What changed in this filing

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Item 1A. Risk Factors

2023-12-15 compared with 2022-12-22 · 185 added, 83 removed, 241 unchanged (53% of the section changed)

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Economic and Market Area

developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance

by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.

Actual events involving limited

liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or

other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events

of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

For example, on

May 1, 2023, First Republic Bank went into receivership and its deposits and substantially all of its assets were acquired by JPMorgan

Chase Bank, National Association.

Similarly, on March 10, 2023, Silicon Valley Bank went into receivership, and on March 12,

Signature Bank went into receivership.

Inflation can have an adverse

impact on our business and on our customers.

Inflation risk is the risk that

the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.

Recently, there

have been market indicators of a pronounced rise in inflation and the Federal Reserve Board has indicated its intention to raise certain

benchmark interest rates in an effort to combat inflation.

As inflation increases and market interest rates rise, the value of our investment

securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.

In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other

utilities, which increases our noninterest expenses.

Furthermore, our customers are also affected by inflation and the rising costs of

goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with

COVID-19 Pandemic Has and Will Continue to Pose Risks and Could Harm Our Business, Results of Operations and Prospects.

COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves.

Given its ongoing and dynamic

nature, it is difficult to predict the full impact of the COVID-19 outbreak on the business of the Company, its customers, employees and

third-party service providers.

The extent of such impact will depend on future developments, which are highly uncertain, including when

the coronavirus can be controlled and abated and when and how the economy may be reopened in an efficient manner.

Additionally, the responses

of various governmental and nongovernmental authorities to curtail business and consumer activities in an effort to mitigate the pandemic

will have material long-term effects on the Company and its customers which are difficult to quantify in the near-term or long-term.

the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company is subject to the following

risks, any of which could have a material, adverse effect on the business, financial condition, liquidity, and results of operations of

risks to the capital markets that may impact the performance of the investment

securities portfolio of the Company, as well as limit our access to capital markets and other funding sources;

effects on key employees, including operational management personnel and

those charged with preparing, monitoring and evaluating the companies’ financial reporting and internal controls;

declines in demand for loans and other banking services and products, as

well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by the Company;

if the economy is unable to substantially reopen or reopen in an efficient

manner, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures

may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may continue to decline in

value, which could cause loan losses to increase;

allowance for loan losses may increase if borrowers experience financial

difficulties, which will adversely affect net income;

the net worth and liquidity of loan guarantors may decline, impairing their

ability to honor commitments;

as the result of the decline in the Federal Reserve Board’s target

federal funds rate to near 0%, the yield on assets may decline to a greater extent than the decline in cost of interest-bearing liabilities,

reducing net interest margin and spread and reducing net income;

cyber security risks are increased as the result of an increase in the number

of employees working remotely;

declines in demand resulting from adverse impacts of the disease on businesses

deemed to be “non-essential” by governments in the markets served by the Company;

increasing or protracted volatility in the price of the Company’s

common stock.

Inflation and rapid increases

in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current

market interest rates.

Although the Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25.0 billion of

loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of

potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions

for immediately liquidity may exceed the capacity of such program.

There is no guarantee that the Treasury, FDIC and Federal Reserve Board

will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they

would do so in a timely fashion.

In addition, inflation generally increases the cost of goods and services we use in our business operations,

such as electricity and other utilities, which increases our noninterest expenses.

Furthermore, our customers are also affected by inflation

and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability

to repay their loans with us.

The Company’s business,

financial condition, results of operations and the trading price of its securities can be materially and adversely affected by many events

and conditions including the following:

• risks to the capital markets that may impact the performance of the investment securities portfolio of

the Company, as well as limit our access to capital markets and other funding sources;

• effects on key employees, including operational management personnel and those charged with preparing,

monitoring and evaluating the companies’ financial reporting and internal controls;

• declines in demand for loans and other banking services and products, as well as a decline in the credit

quality of our loan portfolio in the markets served by the Company;

• if the economy is unable to substantially reopen or reopen in an efficient manner, and high levels of

unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in

increased charges and reduced income;

• collateral for loans, especially real estate, may continue to decline in value, which could cause loan

losses to increase;

• allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely

affect net income;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments;

• as the result of the increase in the Federal Reserve Board’s target federal funds rate, the cost

on interest-bearing liabilities may greater than the yield on interest-earning assets, or reducing the net interest margin, spread and

reducing net income;

• cyber security risks are increased as the result of an increase in the number of employees working remotely;

• declines in demand resulting from adverse impacts of the disease on

businesses deemed to be “non-essential” by governments in the markets served by the Company;

increasing or protracted volatility in the price of the Company’s common stock.

Worsening of Economic Conditions Could Reduce Demand for Our Products and Services and/or Result in Increases in Our Level of Non-performing

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Almost all of our loans are to borrowers located in or secured by collateral located in New Jersey and the New York metropolitan

addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves.

The adverse effect

of the COVID-19 pandemic on the Company, its customers and the communities

where it operates

may adversely affect the Company’s business, results of operations and financial condition for an indefinite period of time.

deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on

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• loan delinquencies, problem assets and foreclosures may increase;

collateral for loans, especially real estate, may decline in value, in turn

reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans;

• collateral for loans, especially real estate, may decline in value,

in turn reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans;

• the value of our securities portfolio may decline;

the net worth and liquidity of loan guarantors may decline, impairing their

ability to honor commitments to us.

• the net worth and liquidity of loan guarantors may decline, impairing

their ability to honor commitments to us.

a significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, an outbreak of hostilities or

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Our profitability depends upon our

continued ability to successfully compete in our market area.

continued ability to

successfully compete in our market area.

The greater resources and deposit and loan products offered by some of our

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and operating results may be materially adversely affected.

Our small size may make it more

difficult for us to compete.

Our asset size may make it more

difficult to compete with other financial institutions that are larger and can more easily afford to invest in the marketing and technologies

needed to attract and retain customers.

Accordingly, we are not always able to offer new products and services as quickly as our competitors.

Lower earnings may also make it more difficult to offer competitive salaries and benefits.

In addition, our smaller customer base may

make it difficult to generate meaningful non-interest income from such activities as securities and insurance brokerage.

Finally, as an

institution smaller than many in our market area, we are disproportionately affected by the continually increasing costs of compliance

with new banking and other regulations.

Interest Rate and Asset Quality

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low interest rate environment may adversely affect our net interest income and profitability.

The Federal Reserve Board decreased

benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic.

The Federal Reserve Board is reversing its

policy of near zero interest rates given its concerns over inflation.

The Federal Reserve Board increased

benchmark interest rates significantly in response to control the inflation.

In recent periods, market interest rates have risen in response

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At September 30, 2023, in the event of an immediate 200 basis point increase in interest rates, the model projects that we would experience

a $212,000, or 0.7%, decrease in net interest income in the first year following the change in interest rates, and a $1.1 million, or

a $391,000, or 1.3%, increase in net interest income in the first year following the change in interest rates, and a $1.8 million, or

5.3%, increase in net interest income in the second year following the change in interest rates.

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our available-for-sale securities portfolio at fair value totaled $10.1 million, which consisted entirely of mortgage-backed securities.

To the extent interest rates decrease and the value of our available-for-sale portfolio increases, our stockholders’ equity will

To the extent interest rates increase and the value of our available-for-sale portfolio increases, our stockholders’ equity will

be affected accordingly.

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our portfolio of commercial real estate and commercial business loans totaled $419.3 million, or 60.1% of our total loans, compared to

$349.6 million (including $25.1 million in PPP loans), or 58.8% of our total loans at September 30, 2021 and $349.1 million (including

$56.0 million in PPP loans), or 57.1% of our total loans at September 30, 2020.

It is our intent to continue to emphasize the origination

of commercial business and commercial real estate loans.

Commercial business and commercial real estate loans generally have more risk

than one-to four-family residential mortgage loans.

At September 30, 2022, there were no non-performing commercial real estate and commercial

business loans compared with $2.4 million at September 30, 2021.

$377.5 million, or 60.0% of our total loans at September 30, 2022 and $349.6 million, or 58.8% of our total loans at September 30, 2021.

It is our intent to continue to emphasize the origination of commercial business and commercial real estate loans.

Commercial business

and commercial real estate loans generally have more risk than one-to four-family residential mortgage loans.

At September 30, 2023, there

was one non-performing commercial real estate loan totaling $2.2 million and no non-performing commercial business loans compared with

no non-performing commercial real estate or commercial business loans at September 30, 2022.

Because the repayment of

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of the collateral.

Because we plan to continue to emphasize the origination of these loans, it may be necessary to

increase our allowance for loan losses because

of the increased credit risk associated with these types of loans.

Any increase to our allowance for loan losses would adversely affect

our earnings.

Because we plan to continue to emphasize the origination of these loans, it may be necessary to increase our allowance

for loan losses because of the increased credit risk associated with these types of loans.

Any increase to our allowance for loan losses

would adversely affect our earnings.

Our Allowance for Loan Losses is Not Sufficient to Cover Actual Loan Losses, Our Earnings Could Decrease.

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decrease our net income.

The allowance for loan losses increased by $358,000 during the year ended September 30, 2022 to $8.4 million

The allowance for loan losses decreased by $103,000 during the year ended September 30, 2023 to $8.3 million

from $8.4 million for the year ended September 30, 2022.

The increases were attributable to the growth in loan receivable, which increased

by $34.3 million to $628.9 million at September 30, 2022 from $594.6 million at September 30, 2021, and higher adjustments to the economic

The allowance for loan losses as a percentage of non-performing loans increased to 297.5% at September 30, 2022 compared with

99.0% at September 30, 2021.

At September 30, 2022 our allowance for loan losses as a percentage of total loans was 1.34%, compared with

1.36% at September 30, 2021.

The allowance for loan losses as a percentage of non-performing loans decreased

to 163.9% at September 30, 2023 compared with 297.5% at September 30, 2022.

At September 30, 2023 our allowance for loan losses as a percentage

of total loans was 1.19%, compared with 1.34% at September 30, 2022.

Future increases in the

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and results of operations.

We are subject to environmental

liability risk associated with lending activities or properties we own.

A significant portion of our loan

portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties,

or with respect to properties that we own in operating our business.

During the ordinary course of business, we may foreclose on and take

title to properties securing defaulted loans.

In doing so, there is a risk that hazardous or toxic substances could be found on these

If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well

as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances

first affected any particular property.

Environmental laws may require us to incur substantial expenses to address unknown liabilities

and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.

future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental

Regulatory Matters

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of these laws and regulations.

The Federal Reserve Board may

require us to commit capital resources to support Magyar Bank.

Federal law requires that a holding

company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary

Under the “source of strength” doctrine, the Federal Reserve Board may require a holding company to make capital injections

into a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound practices for failure to commit

resources to a subsidiary bank.

A capital injection may be required at times when the holding company may not have the resources to provide

it and therefore may be required to borrow the funds or raise capital.

Any loans by a holding company to its subsidiary bank are subordinate

in right of payment to deposits and to certain other indebtedness of such subsidiary bank.

In the event of a holding company’s bankruptcy,

the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of

a subsidiary bank.

Thus, any borrowing that must be done by Magyar Bancorp to make a required capital injection becomes more difficult

and expensive and could have an adverse effect on our business, financial condition and results of operations.

System Failure or Breaches of Our Network Security

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of these events could have a material adverse effect on our financial condition and results of operations.

Other Risks Associated with Our

Our Certificate of Incorporation

Provides That, Subject to Limited Exception, a State or Federal Court in the State of Delaware is the Sole and Exclusive Forum for Certain

Stockholder Litigation Matters, Which Could Limit Our Stockholders’ Ability to Obtain a Favorable Judicial Forum for Disputes With

Us or Our Directors, Officers, and Other Employees .

The Company’s certificate

of incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive

forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary

duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action

asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed

by the internal affairs doctrine will be conducted in a state or federal court in the State of Delaware, in all cases subject to the court’s

having personal jurisdiction over the indispensable parties named as defendants.

This exclusive forum provision does not apply to claims

arising under the federal securities laws.

This exclusive forum provision may limit a stockholder’s ability to bring a claim in

a judicial forum it finds favorable for disputes with the Company and its directors, officers, and other employees or may cause a stockholder

to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both.

In addition, if a court were to find this exclusive forum provision to be inapplicable or unenforceable in a particular action, we may

incur additional costs associated with resolving the action in another jurisdiction, which could have a material adverse effect on our

financial condition and results of operations.

Our Funding Sources may Prove

Insufficient to Replace Deposits at Maturity and Support Our Future Growth.

A Lack of Liquidity Could Adversely Affect Our Financial Condition

and Results of Operations and Result In Regulatory Limits Being Placed on Us.

We must maintain sufficient funds

to respond to the needs of depositors and borrowers.

As a part of our liquidity management, we use a number of funding sources in addition

to core deposit growth and repayments and maturities of loans and investments.

These sources may include Federal Home Loan Bank advances,

federal funds purchased and brokered certificates of deposit.

While we emphasize the generation of low-cost core deposits as a source

of funding, there is strong competition for such deposits in our market area.

Additionally, deposit balances can decrease if customers

perceive alternative investments as providing a better risk/return tradeoff.

Adverse operating results or changes in industry conditions

could lead to difficulty or an inability to access these additional funding sources.

Our financial flexibility will be severely constrained

if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable

interest rates.

Further, if we are required to

rely more heavily on more expensive funding sources to support liquidity and future growth, our revenues may not increase proportionately

to cover our increased costs.

In this case, our operating margins and profitability would be adversely affected.

Alternatively, we may

need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in

us realizing a loss on the sale of such assets.

A lack of liquidity could also

attract increased regulatory scrutiny and potential restraints imposed on us by regulators.

Depending on the capitalization status and

regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action

directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest

rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.

We rely on municipal deposits

as a source of funds for our lending and investment activities.

If we are unable to retain, or are forced to pay a higher rate on, these

deposits, our net income and liquidity could be adversely affected.

Municipal deposits are price sensitive and could result in an increase

in interest expense or funding fluctuations.

At September 30, 2023, $246.4 million, or 32.6% of our total deposits, consisted of municipal

deposits from local government entities.

Several of our municipal deposits have high average balances.

Given our dependence on high-average

balance municipal funds deposits as a source of funds, our inability to retain such funds could significantly and adversely affect our

If we are forced to pay higher rates on our municipal accounts to retain those funds, or if we are unable to retain such funds

and we are forced to resort to other sources of funds for our lending and investment activities, the interest expense associated with

funding sources may be higher than the rates we are currently paying on our municipal deposits, which would adversely affect

our net income.

Unresolved Staff Comments

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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 1A. Risk Factors