What changed in this filing

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Item 1. Business

2024-12-19 compared with 2023-12-15 · 478 added, 941 removed, 490 unchanged (74% of the section changed)

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Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking

statements include, among others, those discussed below and under “Risk Factors” in Part 1, Item 1A of this Annual Report

statements include, among others, those discussed below and under “Risk Factors” in Part I, Item 1A of this Annual Report

on Form 10-K.

Magyar Bancorp, Inc.

(the “Company”)

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

Magyar Bancorp, MHC was

the former mutual holding company for Magyar Bancorp, Inc.

prior to completion of the second-step conversion.

In conjunction with the

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

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

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

Concurrent with the

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

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

At September 30, 2023, Magyar

Bancorp, Inc.

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

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

September 30, 2024, Magyar Bancorp, Inc.

had consolidated assets of $951.9 million, total deposits of $796.7 million and stockholders’

equity of $110.5 million.

Magyar Bancorp, Inc.

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

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

of common stock of Magyar Bank.

The executive office of Magyar Bancorp, Inc.

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

number is (732) 342-7600.

Magyar Bancorp, Inc.

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

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

is located at 400 Somerset Street, New Brunswick, New Jersey

08901, and its telephone number is (732) 342-7600.

Magyar Bank is a New Jersey-chartered

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

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

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

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

The telephone number at our

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

savings bank headquartered in New Brunswick, New Jersey that was originally founded in 1922.

We conduct business from our main office

located at 400 Somerset Street, New Brunswick, New Jersey, and our eight branch offices located in New Brunswick, North Brunswick, South

Brunswick, Branchburg, Bridgewater, Edison and Martinsville, New Jersey.

The telephone number at our main office is (732) 342-7600 and

our website is located at www.magbank.com.

Information on our website is not and should not be considered

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

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

We also originate

consumer loans, which

consist primarily of secured demand loans.

We originate loans primarily for our loan portfolio.

However, from time

to time we have sold some of our long-term, fixed-rate residential mortgage loans into the secondary market, while retaining the servicing

rights for such loans.

In addition, we sell the SBA-guaranteed portion of SBA loans into the secondary market, while retaining the servicing

rights for such loans.

Our revenues are derived principally from interest on loans and securities, our investment securities consist primarily

of mortgage-backed securities and U.S.

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

revenues are derived principally from interest on loans and securities;

our investment securities consist primarily of mortgage-backed

securities and U.S.

Government and government-sponsored enterprise obligations.

We also generate revenues from fees

and service charges.

We also generate revenues from fees and service charges.

Our primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities.

We are subject to comprehensive regulation and examination by the NJDBI and the Federal Deposit Insurance Corporation (“FDIC”).

We are headquartered in New Brunswick,

New Jersey, and our primary deposit market area is concentrated in the communities surrounding our headquarters branch and our branch

offices located in Middlesex and Somerset Counties, New Jersey.

Our primary lending market area is broader than our deposit market area

and includes all of New Jersey.

The economy of our primary market

area is largely urban and suburban with a broad economic base that is typical for counties surrounding the New York metropolitan area.

We are subject to comprehensive

regulation and examination by the New Jersey Department of Banking and Insurance (“NJDBI”) and the Federal Deposit Insurance

Corporation (“FDIC”).

We are headquartered in New

Brunswick, New Jersey, and our primary deposit market area is concentrated in the communities surrounding our headquarters branch and

our branch offices located in Middlesex and Somerset Counties, New Jersey.

Our primary lending market area is broader than our deposit

market area and includes all of New Jersey.

The economy of our primary

market area is largely urban and suburban with a broad economic base that is typical for counties surrounding the New York metropolitan

The median household income in Middlesex and Somerset Counties ranks among the highest in the nation.

We face intense competition within

our market area both in making loans and attracting deposits.

Our market area has a high concentration of financial institutions including

large money center and regional banks, community banks and credit unions.

Some of our competitors offer products and services that we

currently do not offer, such as trust services and private banking.

According to the Federal Deposit Insurance Corporation’s annual

Summary of Deposit report, at June 30, 2023, our market share of deposits was 1.26% and 0.38% in Middlesex and Somerset Counties,

respectively.

Most of the Bank’s customers

are individuals and small to medium-sized businesses which are dependent upon the regional economy.

Adverse changes in economic and business

conditions in the Bank’s markets could adversely affect the Bank’s borrowers, their ability to repay their loans and to borrow

additional funds, and consequently the Bank’s financial condition and performance.

The majority of the Bank’s loans are secured

by real estate located in New Jersey.

A decline in local economic conditions could adversely affect the values of such real estate.

Consequently,

a decline in local economic conditions may have a greater effect on the Bank’s earnings and capital than on the earnings and capital

of larger financial institutions whose real estate loan portfolios are more geographically diverse.

We face intense competition

within our market area both in making loans and attracting deposits.

Our market area has a high concentration of financial institutions

including large money center and regional banks, community banks and credit unions.

Some of our competitors offer products and services

that we currently do not offer, such as trust services and private banking.

According to the Federal Deposit Insurance Corporation’s

annual Summary of Deposit report, at June 30, 2024, our market share of deposits was 1.52% and 0.38% in Middlesex and Somerset

Counties, respectively.

Our market share of deposits was 1.26% and 0.38%, respectively, at June 30, 2023.

Our competition for loans and

deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions.

We face additional competition

for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies.

Our primary focus is to build

and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.

Our competition for loans

and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions.

We face additional

competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies.

Our primary focus

is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.

Lending Activities

We originate residential mortgage

loans to purchase or refinance residential real property.

Residential mortgage loans represented $237.7 million, or 34.1% of our total

loans at September 30, 2023.

Historically, we have not originated a significant number of loans for the purpose of reselling them in the

secondary market.

In the future, however, to help manage interest rate risk and to increase fee income, we may increase our origination

and sale of residential mortgage loans.

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

We also originate commercial real estate, commercial

business and construction loans.

At September 30, 2023, these loans totaled $389.1 million, or 55.8%, $30.2 million, or 4.3%, and $21.9

million, or 3.1%, respectively, of our total loan portfolio.

We also offer consumer loans, which consist primarily of home equity lines

of credit and stock-secured demand loans.

At September 30, 2023, home equity lines of credit and stock-secured demand loans totaled $17.0

million, or 2.4% and $2.4 million, or 0.3%, respectively, of our total loan portfolio.

Our lending relationships

are primarily with small to mid-sized businesses and individual consumers residing primarily in and around central and northern New Jersey.

We primarily originate commercial real estate loans and residential mortgage loans, and to a lesser extent home equity lines of credit,

commercial business and construction and land loans.

Loan Portfolio Composition.

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Commercial real estate

Home equity lines of credit

Construction and land

Home equity loans and lines of credit

Commercial business

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Net deferred loan costs

Allowance for loan losses

Total loans receivable, net

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

(Dollars in thousands)

Loans and Lines

September 30, 2024

(In thousands)

One year or less

After one year through five years

After five years through 15 years

After 15 years

After five years through fifteen years

After fifteen years

The following table sets forth

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Commercial real estate

Home equity lines of credit

Construction and land

Home equity loans and lines of credit

Commercial business

One-to Four-Family

Residential Loans.

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

area and most of which we hold in portfolio.

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

residential mortgage loans (including home equity loans).

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

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

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

Generally, residential mortgage loans

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

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

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

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

Mortgage loans have been primarily

originated for terms of up to 30 years.

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

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

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

During the year ended September 30, 2023,

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

prior year charge-offs.

We also originate home

equity loans secured by residences located in our market area.

One-to Four-Family Residential

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

most of which we hold in portfolio.

At September 30, 2024, $246.2 million, or 31.5% of our total loan portfolio, consisted of residential

mortgage loans.

Generally, residential mortgage loans are originated in amounts up to 80% of the lesser

of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio

in excess of 80%.

Generally, all residential

mortgage loans are underwritten according to Federal Home Loan Mortgage Corporation (“Freddie Mac”) guidelines, policies and

Historically, we have not originated a significant number of loans for the purpose of reselling them in the secondary market.

We also originate home equity

loans secured by residences located in our market area.

The underwriting standards we use for home equity loans include a determination

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on the proposed loan and the value of the collateral securing the loan.

The maximum combined (first and second mortgage liens) loan-to-value

ratio for home equity loans and home equity lines of credit is 80%.

Home equity loans are generally offered with fixed rates of interest

with the loan amount not to exceed $500,000 and with terms of up to 30 years.

There were no non-performing home equity loans at September

30, 2023 and there were no charge-offs or recoveries for impaired home equity loans during the year ended September 30, 2023.

We offer fixed-rate mortgage

loans with terms of either 10, 15, 20 or up to 30 years.

While these loans are normally originated with up to 30-year terms, such loans

typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full upon sale of the property

pledged as security or upon refinancing the original loan.

Therefore, average loan maturity is a function of, among other factors, the

level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding

Generally, all fixed-rate

residential mortgage loans are underwritten according to Federal Home Loan Mortgage Corporation (“Freddie Mac”) guidelines,

policies and procedures.

Historically, we have not originated a significant number of loans for the purpose of reselling them in the secondary

In the future we may increase our origination and sale of fixed-rate residential mortgage loans to help manage interest rate risk

and to increase fee income.

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

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

We occasionally purchase

residential mortgage loans to augment our internal loan origination efforts.

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

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

We underwrite purchased residential mortgage loans using the same

criteria as if we were originating the loans.

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

that were serviced by other lenders.

At September 30, 2023,

we had $137.1 million of fixed-rate residential mortgage loans, which represented 57.7% of our total residential mortgage loan portfolio.

At September 30, 2024, we

had $144.0 million of fixed-rate residential mortgage loans, which represented 58.5% of our total residential mortgage loan portfolio.

At September 30, 2024, our largest fixed-rate residential mortgage loan was $9.9 million.

The loan was performing in accordance with

its contractual repayment terms at September 30, 2023.

We also offer adjustable-rate

residential mortgage loans with interest rates based on the weekly average yield on U.S.

Treasuries or the Secured Overnight Financing

Rate (“SOFR”), which adjust either semi-annually or annually from the outset of the loan or which adjusts annually after a

one-, three-, five-, seven-, and ten-year initial fixed-rate period.

Our adjustable-rate mortgage loans generally provide for maximum

rate adjustments of 2% per adjustment, with a lifetime maximum adjustment up to 5%, regardless of the initial rate.

We also offer adjustable-rate

mortgage loans with an interest rate based on the prime rate as published in The Wall Street Journal or the Federal Home Loan Bank

of New York advance rates.

Due to historically low

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

Adjustable-rate mortgage loans decrease

the risk associated with changes in market interest rates by periodically repricing.

However, these loans have other risks because, as

interest rates increase, the underlying payments by the borrower increase, which increases the potential for default by the borrower.

At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates.

The maximum periodic

and lifetime interest rate adjustments also may limit the effectiveness of adjustable-rate mortgage loans during periods of rapidly rising

interest rates.

At September 30, 2023,

adjustable-rate residential mortgage loans totaled $100.6 million, or 42.3% of our total residential mortgage loan portfolio.

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

The loan was performing in accordance with its contractual repayment terms

at September 30, 2023.

In an effort to provide

financing for low-and moderate-income home buyers, we offer low-to-moderate income residential mortgage loans.

These loans are offered

with fixed rates of interest and terms of up to 40 years, and are secured by one-to four-family residential properties.

All of these loans

are originated using underwriting guidelines of U.S.

government-sponsored enterprises such as Freddie Mac.

These loans are originated

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

All residential mortgage

loans we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable if

the borrower sells or otherwise disposes of the real property securing the mortgage loan.

All borrowers are required to obtain title insurance,

fire and casualty insurance and, if warranted, flood insurance on properties securing real estate loans.

The loan was performing in accordance with its

contractual repayment terms at September 30, 2024.

At September 30, 2024, adjustable-rate

residential mortgage loans totaled $102.2 million, or 41.5% of our total residential mortgage loan portfolio.

The largest adjustable-rate

residential mortgage loan was for $2.2 million.

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

Commercial Real Estate

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We generally originate adjustable-rate commercial real estate loans

with a maximum term of 25 years with adjustable-rate periods every five years.

with a maximum term of 25 years with

adjustable-rate periods every five years.

The maximum loan-to-value ratio for our commercial real

estate loans is 75%, based on the appraised value of the property.

We consider a number of

factors when we originate commercial real estate loans.

We consider a number of factors

when we originate commercial real estate loans.

During the underwriting process we evaluate the business qualifications and financial

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service coverage ratio (the ratio of net operating income to debt service) to ensure it is at least 120% of the monthly debt service.

We require personal guarantees on all commercial real estate loans made to individuals.

Generally, commercial real estate loans made to

corporations, partnerships and other business entities require personal guarantees by the principals.

All borrowers are required to obtain

title, fire and casualty insurance and, if warranted, flood insurance.

Loans secured by commercial

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them more difficult for management to monitor and evaluate.

The maximum amount of a commercial

real estate loan is limited by our Board-established loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital,

or $15.8 million.

At September 30, 2023, our largest commercial real estate loan was $13.5 million to finance the purchase and operation

of a nursing and rehabilitation home in Edison, New Jersey.

The original loan amount was 65% of the purchase price, which was lower than

the appraised value.

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

There was one non-performing

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

September 30, 2022.

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

for impaired commercial real estate loans.

Construction Loans.

Construction and Land

We also originate construction and land acquisition loans for the development of one-to four-family homes, apartment buildings

and commercial properties.

Construction loans are generally offered to experienced local developers operating in our primary market area

and to individuals for the construction of their personal residences.

At September 30, 2023, our construction loans totaled $21.9 million,

or 3.1% of total loans.

At September 30, 2023,

construction loans for the development of one-to four-family residential properties totaled $10.9 million.

These construction loans generally

have a maximum term of 24 months.

We provide financing for land acquisition, site improvement and construction of individual homes.

acquisition loans are limited to 50% to 75% of the sale price of the land.

Site improvement loans are limited to 100% of the bonded site

improvement costs.

Construction loans are limited to 75% of the lesser of the contract sale price or appraised value of the property (less

funds already advanced for land acquisition and site improvement).

At September 30, 2023,

construction loans for the development of commercial properties totaled $7.0 million.

These construction loans have a maximum term of

The maximum loan-to-value ratio limit applicable to these loans is 75% of the appraised value of the property.

At September 30, 2023,

construction loans for the development of town homes, condominiums and apartment buildings totaled $4.0 million.

The maximum loan-to-value

ratio limit applicable to these loans is 75% of the appraised value of the property.

We may retain up to 10% of each loan advance until

the property attains a 90% occupancy level.

The maximum amount of

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

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

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

There were two non-performing

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

at September 30, 2022.

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

for impaired construction loans.

Construction lending is

generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate.

of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of

construction compared to the estimated cost (including interest) of construction and other assumptions.

Construction and land loans are generally offered to experienced local developers operating in our primary

market area and to individuals for the construction of their personal residences.

At September 30, 2024, our construction and land loans

totaled $22.7 million, or 2.9% of total loans.

Construction and land loans

generally have a maximum term of 24 months.

We provide financing for land acquisition, site improvement and hard construction costs.

acquisition loans are limited to 50% of the sale price or appraised value of the land, whichever is lower.

Site improvement loans are

limited to 100% of the bonded site improvement costs.

Construction loans are limited to 75% of the lesser of the contract sale price or

appraised value of the property.

Construction and land lending

is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate.

of loss on a construction and land loan depends largely upon the accuracy of the initial estimate of the value of the property at completion

of construction compared to the estimated cost (including interest) of construction and other assumptions.

If the estimate of construction

cost is inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property.

Additionally, if our estimate of the value of the completed property is inaccurate, our construction loan may exceed the value of the

Additionally, if our estimate of the value of the completed property is inaccurate, our construction and land loan may exceed the value

of the collateral.

The advantages of construction lending are that the market is typically less competitive than standard mortgage products,

the interest rate typically charged is a variable rate, which permits the Bank to protect against sudden changes in its costs of funds,

the interest rate is typically higher to reflect the higher degree of credit risk, and the origination fees charged by the Bank to its

customers can be amortized over the shorter term of a construction loan, typically, one to two years, which permits the Bank to recognize

fees as income over a shorter period of time.

Home Equity Loans and

Lines of Credit and Other Loans.

We originate home equity lines of credit secured by residences located in our market area.

September 30, 2024, these loans totaled $24.7 million, or 3.2% of our total loan portfolio.

The underwriting standards we use for home

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

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

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

Home equity lines of credit have

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

We also originate loans secured

by the common stock of publicly traded companies, provided their shares are listed on the New York Stock Exchange or the NASDAQ Stock

Stock-secured loans are interest-only and are offered for terms up to twelve months and for adjustable rates of interest indexed

to the prime rate, as reported in The Wall Street Journal.

The loan amount is not to exceed 70% of the value of the stock securing

the loan at any time.

At September 30, 2024, stock-secured and other loans totaled $2.1 million, or 0.3% of our total net loan portfolio.

Commercial Business

At September 30, 2023, our commercial business loans totaled $30.2 million, or 4.3% of total loans.

We make commercial

business loans primarily in our market area to a variety of professionals, sole proprietorships and small and mid-sized businesses.

commercial business loans include term loans and revolving lines of credit.

The maximum term of a commercial business loan is 25 years.

We make commercial business loans primarily in our market area to a variety of professionals, sole proprietorships and

small and mid-sized businesses.

Our commercial business loans include term loans

and revolving lines of credit.

At September 30, 2024,

our commercial business loans totaled $24.0 million, or 3.1% of total loans.

The maximum term of a commercial

business loan is 25 years.

Such loans are generally used for longer-term working capital purposes such as purchasing equipment or furniture.

Commercial business

loans are made with either adjustable or fixed rates of interest.

The interest rates for adjustable commercial business loans are typically

based on the prime rate as published in The Wall Street Journal .

Commercial business loans are made with either adjustable or fixed rates of interest.

Included in commercial business

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

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

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

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

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

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

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

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

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

Finally, many SBA borrowers do not

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

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

loans are Small Business Administration (“SBA”) 7(a) loans, on which the SBA provides guarantees of up to 75% of the principal

balance (85% for loans under $150,000).

These loans are made for the purposes of providing working capital and financing the purchase

of equipment, inventory or commercial real estate, and may be made inside or outside the State of New Jersey.

At September 30, 2024, $14.9

million, or 95.2% of the Company’s SBA loan balances, were to businesses located in the State of New Jersey.

Generally, an SBA 7(a)

loan has a deficiency in its credit profile that would not allow the borrower to qualify for a traditional commercial loan, which is why

the government provides the guarantee.

The deficiency may be a higher loan to value ratio, lower debt service coverage ratio or weaker

personal financial guarantees.

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

Finally, many SBA borrowers do not have an ongoing and continuous banking relationship with the Bank, but merely work with the Bank on

a single transaction.

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

Commercial business loans

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We try to minimize these risks through our underwriting standards.

The maximum amount of a commercial

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

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

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

There were no non-performing commercial real estate loans

at September 30, 2023 and 2022.

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

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

Home Equity Lines

of Credit and Other Loans.

We originate home equity lines of credit secured by residences located in our market area.

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

The underwriting standards we use for home equity lines

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

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

The maximum combined (first

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

Home equity lines of credit have adjustable rates

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

The maximum amount of a

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

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

The loan was performing according to its terms at September

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

home equity lines of credit or other loans.

We also originate loans

secured by the common stock of publicly traded companies, provided their shares are listed on the New York Stock Exchange or the NASDAQ

Stock Market, and provided the company is not a banking company.

Stock-secured loans are interest-only and are offered for terms up to

twelve months and for adjustable rates of interest indexed to the prime rate, as reported in The Wall Street Journal.

amount is not to exceed 70% of the value of the stock securing the loan at any time.

At September 30, 2023,

stock-secured and other loans totaled $2.4 million, or 0.3% of our total net loan portfolio.

Generally, we limit the aggregate amount

of loans secured by the common stock of any one corporation to 15% of Magyar Bank’s capital, or $15.8 million.

At September 30,

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

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

Although these loans are underwritten based on the ability

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

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

As of September 30,

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

Loan Originations,

Purchases, Participations and Servicing of Loans.

Lending activities are conducted primarily by our loan personnel operating at

our main and branch office locations.

All loans originated by us are underwritten pursuant to our policies and procedures.

both adjustable rate and fixed rate loans.

Our ability to originate fixed or adjustable rate loans is dependent upon the relative customer

demand for such loans, which is affected by the current and expected future levels of market interest rates.

Generally, we retain in

our portfolio substantially all loans that we originate.

Historically, we have not originated a significant number of loans for the purpose

of selling them in the secondary market.

In the future, however, to help manage our interest rate risk and to increase fee income, we

may increase our origination and sale of fixed-rate residential loans and commercial business loans guaranteed by the SBA.

four-family residential mortgage loans that we sell in the secondary market are sold with servicing rights retained pursuant to master

commitments negotiated with Freddie Mac.

We sell our loans to Freddie Mac without recourse.

No loans were held for sale at September 30,

At September 30, 2023,

we were servicing SBA-guaranteed and commercial participation loans sold in the amount of $35.5 million and $10.7 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.

From time-to-time, we will

also participate in loans, sometimes as the “lead lender.” Whether we are the lead lender or not, we underwrite our participation

portion of the loan according to our own underwriting criteria and procedures.

At September 30, 2023, we had $21.2 million of loan participation

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

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

We have entered into certain loan participations

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

All loan participations

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

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

with their terms.

During the fiscal year

ended September 30, 2023, we originated $94.8 million of fixed-rate and adjustable-rate commercial real estate loans and $46.9 million

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

The fixed-rate loans are primarily loans with terms

of 30 years or less.

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

and $3.0 million of commercial business loans.

Loans to One Borrower

and Concentration of Loans.

The maximum amount of loans to one borrower is limited by our Board-established loans-to-one-borrower

limit, which is currently 15% of Magyar Bank’s capital, or $17.2 million.

At September 30, 2024, our largest loan was $13.2 million

commercial real estate loan to finance the purchase and operation of a nursing and rehabilitation home in Edison, New Jersey.

was performing in accordance with its terms at September 30, 2024.

The size of loans which the

Bank can offer to potential borrowers is less than the size of loans which many of the Bank’s competitors with larger capitalization

are able to offer.

The Bank may engage in loan participations with other banks for loans in excess of the Bank’s legal lending limits.

However, no assurance can be given that such participations will be available at all or on terms which are favorable to the Bank and its

The Bank has established policies

to determine and monitor concentrations of credit risk and to maintain discipline in lending practices with a focus on portfolio diversification.

Asset Quality

We commence collection

efforts when a loan becomes 15 days past due with system-generated reminder notices.

Subsequent late charge and delinquent notices are

issued and the account is monitored on a regular basis thereafter.

Personal, direct contact with the borrower is attempted early in the

collection process as a courtesy reminder and later to determine the reason for the delinquency and to safeguard our collateral.

a loan is more than 60 days past due, the credit file is reviewed and, if deemed necessary, information is updated or confirmed and collateral

re-evaluated.

We commence collection efforts

when a loan becomes 15 days past due with system-generated reminder notices.

Subsequent late charge and delinquent notices are issued

and the account is monitored on a regular basis thereafter.

Personal, direct contact with the borrower is attempted early in the collection

process as a courtesy reminder and later to determine the reason for the delinquency and to safeguard our collateral.

When a loan is more

than 60 days past due, the credit file is reviewed and, if deemed necessary, information is updated or confirmed and collateral re-evaluated.

We make every effort to contact the borrower and develop a plan of repayment to cure the delinquency.

Loans are placed on

non-accrual status when they are delinquent for more than three months.

When loans are placed on non-accrual status, unpaid accrued interest

is fully reversed, and further income is recognized only to the extent received.

A summary report of all

loans 30 days or more past due is provided to the Board of Directors on a monthly basis.

If no repayment plan is in process, the file

is referred to counsel for the commencement of foreclosure or other collection efforts.

Loans are placed on non-accrual

status when they are delinquent for more than 90 days.

When loans are placed on non-accrual status, unpaid accrued interest is fully reversed,

and further income is recognized only to the extent received.

A summary report of all loans

30 days or more past due is provided to the Board of Directors on a monthly basis.

If no repayment plan is in process, the file is referred

to counsel for the commencement of foreclosure and/or other collection efforts.

Non-Performing Assets.

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

Non-accrual loans are loans on which the accrual of interest has ceased.

Loans are generally placed on non-accrual status if,

in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more.

Interest accrued, but

not collected at the date a loan is placed on non-accrual status, is reversed and charged against interest income.

Subsequent cash receipts

are applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate

collectability of principal and interest.

Loans are returned to an accrual status when the borrower’s ability to make periodic principal

and interest payments has returned to normal (i.e., brought current with respect to principal or interest or restructured) and the paying

capacity of the borrower and/or the underlying collateral is deemed sufficient to cover principal and interest.

The following table sets forth

the amounts and categories of our non-accrual assets at the dates indicated.

September 30,

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Commercial real estate

Construction and land

Total non-accrual loans

Allowance for loan losses:

Allowance for credit losses:

Total non-accrual loans to total loans

Allowance for loan loss to total non-accrual loans

Commercial business, commercial

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

At September 30, 2023,

our portfolio of commercial business, commercial real estate and construction loans totaled $441.2 million, or 63.2% of our total loans,

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

We account for our impaired loans

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

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

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

less estimated costs of disposal if the loan is collateral dependent.

Regardless of the measurement method, a creditor may measure impairment

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

We record cash receipts on impaired

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

by the Bankruptcy Court to apply payments otherwise.

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

Troubled debt restructurings (“TDRs”)

occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor

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

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

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

fiscal year ended September 30, 2022.

Allowance for credit loss to total non-accrual loans

Allowance for credit loss to total loan receivable

A loan is considered individually

evaluated when it has been modified for a borrower in financial distress or when, based on current information and events, it is probable

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

the loan agreement.

Individually evaluated loans that have been modified are measured based on the present value of expected future discounted

cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent.

We record cash receipts on

individually evaluated 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.

Delinquent Loans .

8 unchanged sentences

Commercial real estate

Home equity loans and lines of credit

At September 30, 2023

1 unchanged sentence

Commercial real estate

Construction and land

Real Estate Owned .

3 unchanged sentences

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

We held one OREO property totaling

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

Classified Assets.

Federal banking regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful”

or “loss” assets.

An asset is considered “substandard” if it is inadequately protected by the current net worth

and paying capacity of the obligor or of the collateral pledged, if any.

“Substandard” assets include those characterized

by the “distinct possibility” we will sustain “some loss” if the deficiencies are not corrected.

Assets classified

as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic

that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions,

and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “un-collectible”

and of such little value their continuance as assets without the establishment of a specific loss reserve is not warranted.

an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention.

such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the

asset may deteriorate, adversely affecting the repayment of the asset.

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

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

We are required to establish

an allowance for loan losses in an amount deemed prudent by management for loans classified substandard or doubtful, as well as for other

problem loans.

General allowances represent loss allowances which have been established to recognize the inherent losses associated with

lending activities, but which, unlike impairment allowances, have not been allocated to particular problem assets.

When we classify problem

assets, we are required to determine whether or not impairment exists.

A loan is impaired when, based on current information and events,

it is probable that Magyar Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

it is determined that impairment exists, a specific allowance for loss is established.

For collateral-dependent loans, the loan is reduced

by the impairment amount via a reduction to the loan and the allowance for loan loss.

Our determination as to the classification of our

assets and the amount of our valuation allowances is subject to review by the NJDBI and the FDIC, which can direct us to establish additional

loss allowances.

The loan portfolio is reviewed

on a regular basis to determine whether any loans require classification in accordance with applicable regulations.

Not all classified

assets constitute non-performing assets.

Allowance for Loan Losses

Our allowance for loan

losses is maintained at a level management deems necessary to absorb loan losses that are both probable and reasonably estimable.

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

in the nature and volume of loan activities.

along with the general economic and real estate market conditions.

Management further evaluates

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

that enable for the management to establish an adequate reserve.

The loan portfolio are analyzed on a continuous basis and periodically

by management.

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

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

However, this analysis process is inherently subjective,

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

Although we believe we have

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

in the future differ from the current environment.

In June 2016, the Financial

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

ASU 2016-13 significantly changes how entities

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

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

and require entities to record allowances for loan loss.

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

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

duration of each respective loan.

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

how it determines the allowance for loan losses.

In addition, as an integral part

of their examination process, the NJDBI and the FDIC will periodically review our allowance for loan losses.

Such agencies may require

us to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

The provision for loan losses

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

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

with $628.9 million at September 30, 2022.

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

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

Allowance for Loan Losses.

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

We held three properties consisting

of two residential single-family homes and one commercial real estate property totaling $3.7 million at September 30, 2024, an increase

of $3.4 million, or 1035.7% from $328 thousand at September 30, 2023.

Allowance for Credit Losses

assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses

that is deducted from the amortized cost basis.

The allowance for credit losses (“ACL”) reflects management's current estimate

of credit losses that are expected to occur over the remaining life of a financial asset.

The income statement will be affected for the

measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit

losses that have taken place during the period.

ACL on Loans.

Company maintains its ACL on loans at a level that management believes to be appropriate to absorb estimated credit losses as of the date

of the Consolidated Balance Sheet.

The ACL is a valuation reserve established and maintained by charges against income.

Loans, or portions

thereof, are charged-off against the ACL when they are deemed uncollectible.

The ACL is an estimate of expected credit losses that considers

our historical loss experience, the weighted average expected lives of loans, current economic conditions and forecasts of future economic

The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

methodology for determining the ACL has two main components:

evaluation of expected credit losses for certain groups of homogeneous loans

that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The ACL is measured

on a collective (pool) basis when similar characteristics exist.

The Company’s loan portfolio is segmented by loan types that have

similar risk characteristics and behave similarly during economic cycles.

The ACL for individual loans

begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other

pooled loans and, therefore, should be individually assessed.

We individually evaluate loans that meet the following criteria:

it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided

substantially through the operation or sale of the collateral, or (3) when it is determined by management that a loan does not share similar

risk characteristics with other loans.

Credit loss estimates are calculated based on the following three acceptable methods for measuring

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

loan’s observable market price;

or (3) the fair value of the collateral when the loan is collateral dependent.

Our individual loan

evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent.

Collateral values

are reduced to consider expected disposition costs when appropriate.

A charge-off is recorded when the estimated fair value of the loan

is less than the loan balance.

ACL on Unfunded Loan

The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk

via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank.

The ACL on unfunded loan

commitments is included in accounts payable and other liabilities in the Company’s Consolidated Balance Sheets and is adjusted through

credit loss expense.

The estimate includes consideration of the likelihood that funding will occur, the amount of funding that will occur

and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The following table sets forth

activity in our allowance for credit losses on loans for the years indicated.

September 30,

1 unchanged sentence

Balance at beginning of year

Effect of adopting ASU 2016-13

Net charge-offs (recoveries):

One-to four-family residential

Commercial real estate

Commercial business

Total net charge-offs (recoveries)

Provision for loan losses

Provision for credit losses

Balance at end of year

Net charge-offs (recoveries) to average loans outstanding

Allowance for loan losses to total non-accrual assets

Allowance for loan losses to total loans

The following table presents the

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

loan category.

As a Percentage

of Average Loans

September 30, 2023

(Dollars in thousands)

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total net charge-offs

Allocation of Allowance

for Loan Losses.

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

allowance to the total allowance at the dates indicated.

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

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

In Category to

Allowance for credit loss to total loans receivable

Allocation of ACL on

The following table sets forth the ACL on loans allocated by loan category and the percent of the allowance to the total

allowance at the dates indicated, as well as additional information with respect to net loan charge-offs by category.

The ACL on loans

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

the allowance to absorb losses in other categories.

At of For the Year Ended September 30, 2024

At of For the Year Ended September 30, 2023

off to Average

(Dollars in thousands)

At September 30, 2023

One-to four-family residential

Commercial real estate

Home equity lines of credit

Commercial business

Total allowance for loan losses

At September 30, 2022

One-to four-family residential

Commercial real estate

Home equity lines of credit

Construction and land

Home equity loans and lines of credit

Commercial business

Total allowance for loan losses

Our Board of Directors

has adopted our Investment Policy.

Total allowance for credit losses

Our Board of Directors has

adopted our Investment Policy.

This policy determines the types of securities in which we may invest.

21 unchanged sentences

must consider the effect of an investment or sale on our risk-based capital and prospects for yield and appreciation.

At September 30, 2023,

our securities portfolio totaled $96.0 million, or 10.6% of our total assets.

Securities are classified as held-to-maturity or available-for-sale

when purchased.

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

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

The Company did not hold any investment securities

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

Government Agency

and Government-Sponsored Enterprise Obligations.

At September 30, 2023, our U.S.

Government Agency and Government-Sponsored Enterprise

Obligations totaled $89.3 million, or 93.0% of our total securities portfolio.

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

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

While these securities generally provide lower yields than other securities

in our securities portfolio.

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

deposits or borrowings.

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

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

Mortgage-Backed Securities.

We purchase mortgage-backed pass through and collateralized mortgage obligation (“CMO”) securities insured or guaranteed

by Fannie Mae, Freddie Mac or Ginnie Mae.

To a lesser extent, we also invest in mortgage-backed securities issued or sponsored by private

At September 30, 2023, our mortgage-backed securities, including CMOs, totaled $66.0 million, or 68.8%, of our total securities

Included in this balance was a $207,000 mortgage-backed security issued by a private issuer.

Our policy is to limit purchases

of privately issued mortgage-backed securities to non-high risk securities rated “A” or higher by a nationally recognized

credit rating agency.

High risk securities generally are defined as those exhibiting significantly greater volatility of estimated average

life and price due to changes in interest rates than 30-year fixed rate securities.

Mortgage-backed pass through

securities are created by pooling mortgages and issuing a security with an interest rate less than the interest rate on the underlying

Mortgage-backed pass through securities represent a participation interest in a pool of single-family or multi-family mortgages.

As loan payments are made by the borrowers, the principal and interest portion of the payment is passed through to the investor as received.

CMOs are also backed by mortgages, however they differ from mortgage-backed pass through securities because the principal and interest

payments on the underlying mortgages are structured so that they are paid to the security holders of pre-determined classes or tranches

at a faster or slower pace.

The receipt of these principal and interest payments, which depends on the estimated average life for each

class, is contingent on a prepayment speed assumption assigned to the underlying mortgages.

Variances between the assumed payment speed

and actual payments can significantly alter the average lives of such securities.

Mortgage-backed securities and CMOs generally yield

less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements.

However, mortgage-backed

securities are usually more liquid than individual mortgage loans and may be used to collateralize borrowings and other liabilities.

Mortgage-backed securities

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

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

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

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

Our mortgage-backed securities

portfolio had a weighted average yield of 2.24% at September 30, 2023.

The estimated fair value of our mortgage-backed securities portfolio

at September 30, 2023 was $56.6 million, which was $11.3 million less than the amortized cost.

Mortgage-backed securities in Magyar Bank’s

portfolio do not contain sub-prime mortgage loans.

State and municipal

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

Corporate and Other

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

Our Investment

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

by a nationally recognized rating service.

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

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

Equity Securities.

At September 30, 2023, we held no equity securities other than $2.3 million in Federal Home Loan Bank of New York (“FHLBNY”)

The investment in FHLBNY stock is classified as a restricted security, carried at cost and evaluated for impairment.

Equity securities

are not insured or guaranteed investments and are affected by market interest rates and stock market fluctuations.

Such investments other

than the FHLBNY are carried at their fair value and fluctuations in the fair value of such investments, including temporary declines in

value, directly affect our net capital position.

Portfolio Maturities and

Portfolio Maturities

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

10 unchanged sentences

September 30, 2024

(Dollars in thousands)

Obligations of U.S.

22 unchanged sentences

deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Our deposits are generated primarily from customers within our primary market area.

We offer a selection of deposit accounts, including

demand accounts, NOW accounts, money market accounts, savings accounts, retirement accounts and certificates of deposit.

Deposit account

terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and

the interest rate.

deposits are generated primarily from customers within our primary market area.

We offer a selection of deposit accounts, including demand

accounts, NOW accounts, money market accounts, savings accounts, retirement accounts and certificates of deposit.

Deposit account terms

vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest

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

At September 30, 2023, we had $13.8

million in brokered deposits.

Interest rates, maturity

terms, service fees and withdrawal penalties are established on a periodic basis.

Deposit rates and terms are based primarily on current

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

competitors and growth goals.

Personalized customer service,

long-standing relationships with customers and an active marketing program are relied upon to attract and retain deposits.

The flow of deposits is

influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition.

The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand.

on experience, we believe that our deposits are relatively stable.

However, the ability to attract and maintain deposits, and the rates

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

At September 30, 2023, $104.7 million,

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

At September 30, 2024, we had $29.6 million in brokered

The flow of deposits is influenced

significantly by general economic conditions, changes in money market and other prevailing interest rates and competition.

of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand.

Based on experience,

we believe that our deposits are relatively stable.

However, the ability to attract and maintain deposits, and the rates paid on these

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

The following table sets forth

9 unchanged sentences

At September 30, 2024 and

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

2023, the aggregate deposits in amounts greater than $250 thousand, which is the maximum amount for federal deposit insurance, were $380.0

million and $429.9 million, respectively.

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

at September 30, 2023.

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

deposit insurance.

The estimated amounts of deposits that were neither insured nor collateralized were $114.7 million

and $109.3 million at September 30, 2024 and 2023, respectively.

We had no deposits that were uninsured for any reason other than being

in excess of the maximum amount for federal deposit insurance.

The following table sets forth

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

the maturity of certificates of deposits with individual account balances exceeding $250 thousand at September 30, 2024.

September 30,

5 unchanged sentences

Over twelve months

At September 30, 2023 $43.8 million

of our certificates of deposit had maturities of one year or less.

We monitor activity on these accounts and, based on historical experience

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

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

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

The borrowings represent 3.7% of total liabilities and had a

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

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

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

At September 30, 2024, $99.2

million of our certificates of deposit had maturities of one year or less.

We monitor activity on these accounts and, based on historical

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

Subsidiary Activities

Company's only subsidiary is the Bank.

The Bank holds three subsidiaries as described below.

Magyar Investment Company

3 unchanged sentences

securities maintained at Magyar Bank.

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 Magyar Bank’s main office.

In 2006, Magyar Bank acquired a 100% interest in Hungaria Urban Renewal, LLC, which has

no other business other than owning Magyar Bank’s main office site.

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 Magyar Bank’s main office.

In 2006, Magyar Bank acquired a 100% interest in Hungaria Urban Renewal, LLC, which has no

other business other than owning Magyar Bank’s main office site.

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

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

Magyar Service Corporation, a

New Jersey corporation, is a wholly owned subsidiary of Magyar Bank.

Magyar Service Corporation,

a New Jersey corporation, is a wholly owned subsidiary of Magyar Bank.

Magyar Service Corporation offers Magyar Bank customers and others

a complete range of non-deposit investment products and financial planning services, including insurance products, fixed and variable

a complete range of non-deposit investment products and

financial planning services, including insurance products, fixed and variable

annuities, and retirement planning for individual and commercial customers.

Employees and Human

Capital Resources

Employees and Human Capital

At September 30, 2024 we employed

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

91 full-time employees and 10 part-time employees.

Our employees are not represented by any collective bargaining group.

believes that we have good relations with our employees.

We encourage and support the growth

and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization.

Continual learning and career development is advanced through annual performance and development conversations with employees, internally

developed training programs, customized corporate training engagements and seminars, conferences, and other training events employees

are encouraged to attend in connection with their job duties.

The safety, health and wellness

of our employees is a top priority.

The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while

continuing successful operations.

Through teamwork and the adaptability of our management and staff, our branches and operations centers

remained open and in-person during the year ended September 30, 2023.

All employees are asked not to come to work when they experience

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

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

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

Employee retention helps us operate

efficiently and achieve one of our business objectives, which is being a high-level service provider.

We believe our commitment to living

out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals,

offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees.

In addition, nearly

all of our employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns associate

Management believes

that we have good relations with our employees.

Employee retention helps us

operate efficiently and achieve one of our business objectives, which is being a high-level service provider.

We believe our commitment

to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career

goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees.

nearly all of our employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns associate

and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our associates.

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2024, 35% of our current staff had been with us for ten years or more.

FEDERAL AND STATE TAXATION

Federal Taxation

Magyar Bancorp, Inc.

and Magyar Bank are subject to federal income taxation in the same general manner as other corporations, with

some exceptions discussed below.

The most recent audit of Magyar Bank’s federal tax returns by the Internal Revenue Service was

for the period ended September 30, 2015.

The audit did not result in any material adjustments to the Company’s tax returns or the

Company’s financial statements.

The following discussion of federal taxation is intended only to summarize certain pertinent federal

income tax matters and is not a comprehensive description of the tax rules applicable to Magyar Bancorp, Inc.

or Magyar Bank.

Method of Accounting .

For federal income tax purposes, Magyar Bancorp, Inc.

reports its income and expenses on the accrual method of accounting and uses

a tax year ending September 30th for filing its federal and state income tax returns.

Bad Debt Reserves .

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

Net Operating Loss Carryovers .

At September 30, 2023, a financial institution was able to carry back net operating losses to the preceding five taxable years and

forward to the succeeding 20 taxable years.

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

available to offset future taxable income for tax reporting purposes.

Corporate Dividends-Received

Magyar Bancorp, Inc.

may exclude from its federal taxable income 100% of dividends received from Magyar Bank

as a wholly owned subsidiary.

The corporate dividends-received deduction is 65% when the dividend is received from a corporation having

at least 20% of its stock owned by the recipient corporation.

A 50% dividends-received deduction is available for dividends received from

corporations owned less than 20% by the recipient corporation.

State Taxation

New Jersey State

The income of savings institutions in New Jersey, which is calculated based on federal taxable income, subject to certain

adjustments, is subject to New Jersey tax.

For the tax years ending after July 31, 2019, New Jersey tax law requires members of an affiliated

group where there is common ownership to calculate their corporation business tax on a combined or consolidated basis.

Magyar Bancorp,

Inc., Magyar Bank, Magyar Service Corporation, and Magyar Investment Company have filed a New Jersey tax return on a consolidated basis

for the year ended September 30, 2022 and intend to file on a consolidated basis for the year ended September 30, 2023.

Magyar Bancorp, Inc., Magyar

Bank, Magyar Service Corporation, and Magyar Investment Company are not currently under audit with respect to their New Jersey income

Their respective state tax returns have not been audited within the past three years.

Delaware and New

Jersey State Taxation.

As a Delaware holding company not earning income in Delaware, Magyar Bancorp, Inc.

is exempt from Delaware

corporate income tax, but is required to file annual returns and pay annual fees and a franchise tax to the State of Delaware.

Magyar Bancorp, Inc.

to New Jersey corporate income taxes in the same manner as described above for Magyar Bank.

SUPERVISION AND REGULATION

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

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

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

Magyar Bank and Magyar

Bancorp, Inc.

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

rules and regulations of the Federal Reserve Bank (the “FRB”) under the BHCA the provisions of the New Jersey Banking Act

of 1948 (the “New Jersey Banking Act”), and to the regulations of the Commissioner under the New Jersey Banking Act applicable

to bank holding companies.

Magyar Bank and Magyar Bancorp, Inc.

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

and regulations of the FRB and the Commissioner.

Magyar Bancorp, Inc.

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

and Exchange Commission under the federal securities laws.

Any change in such laws

and regulations, whether by the Commissioner, the FDIC, the Federal Reserve Board or through legislation, could have a material adverse

impact on Magyar Bank and Magyar Bancorp, Inc.

is required to file certain reports with, and otherwise comply with,

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

Any change in such laws and

regulations, whether by the Commissioner, the FDIC, the Federal Reserve Board or through legislation, could have a material adverse impact

on Magyar Bank and Magyar Bancorp, Inc.

and their operations and stockholders.

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Act and its related regulations.

Under these laws and regulations, savings banks, including Magyar Bank, generally may invest in:

● real estate mortgages;

● consumer and commercial loans;

● specific types of debt securities, including certain corporate debt securities and obligations of federal,

state and local governments and agencies;

● certain types of corporate equity securities;

● certain other assets.

A savings bank may also

make other investments pursuant to “leeway” authority that permits investments not otherwise permitted by the New Jersey Banking

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

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

New Jersey savings banks may exercise those

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

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

by regulation or by specific authorization is required.

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

law and regulations.

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

Loans-to-One-Borrower

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borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the bank’s capital funds.

bank may lend an additional 10% of the bank’s capital funds if secured by collateral meeting the requirements of the New Jersey

bank may lend an additional 10% of the bank’s capital funds if secured

by collateral meeting the requirements of the New Jersey

Magyar Bank currently complies with applicable loans-to-one-borrower limitations.

Under the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital stock only to the extent that the

payment of the dividend would not impair the capital stock of the savings bank.

In addition, a stock savings bank may not pay a dividend

unless the savings bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively,

the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital stock only to the extent that the payment

of the dividend would not impair the capital stock of the savings bank.

In addition, a stock savings bank may not pay a dividend unless

the savings bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively,

the payment of the dividend would not reduce the surplus.

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asset above the amount necessary to meet its minimum risk-based capital requirements.

In assessing an institution’s

capital adequacy, the FDIC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority

to establish higher capital requirements for individual institutions where deemed necessary.

At September 30, 2024, Magyar

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ratio was 11.11%.

Legislation enacted in 2018 required

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

assets (the “Community Bank Leverage Ratio”).

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

$10 billion of assets that meet certain other requirements.

Institutions with capital meeting or exceeding the specified requirements

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

requirements, including the risk-based requirements.

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

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

A qualifying institution may opt in and out of the Community

Bank Leverage Ratio framework on its quarterly call report.

An institution that ceases to meet any qualifying criteria is provided with

a two-quarter grace period to either comply with the Community Bank Leverage Ratio requirements or comply with the general capital regulations,

including the risk-based capital requirements.

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

Prompt Corrective

The FDIC Improvement Act established a system of prompt corrective action to resolve the problems of undercapitalized

institutions.

The FDIC has adopted regulations to implement the prompt corrective action legislation.

The regulations were amended to

incorporate the previously mentioned increased regulatory capital standards that were effective January 1, 2015.

Prompt Corrective Action.

Federal bank regulatory authorities are required to take “prompt corrective action” with respect to institutions that do not

meet minimum capital requirements.

For these purposes, the applicable statute establishes five capital categories.

An institution is deemed

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

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

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

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

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and dividend restrictions as well as other discretionary actions by the regulator.

The FDIC is required, with

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

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

the occurrence of certain events, including:

● insolvency, or when the assets of the bank are less than its liabilities to depositors and others;

● substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices;

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

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

in the normal course of business;

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

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

Activity Restrictions

on State-Chartered Banks.

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

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

specifically exempted by law or consented to by the FDIC.

Before making a new investment

or engaging in a new activity that is not permissible for a national bank or otherwise permissible under federal law or the FDIC regulations,

an insured bank must seek approval from the FDIC to make such investment or engage in such activity.

The FDIC will not approve the activity

unless the bank meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to

Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a “financial

subsidiary” are subject to additional restrictions.

Federal law permits a state-chartered

savings bank to engage, through financial subsidiaries, in any activity in which a national bank may engage through a financial subsidiary

and on substantially the same terms and conditions.

In general, the law permits a national bank that is well-capitalized and well-managed

to conduct, through a financial subsidiary, any activity permitted for a financial holding company other than insurance underwriting,

insurance investments, real estate investment or development or merchant banking.

The total assets of all such financial subsidiaries

may not exceed the lesser of 45% of the bank’s total assets or $50 million.

The bank must have policies and procedures to assess

the financial subsidiary’s risk and protect the bank from such risk and potential liability, must not consolidate the financial

subsidiary’s assets with the bank’s and must exclude from its own assets and equity all equity investments, including retained

earnings, in the financial subsidiary.

State-chartered savings banks may retain subsidiaries in existence as of March 11, 2000 and may

engage in activities that are not authorized under federal law.

Although Magyar Bank meets all conditions necessary to establish and engage

in permitted activities through financial subsidiaries, it has not yet determined to engage in such activities.

Federal Home Loan

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

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

The federal home loan banks provide a central

credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending.

Magyar Bank, as

a member of the FHLBNY, is required to purchase and hold shares of capital stock in the FHLBNY in specified amounts.

Federal Home Loan Bank

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

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

The federal home loan banks provide a central credit

facility primarily for member thrift institutions as well as other entities involved in home mortgage lending.

Magyar Bank, as a member

of the FHLBNY, is required to purchase and hold shares of capital stock in the FHLBNY in specified amounts.

As of September 30, 2024,

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

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

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

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

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

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

the base scale without notice and comment rulemaking.

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

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

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

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deposit insurance.

Transactions with

Affiliates of Magyar Bank.

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

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

An affiliate includes, among other things,

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

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

affiliates are subject to certain quantitative and collateral requirements.

In this regard, covered transactions between an insured depository

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

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

Applicable law and FDIC regulations generally limit the ability of an insured depository institution to accept,

renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” or, upon application

to and a waiver from the FDIC, “adequately capitalized.” Less-than-well-capitalized banks also are subject to restrictions

on the interest rates that they may pay on deposits.

The characterization of deposits as “brokered” may result in the imposition

of higher deposit assessments on such deposits.

The FDIC’s brokered deposit regulations provide a limited exception for reciprocal

deposits for banks that are well managed and well capitalized (or adequately capitalized and have obtained a waiver from the FDIC as mentioned

Under the limited exception, qualified banks are able to exempt from treatment as “brokered” deposits up to $5 billion

or 20% of the institution’s total liabilities in reciprocal deposits.

Transactions with Affiliates

of Magyar Bank.

Magyar Bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B

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

An affiliate includes, among other things, a company

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

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

subject to certain quantitative and collateral requirements.

In this regard, covered transactions between an insured depository institution

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

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

Collateral of specific

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

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

In connection with

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

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

the CRA regulations.

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

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

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

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

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

will be applicable on January 1, 2027.

An institution’s

failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities.

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

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

In connection with its

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

In 2023, the FDIC, the

FRB, and the Office of the Comptroller of the Currency issued a final rule to strengthen and modernize the CRA regulations.

final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion

as of December 31 in either of the prior two calendar years will be an “intermediate bank.” The agencies will evaluate intermediate

banks under the Retail Lending Test and either the current community development test, referred to in the final rule as the Intermediate

Bank Community Development Test, or, at the bank’s option, the Community Development Financing Test.

The applicability date for

the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1,

An institution’s failure

to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities.

We received an “Outstanding”

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

The Bank Secrecy Act

and USA PATRIOT Act .

The Bank Secrecy Act (“BSA”) and the Uniting and Strengthening America by Providing Appropriate

Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) require Magyar Bank to implement a compliance

program to detect and prevent money laundering, terrorist financing, and illicit crime.

Together, the BSA and USA PATRIOT Act require

Magyar Bank to implement internal controls, conduct customer due diligence, maintain records, and file reports.

The USA PATRIOT Act also

required the federal banking agencies to take into consideration the effectiveness of controls designed to combat money laundering activities

in determining whether to approve a merger or other acquisition application.

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

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

We have established policies,

procedures and systems designed to comply with the BSA, USA PATRIOT Act, and regulations implemented thereunder.

Cyber Security .

The federal banking agencies have adopted rules providing for new notification requirements for banking organizations and their service

providers for significant cybersecurity incidents.

Specifically, the new rules require a banking organization to notify its primary federal

regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident”

rising to the level of a “notification incident” has occurred.

Notification is required for incidents that have materially

affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver

banking products and services, or the stability of the financial sector.

Service providers are required under the rule to notify affected

banking organization customers as soon as possible when the

provider determines that it has experienced a computer-security incident that

has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.

Consumer Protection .

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

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

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

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

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

Further, the Consumer Financial

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

disclosures to consumers and draft model disclosure forms.

Failure to comply with consumer protection laws and regulations can subject

financial institutions to enforcement actions, fines and other penalties.

The failure to comply with these laws could result in enforcement

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

Mortgage Reform .

The Dodd-Frank Act prescribes certain standards that mortgage lenders must consider before making a residential mortgage loan, including

verifying a borrower’s ability to repay such mortgage loan, and allows borrowers to assert violations of certain provisions of TILA

as a defense to foreclosure proceedings.

Under the Dodd-Frank Act, prepayment penalties are prohibited for certain mortgage transactions

and creditors are prohibited from financing insurance policies in connection with a residential mortgage loan or home equity line of credit.

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

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

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

for negative amortization loans and hybrid adjustable-rate mortgages.

The Economic Growth Act included provisions that ease certain requirements

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

Credit Transactions Act of 2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate

Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts.

These laws and regulations mandate certain

disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making

loans, collecting and servicing loans and providing other services.

Further, the Consumer Financial Protection Bureau has broad authority

to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain disclosures to consumers and draft

model disclosure forms.

Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement

actions, fines and other penalties.

The failure to comply with these laws could result in enforcement actions by the federal banking agencies,

as well as other federal regulatory agencies and the Department of Justice.

Privacy Regulations .

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has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

Loans to a Bank’s Insiders

Loans to a Bank’s

Federal Regulation.

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

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

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

Federal regulation also requires that any proposed

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

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

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

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

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

of the officer’s children and certain loans secured by the officer’s residence, may not exceed the greater of $25 thousand

or 2.5% of the bank’s unimpaired capital and surplus, and in no event more than $100 thousand.

Federal regulation also requires

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

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

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

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

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

An exception is made for extensions

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The New Jersey

Banking Act also provides that a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions

Banking Act also provides that

a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions

of the New Jersey Banking Act.

Federal Reserve System

FRB regulations require all depository

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

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

Savings banks, such as Magyar Bank, are

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

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

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

the liquidity needs of the institution.

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

Open Market Committee’s federal funds target rate.

The Bank Secrecy Act and USA

The Bank Secrecy Act (“BSA”)

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

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

and illicit crime.

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

maintain records, and file reports.

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

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

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

of the application process.

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

regulations implemented thereunder.

Savings banks, such as Magyar

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

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

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

to meet the liquidity needs of the institution.

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

Federal Open Market Committee’s federal funds target rate.

Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing

improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures

pursuant to the securities laws.

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

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

Sarbanes-Oxley Act is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties

at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the

securities laws.

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

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

Holding Company Regulation

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

Under the prompt corrective action provisions

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

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

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

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own or control more than 5% of any class of voting shares of such bank or bank holding company.

A bank holding company is required

to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for

the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12

months, will be equal to 10% or more of the company’s consolidated net worth.

The FRB may disapprove such a purchase or redemption

if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, FRB order or

directive, or any condition imposed by, or written agreement with, the FRB.

Such notice and approval is not required for a bank holding

company that would be treated as “well capitalized” under applicable regulations of the FRB, that has received a composite

“1” or “2” rating, as well as a “satisfactory” rating for management, at its most recent bank holding

company inspection by the FRB, and that is not the subject of any unresolved supervisory issues.

In addition, a bank holding company

that does not elect to be a financial holding company under federal regulation, is generally prohibited from engaging in, or acquiring

direct or indirect control of any company engaged in non-banking activities.

One of the principal exceptions to this prohibition is for

activities found by the FRB to be so closely related to banking or managing or controlling banks as to be permissible.

Some of the principal

activities that the FRB has determined by regulation to be so closely related to banking as to be permissible are:

● making or servicing loans;

● performing certain data processing services;

● providing discount brokerage services, or acting as fiduciary, investment or financial advisor;

● leasing personal or real property;

● making investments in corporations or projects designed primarily to promote community welfare;

● acquiring a savings and loan association.

Bank holding companies

that elect to be a financial holding company may engage in activities that are financial in nature or incident to activities which are

financial in nature, including investment banking and insurance underwriting.

Magyar Bancorp, Inc.

has not elected to be a financial holding

company, although it may seek to do so in the future.

Bank holding companies may elect to become a financial holding company if:

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

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

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

its most recent examination;

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

holding company.

Under federal law, depository

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if it ever acquired as a separate subsidiary a depository institution in addition to Magyar Bank.

In connection with the

mutual-to-stock conversion of Magyar Bancorp, MHC, “eligible account holders” and “supplemental eligible account

holders” received an interest in liquidation accounts maintained by the Company and the Bank in an aggregate amount equal to

(a) Magyar Bancorp, MHC’s ownership interest in the Company’s total stockholders’ equity as of the date of the

latest Statement of Balance Sheet included in the offering prospectus for the conversion, plus (b) the value of the net assets of

Magyar Bancorp, MHC as of the date of the latest Statement of Balance Sheet of Magyar Bancorp, MHC before the consummation of

the conversion (excluding its ownership of the Company).

The Company and the Bank hold the liquidation accounts for the benefit of

eligible account holders and supplemental eligible account holders who continue to maintain deposits in the Bank after the

The liquidation accounts are intended to preserve for eligible account holders and supplemental eligible account holders

who continue to maintain their deposit accounts with the Bank a liquidation interest in the residual net worth, if any, of the Bank

(after the payment of all creditors, including depositors to the full extent of their deposit accounts) in the event of a

liquidation of (a) the Company and the Bank or (b) the Bank .

New Jersey Regulation.

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under the Securities Exchange Act of 1934.

Not required for smaller reporting

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

What changed 10-K

Item 1. Business