residents.

these loans are underwritten based on the ability of the individual borrower to repay the loan, the concentration of our portfolio secured

by this stock subjects us to the risk of a decline in the market price of the stock and, therefore, a reduction in the value of the collateral

securing these loans.

As of September 30, 2022, the aggregate loan-to-value ratio of the stock-secured portfolio was 15.8%.

Stock Exchange company that operates a number of facilities in our market area.

Although these loans are underwritten based on the ability

of the individual borrower to repay the loan, the concentration of our portfolio secured by this stock subjects us to the risk of a decline

in the market price of the stock and, therefore, a reduction in the value of the collateral securing these loans.

As of September 30,

2023, the aggregate loan-to-value ratio of the stock-secured portfolio was 16.7%.

Loan Originations,

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interests in which we were the lead lender, and $16.6 million in loan participations in which we were not the lead lender.

no commercial real estate loan participations originated during the year ended September 30, 2022 in which we were not the lead lender.

We have entered into certain loan participations when the aggregate outstanding balance of a particular customer relationship exceeds

our loan-to-one-borrower limit.

All loan participations are loans secured by real estate that adhere to our loan policies.

30, 2022, all participation loans were performing in accordance with their terms.

no commercial real estate loan participations originated during the year ended September 30, 2023.

We have entered into certain loan participations

when the aggregate outstanding balance of a particular customer relationship exceeds our loan-to-one-borrower limit.

All loan participations

are loans secured by real estate that adhere to our loan policies.

At September 30, 2023, all participation loans were performing in accordance

with their terms.

During the fiscal year

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of fixed-rate and adjustable-rate one-to four-family residential mortgage loans.

The fixed-rate loans are primarily loans with terms of

30 years or less.

The fixed-rate loans are primarily loans with terms

of 30 years or less.

We also originated $16.6 million of home equity lines of credit and other loans, $27.1 million of construction loans

and $3.0 million of commercial business loans.

We generally do not purchase

residential mortgage loans, except for loans to low-income borrowers as part of our Community Reinvestment Act lenders program.

30, 2022, we had $5.3 million of one-to four-family residential mortgage loans that were serviced by other lenders.

Asset Quality

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Non-Performing Assets.

The following table sets forth the amounts and categories of our non-performing assets at the dates indicated.

The table includes

troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates

materially less than current market rates) for each date presented.

The following table sets forth the amounts and categories of our non-accrual assets at the dates indicated.

September 30,

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Commercial real estate

Home equity lines of credit

Commercial business

Total non-accrual loans

Accruing loans three months or more past due:

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total loans three months or more past due

Total non-performing loans

Other real estate owned

Total non-performing assets

Performing troubled debt restructurings

and total non-performing assets

Total non-performing loans to total loans

Total non-performing loans and performing

troubled debt restructurings to total loans

Total non-performing assets to total assets

Total non-performing assets and performing

troubled debt restructurings to total assets

Allowance for loan losses:

Total non-accrual loans to total loans

Allowance for loan loss to total non-accrual loans

Commercial business, commercial

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compared to $392.7 million, or 62.4% of our total loans, at September 30, 2022.

The Company’s non-accrual

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

During the year

ended September 30, 2022, $1.3 million in non-accrual commercial business loans, $1.1 million in non-accrual commercial real estate loans

and $685,000 in non-accrual one-to four-family residential mortgage loans were paid off by the borrowers.

In addition, $1.7 million in

non-accrual construction loans and $467,000 in non-accrual one-to four-family residential mortgage loans were paid current by the borrowers.

Additional interest income of

approximately $220,000 and $555,000 would have been recorded during the fiscal years ended September 30, 2022 and 2021, respectively,

if the non-accrual loans summarized in the above table had performed in accordance with their original terms.

The Company accounts for its impaired

loans in accordance with generally accepted accounting principles, which require that a creditor measure impairment based on the present

value of expected future cash flows discounted at the loan’s effective interest rate except that, as a practical expedient, a creditor

We account for our impaired loans

in accordance with generally accepted accounting principles, which require that a creditor measure impairment based on the present value

of expected future cash flows discounted at the loan’s effective interest rate except that, as a practical expedient, a creditor

may measure impairment based on a loan’s observable market price less estimated costs of disposal, or the fair value of the collateral

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based on the fair value of the collateral when the creditor determines that foreclosure is probable.

The Company records cash receipts

on impaired loans that are non-performing as a reduction to principal before applying amounts to interest or late charges unless specifically

directed by the Bankruptcy Court to apply payments otherwise.

The Company generally continues to recognize interest income on impaired

loans that are performing.

We record cash receipts on impaired

loans that are non-performing as a reduction to principal before applying amounts to interest or late charges unless specifically directed

by the Bankruptcy Court to apply payments otherwise.

We generally continue to recognize interest income on impaired loans that are performing.

Troubled debt restructurings (“TDRs”)

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that it would not otherwise consider, such as a below market interest rate, extending the maturity of a loan, or a combination of both.

were no new TDR loans during the fiscal year ended September 30, 2022.

For comparison purposes, there were two TDR loans totaling $340,000

during the fiscal year ended September 30, 2021.

was one new TDR loan during the fiscal year ended September 30, 2023.

For comparison purposes, there were no new TDR loans during the

fiscal year ended September 30, 2022.

Delinquent Loans .

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Loans Delinquent For

90 Days and Over

(Dollars in thousands)

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Commercial real estate

Commercial business

At September 30, 2020

One-to four-family residential

Commercial real estate

Commercial business

At September 30, 2019

One-to four-family residential

Commercial real estate

Commercial business

At September 30, 2018

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Real Estate Owned .

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Holding costs and declines in fair value result in charges to expense after acquisition.

The Company held one OREO property

totaling $281,000 at September 30, 2022, a decrease of $355,000, or 55.8% from $636,000 on at September 30, 2021.

We held one OREO property totaling

$328,000 at September 30, 2023, an increase of $47,000, or 16.7% from $281,000 at September 30, 2022.

Classified Assets.

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On the basis of our review at September 30, 2023, classified assets

consisted of $1.2 million in special mention loans, $4.8 million in substandard loans, and $281,000 in substandard OREO.

consisted of $116,000 in special mention loans, $5.6 million in substandard loans, and $328,000 in substandard OREO.

We are required to establish

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in determining the allowance for loan losses, considers the losses in our loan portfolio both probable and reasonably estimable, and changes

in the nature and volume of loan activities, along with the general economic and real estate market conditions.

The allowance for loan

losses as of September 30, 2022 was maintained at a level that represents management’s best estimate of losses in the loan portfolio

both probable and reasonably estimable.

However, this analysis process is inherently subjective, as it requires us to make estimates that

are susceptible to revisions as more information becomes available.

Although we believe we have established the allowance at levels to

absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the

current environment.

in the nature and volume of loan activities.

along with the general economic and real estate market conditions.

Management further evaluates

risk characteristics of the loan portfolio and considers the borrowers, past and expected loan loss experience and other risk factors

that enable for the management to establish an adequate reserve.

The loan portfolio are analyzed on a continuous basis and periodically

by management.

The allowance for loan losses as of September 30, 2023 was maintained at a level that represents management’s best

estimate of losses in the loan portfolio both probable and reasonably estimable.

However, this analysis process is inherently subjective,

as it requires us to make estimates that are susceptible to revisions as more information becomes available.

Although we believe we have

established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions

in the future differ from the current environment.

In June 2016, the Financial

Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-13.

ASU 2016-13 significantly changes how entities

will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 will replace the incurred loss model under existing guidance with a current expected credit loss (“CECL”) model

and require entities to record allowances for loan loss.

It does specify the allowance should be based on relevant information about past

events, including historical loss experience, current portfolio and market conditions and reasonable and supportable forecasts for the

duration of each respective loan.

Accordingly, the Company expects that the adoption of the CECL model on October 1, 2023 will affect

how it determines the allowance for loan losses.

In addition, as an integral part

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The provision for loan losses

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 decrease was attributable to lower adjustments for the COVID-19 pandemic, lower balances of higher-risk loan segments within

the allowance for loan loss calculation and lower non-performing loan balance at September 30, 2022.

increased $77,000, or 25.3%, to $381,000 for the year ended September 30, 2023 compared to $304,000 for the year ended September 30, 2022.

The increase was attributable to a $69.3 million, or 11.2% increase in loan receivable to $698.2 million at September 30, 2023 compared

with $628.9 million at September 30, 2022.

In addition, non-performing loans increased $2.2 million, or 79.3%, to $5.1 million at September

30, 2023 compared with $2.8 million at September 30, 2022.

Allowance for Loan Losses.

The following table sets forth activity in our allowance for loan losses for the periods indicated.

The following table sets forth activity in our allowance for loan losses for the years indicated.

September 30,

(Dollars in thousands)

Balance at beginning of period

Balance at beginning of year

Net charge-offs (recoveries):

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total charge-offs

Total net charge-offs (recoveries)

Provision for loan losses

Balance at end of year

Net charge-offs (recoveries) to average loans outstanding

Allowance for loan losses to total non-accrual assets

Allowance for loan losses to total loans

The following table presents the

net charge-offs as a percentage of the average loans outstanding for each loan category during the year ended September 30, 2023 for each

loan category.

As a Percentage

of Average Loans

September 30, 2023

(Dollars in thousands)

One-to four-family residential

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Commercial business

Total recoveries

Net (recoveries) charge-offs

Provision for loan losses

Balance at end of period

Net (recoveries) charge-offs to average loans outstanding

Allowance for loan losses to total non-performing loans

Allowance for loan losses to total loans

Total net charge-offs

Allocation of Allowance

for Loan Losses.

The following table sets forth the allowance for loan losses allocated by loan category, the percent of the allowance

to the total allowance and the percent of loans in each category to total loans at the dates indicated.

The allowance for loan losses

allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of

the allowance to absorb losses in other categories.

% of Allowance

In Category to

The following table sets forth the allowance for loan losses allocated by loan category and the percent of the

allowance to the total allowance at the dates indicated.

The allowance for loan losses allocated to each category is not necessarily indicative

of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

In Category to

Total Allowance

(Dollars in thousands)

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Total allowance for loan losses

At September 30, 2020

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total allowance for loan losses

At September 30, 2019

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total allowance for loan losses

At September 30, 2018

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total allowance for loan losses

Our Board of Directors

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when purchased.

At September 30, 2022, $91.6 million of our securities were classified as held-to-maturity and reported at amortized cost,

and $9.2 million were classified as available-for-sale and reported at fair value.

At September 30, 2022, we held no investment securities

classified as held-for-trading.

At September 30, 2023, $85.8 million of our investment securities were classified as held-to-maturity and reported at

amortized cost and $10.1 million were classified as available-for-sale at fair value.

The Company did not hold any investment securities

classified as held-for-trading at September 30, 2023.

Government Agency

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Of this amount, $65.8 million were mortgage-backed securities

and $24.8 million were debt securities.

While these securities generally provide lower yields than other securities in our securities

portfolio, we hold these securities, to the extent appropriate, for liquidity purposes and as collateral for certain deposits or borrowings.

We invest in these securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk

as a result of the guarantees provided by these issuers.

at September 30, 2023, and $23.5 million were debt securities.

While these securities generally provide lower yields than other securities

in our securities portfolio.

We hold these securities to the extent appropriate, for liquidity purposes and as collateral for certain

deposits or borrowings.

We invest in these securities to achieve positive interest rate spreads with minimal administrative expense, and

to lower our credit risk as a result of the guarantees provided by these issuers.

Mortgage-Backed Securities.

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present a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments

to the amortization of any premium or accretion of any discount relating

to such instruments that can change the net

yield on the securities.

There is also reinvestment risk associated with the cash flows from such securities or if the securities are

redeemed by the issuer.

In addition, the market value of such securities may be adversely affected by changes in interest rates.

to the amortization of any premium or accretion of any discount relating to such instruments that can change the net yield on the securities.

There is also reinvestment risk associated with the cash flows from such securities or if the securities are redeemed by the issuer.

addition, the market value of such securities may be adversely affected by changes in interest rates.

Our mortgage-backed securities

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portfolio do not contain sub-prime mortgage loans.

State and municipal

At September 30, 2023, the Bank held seven state and political subdivision investments totaling $3.5 million.

Corporate and Other

At September 30, 2022, the Bank held two corporate notes issued by Goldman Sachs Corporate and Wells Fargo Bank totaling

$5.0 million and $3.0 million, respectively.

Our Investment Policy allows for the purchase of such instruments and requires that corporate

debt obligations be rated in one of the four highest categories by a nationally recognized rating service.

We may invest up to 25% of

Magyar Bank’s investment portfolio in corporate debt obligations and up to 15% of Magyar Bank’s capital in any one issuer.

At September 30, 2023, the Bank held one corporate note issued by Wells Fargo Bank totaling $3.0 million.

Our Investment

Policy allows for the purchase of such instruments and requires that corporate debt obligations be rated in one of the four highest categories

by a nationally recognized rating service.

We may invest up to 25% of Magyar Bank’s investment portfolio in corporate debt obligations

and up to 15% of Magyar Bank’s capital in any one issuer.

Equity Securities.

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value, directly affect our net capital position.

Securities Portfolios.

following table sets forth the composition of our securities portfolio (excluding FHLBNY common stock) at the dates indicated.

At September 30,

(In thousands)

Securities available for sale:

Obligations of U.S.

government agencies:

Mortgage backed securities-residential

Obligations of U.S.

government-sponsored enterprises:

Mortgage-backed securities-residential

Debt securities

Total securities available for sale

Securities held to maturity:

Obligations of U.S.

government agencies:

Mortgage backed securities-residential

Mortgage backed securities-commercial

Obligations of U.S.

government-sponsored enterprises:

Mortgage backed securities-residential

Debt securities

Private label mortgage-backed securities-residential

Obligations of state and political subdivisions

Corporate securities

Total securities held to maturity

Total investment securities:

At September 30, 2022, a total

of 80 securities with an aggregate fair value of $88.9 million had gross unrealized losses of $13.7 million, or approximately 15.4% of

The lower market values of our securities reflects higher market interest rates.

None of these unrealized losses were considered

other-than-temporary.

Portfolio Maturities and

The composition, maturities and weighted average yields of the investment debt securities portfolio and the mortgage-backed

securities portfolio at September 30, 2022 are summarized in the following table.

Maturities are based on the final contractual payment

dates, and do not reflect the impact of prepayments or early redemptions that may occur.

September 30, 2022

The maturities and weighted average yields of the investment debt securities portfolio and the mortgage-backed securities

portfolio at September 30, 2023 are summarized in the following table.

Maturities are based on the final contractual payment dates, and

do not reflect the impact of prepayments or early redemptions that may occur.

The weighted average yield is determined using a yield calculated

from the contractual interest rate adjusted for the amortization/accretion of premium/discount paid to purchase the security, if any,

expected to be recognized during its average life.

Yields on tax-exempt obligations have been computed on a tax-equivalent basis.

More Than One

More Than Five

Years Through

One Year or Less

Total Securities

September 30, 2023

(Dollars in thousands)

Securities available for sale:

Obligations of U.S.

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Mortgage backed securities - residential

Obligations of U.S.

government-sponsored enterprises:

Mortgage-backed securities-residential

securities available for sale

Securities held to maturity:

Obligations of U.S.

government agencies:

Mortgage-backed securities - residential

Mortgage backed securities - commercial

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Private label mortgage-backed securities-residential

Obligations of state and political subdivisions

Obligations of U.S.

states and political subdivisions

Corporate securities

securities held to maturity

Sources of Funds

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We also accept brokered deposits when attractive rates and terms are available.

We had $6.0 million in brokered deposits

at September 30, 2022 and September 30, 2021.

At September 30, 2023, we had $13.8

million in brokered deposits.

Interest rates, maturity

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Deposit rates and terms are based primarily on current

operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals.

operating strategies and market rates, liquidity requirements, rates paid by

competitors and growth goals.

Personalized customer service,

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paid on these deposits, has been and will continue to be significantly affected by market conditions.

At September 30, 2022, $82 .

million, or 12.4% of our deposit accounts, were certificates of deposit (including individual retirement accounts).

At September 30, 2023, $104.7 million,

or 13.9% of our deposit accounts, were certificates of deposit (including individual retirement accounts).

The following table sets forth

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Total deposits

At September 30, 2023 and

2022, the aggregate deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance, were $429.9

million and $292.4 million, respectively.

The estimated amount of deposits that were neither insured nor collateralized was $109.3 million

at September 30, 2023.

2021 and 2020, the aggregate amount of un-insured deposits (which are deposits in amounts greater than $250,000, which is the maximum

amount for federal deposit insurance) was $396.7 million, $374.7 million and $363.4 million, respectively.

At September 30, 2022 and September

30, 2021, we had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.

We had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal

deposit insurance.

The following table sets forth

the maturity of our un-insured certificates of deposit at September 30, 2022.

At September 30,

the maturity of certificates of deposits with individual account balances exceeding $250,000 at September 30, 2023.

September 30,

(In thousands)

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and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity.

The following table sets forth

the interest-bearing deposit activities for the periods indicated.

September 30,

(In thousands)

Beginning balance

Net deposits before interest credited

Interest credited

Ending balance

from the Federal Home Loan Bank of New York (“FHLBNY”) decreased $7.7 million, or 33.1%, to $15.6 million at September 30,

2022 from $23.4 million at September 30, 2021 as deposit inflows were used to repay maturing long-term advances.

The borrowings represent

2.2% of total liabilities and had a weighted average interest rate of 2.48% at September 30, 2022.

Based on eligible collateral pledged

to the FHLBNY at September 30, 2022, we had an aggregate borrowing capacity of $138.9 million with the FHLBNY.

Long-term FHLBNY advances as of

September 30, 2022 mature as follows (in thousands):

Year Ending September

The Bank is also able to borrow funds from an overnight

line of credit with the FHLBNY.

Information concerning overnight line of credit advances with the Federal Home Loan Bank of New York is

summarized as follows:

September 30,

(Dollars in thousands)

Balance at end of year

Weighted average balance during the year

Maximum month-end balance during the year

Average interest rate during the year

from the Federal Home Loan Bank of New York (“FHLBNY”) increased $13.9 million, or 88.9%, to $29.5 million at September 30,

2023 from $15.6 million at September 30, 2022 to fund loan originations.

The borrowings represent 3.7% of total liabilities and had a

weighted average interest rate of 3.27% at September 30, 2023.

Based on eligible collateral pledged to the FHLBNY at September 30, 2023,

we had an aggregate borrowing capacity of $230.1 million with the FHLBNY.

Subsidiary Activities

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As part of a tax abatement agreement with the City of New Brunswick,

Magyar Bank’s new office will remain in Hungaria Urban Renewal, LLC’s name.

Magyar Bank’s main office will remain in Hungaria Urban Renewal, LLC’s name.

Magyar Service Corporation, a

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At September 30, 2023 we employed

87 full-time employees and 7 part-time employees.

89 full-time employees and eight part-time employees.

Our employees are not represented by any collective bargaining group.

Management believes

that we have good relations with our employees.

believes that we have good relations with our employees.

We encourage and support the growth

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signs or symptoms of a possible COVID-19 illness and have been provided paid time off to cover compensation during such absences.

basis, we further promote the health and wellness

of our employees by strongly encouraging work-life balance, offering flexible work schedules, and keeping the employee portion of health

care premiums to a minimum.

ongoing basis, we further promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible

work schedules, and keeping the employee portion of health care premiums to a minimum.

Employee retention helps us operate

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At September 30,

2022, 32% of our current staff had been with us for fifteen years or more.

2023, 39% of our current staff had been with us for ten years or more.

FEDERAL AND STATE TAXATION

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Magyar Bank uses the direct charge off method to account for bad debt deductions for income tax purposes.

Taxable Distributions

and Recapture .

Prior to the 1996 Act, bad debt reserves created prior to January 1, 1988 (pre-base year reserves) were

subject to recapture into taxable income if Magyar Bank failed to meet certain thrift asset and definitional tests.

At September 30, 2022, our total

federal pre-base year reserve was approximately $1.3 million.

However, under current law, pre-base year reserves remain subject to recapture

if Magyar Bank makes certain non-dividend distributions, repurchases any of its stock, pays dividends in excess of tax earnings and profits,

or ceases to maintain a bank charter.

Net Operating Loss Carryovers .

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forward to the succeeding 20 taxable years.

At September 30, 2022, the Company did not have any federal or state net operating loss carry

forwards available to offset future taxable income for tax reporting purposes.

At September 30, 2023, we did not have any federal or state net operating loss carry forwards

available to offset future taxable income for tax reporting purposes.

Corporate Dividends-Received

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This regulation and supervision establishes

a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the deposit

insurance fund and depositors.

The regulatory structure also gives the regulatory authorities extensive discretion in connection with

their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets

and the establishment of adequate loan loss reserves for regulatory purposes.

a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the DIF and

The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and

enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment

of adequate loan loss reserves for regulatory purposes.

Magyar Bancorp, Inc., as

a bank holding company controlling Magyar Bank, is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), and

the rules and regulations of the FRB under the BHCA and to the provisions of the New Jersey Banking Act of 1948 (the “New Jersey

Banking Act”), and to the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies.

Magyar Bank and Magyar Bancorp, Inc.

are required to file reports with, and otherwise comply with the rules and regulations of the FRB

and the Commissioner.

a bank holding company controlling Magyar Bank, is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), the

rules and regulations of the FRB under the BHCA the provisions of the New Jersey Banking Act of 1948 (the “New Jersey Banking Act”),

and to the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies.

Magyar Bank and Magyar

Bancorp, Inc.

are required to file reports with, and otherwise comply with the rules and regulations of the FRB and the Commissioner.

Magyar Bancorp, Inc.

is required to file certain reports with, and otherwise comply with, the rules and regulations

of the Securities and Exchange Commission under the federal securities laws.

is required to file certain reports with, and otherwise comply with, the rules and regulations of the Securities

and Exchange Commission under the federal securities laws.

Any change in such laws

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“Leeway” investments must comply with a number of limitations on the individual and aggregate amounts of “leeway”

A savings bank may also exercise trust powers upon approval

of the Commissioner.

New Jersey savings banks

may exercise those powers, rights, benefits or privileges authorized for national banks or out-of-state banks or for federal or out-of-state

savings banks or savings associations, provided that before exercising any such power, right, benefit or privilege, prior approval by

the Commissioner by regulation or by specific authorization is required.

The exercise of these lending, investment and activity powers

are limited by federal law and regulations.

See “Federal Banking Regulation-Activity Restrictions on State-Chartered Banks”

A savings bank may also exercise trust powers upon approval of the Commissioner.

New Jersey savings banks may exercise those

powers, rights, benefits or privileges authorized for national banks or out-of-state banks or for federal or out-of-state savings banks

or savings associations, provided that before exercising any such power, right, benefit or privilege, prior approval by the Commissioner

by regulation or by specific authorization is required.

The exercise of these lending, investment and activity powers are limited by federal

law and regulations.

See “Federal Banking Regulation-Activity Restrictions on State-Chartered Banks” below.

Loans-to-One-Borrower

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Regulations of the Commissioner impose on New Jersey-chartered depository institutions, including Magyar Bank, minimum capital requirements

similar to those imposed by the Federal Deposit Insurance Corporation on insured state banks.

See “Federal Banking Regulation-Capital

Requirements.”

similar to those imposed by the FDIC on insured state banks.

See “Federal Banking Regulation-Capital Requirements.”

Examination and Enforcement.

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a common equity Tier

1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets, and a Tier 1

1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio, and a Tier

1 capital to total assets leverage ratio.

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At September 30, 2023, Magyar

Bank’s common equity Tier 1 capital to risk-based assets ratio was 15.22%, total capital to risk-based assets was 16.47%, and Tier

1 capital to total assets leverage ratio was 11.13%.

Legislation enacted in May 2018

required the federal banking agencies to establish an optional “community bank leverage ratio” of between 8% to 10% Tier 1

equity/consolidated assets (the “Community Bank Leverage Ratio”).

The Community Bank Leverage Ratio is available to institutions

with less than $10 billion of assets that meet certain other requirements.

Institutions with capital meeting or exceeding the specified

requirements and electing to follow the alternative regulatory capital structure will be considered to comply with the applicable regulatory

capital requirements, including the risk-based requirements.

The federal banking agencies adopted final regulations that set 9.0% as the

minimum capital for the Community Bank Leverage Ratio, effective January 1, 2020.

Bank’s common equity Tier 1 capital to risk-based assets ratio was 14.97%, total capital to risk-based assets ratio was 16.22%,

and Tier 1 capital to total assets leverage ratio was 11.11%.

At September 30, 2022, Magyar Bank’s common equity Tier 1 capital

to risk-based assets ratio was 15.22%, total capital to risk-based assets ratio was 16.47%, and Tier 1 capital to total assets leverage

ratio was 11.13%.

Legislation enacted in 2018 required

the federal banking agencies to establish an optional “community bank leverage ratio” of between 8% to 10% Tier 1 equity/consolidated

assets (the “Community Bank Leverage Ratio”).

The Community Bank Leverage Ratio is available to institutions with less than

$10 billion of assets that meet certain other requirements.

Institutions with capital meeting or exceeding the specified requirements

and electing to follow the alternative regulatory capital structure will be considered to comply with the applicable regulatory capital

requirements, including the risk-based requirements.

The federal banking agencies adopted final regulations that set 9.0% as the minimum

capital for the Community Bank Leverage Ratio, effective January 1, 2020.

A qualifying institution may opt in and out of the Community

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including the risk-based capital requirements.

Magyar Bank has not elected to use the Community Bank Leverage Ratio.

Prompt Corrective

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An institution is deemed

to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio

to be “well capitalized” if it has a total risk-based capital ratio of

10.0% or greater, a Tier 1 risk-based capital ratio

of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.

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some exceptions, to appoint a receiver or conservator for an insured state bank if that bank is “critically undercapitalized.”

For this purpose, “critically undercapitalized” means having a ratio of tangible capital to total assets of less than 2%.

The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon

3 unchanged sentences

● existence of an unsafe or unsound condition to transact business;

likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in

the normal course of business;

insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of

the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.

● likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations

in the normal course of business;

● insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all

of the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.

Activity Restrictions

on State-Chartered Banks.

Federal law and FDIC regulations generally limit the activities and investments of state-chartered Federal

Deposit Insurance Corporation-insured banks and their subsidiaries to those

permissible for national banks and their subsidiaries,

unless such activities and investments are specifically exempted by law or consented to by the Federal Deposit Insurance Corporation.

Federal law and FDIC regulations generally limit the activities and investments of state-chartered FDIC-insured

banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are

specifically exempted by law or consented to by the FDIC.

Before making a new investment

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Magyar Bank is a member of the Federal Home Loan Bank system, which consists of eleven regional federal home loan

banks, each subject to supervision and regulation by the Federal Housing Finance Board.

banks, each subject to supervision and regulation by the Federal Housing Finance Agency.

The federal home loan banks provide a central

4 unchanged sentences

Magyar Bank was in compliance with these requirements.

The Federal Deposit Insurance Corporation has extensive enforcement authority over insured savings banks, including Magyar Bank.

enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove

directors and officers.

In general, these enforcement actions may be initiated in response to violations of laws and regulations and to

unsafe or unsound practices.

The FDIC has extensive enforcement authority over insured savings banks, including Magyar Bank.

This enforcement authority includes, among

other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers.

these enforcement actions may be initiated in response to violations of laws and regulations, unsafe or unsound practices or non-compliance

with agency conditions or agreements.

Deposit Insurance.

The Deposit Insurance Fund of the Federal Deposit Insurance Corporation insures deposits at Federal Deposit Insurance Corporation insured

financial institutions such as Magyar Bank generally up to a maximum of $250,000 per separately insured depositor.

the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to one of four risk

categories based on supervisory evaluations, regulatory capital levels and certain other risk factors.

Rates are based on each institution’s

risk category and certain specified risk adjustments.

Institutions deemed to be less risky pay lower rates while institutions deemed riskier

pay higher rates.

Assessment rates (inclusive of possible adjustments) currently range from 2 1/2 to 45 basis points of each institution’s

total assets less tangible capital.

The Federal Deposit Insurance Corporation may increase or decrease the scale uniformly, except that

no adjustment can deviate more than two basis points from the base scale without notice and comment rulemaking.

The Federal Deposit Insurance

Corporation’s current system represents a change, required by the Dodd-Frank Act, from its prior practice of basing the assessment

on an institution’s deposits.

2020, the FDIC issued a final rule that mitigates the deposit insurance assessment effects of participating in certain COVID-19 liquidity

The FDIC will generally remove the effect of PPP lending in calculating an institution’s deposit insurance assessment.

The final rule also provides an offset to an institution’s total assessment amount for the increase in its assessment base attributable

to participation in the PPP.

The DIF of the FDIC insures deposits at Federal Deposit Insurance Corporation insured financial institutions such as Magyar Bank generally

up to a maximum of $250,000 per separately insured depositor.

the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations,

regulatory capital levels and certain other risk factors.

Rates are based on each institution’s risk category and certain specified

risk adjustments.

Institutions deemed to be less risky pay lower rates while institutions deemed riskier pay higher rates.

rates (inclusive of possible adjustments) currently range from 2.5 to 32 basis points of each institution’s total assets less tangible

The FDIC may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis points from

the base scale without notice and comment rulemaking.

The FDIC’s current system represents a change, required by the Dodd-Frank

Act, from its prior practice of basing the assessment on an institution’s deposits.

of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe

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Magyar Bank’s authority to engage in transactions with its affiliates is limited by Sections

23A and 23B of the Federal Reserve Act and its implementing Regulation W promulgated by the Board of Governors of the Federal Reserve

An affiliate is a company that controls, is controlled by, or is under common control with an insured depository institution such

as Magyar Bancorp, Inc.

In general, loan transactions between an insured depository institution and its affiliates are subject to certain

quantitative and collateral requirements.

In this regard, transactions between an insured depository institution and its affiliates are

limited to 10% of the institution’s unimpaired capital and unimpaired surplus for transactions with any one affiliate and 20% of

unimpaired capital and unimpaired surplus for transactions in the aggregate with all affiliates.

Collateral of specific types and in specified

amounts ranging from 100% to 130% of the amount of the transaction must usually be provided by affiliates in order to receive loans from

the savings association.

In addition, transactions with affiliates must be consistent with safe and sound banking practices, not involve

low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

is in compliance with these requirements.

23A and 23B of the Federal Reserve Act and its implementing Regulation W promulgated by the FRB.

An affiliate includes, among other things,

a company that controls, is controlled by, or is under common control with an insured depository institution, such as Magyar Bancorp,

In general, “covered transactions,” as defined by these authorities, between an insured depository institution and its

affiliates are subject to certain quantitative and collateral requirements.

In this regard, covered transactions between an insured depository

institution and its affiliates are limited to 10% of the institution’s capital stock and surplus for transactions with any one affiliate,

and 20% of the institution’s capital stock and surplus for transactions in the aggregate with all affiliates.

Collateral of specific

types and in specified amounts ranging from 100% to 130% of the amount of the transaction must usually be provided by affiliates for a

savings bank to engage in a credit transaction with them.

In addition, “covered transactions” with affiliates must be on terms

and conditions consistent with safe and sound banking practices, and generally may not involve low-quality assets.

Transactions with affiliates

must generally be on terms and under circumstances that are substantially the same, or at least as favorable to the institution, as comparable

transactions involving non-affiliates.

Magyar Bank is currently in compliance with these requirements.

Prohibitions Against

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Community Reinvestment

Act and Fair Lending Laws.

All FDIC-insured institutions have a responsibility under the Community Reinvestment Act (“CRA”)

and related regulations to help meet the credit needs of their communities, including low- and moderate-income neighbourhoods.

In connection

with its examination of a state chartered savings bank, the FDIC is required to assess the institution’s record of compliance with

Among other things, the current CRA regulations replace the prior process-based assessment factors with a new evaluation system

that rates an institution based on its actual performance in meeting community needs.

In particular, the current evaluation system focuses

on three tests:

a lending test, to evaluate the institution’s record of making loans in its service areas;

an investment test, to evaluate the institution’s record of investing in community development projects,

affordable housing, and programs benefiting low or moderate income individuals and businesses;

a service test, to evaluate the institution’s delivery of services through its service channels.

All FDIC-insured institutions have a responsibility under the Community Reinvestment Act (“CRA”) and related

regulations to help meet the credit needs of their communities, including low- and moderate-income neighbourhoods.

In connection with

its examination of a state chartered savings bank, the FDIC is required to assess the institution’s record of compliance with the

On October 24, 2023, the FDIC, the FRB, and the Office of the Comptroller of the Currency issued a final rule to strengthen and modernize

the CRA regulations.

Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar

years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank.”

The agencies will evaluate intermediate banks under the Retail Lending Test and either the current community development test, referred

to in the final rule as the Intermediate Bank Community Development Test, or, at the bank’s option, the Community Development Financing

The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements

will be applicable on January 1, 2027.

An institution’s

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an “Outstanding” CRA rating in our most recently completed federal examination, which was conducted by the FDIC in 2022.

In addition, the Equal Credit

Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics

specified in those statutes.

The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement

actions by the FDIC, as well as other federal regulatory agencies and the Department of Justice.

Consumer Protection .

Magyar Bank and Magyar Bancorp are subject to federal and state laws designed to protect consumers and prohibit unfair, deceptive or abusive

business practices, including the Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting

Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”), the Gramm-Leach Bliley Act, the

Truth in Lending Act (“TILA”), the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National

Flood Insurance Act and various state law counterparts.

These laws and regulations mandate certain disclosure requirements and regulate

the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting loans and providing

other services.

Further, the Consumer Financial Protection Bureau also has a broad mandate to prohibit unfair or deceptive acts and practices

and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms.

Failure to comply with consumer

protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties.

The failure to comply

with these laws could result in enforcement actions by the federal banking agencies, as well as other federal regulatory agencies and

the Department of Justice.

Magyar Bank and Magyar Bancorp are subject to federal and state fair lending laws.

The Equal Credit Opportunity Act and the Fair Housing

Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.

Magyar Bank and Magyar Bancorp are subject to other federal and state laws designed to protect consumers and prohibit unfair, deceptive

or abusive business practices, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate

Credit Transactions Act of 2003 (the “FACT Act”), the Gramm-Leach Bliley Act, the Truth in Lending Act (“TILA”),

the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact

with clients when taking deposits, making loans, collecting and servicing loans and providing other services.

Further, the Consumer Financial

Protection Bureau has broad authority to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain

disclosures to consumers and draft model disclosure forms.

Failure to comply with consumer protection laws and regulations can subject

financial institutions to enforcement actions, fines and other penalties.

The failure to comply with these laws could result in enforcement

actions by the federal banking agencies, as well as other federal regulatory agencies and the Department of Justice.

Mortgage Reform .

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In addition, the Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage

generally limits the ability of a mortgage

originator to be compensated by others if compensation is received from a consumer.

The Dodd-Frank Act requires mortgage lenders to make

additional disclosures prior to the extension of credit, and in each billing statement, for negative amortization loans and hybrid adjustable-rate

The Economic Growth Act included provisions that ease certain requirements related to mortgage transactions for certain institutions

with less than $10 billion in total consolidated assets.

loans and generally limits the ability of a mortgage originator to be compensated by others if compensation is received from a consumer.

The Dodd-Frank Act requires mortgage lenders to make additional disclosures prior to the extension of credit, and in each billing statement,

for negative amortization loans and hybrid adjustable-rate mortgages.

The Economic Growth Act included provisions that ease certain requirements

related to mortgage transactions for certain institutions with less than $10 billion in total consolidated assets.

Privacy Regulations .

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Federal Regulation.

A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any of certain

entities affiliated with any such person (an insider’s related interest) are subject to the conditions and limitations imposed by

Section 22(h) of the Federal Reserve Act and its implementing regulations.

Under these restrictions, the aggregate amount of the loans

to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks,

which is comparable to the loans-to-one-borrower limit applicable to Magyar Bank’s loans.

See “New Jersey Banking Regulation—Loans-to-One

Borrower Limitations.” All loans by a bank to all insiders and insiders’ related interests in the aggregate may not exceed

the bank’s unimpaired capital and unimpaired surplus.

With certain exceptions, loans to an executive officer, other than loans for

the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the lesser of

(1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus.

Federal regulation also requires

that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors

of the bank, with any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that

insider and the insider’s related interests, would exceed either (1) $250,000 or (2) the greater of $25,000 or 5% of the bank’s

unimpaired capital and surplus.

Generally, such loans must be made on substantially the same terms as, and follow credit underwriting

procedures that are not less stringent than, those that are prevailing at the time for comparable transactions with other persons.

A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any entities controlled

by any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the

Federal Reserve Act and its implementing regulations.

Under these restrictions, the aggregate amount of the loans to any insider and the

insider’s related interests may not exceed the loans-to-one-borrower limit applicable to member banks, which is comparable to the

loans-to-one-borrower limit applicable to Magyar Bank’s loans.

See “New Jersey Banking Regulation—Loans-to-One Borrower

Limitations.” All loans by a bank to all insiders and insiders’ related interests in the aggregate may not exceed the bank’s

unimpaired capital and unimpaired surplus.

With certain exceptions, loans to an executive officer, other than loans for the education

of the officer’s children and certain loans secured by the officer’s residence, may not exceed the greater of $25,000 or 2.5%

of the bank’s unimpaired capital and surplus, and in no event more than $100,000.

Federal regulation also requires that any proposed

loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors of the bank, with

any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the

insider’s related interests, would exceed the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus.

loans to an insider’s related interests must be made on substantially the same terms as, and follow credit underwriting procedures

that are not less stringent than, those that are prevailing at the time for comparable transactions with other persons.

An exception is made for extensions

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Federal Reserve System

Federal Reserve Board regulations

require all depository institutions to maintain reserves at specified levels against their transaction accounts (primarily NOW and regular

checking accounts).

At September 30, 2022, Magyar Bank was in compliance with the Federal Reserve Board’s reserve requirements.

Savings banks, such as Magyar Bank, are authorized to borrow from the Federal Reserve Bank “discount window.” Magyar Bank

is deemed by the Federal Reserve Board to be generally sound and thus is eligible to obtain secondary credit from its Federal Reserve

Generally, secondary credit is extended on a very short-term basis to meet the liquidity needs of the institution.

Loans must be

secured by acceptable collateral and carry a rate of interest above the Federal Open Market Committee’s federal funds target rate.

The USA PATRIOT Act

The USA PATRIOT Act gives the

federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers,

increased information sharing and broadened anti-money laundering requirements.

The USA PATRIOT Act also requires the federal banking

agencies to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether

to approve a merger or other acquisition application of a member institution.

Accordingly, if we engage in a merger or other acquisition,

our controls designed to combat money laundering would be considered as part of the application process.

We have established policies,

procedures and systems designed to comply with these regulations.

FRB regulations require all depository

institutions to maintain reserves at specified levels against their transaction accounts (primarily NOW and regular checking accounts).

At September 30, 2023, Magyar Bank was in compliance with the FRB’s reserve requirements.

Savings banks, such as Magyar Bank, are

authorized to borrow from the Federal Reserve Bank “discount window.” Magyar Bank is deemed by the FRB to be generally sound

and thus is eligible to obtain secondary credit from its FRB.

Generally, secondary credit is extended on a very short-term basis to meet

the liquidity needs of the institution.

Loans must be secured by acceptable collateral and carry a rate of interest above the Federal

Open Market Committee’s federal funds target rate.

The Bank Secrecy Act and USA

The Bank Secrecy Act (“BSA”)

and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA

PATRIOT Act”) require Magyar Bank to implement a compliance program to detect and prevent money laundering, terrorist financing,

and illicit crime.

Together, the BSA and USA PATRIOT Act require Magyar Bank to implement internal controls, conduct customer due diligence,

maintain records, and file reports.

The USA PATRIOT Act also required the federal banking agencies to take into consideration the effectiveness

of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application.

Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part

of the application process.

We have established policies, procedures and systems designed to comply with the BSA, USA PATRIOT Act, and

regulations implemented thereunder.

Sarbanes-Oxley Act of 2002

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pursuant to the securities laws.

We have policies, procedures and systems designed to comply with these regulations, and we review and

document such policies, procedures and systems to ensure continued compliance with these regulations.

We have policies, procedures and systems designed to comply with this Act and its implementing regulations,

and we review and document such policies, procedures and systems to ensure continued compliance.

Holding Company Regulation

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Bank holding companies are subject to examination, regulation and periodic

reporting under the Bank Holding Company Act, as administered by the Federal Reserve Board (“FRB”).

Bank holding companies

are generally subject to consolidated capital requirements established by the FRB.

Bank holding companies under $3 billion in consolidated

assets remain exempt from consolidated regulatory capital requirements, unless the FRB determines otherwise in particular cases.

reporting under the BHCA, as administered by the FRB.

Bank holding companies are generally subject to consolidated capital requirements

established by the FRB.

Bank holding companies under $3.0 billion in consolidated assets remain exempt from consolidated regulatory capital

requirements, unless the FRB determines otherwise in particular cases.

Regulations of the FRB provide

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unsafe or unsound manner.

The Dodd-Frank Act codified the source of strength policy and requires the promulgation of implementing regulations.

Under the prompt corrective action provisions of the Dodd-Frank Act, a bank holding company parent of an undercapitalized subsidiary bank

The Dodd-Frank Act codified the source of strength policy and required the promulgation of implementing regulations.

Under the prompt corrective action provisions

of the Dodd-Frank Act, a bank holding company parent of an undercapitalized subsidiary bank

would be directed to guarantee, within limitations, the capital restoration plan that is required of such an undercapitalized bank.

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● each of its depository institution subsidiaries is “well managed;”

each of its depository institution subsidiaries has at least a “satisfactory” Community Reinvestment

Act rating at its most recent examination;

● each of its depository institution subsidiaries has at least a “satisfactory” CRA rating at

its most recent examination;

● the bank holding company has filed a certification with the FRB stating that it elects to become a financial

24 unchanged sentences

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 1. Business