What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-12-15 compared with 2022-12-22 · 1413 added, 768 removed, 681 unchanged (76% of the section changed)

1 unchanged sentence

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm  (PCAOB ID

Report of Independent Registered Public Accounting Firms (PCAOB IDs 74 and 49) 46

Consolidated Balance Sheets as of September 30, 2023 and 2022 50

1 unchanged sentence

Consolidated Statements of Comprehensive Income for the Years Ended September 30, 2023 and 2022 52

Consolidated Statements of Changes in Stockholders’

Equity for the Years Ended September 30, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended September 30, 2023 and 2022 53

Consolidated Statements of Cash Flows for the Years Ended September 30, 2023 and 2022 54

Notes to Consolidated Financial Statements 55

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board

of Directors of Magyar Bancorp, Inc.

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheet of Magyar Bancorp, Inc.

and subsidiary (the “Company”) as of September 30, 2023;

the related consolidated

statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended;

and the related

notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and

its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements

based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent, with respect to the Company, in accordance with U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an

understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated

below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated

to the Audit Committee and that:

(1) relate to accounts or disclosures that are material to the financial statements;

and (2) involve

our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter, in any way,

our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing

separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan Losses (ALL)

– Qualitative Factors

Description of the Matter

The Company’s loan

portfolio totaled $697.4 million as of September 30, 2023, and the associated ALL was $8.3 million.

As discussed in Notes B and E to the

consolidated financial statements, determining the amount of the ALL requires significant judgment about the collectability of loans,

which includes an assessment of quantitative factors such as historical loss experience within each risk category of loans and testing

of certain commercial loans for impairment.

Management applies additional qualitative adjustments to reflect the inherent losses that

exist in the loan portfolio at the balance sheet date that are not reflected in the historical loss experience.

Qualitative adjustments

are made based upon changes in policy and staff, economic and business conditions, nature and volume of portfolio, trends in underperforming

loans, trends in collateral value, concentrations of credit, legal and regulatory landscape, and other factors.

We identified these qualitative

adjustments within the ALL as critical audit matters because they involve a high degree of subjectivity.

In turn, auditing management’s

judgments regarding the qualitative factors applied in the ALL calculation involved a high degree of subjectivity.

How We Addressed the Matter in

We gained an understanding of the

Company’s process for establishing the ALL, including the qualitative adjustments made to the ALL.

We evaluated the design and tested

the operating effectiveness of controls over the Company’s ALL process, which included, among others, management’s review

and approval controls designed to assess the need and level of qualitative adjustments to the ALL, as well as the reliability of the data

utilized to support management’s assessment.

Regarding the measurement

of the qualitative adjustments, we evaluated the completeness, accuracy, and relevance of the data and inputs utilized in management’s

We evaluated the reasonableness of the conclusions reached by management for both directional consistency and magnitude related

to the underlying data.

We also utilized internal credit

review specialists with knowledge to evaluate the appropriateness of management’s risk-rating processes, to ensure that the risk

ratings applied to the commercial loan portfolio were reasonable.

We have served as the Company’s auditor since 2023.

Snodgrass, P.C.

Cranberry Township, Pennsylvania

December 15, 2023

Report of Independent Registered Public Accounting

Board of Directors and Stockholders

Magyar Bancorp, Inc.

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Magyar Bancorp, Inc.

and Subsidiary (the Company) as of September 30, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’

equity and cash flows for each of the two years in the period ended September 30, 2022, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance

sheet of Magyar Bancorp, Inc.

and Subsidiary (the Company) as of September 30, 2022, the related consolidated statements of income, comprehensive

income, changes in stockholders’ equity and cash flows, for the year then ended, and the related notes (collectively, the financial

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of September 30, 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles

generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S.

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

( PCAOB ) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

We conducted our audit in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or is required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses –

The critical audit matter communicated below is a

matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit

committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion

on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses –

Qualitative Factors

The allowance for loan losses as of September 30, 2022 was $8.4 million.

As described in Notes B and E to the consolidated financial statements, the allowance for loan losses is established through a provision for loan losses and represents an amount which, in management’s judgement, will be adequate to absorb losses on existing loans.

The allowance for loan losses as of September 30,

2022 was $8.4 million.

As described in Notes B and E to the consolidated financial statements, the allowance for loan losses is established

through a provision for loan losses and represents an amount which, in management’s judgement, will be adequate to absorb losses

on existing loans.

The allowance consists of specific and general components in the amounts of $0.1 million and $8.3 million, respectively.

The specific component relates to loans that are delinquent or otherwise identified as impaired by management.

All such loans are evaluated individually, with principal consideration given to the value of the collateral securing the loan and discounted cash flows.

Specific impairment allowances are established as required by this analysis.

The general loan loss allocation component is determined by segregating the remaining loans by type of loan, risk weighting, and payment history.

This analysis establishes historical loss factors based on a five year look back period that are applied to the loan groups adjusted for the following qualitative factors:

levels of trends in delinquency and non-accrual loans, volume and loan term trends, changes in the lending policy, national and local economic trends and conditions, changes in concentrations of credit from a loan type, industry and/or geographic standpoint, the experience, ability and depth of lending management, and trends in collateral value.

The evaluation of the qualitative factors requires a significant amount of judgement by management and involves a high degree of subjectivity.

We identified the qualitative factor component of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management rely on analysis that is often subjective in nature and the estimate is highly sensitive to changes in significant assumptions.

Our audit procedures related to the qualitative factors of the allowance for loan losses included the following, among others:

We obtained an understanding of how management developed the estimates and related assumptions, including:

Testing completeness and accuracy of key data inputs used in forming assumptions or calculations and testing the reliability of the underlying data on which these factors are based by comparing information to source documents and external information sources.

Evaluating the reasonableness of the qualitative factors established by management as compared to the underlying internal or external information sources.

We have served as the Company's auditor since 2018.

All such loans are evaluated

individually, with principal consideration given to the value of the collateral securing the loan and discounted cash flows.

impairment allowances are established as required by this analysis.

The general loan loss allocation component is determined by segregating

the remaining loans by type of loan, risk weighting, and payment history.

This analysis establishes historical loss factors based on a

five year look back period that are applied to the loan groups adjusted for the following qualitative factors:

levels of and trends in

delinquency rates and non-accrual loans, volume and loan term trends, changes in the lending policy, national and local economic trends

and conditions, changes in concentrations of credit from a loan type, industry and/or geographic standpoint, the experience, ability and

depth of lending management, and trends in collateral value.

The evaluation of the qualitative factors requires a significant amount of

judgement by management and involves a high degree of subjectivity.

We identified the qualitative factor component of

the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment

as amounts determined by management rely on analysis that is often subjective in nature and the estimate is highly sensitive to changes

in significant assumptions.

Our audit procedures related to the qualitative factors

of the allowance for loan losses included the following, among others:

● We obtained an understanding of how management

developed the estimates and related assumptions, including:

− Testing completeness and accuracy of key data inputs used in forming assumptions or calculations and testing

the reliability of the underlying data on which these factors are based by comparing information to source documents and external information

− Evaluating the reasonableness of the qualitative factors established by management as compared to the

underlying internal or external information sources.

/s/ RSM US LLP

Philadelphia, Pennsylvania

We served as the Company’s auditor from 2018 to 2023.

Blue Bell, Pennsylvania

December 22, 2022

2 unchanged sentences

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

September 30,

(In Thousands, Except Share

and Per Share Data)

September 30,

2 unchanged sentences

Investment securities - available-for-sale, at fair value

Investment securities - held to maturity, at amortized cost (fair value of

$ 79,914 and $ 57,282 at September 30, 2022 and 2021, respectively)

Investment securities - held-to-maturity, at amortized cost (fair value of $ 73,728 and $ 79,914 at September 30, 2023 and 2022, respectively)

Federal Home Loan Bank of New York stock, at cost

Loans receivable, net of allowance for loan losses of $ 8,433 and $ 8,075

at September 30, 2022 and 2021, respectively

Loans receivable, net of allowance for loan losses of $ 8,330 and $ 8,433 at September 30, 2023 and 2022, respectively

Bank owned life insurance

1 unchanged sentence

Premises and equipment, net

Other real estate owned ("OREO")

Liabilities and Stockholders'

Other real estate owned ("OREO")

Liabilities and Stockholders' Equity

Escrowed funds

2 unchanged sentences

Total liabilities

Stockholders'

Stockholders' equity

Preferred stock:

4 unchanged sentences

7,097,825 shares issued;

6,745,128 and 7,097,825 shares

outstanding at September 30, 2022 and 2021, respectively, at cost

6,674,184 and 6,745,128 shares outstanding at September 30, 2023 and 2022, respectively, at cost

Additional paid-in capital

4 unchanged sentences

Accumulated other comprehensive loss

Total stockholders'

Total liabilities and stockholders'

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Income

(In Thousands, Except Share and Per Share Data)

(In Thousands, Except Share

and Per Share Data)

September 30,

8 unchanged sentences

Provision for loan losses

Net interest and dividend income after

provision for loan losses

Net interest and dividend income after provision for loan

Service charges

Income on bank owned life insurance

Fees for other customer services

Interest rate swap fees

8 unchanged sentences

Data processing expenses

Director fees and benefits

Marketing and business development

OREO expenses

FDIC deposit insurance premiums

Loan servicing expenses

Other expenses

2 unchanged sentences

Income tax expense

Net income per share-basic and diluted

Weighted average basic and diluted shares outstanding

Earnings per share - basic

Earnings per share - diluted

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(In Thousands)

September 30,

Other comprehensive income (loss)

1 unchanged sentence

Defined benefit pension plan gain

Other comprehensive (loss) income, before tax

Other comprehensive income (loss), before tax

Deferred income tax effect

Total other comprehensive (loss) income

Total other comprehensive income (loss)

Total comprehensive income

2 unchanged sentences

AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders'

For the Year Ended September 30, 2022 and 2021

(In Thousands, Except for Share Amounts)

Consolidated Statements of Changes in Stockholders' Equity

For the Years Ended September 30, 2023 and 2022

(In Thousands, Except for Share and Per-Share Amounts)

Comprehensive

Balance, September 30, 2021

Other comprehensive income

Common stock acquired by ESOP 

Dividends paid on common stock ($ 0.21 per share)

Other comprehensive loss

Common stock acquired by ESOP

ESOP shares allocated

Second-step conversion and stock offering:

Magyar Bancorp, MHC shares sold in public offering, net of offering costs

Retirement of MHC shares

Fractional shares and other adjustments resulting from conversion of existing shares at 1.2213 exchange rate

Purchase of treasury stock

Stock-based compensation expense

Balance, September 30, 2022

Dividends paid on common stock ($ 0.20 per share)

Other comprehensive loss

Common stock acquired by ESOP 

Other comprehensive income

Treasury stock used for restricted stock plan

ESOP shares allocated

Retirement of 112,996 treasury shares

Purchase of treasury stock

Stock-based compensation expense 

Balance, September 30, 2023

4 unchanged sentences

(In Thousands)

For the Year Ended

For the Years Ended

September 30,

4 unchanged sentences

Provision for loan losses

Provision for loss on other real estate owned

Originations of SBA loans held for sale

Proceeds from the sales of SBA loans

Gains on sale of loans receivable

Gains on sale of loans

Gains on the sales of other real estate owned

Gains on the sale of premises and equipment

ESOP compensation expense

Stock-based compensation expense

Deferred income tax expense (benefit)

Decrease in accrued interest receivable

Deferred income tax (benefit) expense

(Increase) decrease in accrued interest receivable

Increase in surrender value of bank owned life insurance

Increase in other assets

Decrease in accrued interest payable

Increase in accounts payable and other liabilities

Increase in accrued interest payable

(Decrease) increase in accounts payable and other liabilities

Net cash provided by operating activities

5 unchanged sentences

Purchases of investment securities available-for-sale

Proceeds from calls of investment securities held to maturity

Proceeds from calls of investment securities available for sale

Principal repayments on investment securities held-to-maturity

Principal repayments on investment securities available-for-sale

Purchase of bank owned life insurance

Purchases of bank owned life insurance

Purchases of premises and equipment

Proceeds from the sale of premises and equipment

Investment in other real estate owned

Proceeds from other real estate owned

Purchase of Federal Home Loan Bank stock

Redemption of Federal Home Loan Bank stock

2 unchanged sentences

Net increase in deposits

Net proceeds from issuance of common stock

Purchase of common stock for ESOP

2 unchanged sentences

Repayments of long-term advances

Cash paid on common stock dividends

Cash dividends paid on common stock

Purchase of treasury stock

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

2 unchanged sentences

Cash paid for

Non-cash operating activities

Real estate acquired in full satisfaction of loans in foreclosure

The accompanying notes are an integral part of these consolidated financial statements.

5 unchanged sentences

Magyar Bancorp, Inc.

(the “Company”) is a Delaware-chartered bank holding company.

The Company owns 100 % of the outstanding common stock of Magyar Bank (the “Bank”), a New Jersey-chartered stock savings bank.

The Bank offers consumer and commercial banking services to individuals, businesses, and nonprofit organizations throughout the central New Jersey area through its administrative office in New Brunswick, New Jersey and seven full-service branch offices in Middlesex and Somerset Counties in New Jersey.

The Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System.

The Bank is supervised and regulated by the Federal Deposit Insurance Corporation (the “FDIC”) and the New Jersey Department of Banking and Insurance.

Magyar Investment Company, a New Jersey investment corporation subsidiary of the Bank, was formed on August 15, 2006 for the purpose of buying, selling and holding investment securities.

Magyar Service Corporation, a New Jersey corporation, is a wholly owned, non-bank subsidiary of the Bank.

Magyar Service Corporation, which also operates under the name Magyar Financial Services, receives commissions from annuity and life insurance sales referred to a licensed, non-bank financial planner.

Hungaria Urban Renewal, LLC is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose of acquiring and developing the Bank’s new main office.

The Bank owns a 100% interest in Hungaria Urban Renewal, LLC, which has no other business other than owning the Bank’s main office site.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”) and predominant practices within the banking industry.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank, and its wholly-owned subsidiaries Magyar Investment Company, Magyar Service Corporation, and Hungaria Urban Renewal, LLC.

(the “Company”)

is a Delaware-chartered bank holding company.

The Company owns 100 % of the outstanding common stock of Magyar Bank (the “Bank”),

a New Jersey-chartered stock savings bank.

The Bank offers consumer and commercial banking services to individuals, businesses, and nonprofit

organizations throughout the central New Jersey area through its administrative office in New Brunswick, New Jersey and seven full-service

branch offices in Middlesex and Somerset Counties in New Jersey.

The Company is subject to regulation and supervision by the Board of

Governors of the Federal Reserve System.

The Bank is supervised and regulated by the Federal Deposit Insurance Corporation (the “FDIC”)

and the New Jersey Department of Banking and Insurance.

Magyar Investment Company,

a New Jersey investment corporation subsidiary of the Bank, was formed on August 15, 2006 for the purpose of buying, selling and holding

investment securities.

Magyar Service Corporation, a New

Jersey corporation, is a wholly owned, non-bank subsidiary of the Bank.

Magyar Service Corporation, which also operates under the name

Magyar Financial Services, receives commissions from annuity and life insurance sales referred to a licensed, non-bank financial planner.

Hungaria Urban Renewal, LLC

is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose of acquiring and

developing the Bank’s new main office.

The Bank owns a 100 % interest in Hungaria Urban Renewal, LLC, which has no other business

other than owning the Bank’s main office site.

NOTE B - SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Basis of Financial Statement

The accounting and reporting policies

of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”) and predominant

practices within the banking industry.

The consolidated financial statements include the accounts of the Company and its wholly owned

subsidiary, the Bank, and its wholly-owned subsidiaries Magyar Investment Company, Magyar Service Corporation, and Hungaria Urban Renewal,

All intercompany balances and transactions have been eliminated in the consolidated financial statements.

The Company has evaluated subsequent events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2022, for items that should potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through the date these consolidated financial statements were available to be issued.

In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

The Company has evaluated subsequent

events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2023, for items that should potentially

be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through the date these consolidated

financial statements were available to be issued.

In preparing financial statements

in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities,

the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and

expenses during the reporting period.

Actual results could differ from those estimates.

The principal estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses and the deferred tax asset.

The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, as well as current loan collateral values.

However, actual losses on specific loans, which also are encompassed in the analysis, may vary from estimated losses.

The principal estimates that are

particularly susceptible to significant change in the near term relate to the allowance for loan losses and the deferred tax asset.

evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics

and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific

borrowers to pay specific loan obligations, as well as current loan collateral values.

However, actual losses on specific loans, which

also are encompassed in the analysis, may vary from estimated losses.

The Company records income taxes

using the asset and liability method.

Accordingly, deferred tax assets and liabilities:

(i) are recognized for the expected future

tax consequences of events that have been recognized in the financial statements or tax returns;

(ii) are attributable to differences

between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases;

and (iii) are

measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The Company records income taxes using the asset and liability method.

Accordingly, deferred tax assets and liabilities:

(i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns;

(ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases;

and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment.

The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

Where applicable, deferred tax

assets are reduced by a valuation allowance for any portions determined not likely to be realized.

The effect on deferred tax assets and

liabilities of a change in tax rates is recognized in income tax expense in the period of enactment.

The valuation allowance is adjusted,

by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, time deposits with original maturities less than three months and overnight deposits.

For purposes of reporting cash

flows, cash and cash equivalents include cash on hand, amounts due from banks, time deposits with original maturities less than three

months and overnight deposits.

Investment Securities

The Company classifies its investment securities into one of three portfolios:

held to maturity, available for sale or trading.

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost.

Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings.

Debt securities not classified as either trading securities or as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income (“AOCI”) component of stockholders’

Equity securities, with certain exceptions, are measured at fair value with changes in fair value recognized in net income.

If the fair value of a security is less than its amortized cost, the security is deemed to be impaired.

Management evaluates all securities with unrealized losses quarterly to determine if such impairments are “temporary”

or “other-than-temporary”

in accordance with applicable accounting guidance.

The Company accounts for temporary impairments based upon security classification as either available for sale, held to maturity or trading.

Temporary impairments on “available for sale”

securities are recognized, on a tax-effected basis, through AOCI with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes.

Conversely, the Company does not adjust the carrying value of “held to maturity”

securities for temporary impairments, although information concerning the amount and duration of impairments on held to maturity securities is generally disclosed in periodic consolidated financial statements.

The carrying value of securities held in a trading portfolio is adjusted to their fair value through earnings on a daily basis.

However, the Company maintained no securities in trading portfolios at or during the periods presented in these consolidated financial statements.

The Company accounts for other-than-temporary impairments based upon several considerations.

First, other-than-temporary impairments on securities that the Company has decided to sell as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery of their fair value to a level equal to their amortized cost, are recognized in operations.

If neither of these criteria apply, then the other-than-temporary impairment is separated into credit-related and noncredit-related components.

The credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below its amortized cost while the noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related.

The Company recognizes credit-related, other-than-temporary impairments in earnings, while noncredit-related, other-than-temporary impairments on debt securities are recognized, net of deferred taxes, in AOCI.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Premiums and discounts on all securities are amortized or accreted to maturity by use of the level-yield method considering the impact of principal amortization and prepayments on mortgage-backed securities.

The Company classifies its investment

securities into one of two portfolios:

held to maturity or available for sale.

Investments in debt securities that the Company has the

positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost.

Debt securities

not classified as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized

holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income (“AOCI”) component

of stockholders’ equity.

Equity securities, with certain exceptions, are measured at fair value with changes in fair value recognized

in net income.

If the fair value of a security

is less than its amortized cost, the security is deemed to be impaired.

Management evaluates all securities with unrealized losses quarterly

to determine if such impairments are “temporary” or “other-than-temporary” in accordance with applicable accounting

The Company accounts for temporary impairments based upon security classification as either available for sale or held to maturity.

Temporary impairments on “available for sale” securities are recognized, on a tax-effected basis, through AOCI with offsetting

entries adjusting the carrying value of the security and the balance of deferred taxes.

Conversely, the Company does not adjust the carrying

value of “held to maturity” securities for temporary impairments, although information concerning the amount and duration

of impairments on held to maturity securities is generally disclosed in periodic consolidated financial statements.

The Company accounts for other-than-temporary

impairments based upon several considerations.

First, other-than-temporary impairments on securities that the Company has decided to sell

as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery of their fair value

to a level equal to their amortized cost, are recognized in operations.

If neither of these criteria apply, then the other-than-temporary

impairment is separated into credit-related and noncredit-related components.

The credit-related impairment generally represents the amount

by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below

its amortized cost while the noncredit-related component represents the remaining portion of the impairment not otherwise designated as

credit-related.

The Company recognizes credit-related, other-than-temporary impairments in earnings, while noncredit-related, other-than-temporary

impairments on debt securities are recognized, net of deferred taxes, in AOCI.

Premiums and discounts on all securities

are amortized or accreted to maturity by use of the level-yield method considering the impact of principal amortization and prepayments

on mortgage-backed securities.

Gain or loss on sales of securities is recognized on the specific identification method.

Regulatory Stock, at Cost

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to purchase and hold restricted stock of its district FHLB according to a predetermined formula.

The Company invests in Federal Home Loan Bank of New York stock as required to support borrowing activities, as detailed in Note J to these consolidated financial statements.

Although FHLB stock is an equity interest in a FHLB, it does not have a readily determinable fair value because its ownership is restricted and it lacks a market.

FHLB stock can be sold back only at its par value of $ 100 per share and only to the FHLBs or to another member institution.

Accordingly, the FHLB restricted stock is carried at cost, less any applicable impairment charges.

Loans and Allowance for Loan Losses

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, adjusted for net deferred loan fees and costs, and reduced by an allowance for loan losses.

Interest on loans is accrued and credited to operations based upon the principal amounts outstanding.

The allowance for loan losses is established through a provision for possible loan losses charged to operations.

Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely.

Income recognition of interest is discontinued when, in the opinion of management, the collectability of such interest becomes doubtful.

A loan is generally classified as non-accrual when the scheduled payment(s) due on the loan is delinquent for more than 90 days.

Loan origination fees and certain direct origination costs are deferred and amortized over the life of the related loans as an adjustment to the yield on loans receivable using the effective interest method.

The allowance for loan losses is maintained at an amount management deems adequate to cover estimated losses.

In determining the level to be maintained, management evaluates many factors, including current economic trends, industry experience, historical loss experience, industry loan concentrations, the borrowers’

ability to repay and repayment performance, and estimated collateral values.

In the opinion of management, the present allowance is adequate to absorb reasonable, foreseeable loan losses.

While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary based on changes in economic conditions or any of the other factors used in management’s determination.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for losses on loans.

Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Charge-offs to the allowance are made when the loan is transferred to other real estate owned or other determination of a confirmed loss.

Recoveries on loans previously charged off are also recorded through the allowance.

A loan is considered impaired when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due including principal and interest, according to the contractual terms of the loan agreement.

The Company measures impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate or as a practical expedient, at the loan’s current observable market price, or the fair value of the collateral if the loan is collateral dependent.

The amount by which the recorded investment of an impaired loan exceeds the measurement value is recognized by creating a valuation allowance through a charge to the provision for loan losses.

Impairment criteria generally do not apply to those smaller-balance homogeneous loans that are collectively evaluated for impairment which, for the Company, includes one- to four-family first mortgage loans and consumer loans, other than those modified in a troubled debt restructuring.

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 may continue to recognize interest income on impaired loans where there is no confirmed loss.

Federal law requires a

member institution of the Federal Home Loan Bank (“FHLB”) system to purchase and hold restricted stock of its district FHLB

according to a predetermined formula.

The Company invests in Federal Home Loan Bank of New York stock as required to support borrowing

activities, as detailed in Note J to these consolidated financial statements.

Although FHLB stock is an equity interest in a FHLB, it

does not have a readily determinable fair value because its ownership is restricted and it lacks a market.

FHLB stock can be sold back

only at its par value of $ 100 per share and only to the FHLBs or to another member institution.

Accordingly, the FHLB restricted stock

is carried at cost, less any applicable impairment charges.

Loans and Allowance for Loan

Loans that management has the intent

and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, adjusted for

net deferred loan fees and costs, and reduced by an allowance for loan losses.

Interest on loans is accrued and credited to operations

based upon the principal amounts outstanding.

The allowance for loan losses is established through a provision for possible loan losses

charged to operations.

Loans are charged against the allowance for loan losses when management believes that the collectability of the

principal is unlikely.

MAGYAR BANCORP, INC.

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September 30, 2023 and 2022

Income recognition of interest

is discontinued when, in the opinion of management, the collectability of such interest becomes doubtful.

A loan is generally classified

as non-accrual when the scheduled payment(s) due on the loan is delinquent for more than 90 days.

When a loan is placed on non-accrual,

all previously accrued and unpaid interest is reversed.

Loan origination fees and certain direct origination costs are deferred and amortized

over the life of the related loans as an adjustment to the yield on loans receivable using the effective interest method.

The allowance for loan losses is

maintained at an amount management deems adequate to cover estimated losses.

In determining the level to be maintained, management evaluates

many factors, including current economic trends, industry experience, historical loss experience, industry loan concentrations, the borrowers’

ability to repay and repayment performance, and estimated collateral values.

In the opinion of management, the present allowance is adequate

to absorb reasonable, foreseeable loan losses.

While management uses the best information available to make such evaluations, future adjustments

to the allowance may be necessary based on changes in economic conditions or any of the other factors used in management’s determination.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance

for losses on loans.

Such agencies may require the Company to recognize additions to the allowance based on their judgments about information

available to them at the time of their examination.

Charge-offs to the allowance are made when the loan is transferred to other real estate

owned or other determination of a confirmed loss.

Recoveries on loans previously charged off are also recorded through the allowance.

A loan is considered impaired

when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due including principal

and interest, according to the contractual terms of the loan agreement.

The Company measures impaired loans based on the present value

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

current observable market price, or the fair value of the collateral if the loan is collateral dependent.

The amount by which the recorded

investment of an impaired loan exceeds the measurement value is recognized by creating a valuation allowance through a charge to the provision

for loan losses.

Impairment criteria generally do not apply to those smaller-balance homogeneous loans that are collectively evaluated

for impairment which, for the Company, includes one- to four-family first mortgage loans and consumer loans, other than those modified

in a troubled debt restructuring.

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 may continue to recognize interest income on impaired loans

where there is no confirmed loss.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation, and include capitalized expenditures for new facilities, major betterments and renewals.

Expenditures for maintenance and repairs are charged to expense as incurred.

Depreciation is computed using the straight-line method based upon the estimated useful lives of the related assets for financial reporting purposes and using the mandated methods by asset type for income tax purposes.

Premises and equipment are carried

at cost less accumulated depreciation, and include capitalized expenditures for new facilities, major betterments and renewals.

for maintenance and repairs are charged to expense as incurred.

Depreciation is computed using the straight-line method based upon the

estimated useful lives of the related assets for financial reporting purposes and using the mandated methods by asset type for income

tax purposes.

Leasehold improvements are depreciated using the straight-line method based upon the initial term of the lease.

The Company accounts for the impairment of long-lived assets in accordance with US GAAP, which requires recognition and measurement for the impairment of long-lived assets to be held and used or to be disposed of by sale.

The Company accounts for the impairment

of long-lived assets in accordance with US GAAP, which requires recognition and measurement for the impairment of long-lived assets to

be held and used or to be disposed of by sale.

The Company had no impaired long-lived assets at September 30, 2023 and 2022.

Revenue Recognition

The Company recognizes revenue in the consolidated statements of income as it is earned and when collectability is reasonably assured.

The primary source of revenue is interest income from interest earning assets, which is recognized on the accrual basis of accounting using the effective interest method.

The recognition of revenues from interest earning assets is based upon formulas from underlying loan agreements, securities contracts, or other similar contracts.

Non-interest income is recognized on the accrual basis of accounting as services are provided or as transactions occur.

Non-interest income includes earnings on bank-owned life insurance, deposit accounts, merchant services, ATM and debit card fees, mortgage banking activities, commercial loan prepayment penalties and other miscellaneous services and transactions.

The Company’s contracts with customers in the scope of ASC 606, “Revenue from Contracts with Customers”

are contracts for deposit accounts and contracts for non-deposit investment accounts through a third party service provider.

Both types of contracts result in non-interest income being recognized.

The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM transaction fees, is included as a component of service charges on the consolidated statements of income.

The revenue resulting from non-deposit investment accounts is included as a component of other operating income on the consolidated statements of income.

Revenue from contracts with customers included in service charges was $ 1.2 million and $ 1.1 million for the years ended September 30, 2022 and 2021, respectively.

Revenue from contracts with customers included in other operating income was $ 87,000 and $ 110,000 for the years ended September 30, 2022 and 2021, respectively.

For our contracts with customers, we satisfy our performance obligations each day as services are rendered.

For our deposit account revenue, we receive payment on a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from our third party service provider as services are rendered.

There was no fee income from other customer services at September 30, 2022.

During the year ended September 30, 2021, the Bank assisted a local county with services related to a Small Business Relief Grant (“SBRG”) program from which the Bank recognized $777,000 as fees for other customer services.

These services included the review of the applications, review of the required supporting documentation, including financial statements and tax returns, and the determination of whether or not the applicant qualified for the SBRG using the County’s eligibility criteria.

The Bank applied the five-step approach outlined ASC Topic 606 to determine that there was a qualifying contract with specific services provided by the Bank for a fixed fee that was received and recognized for the completion of a specific performance obligation.

Other Real Estate Owned

Real estate acquired through foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the date of acquisition or transfer, and subsequently at the lower of its net cost or fair value less estimated selling costs.

Adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses.

The carrying value of the individual properties is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time a provision for losses on such real estate is charged to operations.

The Company accounts for gains on sales of other real estate owned under ASC Topic 606 Revenue from Contracts with Customers , which uses a principles based methodology.

As it pertains to the criteria for determining how a contract should be accounted for under the new guidance, judgment is required in evaluating if:

(a) a commitment on the buyer’s part exists, (b) collection is probable in circumstances where the initial investment is minimal and (c) the buyer has obtained control of the asset, including the significant risks and rewards of the ownership.

If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannot be recognized under the new guidance.

The Company recognizes revenue

in the consolidated statements of income as it is earned and when collectability is reasonably assured.

The primary source of revenue

is interest income from interest earning assets, which is recognized on the accrual basis of accounting using the effective interest method.

The recognition of revenues from interest earning assets is based upon formulas from underlying loan agreements, securities contracts,

or other similar contracts.

Non-interest income is recognized on the accrual basis of accounting as services are provided or as transactions

Non-interest income includes earnings on bank-owned life insurance, deposit accounts, merchant services, ATM and debit card fees,

mortgage banking activities, commercial loan prepayment penalties and other miscellaneous services and transactions.

MAGYAR BANCORP, INC.

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September 30, 2023 and 2022

Operating expenses of holding real estate, net of related income, are charged against income as incurred.

Losses on the disposition of real estate, including expenses incurred in connection with the disposition, are charged to operations.

The Company’s contracts with

customers in the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

606, “ Revenue from Contracts with Customers ” are contracts for deposit accounts and contracts for non-deposit investment

accounts through a third party service provider.

Both types of contracts result in non-interest income being recognized.

revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM

transaction fees, is included as a component of service charges on the Consolidated Statements of Income.

The revenue resulting from

non-deposit investment accounts is included as a component of other operating income on the Consolidated Statements of Income.

Revenue from contracts with customers

included in service charges was $ 1.6 million and $ 1.2 million for the years ended September 30, 2023 and 2022, respectively.

Revenue from contracts with customers included in other operating income was $ 98,000 and $ 87,000 for the years ended September 30, 2023

and 2022, respectively.

For our contracts with customers,

we satisfy our performance obligations each day as services are rendered.

For our deposit account revenue, we receive payment on

a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from

our third party service provider as services are rendered.

Other Real Estate Owned

Real estate acquired through

foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the date of acquisition or transfer,

and subsequently at the lower of its net cost or fair value less estimated selling costs.

Adjustments to the carrying value at the date

of acquisition or transfer are charged to the allowance for loan losses.

The carrying value of the individual properties is subsequently

adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time a provision for losses on such real

estate is charged to operations.

The Company accounts for gains

on sales of other real estate owned under ASC Topic 606 Revenue from Contracts with Customers , which uses a principles based methodology.

As it pertains to the criteria for determining how a contract should be accounted for under the new guidance, judgment is required in

evaluating if:

(a) a commitment on the buyer’s part exists, (b) collection is probable in circumstances where the initial investment

is minimal and (c) the buyer has obtained control of the asset, including the significant risks and rewards of the ownership.

is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain

cannot be recognized under the new guidance.

Operating expenses of holding

real estate, net of related income, are charged against income as incurred.

Losses on the disposition of real estate, including expenses

incurred in connection with the disposition, are charged to operations.

Pension and Postretirement Plans

The Company sponsors qualified defined benefit pension plan and supplemental executive retirement plan (SERP).

The qualified defined benefit pension plan is funded with trust assets invested in a diversified portfolio of debt and equity securities.

Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works.

The Company sponsors qualified

defined benefit pension plan and supplemental executive retirement plan (“SERP”).

The qualified defined benefit pension plan

is funded with trust assets invested in a diversified portfolio of debt and equity securities.

Accounting for pensions and other postretirement

benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each

employee works.

This involves extensive use of assumptions about inflation, investment returns, mortality, turnover, and discount rates.

Among other factors, changes in interest rates, investment returns and the market value of plan assets can (i) affect the level of plan funding;

Among other factors, changes in interest rates, investment returns and the market value of plan assets can (i) affect the level of plan

(ii) cause volatility in the net periodic pension cost;

and (iii) increase our future contribution requirements.

A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations.

A significant increase in our contribution requirements with respect to our qualified defined benefit pension plan could have an adverse impact on our cash flow.

Changes in the key actuarial assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and other postretirement benefit plan.

See Note M, “Pension Plan,”

and Note N, “Non-Qualified Compensation Plan”

for information on these plans and the assumptions used.

The Company and its subsidiaries file consolidated federal and state income tax returns.

Income taxes are allocated based on the contribution of their respective income or loss to the consolidated income tax returns.

The Company records income taxes on the basis of reported income using the asset and liability method.

Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

To the extent that current available evidence about the future raises doubt about the realization of a deferred tax asset, a valuation allowance is established.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company follows the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 740, which provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

At September 30, 2022 and 2021, no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets.

The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.

No interest and penalties were recorded during the year ended September 30, 2022 and 2021.

The tax years subject to examination by the taxing authorities are the years ended September 30, 2017 and forward.

Advertising Costs

The Company expenses advertising costs as incurred.

A significant

decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic

pension costs and adversely affect our results of operations.

A significant increase in our contribution requirements with respect to

our qualified defined benefit pension plan could have an adverse impact on our cash flow.

Changes in the key actuarial assumptions would

impact net periodic benefit expense and the projected benefit obligation for our defined benefit and other postretirement benefit plan.

See Note L, “Pension Plan,” and Note M, “Non-Qualified Compensation Plan” for information on these plans and the

assumptions used.

MAGYAR BANCORP, INC.

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September 30, 2023 and 2022

The Company and its subsidiaries

file consolidated federal and state income tax returns.

Income taxes are allocated based on the contribution of their respective income

or loss to the consolidated income tax returns.

The Company records income

taxes on the basis of reported income using the asset and liability method.

Accordingly, deferred tax assets and liabilities are recognized

for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax basis.

To the extent that current available evidence about the future raises doubt about the realization of a

deferred tax asset, a valuation allowance is established.

Deferred tax assets and liabilities are measured using enacted tax rates expected

to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company follows the provisions

of FASB ASC Topic 740, which provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s

financial statements.

The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition

and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification,

interest and penalties, accounting in interim periods, disclosure and transition.

At September 30, 2023 and 2022,

no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets.

The Company’s policy

is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.

interest and penalties were recorded during the year ended September 30, 2023 and 2022.

The tax years subject to examination by the

taxing authorities are the years ended September 30, 2018 and forward.

Advertising Costs

The Company expenses advertising

costs as incurred.

Earnings Per Share

Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Basic income per share is calculated

by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period.

The weighted average common shares outstanding include shares allocated to the Employee Stock Ownership Plan.

Diluted income per share is calculated by adjusting the weighted average common shares outstanding to reflect the potential dilution that could occur using the treasury stock method if securities or other contracts to issue common stock, such as stock options and unvested restricted stock, were exercised and converted into common stock.

Diluted income per share is calculated

by adjusting the weighted average common shares outstanding to reflect the potential dilution that could occur using the treasury stock

method if securities or other contracts to issue common stock, such as stock options and unvested restricted stock, were exercised and

converted into common stock.

The resulting shares issued would share in the earnings of the Company.

Shares issued and shares reacquired during the period are weighted for the portion of the period that they were outstanding.

In periods of loss, dilution is not calculated and diluted loss per share is equal to basic loss per share.

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per share (“EPS”) calculations.

For the Years Ended September 30,

(In thousands, except share and per share data)

Basic and diluted EPS

Net income available to weighted average common shareholders

Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) includes net income as well as certain other items which result in a change to equity during the period.

The other items allocated to comprehensive income (loss), as well as the related income tax effects, for the years ended September 30, 2022 and 2021 were as follows:

Shares issued and shares reacquired

during the period are weighted for the portion of the period that they were outstanding.

In periods of loss, dilution is not calculated

and diluted loss per share is equal to basic loss per share.

The following tables illustrate

the reconciliation of the numerators and denominators of the basic and diluted earnings per share (“EPS”) calculations.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30,

(Dollars in thousands, except

share and per share data)

Income applicable to common shares

Weighted average shares outstanding - basic

Potential diliutive common stock equivalents

Weighted average shares outstanding - diluted

Earnings per share - basic

Earnings per share - diluted

All options were anti-dilutive at

September 30, 2023 and 2022.

Comprehensive Income (Loss) and Accumulated

Other Comprehensive Income (Loss)

Comprehensive income (loss) includes

net income as well as certain other items which result in a change to equity during the period.

The other items allocated to comprehensive

income (loss), as well as the related income tax effects, for the years ended September 30, 2023 and 2022 were as follows:

September 30,

(In thousands)

2 unchanged sentences

Defined benefit pension plan

Total unrealized holding gain (loss) arising during period

Reclassification of pension costs

Other comprehensive income (loss), net

(a) All amounts are net

Related income tax expense or benefit calculated using an income tax rate approximating 25 % for available-for-sale

investments and 28 % for pension plan.

Details about the reclassification

of accumulated other comprehensive income (loss) components and the affected line item in the Consolidated Statement of Income for the

years ended September 30, 2023 and 2022 were as follows:

MAGYAR BANCORP, INC.

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September 30, 2023 and 2022

The components of accumulated other comprehensive loss at September 30, 2022 and 2021 were as follows:

Amount Reclassified From

Accumulated Other Comprehensive

Loss For the Year Ended September 30,

Affected Line Item in the

Consolidated Statement of Income

(In thousands)

Defined benefit pension plan (1)

Amortization of net gain (loss) and prior service costs

Compensation and employee benefits

Related income tax expense

Net effect on accumulated other comprehensive loss

Total reclassification

(1) For additional details

related to the defined benefit pension plan see Note L - Pension Plan

The components of accumulated

other comprehensive loss at September 30, 2023 and 2022 were as follows:

September 30,

3 unchanged sentences

Total accumulated other comprehensive loss

(a) Related income tax benefit calculated using an income tax rate approximating 25% for available-for-sale investments and 28% for pension plan.

Bank-Owned Life Insurance

The Company has purchased Bank-Owned Life Insurance policies (“BOLI”).

BOLI involves the purchasing of life insurance by the Company on directors and officers of the Bank.

The Company has purchased Bank-Owned

Life Insurance policies (“BOLI”).

BOLI involves the purchasing of life insurance by the Company on directors and officers

The proceeds are used to help defray the costs of non-qualified compensation plans.

The Company is the owner and beneficiary of the policies.

BOLI is recorded on the Consolidated Balance Sheets at its cash surrender value and changes in the cash surrender value are recorded in other income in the Consolidated Statement of Operations.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under commercial lines of credit.

Such financial instruments are recorded when they are funded.

The Company is the owner and beneficiary

of the policies.

BOLI is recorded on the Consolidated Balance Sheets at its cash surrender value and changes in the cash surrender value

are recorded in other income in the Consolidated Statements of Income.

Off-Balance Sheet Credit

Related Financial Instruments

In the ordinary course of business,

the Company has entered into commitments to extend credit, including commitments under commercial lines of credit.

Such financial instruments

are recorded when they are funded.

The Company does not engage in the use of derivative financial instruments.

See Note Q, “Financial Instruments With Off-Balance Risk.”

See Note Q, “Financial

Instruments With Off-Balance Risk.”

Segment Reporting

The Company acts as an independent, community, financial services provider, and offers traditional banking and related financial services to individual, business and government customers.

The Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits;

The Company acts as an independent,

community, financial services provider, and offers traditional banking and related financial services to individual, business and government

The Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand

the making of commercial, consumer and home equity loans;

and the provision of other financial services.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Company.

As such, discrete financial information is not available and segment reporting would not be meaningful.

New Accounting Pronouncements

In connection with the preparation of quarterly and annual reports in accordance with the Securities and Exchange Commission’s (“SEC”) Securities Exchange Act of 1934, SEC Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on financial statements when they are adopted in the future.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses.

ASU 2016-13 requires entities to report “expected”

credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss”

These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts.

This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.

These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In October 2019, the FASB voted to defer the effective date of ASU 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022 (effective October 1, 2023 for the Company), and interim periods within those fiscal years.

The Company currently expects to continue to qualify as a smaller reporting company, based upon the current SEC definition, and as a result, will likely be able to defer implementation of the new standard for a period of time.

The Company did not early adopt, but will continue to review factors that might indicate that the full deferral time period should not be used.

The Company continues to evaluate the impact the new standard will have on the accounting for credit losses, but the Company may recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016.

The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on its consolidated financial condition or results of operations.

Management does not separately

allocate expenses, including the cost of funding loan demand, between the commercial and retail operations of the Company.

As such, discrete

financial information is not available and segment reporting would not be meaningful.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020 , to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.

Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform”

if certain criteria are met.

An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination.

Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform.

The amendments in this ASU are effective for all entities upon issuance through December 31, 2022.

The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326):

New Accounting Pronouncements

In connection with the preparation

of quarterly and annual reports in accordance with the Securities and Exchange Commission’s (“SEC”) Securities Exchange

Act of 1934, SEC Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards

will have on financial statements when they are adopted in the future.

In June 2016,

the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend

credit rather than the current “incurred loss” model.

These expected credit losses for financial assets held at the reporting

date are to be based on historical experience, current conditions, and reasonable and supportable forecasts.

This ASU will also require

enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used

in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.

These disclosures

include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

exceptions, transition to the new requirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning

of the first reporting period in which the guidance is adopted.

This update is effective for SEC filers that are eligible to be smaller

reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods

within those fiscal years.

Accordingly, the Company will adopt this guidance effective October 1, 2023 using the modified retrospective

approach for all financial assets measured at amortized cost, including loans, available-for-sale debt securities and unfunded commitments.

The Company expects to record a cumulative effect increase to retained earnings related to on-balance sheet exposures (loans receivable)

and a decrease to retained earnings related to off-balance sheet exposures (unfunded loan commitments).

The Company determined that there

was no impact to retained earnings related to available-for-sale or held-to-maturity debt securities as a result of adopting this guidance.

In January 2020, the FASB issued

ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March

2020 , to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting

to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative

reference rates, such as the Secured Overnight Financing Rate.

Entities can elect not to apply certain modification accounting requirements

to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met.

An entity that makes

this election would not have to re-measure the contracts at the modification date or reassess a previous accounting determination.

entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected

by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt

securities that reference an interest rate affected by reference rate reform.

The sunset provision included in Topic 848 was based on

the expectations of when LIBOR would cease being published.

In March 2021, the UK Financial Conduct Authority announced that the intended

cessation date of LIBOR would be June 30, 2023, which is beyond the established sunset date of Topic 848.

In December 2022, the FASB issued

ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

The amendments in this ASU provide temporary

relief by deferring the sunset date provision included in Topic 848.

The amendments in ASU 2022-06 defer the effective date for all entities

upon issuance through December 31, 2024.

These updates are not expected to have a significant impact on the Company’s financial

In March 2022, the FASB issued

ASU 2022-02, F inancial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinances and restructurings by creditors when a borrower is experiencing financial difficulty.

In addition, for public business entities, the amendments in this ASU require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost.

For entities that have not yet adopted the amendments in Update 2016-13, which is discussed in greater detail above, the effective dates for the amendments in this update are the same as the effective dates in Update 2016-13.

The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

The amendments

in this ASU eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled

Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinances and restructurings by creditors

when a borrower is experiencing financial difficulty.

In addition, for public business entities, the amendments in this ASU require that

an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within

the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost .

For entities that have not yet adopted

the amendments in Update 2016-13, which is discussed in greater detail above, the effective dates for the amendments in this update are

the same as the effective dates in Update 2016-13.

These updates are not expected to have a significant impact on the Company’s

financial statements, other than enhanced disclosure.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

Subsequent Events

On October 27, 2022, the Company declared dividend of $0.03 per common share, payable on November 23, 2022, to common shareholders of record at the close of business on November 10, 2022.

On November 15, 2022, the Company declared a special dividend of $0.08 per common share, payable on December 13, 2022, to common shareholders of record at the close of business on November 29, 2022.

NOTE C –

STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

The Company follows FASB Accounting Standards Codification (“ASC”) Section 718, Compensation-Stock Compensation, which covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in financial statements.

The cost is measured based on the fair value of the equity or liability instruments issued.

ASC 718 also requires the Company to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense.

In accordance with SEC Staff Accounting Bulletin (“SAB”) No.

107, the Company classified share-based compensation for employees and outside directors within “compensation and employee benefits”

in the Consolidated Statements of Income to correspond with the same line item as the cash compensation paid.

Stock options generally vest over a five-year service period and expire ten years from issuance.

Management recognizes compensation expense for all option grants over the awards’

respective requisite service periods.

The fair values of all option grants were estimated using the Black-Scholes option-pricing model.

Since there was limited historical information on the volatility of the Company’s stock, management also considered the average volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value.

On October 30, 2023, the Company

announced that its Board of Directors has approved a quarterly cash dividend of $ 0.04 per common share to shareholders of record at the

close of business on November 9, 2023, payable on November 24, 2023.

On November 15, 2023, the Company

declared a special dividend of $ 0.07 per common share, payable on December 12, 2023, to shareholders of record at the close of business

on November 28, 2023.

NOTE C – STOCK-BASED COMPENSATION AND STOCK REPURCHASE

The Company follows FASB ASC Section

718, Compensation-Stock Compensation , which covers a wide range of share-based compensation arrangements including share options,

restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

ASC 718 requires that

compensation cost relating to share-based payment transactions be recognized in financial statements.

The cost is measured based on the

fair value of the equity or liability instruments issued.

ASC 718 also requires the Company

to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits of realized tax deductions

in excess of previously recognized tax benefits on compensation expense.

In accordance with SEC Staff Accounting Bulletin (“SAB”)

107, the Company classified share-based compensation for employees and outside directors within “compensation and employee

benefits” in the Consolidated Statements of Income to correspond with the same line item as the cash compensation paid.

Stock options generally vest over

a five-year service period and expire ten years from issuance.

Management recognizes compensation expense for all option grants over the

awards’ respective requisite service periods.

The fair values of all option grants were estimated using the Black-Scholes option-pricing

Since there was limited historical information on the volatility of the Company’s stock, management also considered the average

volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value.

Management estimated the expected life of the options using the simplified method allowed under SAB No.

The 7-year Treasury yield in effect at the time of the grant provided the risk-free rate for periods within the contractual life of the option.

Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards.

The seven-year Treasury yield

in effect at the time of the grant provided the risk-free rate for periods within the contractual life of the option.

Management recognizes

compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service

period of the awards.

Management estimated a 95% retention rate for stock option recipients.

1 unchanged sentence

Shares will be obtained from either the open market or treasury stock upon share option exercise.

Restricted shares generally vest over a five-year service period on the anniversary of the grant date.

Restricted shares generally vest

over a five-year service period on the anniversary of the grant date.

Once vested, these awards are irrevocable.

The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted shares under the Company’s restricted stock plans.

Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

The product of the number

of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted shares under

the Company’s restricted stock plans.

Management recognizes compensation expense for the fair value of restricted shares on a straight-line

basis over the requisite service period.

On August 25, 2022, the Company

adopted the 2022 Equity Compensation Plan which provided for grants of up to 547,400 shares to be allocated between incentive and non-qualified

stock options and restricted stock awards to officers, employees and directors of the Company and Magyar Bank.

At September 30, 2023,

293,200 options and 156,400 shares of restricted stock had been awarded from the plan.

The following is a summary of the

status of the Company’s stock option activity and related information for its option plan for the year ended September 30, 2023:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The following is a summary of the status of the Company’s stock option activity and related information for its option plan for the period ended September 30, 2022 and 2021:

Stock Options

Exercise Price

3 unchanged sentences

Exercisable at September 30, 2023

The following is a summary of the status of the Company’s non-vested restricted shares as of September 30, 2022 and 2021, and changes during those years:

The following is a summary of the

status of the Company’s non-vested restricted shares as of September 30, 2023 and 2022, and changes during those years:

Average Grant

Date Fair Value

Balance at September 30, 2022

Balance at September 30, 2023

Stock option and stock award expenses included with compensation expense were $ 0 and $ 6,000 , respectively, for the year ended September 30, 2022.

There was no stock option or stock award expense for the year ended September 30, 2021.

The Company had no other stock-based compensation plans as of September 30, 2022 except as disclosed below.

On July 21, 2022 the Company announced its third stock repurchase program and authorized the repurchase of up to 5% of its outstanding shares of common stock, or 354,891 shares.

As of September 30, 2022, 352,697 shares had been repurchased at an average price of $12.90.

The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees who meet certain eligibility requirements.

The ESOP trust purchases shares of common stock in the open market using proceeds of a loan from the Company.

The loan is secured by shares of the Company’s stock.

The Bank makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company.

Stock option and stock award

expenses included with compensation expense were $ 259,000 and $ 405,000 , respectively, for the year ended September 30, 2023.

and stock award expenses included with compensation expense were $ 0 and $ 6,000 , respectively, for the year ended September 30, 2022.

Company had no other stock-based compensation plans as of September 30, 2023 except as disclosed below.

The Company has an Employee Stock

Ownership Plan ("ESOP") for the benefit of employees who meet certain eligibility requirements.

The ESOP trust purchases shares

of common stock in the open market using proceeds of a loan from the Company.

The loan is secured by shares of the Company’s stock.

The Bank makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the

As the debt is repaid, shares are released as collateral and allocated to qualified employees.

Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets.

The Company accounts for its ESOP in accordance with FASB ASC Topic 718, “Employer’s Accounting for Employee Stock Ownership Plans.”

As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.

Accordingly, the shares pledged

as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets.

The Company accounts for its ESOP in accordance

with FASB ASC Topic 718, “ Employer’s Accounting for Employee Stock Ownership Plans .” As shares are released from

collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding

for earnings per share computations.

In connection with the Company’s

second-step stock offering, the ESOP trustees purchased, 8 % of the shares of the Company common stock sold in the offering, or 312,800

shares, in the open market for $ 3.4 million, reflecting an average cost per share of $ 10.77 .

The ESOP loan bears a variable interest rate

that adjusts annually to Prime Rate ( 7.50 % at January 1, 2023) with principal and interest payable annually in equal installments over

The following table presents the components of the ESOP

shares for the years ended September 30, 2023 and 2022:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

T he Company’s ESOP (“2006 ESOP”) was established in 2006 as part of the Company’s initial public offering.

The total cost of shares purchased by the 2006 ESOP trust was $ 2.3 million, reflecting an average cost per share of $ 10.58 .

The loan bore a variable interest rate that adjusted annually to Prime Rate (3.25% at January 1, 2021) with principal and interest payable annually in equal installments over thirty years.

The 2006 ESOP loan was fully repaid during the year ended September 30, 2021 and the remaining shares were allocated to participants.

In connection with the Company’s second-step stock offering, the ESOP trustees subscribed for, and intended to purchase, on behalf of the ESOP, 8 % of the shares of the Company common stock sold in the offering, or 312,800 shares (“2021 ESOP”).

The ESOP trustees purchased 312,800 shares of the Company’s common stock in the open market through September 30, 2022 for $ 3.4 million, reflecting an average cost per share of $ 10.77 .

The 2021 ESOP loan bears a variable interest rate that adjusts annually to Prime Rate (3.25% at January 1, 2022) with principal and interest payable annually in equal installments over thirty years.

The following table presents the components of the ESOP shares as of September 30, 2022:

Unreleased shares at September 30, 2021

7 unchanged sentences

Total ESOP shares

The Company's contribution expense for the ESOP was $177,000 and $107,000 for years ended September 30, 2022 and 2021, respectively.

The aggregate fair value of the unreleased ESOP shares at September 30, 2022 was approximately $3.8 million.

The Company's contribution expense

for the ESOP was $ 122,000 and $ 179,000 for years ended September 30, 2023 and 2022, respectively.

The aggregate fair value of the unreleased

ESOP shares at September 30, 2023 was approximately $ 3.0 million.

On December 8, 2022, the Company

announced the completion of its third stock repurchase program, under which 354,891 shares had been repurchased at an average price of

The Company announced its fourth authorization of an additional stock repurchase plan pursuant to which the Company intends to

repurchase up to an additional 5 % of its outstanding shares, or up to 337,146 shares, under which 100,830 shares had been repurchased

at an average price of $ 11.80 .

Under this stock repurchase program, 236,316 shares of the 337,146 shares authorized remained available

for repurchase as of September 30, 2023.

The Company’s intended use of the repurchased shares is for general corporate purposes.

The Company held treasury stock shares totaling 423,641 at September 30, 2023.

The timing of the repurchases will depend on certain factors,

including but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital.

NOTE D - INVESTMENT SECURITIES

The amortized cost, gross unrealized gains or losses and fair value of the Company’s investment securities available-for-sale and held-to-maturity are as follows:

The following table summarizes

the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at September 30, 2023:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30, 2023

22 unchanged sentences

Total investment securities

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

At September 30, 2021

The following table summarizes

the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at September 30, 2022:

September 30, 2022

(In thousands)

21 unchanged sentences

Total investment securities

The contractual maturities of mortgage-backed securities generally exceed 10 years;

however, the effective lives are expected to be shorter due to anticipated prepayments.

At September 30, 2022, the available-for-sale mortgage-backed securities - residential included an amortized cost of $118,000 and a fair value of $107,000 for obligations of U.S.

government agencies issued by the Government National Mortgage Association and obligations of U.S.

government-sponsored enterprises issued by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation with an amortized cost of $11.0 million and a fair value of $9.1 million.

The maturities of the debt securities, municipal bonds and certain information regarding to the mortgage-backed securities held-to-maturity at September 30, 2022 are summarized in the following table:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

The contractual maturities of

mortgage-backed securities generally exceed 10 years, however, the effective lives are expected to be shorter due to anticipated

At September 30, 2023, the available-for-sale mortgage-backed securities-residential included obligations of U.S.

agencies issued by the Government National Mortgage Association with an amortized cost of $ 106,000 and a fair value of $ 92,000 and obligations

government-sponsored enterprises issued by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation with

an amortized cost of $ 12.0 million and a fair value of $ 10.0 million.

At September 30, 2023, the held-to-maturity mortgage-backed securities–residential

included obligations of U.S.

government agencies issued by the Government National Mortgage Association with an amortized cost of $ 5.1

million and a fair value of $ 4.2 million and obligations of U.S.

government-sponsored enterprises issued by Federal National Mortgage

Association and Federal Home Loan Mortgage Corporation with an amortized cost of $ 48.1 million and a fair value of $ 39.6 million.

The maturities of debt securities,

municipal bonds and certain information regarding mortgage-backed securities held-to-maturity at September 30, 2023 are summarized in

the following table:

September 30, 2023

6 unchanged sentences

Mortgage backed securities:

Residential (1)

Commercial (2)

(1)

Held-to-maturity mortgage-backed securities –

residential include an amortized cost of $5.5million and a fair value of $4.8 million for obligations of U.S.

government agencies issued by the Government National Mortgage Association and obligations of U.S.

government-sponsored enterprises issued by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation which had an amortized cost of $49.0 million and a fair value of $41.4 million.

Also included are mortgage backed securities issued by non-U.S.

government agencies and government-sponsored enterprises with an amortized cost of $224,000 and a fair value of $214,000.

(2)

Held-to-maturity mortgage-backed securities –

commercial include an amortized cost of $631,000 and a fair value of $631,000 for obligations of U.S.

government agencies issued by the United States Small Business Administration.

There were no sales of securities

during the years ended September 30, 2023 and 2022.

As of September 30, 2023 and 2022,

investment securities having an estimated fair value of approximately $ 12.0 million and $ 37.7 million, respectively, were pledged to secure

public deposits.

Details of securities with unrealized

losses at September 30, 2023 and 2022 are as follows:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

There were no sales of securities during the years ended September 30, 2022 and 2021.

As of September 30, 2022 and 2021, securities having an estimated fair value of approximately $ 37.7 million and $ 30.9 million, respectively, were pledged to secure public deposits.

Details of securities with unrealized losses at September 30, 2022 and 2021 are as follows:

Less Than 12 Months

12 Months Or Greater

September 30, 2022

(Dollars in thousands)

September 30, 2023

Obligations of U.S.

9 unchanged sentences

Corporate securities

Less Than 12 Months

12 Months Or Greater

September 30, 2022

(Dollars in thousands)

Obligations of U.S.

6 unchanged sentences

Debt securities

Private label mortgage-backed securities- residential

Obligations of state and political subdivisions

Corporate securities

The investment securities listed above currently have fair values less than amortized cost and therefore contain unrealized losses.

The Company evaluated these securities and determined that the decline in value was primarily related to fluctuations in the interest rate environment and were not related to any company or industry specific event.

The Company anticipates full recovery of amortized costs with respect to these securities.

The Company does not intend to sell these securities and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery.

Management has considered factors regarding other than temporarily impaired securities and determined that there are no securities with impairment that is other than temporary as of September 30, 2022 and 2021.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

The investment securities listed

above currently have fair values less than amortized cost and therefore contain unrealized losses.

The Company evaluated these securities

and determined that the decline in value was primarily related to fluctuations in the interest rate environment and were not related to

any company or industry specific event.

The Company anticipates full recovery

of amortized costs with respect to these securities.

The Company does not intend to sell these securities and has determined that it is

not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery.

has considered factors regarding other than temporarily impaired securities and determined that there are no securities with impairment

that is other than temporary as of September 30, 2023 and 2022.

NOTE E - LOANS RECEIVABLE, NET

Loans receivable are comprised of the following:

Loans receivable are comprised

of the following:

September 30,

8 unchanged sentences

Total loans receivable, net

Certain directors and executive officers of the Company have loans with the Bank.

Such loans were made in the ordinary course of business at the Bank’s normal credit terms, including interest rate and collateralization, and do not represent more than a normal risk of collection.

Total loans receivable from directors and executive officers, and affiliates thereof, were approximately $ 2.3 million at both September 30, 2022 and 2021.

There were $ 738,000 and $ 31,000 in new loans or advances on existing lines of credit during the year ended September 30, 2022 and 2021, respectively.

Total principal repayments were approximately $ 731,000 and $ 191,000 for the year ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and 2021, the Company was servicing loans for others amounting to approximately $ 43.6 million and $ 39.3 million, respectively.

The Company held mortgage servicing rights in the amount of $ 0 and $ 4,000 at September 30, 2022 and 2021, respectively.

Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing.

Loan servicing income is recorded on the cash basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees.

In connection with loans serviced for others, the Company held borrowers’

escrow balances of approximately $ 27,000 and $ 33,000 at September 30, 2022 and 2021, respectively.

The segments of the Bank’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance.

The residential mortgage loan segment is further disaggregated into two classes:

first lien, amortizing term loans, and the combination of second lien amortizing term loans and home equity lines of credit.

The commercial loan segment is further disaggregated into three classes:

loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties.

The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built.

Construction loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the loan.

The commercial business loan segment consists of loans made for the purpose of financing the activities of commercial customers and consists primarily of revolving lines of credit.

The consumer loan segment consists primarily of stock-secured installment loans, but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.

Management evaluates individual loans in all segments for possible impairment if the loan either is in nonaccrual status, or is risk rated Substandard and is 90 days or more past due.

Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

Once the determination has been made that a loan is impaired, the recorded investment in the loan is compared to the fair value of the loan using one of three methods:

(a) the present value of expected future cash flows discounted at the loan’s effective interest rate;

(b) the loan’s current observable market price;

Certain directors and executive

officers of the Company have loans with the Bank.

Such loans were made in the ordinary course of business at the Bank’s normal credit

terms, including interest rate and collateralization, and do not represent more than a normal risk of collection.

Total loans receivable

from directors and executive officers, and affiliates thereof, were approximately $ 5.1 million at September 30, 2023 and $ 2.3 million

at September 30, 2022.

There were $ 2.9 million and $ 738,000 in new loans or advances on existing lines of credit during the year ended

September 30, 2023 and 2022, respectively.

Total principal repayments were approximately $ 142,000 and $ 731,000 for the year ended September

30, 2023 and 2022, respectively.

At September 30, 2023 and 2022,

the Company was servicing loans for others amounting to approximately $ 48.1 million and $ 43.6 million, respectively.

The Company held

mortgage servicing rights in the amount of $ 28,000 and $ 0 at September 30, 2023 and 2022, respectively.

Servicing loans for others generally

consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing.

servicing income is recorded on the cash basis and includes servicing fees from investors and certain charges collected from borrowers,

such as late payment fees.

In connection with loans serviced for others, the Company held borrowers’ escrow balances of approximately

$ 27,000 at September 30, 2023 and 2022.

The segments of the Bank’s

loan portfolio are disaggregated to a level that allows management to monitor risk and performance.

The residential mortgage loan

segment is further disaggregated into two classes:

first lien, amortizing term loans, and the combination of second lien amortizing term

loans and home equity lines of credit.

The commercial loan segment is further disaggregated into three classes:

loans secured by

multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential

The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing

and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to

individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built.

loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not

known at the time of the loan.

The commercial business loan segment consists of loans made for the purpose of financing the activities

of commercial customers and consists primarily of revolving lines of credit.

The consumer loan segment consists primarily of stock-secured

installment loans, but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.

Management evaluates individual

loans in all segments for possible impairment if the loan either is in nonaccrual status, or is risk rated Substandard and is 90 days

or more past due.

Loans are considered to be impaired when, based on current information and events, it is probable that the

Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan

Factors considered by management in evaluating impairment include payment status, collateral value, and the probability

of collecting scheduled principal and interest payments when due.

Management determines the significance of payment delays and payment

shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including

the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation

to the principal and interest owed.

Once the determination has been

made that a loan is impaired, the recorded investment in the loan is compared to the fair value of the loan using one of three methods:

the present value of expected future cash flows discounted at the loan’s effective interest rate;

(b) the loan’s current observable

market price;

or (c) the fair value of the collateral securing the loan, less anticipated selling and disposition costs.

The method is selected on a loan-by loan basis, with management primarily utilizing the fair value of collateral method.

If there is a shortfall between the fair value of the loan and the recorded investment in the loan, the Company charges the difference to the allowance for loan loss as a charge-off and carries the impaired loan on its books at fair value.

It is the Company’s policy to evaluate impaired loans on an annual basis to ensure the recorded investment in a loan does not exceed its fair value.

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary for the periods presented:

is selected on a loan-by loan basis, with management primarily utilizing the fair value of collateral method.

If there is a shortfall

between the fair value of the loan and the recorded investment in the loan, the Company charges the difference to the allowance for loan

loss as a charge-off and carries the impaired loan on its books at fair value.

It is the Company’s policy to evaluate impaired loans

on an annual basis to ensure the recorded investment in a loan does not exceed its fair value.

The following table presents impaired

loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary

for the periods presented:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

Impaired Loans

10 unchanged sentences

Total impaired loans

Impaired Loans

Impaired Loans with

with No Specific

Specific Allowance

Total Impaired Loans

At and for the year ended

September 30, 2022

(In thousands)

One-to four-family residential

2 unchanged sentences

Total impaired loans

The average recorded investment in impaired loans was $ 8.1 million and $ 12.2 million for the years ended September 30, 2022 and 2021, respectively.

During the years ended September 30, 2022 and 2021, interest income of $ 135,000 and $ 139,000 , respectively, was recognized for performing TDR loans while no interest income was recognized for delinquent non-accrual loans.

Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio.

The first six categories are considered not criticized, and are aggregated as “Pass”

The criticized rating categories utilized by management generally follow bank regulatory definitions.

The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.

Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.

The average recorded investment

in impaired loans was $ 5.9 million and $ 8.1 million for the years ended September 30, 2023 and 2022, respectively.

During the years ended

September 30, 2023 and 2022, interest income of $ 96,000 and $ 135,000 , respectively, was recognized for performing TDR loans while no interest

income was recognized for delinquent non-accrual loans.

Management uses a ten point internal

risk rating system to monitor the credit quality of the overall loan portfolio.

The first six categories are considered not criticized,

and are aggregated as “Pass” rated.

The criticized rating categories utilized by management generally follow bank regulatory

The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue

and unwarranted credit risk, but not to the point of justifying a Substandard classification.

Loans in the Substandard category have well-defined

weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses

are not corrected.

All loans greater than three months past due are considered Substandard.

Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.

Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.

The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis.

The Asset Review Committee performs monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse.

Confirmation of the appropriate risk grade is performed by an external loan review company that semi-annually reviews and assesses loans within the portfolio.

Generally, the external consultant reviews commercial relationships greater than $500,000 and/or criticized relationships greater than $250,000.

Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.

Any portion of a loan that has been charged

off is placed in the Loss category.

To help ensure that risk ratings

are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating

process with several layers of internal and external oversight.

Generally, consumer and residential mortgage loans are included in the

Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of

a possible credit event.

The Bank’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans

in their portfolios at origination and on an ongoing basis.

The Asset Review Committee performs monthly reviews of all commercial relationships

internally rated 6 (“Watch”) or worse.

Confirmation of the appropriate risk grade is performed by an external loan review

company that semi-annually reviews and assesses loans within the portfolio.

Generally, the external consultant reviews commercial relationships

greater than $500,000 and/or criticized relationships greater than $250,000.

Detailed reviews, including plans for resolution, are performed

on loans classified as Substandard on a monthly basis.

The following tables present the

classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful

within the Bank’s internal risk rating system for the periods presented:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the Bank’s internal risk rating system for the periods presented:

(In thousands)

4 unchanged sentences

Commercial business

(In thousands)

September 30, 2022

3 unchanged sentences

Commercial business

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans for the periods presented:

Management further monitors the

performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded

payment is past due.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing

loans and nonaccrual loans for the periods presented:

(In thousands)

4 unchanged sentences

Commercial business

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

(In thousands)

4 unchanged sentences

Commercial business

The amount of interest income not recognized on non-accrual loans was approximately $ 220,000 and $ 555,000 for the years ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and September 30, 2021, there were no commitments to lend additional funds to borrowers whose loans are classified as non-accrual.

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio.

The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate.

For general allowances, historical loss trends are used in the estimation of losses in the current portfolio.

These historical loss amounts are modified by other qualitative and economic factors.

The loans are segmented into classes based on their inherent varying degrees of risk, as described above.

Management tracks the historical net charge-off activity by segment and utilizes this figure, as a percentage of the segment, as the general reserve percentage for pooled, homogenous loans that have not been deemed impaired.

Typically, an average of losses incurred over 5 historical years is used.

Non-impaired credits are segregated for the application of qualitative factors.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.

The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

The amount of interest income not

recognized on non-accrual loans was approximately $ 309,000 and $ 220,000 for the years ended September 30, 2023 and 2022, respectively.

At September 30, 2023 and September 30, 2022, there were no commitments to lend additional funds to borrowers whose loans are classified

as non-accrual.

An allowance for loan losses (“ALL”)

is maintained to absorb losses from the loan portfolio.

The ALL is based on management’s continuing evaluation of the

risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of

the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank’s methodology for

determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above)

and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance

for Loan and Lease Losses and other bank regulatory guidance.

Loans that are collectively evaluated

for impairment are analyzed with general allowances being made as appropriate.

For general allowances, historical loss trends are

used in the estimation of losses in the current portfolio.

These historical loss amounts are modified by other qualitative and economic

The loans are segmented into classes

based on their inherent varying degrees of risk, as described above.

Management tracks the historical net charge-off activity by

segment and utilizes this figure, as a percentage of the segment, as the general reserve percentage for pooled, homogenous loans that

have not been deemed impaired.

Typically, an average of losses incurred over five historical years is used.

Non-impaired credits are segregated

for the application of qualitative factors.

Management has identified a number of additional qualitative factors which it uses to supplement

the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools

to differ from historical loss experience.

The additional factors that are evaluated quarterly and updated using information obtained

from internal, regulatory, and governmental sources are:

national and local economic trends and conditions;

levels of and trends in delinquency rates and non-accrual loans;

levels of and trends in delinquency

rates and non-accrual loans;

trends in volumes and terms of loans;

effects of changes in lending policies;

experience, ability, and depth of lending staff;

experience, ability, and depth

of lending staff;

value of underlying collateral;

and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management maintained or increased several of these factors during the year ended September 30, 2022 due to the higher risk of credit loss resulting from the a higher likelihood of economic recession and its ongoing impact on borrowers.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.

When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

Since loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ALL for loans individually evaluated for impairment.

Management maintained or increased several of these factors during the year ended September 30, 2023 due to the higher risk of credit

loss resulting from the a higher likelihood of economic recession and its ongoing impact on borrowers.

Management reviews the loan portfolio

on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.

information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ALL for

loans individually evaluated for impairment.

The following tables summarize

the activity in the allowance for loan losses by loan category for the years ended September 30, 2023 and 2022:

(In thousands)

Balance-September 30, 2022

Provision (credit)

Balance-September 30, 2023

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The following tables summarize the activity in the allowance for loan losses by loan category for the years ended September 30, 2022 and 2021:

(In thousands)

2 unchanged sentences

Balance-September 30, 2022

The following tables summarize

the allowance for loan loss by loan category, segregated into the amount required for loans individually evaluated for impairment and

the amount required for loans collectively evaluated for impairment as of September 30, 2023 and September 30, 2022:

(In thousands)

Balance - September 30, 2023

Provision (credit)

Individually evaluated

for impairment

Collectively evaluated

for impairment

Loans receivable:

Balance - September 30, 2023

The following tables summarize the ALL by loan category, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2022 and September 30, 2021:

Individually evaluated

for impairment

Collectively evaluated

for impairment

(In thousands)

Allowance for Loan Losses:

Balance - September 30, 2022 

Individually evaluated for impairment

Collectively evaluated for impairment

Balance - September 30, 2022

Individually evaluated

for impairment

Collectively evaluated

for impairment

Loans receivable:

Balance - September 30, 2022 

Individually evaluated for impairment

Collectively evaluated for impairment

Balance - September 30, 2022

Individually evaluated

for impairment

Collectively evaluated

for impairment

The allowance for loan losses is

based on estimates, and actual losses will vary from current estimates.

Management believes that the segmentation of the loan portfolio

into homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application

of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

is a loan that has been modified whereby the Bank has agreed to make certain concessions to a borrower

to meet the needs of both the borrower and the Bank to maximize the ultimate recovery of a loan.

TDR occurs when a borrower is experiencing,

or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted

to the borrower.

The types of concessions granted generally included, but are not limited to interest rate reductions, limitations on

the accrued interest charged, term extensions, and deferment of principal.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

(In thousands)

Allowance for Loan Losses:

Balance - September 30, 2021 

Individually evaluated for impairment

Collectively evaluated for impairment

Loans receivable:

Balance - September 30, 2021 

Individually evaluated for impairment

Collectively evaluated for impairment

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates.

Management believes that the segmentation of the loan portfolio into homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

A TDR is a loan that has been modified whereby the Bank has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Bank to maximize the ultimate recovery of a loan.

TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower.

The types of concessions granted generally included, but are not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

A default on a troubled debt restructured loan for purposes of this disclosure occurs when a borrower is 90 days past due or a foreclosure or repossession of the applicable collateral has occurred.

There were no defaults of TDRs during the year ended September 30, 2022.

There were no TDR loans during the year ended September 30, 2022, compared with two TDR loans during the year ended September 30, 2021.

on a troubled debt restructured loan for purposes of this disclosure occurs when a borrower is 90 days past due or a foreclosure or repossession

of the applicable collateral has occurred.

There was one TDR totaling $ 106,000 during the year ended September 30, 2023, compared with

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

All TDR loans were performing in accordance with their restructured terms as September

The following tables summarizes the TDRs during the years ended September 30, 2022 and 2021:

The following tables summarizes the TDRs during the years ended September 30 ,

2023 and 2022:

Investment Before

TDR Modification

Investment After

TDR Modification

September 30, 2022  

(Dollars in thousands)

Investment Before

TDR Modification

Investment After

TDR Modification

September 30, 2021

(Dollars in thousands)

September 30, 2023

One-to four-family residential

Total loans pledged as collateral against FHLBNY borrowings were $ 181.2 million and $ 192.6 million as of September 30, 2022 and 2021, respectively.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

NOTE F - ACCRUED INTEREST RECEIVABLE

The following is a summary of accrued interest receivable:

September 30, 2022

(In thousands)

Investment securities

Mortgage-backed securities

Total accrued interest receivable

NOTE G - PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

Total loans pledged as collateral

against Federal Home Loan Bank of New York (“FHLBNY”) borrowings were $ 341.6 million and $ 181.2 million as of September 30,

2023 and 2022, respectively.

NOTE F - PREMISES AND EQUIPMENT

Premises and equipment consist

of the following:

September 30,

5 unchanged sentences

Premises and equipment, net

For the years ended September 30, 2022 and 2021, depreciation expense included in occupancy expense amounted to approximately $ 839,000 and $ 835,000 , respectively.

NOTE H - OTHER REAL ESTATE OWNED

The Company held $ 281,000 of real estate owned properties at September 30, 2022 and $ 636,000 at September 30, 2021.

The Company did not have any write-downs on these properties at September 30, 2022 compared with $ 337,000 for the years ended September 30, 2021.

The write-down amounts were carried as valuation allowances, unless the properties were sold.

Further declines in real estate values may result in increased foreclosed real estate expense in the future.

Routine holding costs are charged to expense as incurred and improvements to real estate owned that enhance the value of the real estate are capitalized.

NOTE I - DEPOSITS

A summary of deposits by type of account follows:

For the years ended September 30,

2023 and 2022, depreciation expense included in occupancy expense amounted to approximately $ 840,000 and $ 839,000 , respectively.

NOTE G - OTHER REAL ESTATE OWNED

The Company held $ 328,000 of real

estate owned properties at September 30, 2023 and $ 281,000 at September 30, 2022.

The Company did not have any write-downs on these properties

for the year ended September 30, 2023 and 2022.

Further declines in real estate values may result in increased foreclosed real estate

expense in the future.

Routine holding costs are charged to expense as incurred and improvements to real estate owned that enhance the

value of the real estate are capitalized.

NOTE H - DEPOSITS

A summary of deposits by type of

account follows:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30,

6 unchanged sentences

Total deposits

The current FDIC insurance limit on bank deposit accounts is $ 250,000 .

The aggregate amount of deposit accounts with a denomination of $250,000 or more was approximately $ 399.9 million at September 30, 2022 compared with $ 378.5 million at September 30, 2021.

The aggregate amount of certificate deposits, including individual retirement accounts with balances of $250,000 or more was $ 14.6 million at September 30, 2022 compared with $ 39.4 million at September 30, 2021.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

At September 30, 2022, certificates of deposit (including retirement accounts and brokered certificate deposit accounts) have contractual maturities as follows (in thousands):

The current FDIC insurance limit

on bank deposit accounts is $ 250,000 .

The aggregate amount of deposit accounts with a denomination of $250,000 or more was approximately

$ 429.9 million at September 30, 2023 compared with $ 292.4 million at September 30, 2022.

The aggregate amount of certificate deposits,

including individual retirement accounts with balances of $250,000 or more was $ 5.3 million at September 30, 2023 compared with $ 3.6 million

at September 30, 2022.

At September 30, 2023, certificates

of deposit (including retirement accounts and brokered certificate deposit accounts) have contractual maturities as follows (in thousands):

Year Ending September 30,

2029 and after

NOTE J - BORROWINGS

Included with the certificates

of deposit were $ 13.8 million and $ 6.0 million in brokered certificates of deposit at September 30, 2023 and 2022, respectively.

NOTE I - BORROWINGS

Federal Home Loan Bank of New York Advances

Long term Federal Home Loan Bank of New York (“FHLBNY”) advances at September 30, 2022 and September 30, 2021 totaled approximately $ 15.6 million and $ 23.4 million, respectively.

The weighted average interest rates on advances outstanding at September 30, 2022 and 2021 were 2.48 % and 2.13 %, respectively.

The advances were collateralized by unencumbered qualified assets consisting of one-to-four family residential and commercial real estate mortgage loans.

Advances are made pursuant to several different credit programs offered from time to time by the FHLBNY.

Long term FHLBNY advances as of September 30, 2022 mature as follows (in thousands):

Long term FHLBNY advances at September

30, 2023 and September 30, 2022 totaled approximately $ 29.5 million and $ 15.6 million, respectively.

The weighted average interest rates

on advances outstanding at September 30, 2023 and 2022 were 3.27 % and 2.48 %, respectively.

The advances were collateralized by unencumbered

qualified assets consisting of one-to-four family residential and commercial real estate mortgage loans.

Advances are made pursuant to

several different credit programs offered from time to time by the FHLBNY.

Long term FHLBNY advances as of

September 30, 2023 mature as follows (in thousands):

Year Ending September 30,

Additionally, the Company has established an Overnight Line of Credit arrangement with the FHLBNY.

The total amount available under the line of credit is based on the amount of eligible collateral pledged to the FHLBNY.

At September 30, 2022 and 2021, the Company had available credit from the FHLBNY totaling $ 83.2 million and $ 87.9 million, respectively.

Information concerning short-term arrangement with the FHLBNY is summarized as follows:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

Additionally, the Company has

established an Overnight Line of Credit arrangement with the FHLBNY.

The total amount available under the line of credit is based on the

amount of eligible collateral pledged to the FHLBNY.

At September 30, 2023 and 2022, the Company had available credit from the FHLBNY

totaling $ 122.2 million and $ 83.2 million, respectively.

Information concerning short-term arrangement with the FHLBNY is summarized as

September 30,

4 unchanged sentences

Average interest rate during the year

Securities Sold Under Reverse Repurchase Agreements

Qualifying repurchase agreements are treated as financings and are reflected as a liability in the Consolidated Balance Sheets.

The Company did not have repurchase agreements outstanding at September 30, 2022 and September 30, 2021.

Securities Sold Under Reverse

Repurchase Agreements

Qualifying repurchase agreements

are treated as financings and are reflected as a liability in the Consolidated Balance Sheets.

The Company did not have repurchase agreements

outstanding at September 30, 2023 and September 30, 2022.

NOTE J – SERVICING POLICY

The Company originates and sells

loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed by the Small Business Administration

The Company has sold loans on a servicing retained basis and on a servicing released basis.

with servicing retained and servicing released during the year ended September 30, 2023 were $ 6.5 million and $ 0 , respectively.

sold with servicing retained and servicing released during the year ended September 30, 2022 were $ 10.5 million and $ 0 , respectively.

The Company accounts for sales in accordance with ASC 860, Transfers and Servicing.

Upon sale, the receivables are removed from the

balance sheet, mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale, if applicable, is

recognized for the difference between the carrying value of the receivables and the sales proceeds, net of origination costs.

Gains on sales of loans, representing

the difference between the total sales price received for the loans and the allocated cost of the loans, are recognized when loans are

sold and delivered to the purchasers.

Loans are accounted for as sold when control of the loan is surrendered.

Control over the loans

is deemed surrendered when (1) the loans have been isolated from the Company, (2) the buyer has the right (free of conditions that constrain

it from taking advantage of that right) to pledge or exchange the loans and (3) the Company does not maintain effective control over the

loans through either (a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before maturity, or (b)

the ability to unilaterally cause the buyer to return specific loans.

The Company services one-to-four

family residential mortgage loans and SBA 7(a) loans for investors in the secondary market, which are not included in the Consolidated

Balance Sheets.

The Company’s fee is a percentage of the principal balance and is recognized as income when received.

September 30, 2023 and 2022, the Company was servicing mortgage loans sold in the amount of $ 1.9 million and $ 2.1 million, respectively,

and SBA loans sold in the amount of $ 35.5 million and $ 32.0 million, respectively.

Loan servicing includes collecting and remitting loan

payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions

in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering

Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing revenues and are

included in other assets on the Consolidated Balance Sheets.

Activity in loan servicing rights during the years ended September 30,

2023 and 2022 are summarized as follows:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

NOTE K –

SERVICING POLICY

The Company originates and sells loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed by the Small Business Administration (the “SBA”).

The Company has sold loans on a servicing retained basis and on a servicing released basis.

Loans sold with servicing retained and servicing released during the year ended September 30, 2022 were $ 10.5 million and $ 0 , respectively.

Loans sold with servicing retained and servicing released during the year ended September 30, 2021 were $ 7.1 million and $ 0 , respectively.

The Company accounts for sales in accordance with ASC 860, Transfers and Servicing.

Upon sale, the receivables are removed from the balance sheet, mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale, if applicable, is recognized for the difference between the carrying value of the receivables and the sales proceeds, net of origination costs.

Gains on sales of loans, representing the difference between the total sales price received for the loans and the allocated cost of the loans, are recognized when loans are sold and delivered to the purchasers.

Loans are accounted for as sold when control of the loan is surrendered.

Control over the loans is deemed surrendered when (1) the loans have been isolated from the Company, (2) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the loans and (3) the Company does not maintain effective control over the loans through either (a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before maturity, or (b) the ability to unilaterally cause the buyer to return specific loans.

The Company services one-to-four family residential mortgage loans for investors in the secondary mortgage market, which are not included in the Consolidated Balance Sheets.

The Company’s fee is a percentage of the principal balance and is recognized as income when received.

At September 30, 2022 and 2021, the Company was servicing such sold mortgage loans in the amount of $ 2.1 million and $ 3.7 million, respectively.

Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans.

Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing revenues and are included in other assets on the Consolidated Balance Sheets.

Activity in mortgage servicing rights during the years ended September 30, 2022 and 2021 are summarized as follows:

September 30,

3 unchanged sentences

Ending balance

Mortgage servicing rights are carried at the lower of amortized cost or fair value.

Fair values are estimated using discounted cash flows based on a current market interest rate.

The Company also services the SBA guaranteed portion of commercial business loans sold to investors in the secondary market, which are not included in the Consolidated Balance Sheets.

The Company’s fee is a percentage of the principal balance and is recognized as income when received.

At September 30, 2022 and 2021, the Company was servicing SBA loans sold in the amount of $ 32.0 million and $ 24.2 million, respectively.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

NOTE L - INCOME TAXES

The Company’s income tax expense is comprised of the following components for the years ended September 30, 2022 and 2021:

For the Year Ended

Loan servicing rights are carried

at the lower of amortized cost or fair value.

Fair values are estimated using discounted cash flows based on a current market interest

NOTE K - INCOME TAXES

The Company’s income tax

expense is comprised of the following components for the years ended September 30, 2023 and 2022:

September 30,

1 unchanged sentence

Total income tax expense

A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2022 and 2021 is as follows:

A reconciliation of income tax

at the statutory tax rate to the effective income tax expense for the years ended September 30, 2023 and 2022 is as follows:

September 30,

5 unchanged sentences

Nondeductible expenses

Share based compensation

Employee stock ownership plan

Total income tax expense

The major sources of temporary differences and their deferred tax effect at September 30, 2022 and 2021 are as follows:

The major sources of temporary

differences and their deferred tax effect at September 30, 2023 and 2022 are as follows:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30,

1 unchanged sentence

Allowance for loan losses

Net unrealized loss, investment securities available-for-sale

Deferred loan fees

Unrealized loss, minimum pension liability

Employee benefits

Allowance for transaction expense

Straight line rent

4 unchanged sentences

Net deferred tax asset, included in other assets

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and carry forwards are available.

There were no valuation allowances for the year ended September 30, 2022 and 2021.

The Company has considered future market growth, forecasted earnings, future taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets.

If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made.

The Bank’s statutory income tax rate in the State of New Jersey was 9.0 % for the years ending September 30, 2022 and 2021.

The State of New Jersey imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $ 1 million.

The surtax is set at a rate of 2.5 % and it currently effective through December 31, 2023.

Accordingly, the Company used an 11.5 % State tax rate for the calculation of its State income tax expense the years ended September 30, 2022 and 2021.

NOTE M - PENSION PLAN

The Company had a noncontributory defined benefit pension plan (the “Plan”) covering all eligible employees.

On January 26, 2006, the Plan was frozen and amended to eliminate future benefit accruals after February 15, 2006.

In assessing the realizability

of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will

not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the

periods in which temporary differences are deductible and carry forwards are available.

There were no valuation allowances

for the year ended September 30, 2023 and 2022.

The Company has considered future market growth, forecasted earnings, future taxable income,

feasible and permissible tax planning strategies in determining the realizability of deferred tax assets.

If the Company was to determine

that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance,

an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made.

The Bank’s statutory income

tax rate in the State of New Jersey was 9.0 % for the years ending September 30, 2023 and 2022.

The State of New Jersey has imposed a temporary

surtax on corporations earning New Jersey allocated income in excess of $ 1 million.

The surtax is set at a rate of 2.5 % and it currently

effective through December 31, 2023.

Accordingly, the Company used an 11.5 % State tax rate for the calculation of its State income tax

expense the years ended September 30, 2023 and 2022.

NOTE L - PENSION PLAN

The Company had a noncontributory

defined benefit pension plan (the “Plan”) covering all eligible employees.

On January 26, 2006, the Plan was frozen and amended

to eliminate future benefit accruals after February 15, 2006.

Plan assets are invested in seven

diversified investment funds of the Pentegra Retirement Trust, a no load series open-ended mutual fund.

The long-term investment objective

is to be invested 65 % in equity securities (equity mutual funds) and 35 % in debt securities (bond mutual funds).

Asset rebalancing is

performed at least annually, with interim adjustments made when the investment mix varies more than 5% from the target (i.e., a 10% target

Risk/volatility is further managed by the distinct investment objectives of each of the funds and the diversification within each

The following table sets forth

the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2023 and September

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

Plan assets are invested in seven diversified investment funds of the Pentegra Retirement Trust, a no load series open-ended mutual fund.

The long-term investment objective is to be invested 65 % in equity securities (equity mutual funds) and 35 % in debt securities (bond mutual funds).

Asset rebalancing is performed at least annually, with interim adjustments made when the investment mix varies more than 5% from the target (i.e., a 10% target range).

Risk/volatility is further managed by the distinct investment objectives of each of the funds and the diversification within each fund.

The following table sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2022 and September 30, 2021.

September 30,

10 unchanged sentences

Actual return on plan assets

Employer contributions

Annuity payments and lump sum distributions

1 unchanged sentence

Funded status included with other assets

Funded status included with other liabilities

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Net pension cost for the years ended September 30, 2022 and 2021 included the following components:

Net pension cost for the years

ended September 30, 2023 and 2022 included the following components:

September 30,

5 unchanged sentences

Net pension cost

For the year ended September 30, 2022 and 2021, the weighted average discount rate used in determining the actuarial net periodic pension cost was 3.0 % and 2.75 %, respectively.

For the year ended September 30, 2022 and 2021, the weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 5.25 % and 3.00 %, respectively.

The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset classes.

Equities and fixed income securities were assumed to earn rates of return in the ranges of 6 - 8 % and 3 - 5 %, respectively, with an assumed long-term inflation rate of 2.5 % reflected within these ranges for the year ended September 30, 2022.

When these overall return expectations are applied to the plan’s target allocation, the result is an expected rate of return of 5.0 % to 7.0 %.

Accordingly, the expected long-term rate of return on assets were 6.00% for 2023 and 6.00 % for 2022.

For the year ended September 30,

2023 and 2022, the weighted average discount rate used in determining the actuarial net periodic pension cost was 5.25 % and 3.00 %, respectively.

For the year ended September 30, 2023 and 2022, the weighted average discount rate used in determining the actuarial present value of

the projected benefit obligation was 5.75 % and 5.25 %, respectively.

The long-term rate-of-return-on-assets

assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future

returns as applied to the plan’s target allocation of asset classes.

Equities and fixed income securities were assumed to earn rates

of return in the ranges of 6 - 8 % and 3 - 5 %, respectively, with an assumed long-term inflation rate of 2.5 % reflected within these ranges

for the year ended September 30, 2023.

When these overall return expectations are applied to the plan’s target allocation, the result

is an expected rate of return of 5.0 % to 7.0 %.

Accordingly, the expected long-term rates of return on assets were 6.00 % for 2024 and 6.00 %

Current Asset Allocation

The Plan’s weighted-average asset allocations at September 30, 2022 and 2021, by asset category are as follows:

The Plan’s weighted-average

asset allocations at September 30, 2023 and 2022, by asset category are as follows:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30,

2 unchanged sentences

Other (money market fund)

The target asset allocation set for the assets of the Plan are in equity securities ranging from 50 percent to 75 percent and in debt securities ranging from 25 percent to 50 percent.

In general, the Plan assets are investment securities that are well-diversified in terms of industry, capitalization and asset class.

The Plan assets are mostly a mix of mutual funds indexed to the performance of Fortune 500 U.S.

companies, debt securities held in bond funds, domestic and foreign common equity funds, and a money market fund.

The Plan’s exposure to a concentration of credit risk is limited by the diversification of the investments into various investment options with multiple asset managers.

The target asset allocation set

for the assets of the Plan are in equity securities ranging from 50 % to 75 % and in debt securities ranging from 25 % to 50 %.

the Plan assets are investment securities that are well-diversified in terms of industry, capitalization and asset class.

The Plan assets

are mostly a mix of mutual funds indexed to the performance of Fortune 500 U.S.

companies, debt securities held in bond funds, domestic

and foreign common equity funds, and a money market fund.

The Plan’s exposure to a concentration of credit risk is limited by the

diversification of the investments into various investment options with multiple asset managers.

Expected Contributions

For the fiscal year ending September 30, 2023, the Company does not expect to make a contribution to the Plan.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

For the fiscal year ending September

30, 2024, the Company does not expect to make a contribution to the Plan.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid as follows (in thousands):

The following benefit payments

are expected to be paid as follows (in thousands):

October 1, 2023 through September 30, 2024

4 unchanged sentences

October 1, 2028 through September 30, 2033

Included in the funded status of the Plan at September 30, 2022 and 2021, are actuarial losses of $ 956,000 and $ 1,167,000 , respectively.

These amounts are included, net of related income tax effects of $ 288,000 and $ 351,000 , respectively, in the accumulated other comprehensive loss component of stockholders’

The following table presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic 820.

Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

See Note R for further detail regarding fair value hierarchy.

Included in the funded status of

the Plan at September 30, 2023 and 2022, are actuarial losses of $ 440,000 and $ 956,000 , respectively.

These amounts are included, net

of related income tax effects of $ 132,000 and $ 288,000 , respectively, in the accumulated other comprehensive loss component of stockholders’

The following table presents

the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic 820.

assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Q for further detail regarding fair value hierarchy.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

Fair Value Measurements at Reporting Date Using:

11 unchanged sentences

Large - Cap Core

Mid - Cap Core

Small - Cap Core

9 unchanged sentences

Large - Cap Core

Mid - Cap Core

Small - Cap Core

4 unchanged sentences

Total Investment

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Equity and debt securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).

NOTE N - NONQUALIFIED COMPENSATION PLAN

The Company maintains a Supplemental Executive Retirement Plan (“SERP”) for the benefit of its senior officers.

In addition, the Company also adopted voluntary Deferred Income and Retirement Plans on behalf of its directors.

The SERP provides the Company with the opportunity to supplement the retirement income of selected officers to achieve equitable wage replacement at retirement while the Deferred Income Plan provides participating directors with an opportunity to defer all or a portion of their fees into a tax deferred accumulation account for future retirement.

The Director Retirement Plan enables the Company to reward its directors for longevity of service in consideration of their availability and consultation.

The SERP is based upon achieving a total retirement benefit equal to a percentage of the participants’

final annual salary.

Under the Director Supplemental Retirement Income Plan (the “Plan”), directors that began service before 2002 are entitled to a benefit upon attainment of his/her benefit age.

The directors will receive an annual amount in monthly installments based on his/her total Board and Committee fees in the twelve months prior to attainment of his/her benefit age.

The amount will be ten percent (10%) plus two and one-half percent (2 1/2%) for each year of service as a Director, with a minimum of fifty percent (50%), provided the Director has served for at least five (5) years, and a maximum of sixty percent (60%).

The maximum benefit increases for any Director serving as Chairman of the Board for at least five years to seventy-five percent (75%).

The Company funds the plans through modified endowment contracts.

Income recorded for the plans represents life insurance income as recorded based on the projected increases in cash surrender values of life insurance policies.

As of September 30, 2022 and 2021, the Company’s life insurance contracts had cash surrender values of approximately $ 17,660,000 and $ 14,288,000 , respectively.

The Company is recording benefit costs so that the cost of each participant’s retirement benefits is being expensed and accrued over the participant’s active employment so as to result in a liability at retirement date equal to the present value of the benefits expected to be provided.

NOTE O - 401(K) EMPLOYEE CONTRIBUTION PLAN

The Company has a defined contribution 401(k) plan covering all employees, as defined under the plan document.

Employees may contribute to the plan, as defined under the plan document, and the Company can make discretionary contributions.

The Company contributed $ 271,000 and $ 232,000 to the plan for the years ended September 30, 2022 and 2021, and is included in compensation and employee benefits in the accompanying Consolidated Statements of Income.

Equity and debt securities are

reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).

NOTE M - NONQUALIFIED COMPENSATION

The Company maintains a Supplemental

Executive Retirement Plan (“SERP”) for the benefit of its senior officers.

In addition, the Company also adopted voluntary

Deferred Income and Retirement Plans on behalf of its directors.

The SERP provides the Company with the opportunity to supplement the

retirement income of selected officers to achieve equitable wage replacement at retirement while the Deferred Income Plan provides participating

directors with an opportunity to defer all or a portion of their fees into a tax deferred accumulation account for future retirement.

The Director Retirement Plan enables the Company to reward its directors for longevity of service in consideration of their availability

and consultation.

The SERP is based upon achieving a total retirement benefit equal to a percentage of the participants’ final annual

Under the Director Supplemental

Retirement Income Plan (the “Plan”), directors that began service before 2002 are entitled to a benefit upon attainment of

his/her benefit age.

The directors will receive an annual amount in monthly installments based on his/her total Board and Committee fees

in the twelve months prior to attainment of his/her benefit age.

The amount will be 10% plus 2 1/2% for each year of service as a Director,

with a minimum of 50%, provided the Director has served for at least five years, and a maximum of 60%.

The maximum benefit increases for

any Director serving as Chairman of the Board for at least five years to 75%.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

NOTE P - COMMITMENTS

Lease Commitments

Approximate future minimum payments under non-cancelable operating leases are due as follows for the years indicated (in thousands):

September 30, 2023

September 30, 2024

September 30, 2025

September 30, 2026

September 30, 2027

Accounting Standard Update ASC 842, “Leases”

requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset, measured at the present value of the future minimum lease payments, at the lease commencement date.

The Company has operating leases for five branch locations.

Our leases have remaining lease terms of up to 10 years, some of which include options to extend the leases for up to 10 additional years.

Operating leases are recorded as ROU assets and lease liabilities and are included within Other assets and Accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at lease commencement base on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate.

The incremental borrowing rate used by the Company to value its operating leases is based on the interpolated term advance rate available from the FHLBNY, based on the remaining lease term.

The following table presents the balance sheet information related to our leases:

The Company funds the plans through

modified endowment contracts.

Income recorded for the plans represents life insurance income as recorded based on the projected increases

in cash surrender values of life insurance policies.

As of September 30, 2023 and 2022, the Company’s life insurance contracts had

cash surrender values of approximately $ 18 million and $ 17.7 million, respectively.

The Company is recording benefit

costs so that the cost of each participant’s retirement benefits is being expensed and accrued over the participant’s active

employment so as to result in a liability at retirement date equal to the present value of the benefits expected to be provided.

expense for nonqualified retirement benefits recorded during the year ended September 30, 2023 and 2022 was $ 375,000 and $ 424,000 , respectively.

Included in accounts payable and other liabilities at September 30, 2023 and 2022 were accrued retirement benefits totaling $ 828,000 and

$ 630,000 , respectively, for these plans.

NOTE N - 401(K) EMPLOYEE CONTRIBUTION

The Company has a defined contribution

401(k) plan covering all employees, as defined under the plan document.

Employees may contribute to the plan, as defined under the plan

document, and the Company can make discretionary contributions.

The Company contributed $ 257,000 and $ 271,000 to the plan for the years

ended September 30, 2023 and 2022, and is included in compensation and employee benefits in the accompanying Consolidated Statements of

NOTE O - COMMITMENTS

Accounting Standard Update ASC

842, “ Leases ” requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset, measured

at the present value of the future minimum lease payments, at the lease commencement date.

The Company has operating leases

for five branch locations.

Our leases have remaining lease terms of up to 10 years, some of which include options to extend the leases

for up to 10 additional years.

Operating leases are recorded as ROU assets and lease liabilities and are included within Other assets

and Accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

Operating lease ROU assets represent

our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments

arising from the lease.

ROU assets and lease liabilities are recognized at lease commencement base on the present value of the remaining

lease payments using a discount rate that represents our incremental borrowing rate.

The incremental borrowing rate used by the Company

to value its operating leases is based on the interpolated term advance rate available from the FHLBNY, based on the remaining lease term.

The following table presents the

balance sheet information related to our leases:

September 30,

5 unchanged sentences

Weighted average discount rate

The following table summarizes the maturity of our remaining lease liabilities by year:

The following table summarizes the

maturity of our remaining lease liabilities by year:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

September 30,

5 unchanged sentences

Present value of lease liabilities

Total rental expense, included

in occupancy expense, was approximately $ 809,000 and $ 807,000 for the years ended September 30, 2023 and 2022, respectively.

Contingencies

The Company and its subsidiaries,

from time to time, are a party to routine litigation that arises in the normal course of business.

In the opinion of management, the resolution

of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results

of operations.

NOTE P - FINANCIAL INSTRUMENTS WITH

OFF-BALANCE-SHEET RISK

The Company may use derivative

financial instruments, such as interest rate floors and collars, as part of its interest rate risk management.

Interest rate caps

and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a

predetermined period of time if certain market interest rate thresholds are met.

The Company considers the credit risk inherent in these

contracts to be negligible.

As of September 30, 2023 and 2022, the Company did not hold any interest rate floors or collars.

The Company is a party to interest

rate derivatives that are not designated as hedging instruments.

Under a program, the Company executes interest rate swaps with commercial

lending customers to facilitate their respective risk management strategies.

These interest rate swaps with customers are simultaneously

offset by interest rate swaps that the Bank executes with a third-party financial institution, such that the Bank minimizes its net risk

exposure resulting from such transactions.

Because the interest rate swaps associated with this program do not meet the strict hedge accounting

requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into

consideration the risk rating, probability of default and loss given default for all counterparties.

The Company had $0 in cash pledged

for collateral on its interest rate swaps with financial institutions at September 30, 2023 and 2022.

The following table presents summary

information regarding these derivatives for September 30, 2023 and 2022.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

Total rental expense, included in occupancy expense, was approximately $ 807,000 and $ 811,000 for the years ended September 30, 2022 and 2021, respectively.

Contingencies

The Company and its subsidiaries, from time to time, are a party to routine litigation that arises in the normal course of business.

In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

NOTE Q - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company may use derivative financial instruments, such as interest rate floors and collars, as part of its interest rate risk management.

Interest rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a predetermined period of time if certain market interest rate thresholds are met.

The Company considers the credit risk inherent in these contracts to be negligible.

As of September 30, 2022 and 2021, the Company did not hold any interest rate floors or collars.

The Company is a party to interest rate derivatives that are not designated as hedging instruments.

Under a program, the Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies.

These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Bank executes with a third-party financial institution, such that the Bank minimizes its net risk exposure resulting from such transactions.

Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties.

The Company had $ 0 and $ 300,000 in cash pledged for collateral on its interest rate swaps with financial institutions at September 30, 2022 and 2021, respectively.

The following table presents summary information regarding these derivatives for September 30, 2022 and 2021.

Weighted Average

11 unchanged sentences

3rd Party interest rate swaps

At September 30, 2022 and 2021, the Company had outstanding commitments (substantially all of which expire within one year) to originate one-to four-family residential loans, construction loans, commercial real estate loans, commercial business loans and consumer loans.

These commitments were comprised of fixed and variable rate loans.

(1) Derivative

assets were incorrectly shown as a negative balance within the Company's Annual Report on Form 10-K for the year-ended September 30, 2022.

The derivative asset balances have been corrected within the table above.

The correction did not have an impact on the Company's consolidated

balance sheet.

At September 30, 2023 and 2022,

the Company had outstanding commitments (substantially all of which expire within one year) to originate one-to four-family residential

loans, construction loans, commercial real estate loans, commercial business loans and consumer loans.

These commitments were comprised

of fixed and variable rate loans.

September 30,

5 unchanged sentences

Variable rate loan commitments

NOTE Q - FAIR VALUE DISCLOSURES

The Company uses fair value measurements

to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company’s securities

available-for-sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record

at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, loans

receivable and other real estate owned, or OREO.

These non-recurring fair value adjustments involve the application of lower-of-cost-or-market

accounting or write-downs of individual assets.

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

NOTE R - FAIR VALUE DISCLOSURES

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company’s securities available-for-sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, loans receivable and other real estate owned, or OREO.

These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

In accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

These levels are:

In accordance with ASC 820, Fair

Value Measurements and Disclosures (“ASC 820”), the Company groups its assets and liabilities at fair value in three levels,

based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

Valuation is based upon quoted prices for identical instruments traded in active markets.

4 unchanged sentences

The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

The Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

The Company bases its fair values

on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date.

ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs

when measuring fair value.

The following is a description

of valuation methodologies used for assets measured at fair value on a recurring basis.

Securities available-for-sale

The Company’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’

The Company’s available-for-sale

portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated

other comprehensive income (loss) in stockholders’ equity.

The securities available-for-sale portfolio consists of U.S.

government and government-sponsored enterprise obligations, municipal bonds, and mortgage-backed securities.

The fair values of these securities are obtained from an independent nationally recognized pricing service.

An independent pricing service provides prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

and government-sponsored enterprise obligations and mortgage-backed securities.

The fair values of these securities are obtained from

an independent nationally recognized pricing service.

An independent pricing service provides prices which are categorized as Level 2,

as quoted prices in active markets for identical assets are generally not available for the securities.

The following tables provide the

level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a recurring

basis at September 30, 2023 and 2022:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a recurring basis at September 30, 2022 and 2021:

September 30, 2023

23 unchanged sentences

Total Liabilities

The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Mortgage Servicing Rights

Mortgage Servicing Rights (MSR’s) are carried at the lower of amortized cost or estimated fair value.

The estimated fair value of MSRs is determined through a calculation of future cash flows, incorporating estimates of assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements and, as such, are classified as Level 3.

No valuation write-downs were made to MSR’s during the years ended September 30, 2022 and 2021.

(1) Derivative

assets were incorrectly shown as a negative balance within the Company's Annual Report on Form 10-K for the year-ended September 30, 2022.

The derivative asset balances and corresponding totals have been corrected within the table above.

The correction did not have an impact

on the Company's consolidated balance sheet.

The following is a description

of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Impaired Loans

Loans which meet certain criteria are evaluated individually for impairment.

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.

All amounts due according to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement.

Loans which meet certain criteria

are evaluated individually for impairment.

A loan is impaired when, based on current information and events, it is probable that the Company

will be unable to collect all amounts due according to the contractual terms of the loan agreement.

All amounts due according to the contractual

terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement.

Three impairment measurement methods are used, depending upon the collateral securing the asset:

1) the present value of expected future cash flows discounted at the loan’s effective interest rate;

2) the asset’s observable market price;

or 3) the fair value of the collateral if the asset is collateral dependent.

The regulatory agencies require this method for loans from which repayment is expected to be provided solely by the underlying collateral.

The Company’s impaired loans are generally collateral dependent and, as such, are carried at the estimated fair value of the collateral less estimated selling and disposition costs.

Fair value is estimated through current appraisals, and adjusted as necessary, by management, to reflect current market conditions and, as such, are generally classified as Level 3.

Appraisals of collateral securing impaired loans are conducted by approved, qualified, and independent third-party appraisers.

Such appraisals are ordered via the Bank’s credit administration department, independent from the lender who originated the loan, once the loan is deemed impaired, as described in the previous paragraph.

1) the present value of expected future

cash flows discounted at the loan’s effective interest rate;

2) the asset’s observable market price;

or 3) the fair value

of the collateral if the asset is collateral dependent.

The regulatory agencies require this method for loans from which repayment is

expected to be provided solely by the underlying collateral.

The Company’s impaired loans are generally collateral dependent and,

as such, are carried at the estimated fair value of the collateral less estimated selling and disposition costs.

Fair value is estimated

through current appraisals, and adjusted as necessary, by management, to reflect current market conditions and, as such, are generally

classified as Level 3.

Appraisals of collateral securing

impaired loans are conducted by approved, qualified, and independent third-party appraisers.

Such appraisals are ordered via the Bank’s

credit administration department, independent from the lender who originated the loan, once the loan is deemed impaired, as described

in the previous paragraph.

Impaired loans are generally re-evaluated with an updated appraisal within one year of the last appraisal.

However, the Company also obtains updated appraisals on performing construction loans that are approaching their maturity date to determine whether or not the fair value of the collateral securing the loan remains sufficient to cover the loan amount prior to considering an extension.

The Company discounts the appraised “as is”

value of the collateral for estimated selling and disposition costs and compares the resulting fair value of collateral to the outstanding loan amount.

If the outstanding loan amount is greater than the discounted fair value, the Company requires a reduction in the outstanding loan balance or additional collateral before considering an extension to the loan.

If the borrower is unwilling or unable to reduce the loan balance or increase the collateral securing the loan, it is deemed impaired and the difference between the loan amount and the fair value of collateral, net of estimated selling and disposition costs, is charged off through a reduction of the allowance for loan loss.

However, the Company also obtains updated appraisals on performing construction loans that are approaching their maturity date to determine

whether or not the fair value of the collateral securing the loan remains sufficient to cover the loan amount prior to considering an

The Company discounts the appraised “as is” value of the collateral for estimated selling and disposition costs

and compares the resulting fair value of collateral to the outstanding loan amount.

If the outstanding loan amount is greater than the

discounted fair value, the Company requires a reduction in the outstanding loan balance or additional collateral before considering an

extension to the loan.

If the borrower is unwilling or unable to reduce the loan balance or increase the collateral securing the loan,

it is deemed impaired and the difference between the loan amount and the fair value of collateral, net of estimated selling and disposition

costs, is charged off through a reduction of the allowance for loan loss.

MAGYAR BANCORP, INC.

3 unchanged sentences

Other Real Estate Owned

Other real estate owned is carried at lower of cost or estimated fair value less disposal costs.

The estimated fair value of the real estate is determined through current appraisals, and adjusted as necessary, by management, to reflect current market conditions.

As such, other real estate owned is generally classified as Level 3.

There were no valuation write-downs for the year ended September 30, 2022, and $ 337,000 were made to two properties held as other real estate owned during the year ended September 30, 2021.

The properties were written down based on an updated appraisal of the real estate.

The following tables provide the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at September 30, 2022 and 2021:

Other real estate owned is carried

at lower of cost or estimated fair value less disposal costs.

The estimated fair value of the real estate is determined through current

appraisals, and adjusted as necessary, by management, to reflect current market conditions.

As such, other real estate owned is generally

classified as Level 3.

There were no valuation write-downs for the years ended September 30, 2023 and 2022.

The following tables provide the

level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at September 30,

2023 and 2022:

September 30, 2023

1 unchanged sentence

Impaired loans

Other real estate owned

September 30, 2022

Impaired loans

Other real estate owned

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Company has utilized Level 3 inputs to determine fair value:

The following tables present additional

quantitative information about assets measured at fair value on a nonrecurring basis and for which Company has utilized Level 3 inputs

to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements

4 unchanged sentences

Impaired loans

Appraisal ofcollateral (1)

Appraisal of collateral (1)

Appraisal adjustments (2)

-50% to -8.0% (-19.4%)

Other real estate owned

Appraisal ofcollateral (1)

Liquidation expenses (2)

- 28.0 % to - 28.0 % (- 28.0 %)

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

September 30, 2022

2 unchanged sentences

Impaired loans

Appraisal ofcollateral (1)

Appraisal of collateral (1)

Appraisal adjustments (2)

0% to -31.7% (-9.9%)

Other real estate owned

Appraisal ofcollateral (1)

(1) Fair value is generally determined through independent appraisals for the underlying collateral, which

generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated

liquidation expenses.

- 31.2 % to - 45.5 % (- 39.4 %)

(1)

Fair value is generally determined through independent appraisals for the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of September 30, 2022 and September 30, 2021.

This table excludes financial instruments for which the carrying amount approximates fair value, which includes cash and cash equivalents, FHLBNY stock, bank owned life insurance, accrued interest receivable, interest and non-interest bearing demand, savings deposits, and accrued interest payable.

For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.

For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent

of the appraisal.

The following presents the carrying

amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized

cost as of September 30, 2023 and September 30, 2022.

This table excludes financial instruments for which the carrying amount approximates

fair value, which includes cash and cash equivalents, FHLBNY stock, bank owned life insurance, accrued interest receivable, interest and

non-interest bearing demand, savings deposits, and accrued interest payable.

For short-term financial assets such as cash and cash equivalents,

the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument

and its expected realization.

For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits,

the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2023 and 2022

Fair Value Measurement Placement

10 unchanged sentences

Certificates of deposit

NOTE S - REGULATORY CAPITAL

The Company and Bank are required to maintain minimum amounts of capital to total “risk-weighted”

assets, as defined by the banking regulators.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

NOTE R - REGULATORY CAPITAL

The Company and Bank are required

to maintain minimum amounts of capital to total “risk-weighted” assets, as defined by the banking regulators.

Failure to meet

minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could

have a direct material effect on the Company’s financial statements.

Under capital adequacy guidelines and the regulatory framework

for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s

and Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices.

amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The “Basel III” regulatory

capital reforms and changes required by the Dodd-Frank Act include a minimum common equity Tier 1 capital (“CET1”) to risk-weighted

assets ratio of 4.5 % of risk-weighted assets, a minimum Tier 1 capital to risk-weighted assets of 6.0 % and a minimum leverage ratio of

The required minimum ratio of total capital to risk-weighted assets is 8.0 %.

The regulatory banking rules also require a “capital

conservation buffer” of 2.5% above the new regulatory minimum capital ratios, and resulted in the following minimum ratios:

a common equity Tier 1 capital ratio of 7.0%;

(ii) a Tier 1 capital ratio of 8.5%;

and (iii) a total capital ratio of 10.5%.

An institution

will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level

falls below the buffer amount.

These limitations established a maximum percentage of eligible retained income that could be utilized for

such actions.

As of September 30, 2023, the most

recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework

for prompt corrective action.

There are no conditions or events since that notification that management believes have changed

the Bank’s category.

The following tables set forth

the Company’s and the Bank’s actual and required capital levels under those measures:

MAGYAR BANCORP, INC.

2 unchanged sentences

September 30, 2023 and 2022

The “Basel III”

regulatory capital reforms and changes required by the Dodd-Frank Act include a minimum common equity Tier 1 capital (“CET1”) to risk-weighted assets ratio of 4.5 % of risk-weighted assets, a minimum Tier 1 capital to risk-weighted assets of 6.0 % and a minimum leverage ratio of 4.0 %.

The required minimum ratio of total capital to risk-weighted assets is 8.0 %.

The regulatory banking rules also require a “capital conservation buffer”

of 2.5% above the new regulatory minimum capital ratios, and resulted in the following minimum ratios:

(i) a common equity Tier 1 capital ratio of 7.0%;

(ii) a Tier 1 capital ratio of 8.5%;

and (iii) a total capital ratio of 10.5%.

An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount.

These limitations established a maximum percentage of eligible retained income that could be utilized for such actions.

As of September 30, 2022, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

There are no conditions or events since that notification that management believes have changed the Bank’s category.

The following tables set forth the Company’s and the Bank’s actual and required capital levels under those measures:

At September 30, 2022

Required for capital

adequacy purposes

capitalized under

Required for capital

prompt corrective

At September 30, 2023

adequacy purposes

action provisions

Tier 1 leverage ratio

%(1)

Tier 1 risk-based capital ratio

%(1)

Total risk-based capital ratio

%(1)

≥ 10.50 % (1)

At September 30, 2022

Tier 1 leverage ratio

%(1)

Tier 1 risk-based capital ratio

%(1)

Total risk-based capital ratio

%(1)

(1)

Includes 2.50% capital conservation buffer

Changes In and Disagreements with Accountants

on Accounting and Financial Disclosure

≥ 10.50 % (1)

2.50% capital conservation buffer

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data