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Item 8. Financial Statements and Supplementary Data

2025-12-19 compared with 2024-12-19 · 1196 added, 1547 removed, 564 unchanged (83% of the section changed)

Financial Statements and Supplementary Data

Statements and Supplementary Data

Consolidated Financial Statements:

6 unchanged sentences

Notes to Consolidated Financial Statements 39

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board

of Directors of Magyar Bancorp, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors

of Magyar Bancorp, Inc.

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheets of Magyar Bancorp, Inc.

We have audited the accompanying consolidated

balance sheets of Magyar Bancorp, Inc.

and subsidiary (the “Company”) as of September 30, 2025 and 2024;

related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then

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

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the

results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in

the United States of America.

Change in Accounting Principle

As discussed in Note B to the consolidated

financial statements, the Company changed its method of accounting for credit losses effective October 1, 2023, due to the adoption of

Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses .

the related consolidated

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

and the related

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

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations

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

Basis for Opinion

These financial statements are the

responsibility of the Company’s management.

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

based on our audits.

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

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

federal securities laws and the applicable rules

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

We conducted our audits in

accordance with the standards of the PCAOB.

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

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

The Company is not required to

have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required

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

of the Company’s internal control over financial reporting.

These financial statements are the responsibility

of the Company’s management.

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

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

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

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

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

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

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

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

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

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

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

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

respond to those risks.

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

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

evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess

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

to those risks.

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

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

the overall presentation of the financial statements.

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

Critical Audit Matters

The critical audit matters communicated

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

to the Audit Committee and that:

The critical audit matters communicated below

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

the Audit Committee and that:

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

and (2) involve

our especially challenging, subjective, or complex judgments.

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

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

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

Allowance for Credit Losses (ACL)

– Qualitative Adjustments

and (2) involve our

especially challenging, subjective, or complex judgments.

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

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

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

Allowance for Credit Losses (ACL) – Qualitative

Description of the Matter

The Company’s loan portfolio

totaled $780.2 million as of September 30, 2024, and the associated ACL was $7.5 million.

As discussed in Notes B and E to the consolidated

financial statements, determining the amount of the ACL requires significant judgment about the expected future losses.

The ACL calculation

is based on an average charge-off model, to identify a baseline expected loss reserve, which is then adjusted for certain qualitative

Management applies these qualitative adjustments to the baseline reserve, to reflect changes in the environment, both internal

and external, that are different from the conditions that existed during the historical loss calculation period.

We identified these qualitative

adjustments within the ACL as a critical audit matter because they involve a high degree of subjectivity.

While the determination of these

qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality

and magnitude of adjustments are highly subjective.

How we addressed the matter in our

The primary procedures we performed

to address this critical audit matter included:

● Testing the design, implementation, and operating effectiveness of internal controls over the calculation

of the allowance for credit losses, including the accuracy of inputs into significant factor adjustments.

● Testing the completeness and accuracy of the significant data points that management uses in their evaluation

of significant qualitative adjustments.

● Testing the accuracy of other significant inputs into the calculation including loan balances, historical

charge-off and recovery data, and expected loan terms.

● Evaluating the directional consistency and magnitude of management’s conclusions regarding basis

points applied (whether positive or negative), based on the trends identified in the underlying data.

● Testing the clerical accuracy of the application of the qualitative adjustments to the loan segments within

the ACL calculation.

We have served as the Company’s

auditor since 2023.

Snodgrass, P.C.

The Company’s loan portfolio totaled $857.4

million as of September 30, 2025, and the associated ACL was $8.4 million.

As discussed in Notes B and E to the consolidated financial

statements, determining the amount of the ACL requires significant judgment about the expected future losses.

The ACL calculation is based

on an average charge-off model, to identify a baseline expected loss reserve, which is then adjusted for certain qualitative conditions.

Management applies these qualitative adjustments to the baseline reserve, to reflect changes in the environment, both internal and external,

that are different from the conditions that existed during the historical loss calculation period.

We identified these qualitative adjustments within

the ACL as a critical audit matter because they involve a high degree of subjectivity.

While the determination of these qualitative adjustments

includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude

of adjustments are highly subjective.

How we addressed the matter in our audit

The primary procedures we performed to address

this critical audit matter included:

the design, implementation, and operating effectiveness of internal controls over the calculation of the allowance for credit losses,

including the accuracy of inputs into significant factor adjustments.

the completeness and accuracy of the significant data points that management uses in their evaluation of significant qualitative adjustments.

the accuracy of other significant inputs into the calculation including loan balances, historical charge-off and recovery data, and expected

the directional consistency and magnitude of management’s conclusions regarding basis points applied (whether positive or negative),

based on the trends identified in the underlying data.

the clerical accuracy of the application of the qualitative adjustments to the loan segments within the ACL calculation.

We have served as the Company’s auditor

Cranberry Township, Pennsylvania

3 unchanged sentences

Consolidated Balance Sheets

(In Thousands, Except Share

and Per Share Data)

(In Thousands, Except Share and Per Share Data)

September 30,

32 unchanged sentences

Total liabilities and stockholders’ equity

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

The accompanying notes are

an integral part of these consolidated financial statements.

MAGYAR BANCORP, INC.

1 unchanged sentence

Consolidated Statements of Income

(In Thousands, Except Share

and Per Share Data)

(In Thousands, Except Share and Per Share Data)

September 30,

8 unchanged sentences

Provision for credit losses-loans

Recovery of credit losses-unfunded commitments

Recovery for credit losses-unfunded commitments

Total provision for credit losses

Net interest and dividend income after

provision for credit losses

Net interest and dividend income after provision for credit

Service charges

4 unchanged sentences

Gains on SBA loans

Gains on OREO

Net gains on OREO

Total other income

22 unchanged sentences

Other comprehensive income

Unrealized gain (loss) on securities available for sale

Unrealized gain on securities available for sale

Defined benefit pension plan gain

12 unchanged sentences

Dividends paid on common stock ($ 0.26 per share)

Effect of adopting ASU 2016-13

Other comprehensive income

1 unchanged sentence

ESOP shares allocated

Retirement of 112,996 treasury shares

Purchase of treasury stock

2 unchanged sentences

Dividends paid on common stock ($ 0.29 per share)

Effect of adopting ASU 2016-13

Other comprehensive income

Treasury stock used for restricted stock plan

Treasury stock used for exercised stock options

ESOP shares allocated

11 unchanged sentences

Depreciation expense

Premium amortization on investment securities, net

(Discount) premium (accretion) amortization on investment securities, net

Provision for credit losses

Provision for loss on other real estate owned

Originations of SBA loans held for sale

1 unchanged sentence

Gains on sale of SBA loans

Gains on other real estate owned

Gains on the sales of other real estate owned

Gains on the sale of premises and equipment

1 unchanged sentence

Stock-based compensation expense

Deferred income tax expense (benefit)

Deferred income tax (benefit) expense

Increase in accrued interest receivable

Income on bank owned life insurance

Decrease (increase) in other assets

Decrease in other assets

Increase in accrued interest payable

(Decrease) increase in accounts payable and other liabilities

Decrease in accounts payable and other liabilities

Net cash provided by operating activities

2 unchanged sentences

Purchases of loans receivable

Proceeds from the sale of loans receivable

Purchases of investment securities held-to-maturity

Purchases of investment securities available-for-sale

Proceeds from maturities of investment securities held-to-maturity

Principal repayments on investment securities held-to-maturity

3 unchanged sentences

Purchases of premises and equipment, net

Proceeds from the sale of premises and equipments

Investment in other real estate owned

Proceeds from the sale of premises and land

Proceeds from the sale of other real estate owned

4 unchanged sentences

Net increase in deposits

Net increase in escrowed funds

Net (decrease) increase in escrowed funds

Proceeds from long-term advances

Repayments of long-term advances

Cash dividends paid on common stock

Dividends paid on common stock

Purchase of treasury stock

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of year

7 unchanged sentences

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

MAGYAR BANCORP, INC.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

NOTE A - ORGANIZATION

The Company is a Delaware-chartered

bank holding company.

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

stock savings bank.

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

the central New Jersey area through its administrative office in New Brunswick, New Jersey and seven full-service branch offices in Middlesex

and Somerset Counties in New Jersey.

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

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

Department of Banking and Insurance (“NJDBI”).

Magyar Investment Company,

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

investment securities.

Magyar Service Corporation,

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

Magyar Service Corporation, which also operates under the

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

Hungaria Urban

Renewal, LLC is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose of

acquiring and developing the Bank’s new main office.

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

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

NOTE B - SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Basis of Financial

Statement Presentation

The accounting and

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

and predominant practices within the banking industry.

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

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

Urban Renewal, LLC.

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

The Company has evaluated

subsequent events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2024, for items that should

potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through the date these

consolidated financial statements were available to be issued.

In preparing financial

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

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

of revenues and expenses during the reporting period.

A - ORGANIZATION

Company is a Delaware-chartered bank holding company.

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

a New Jersey-chartered stock savings bank.

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

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

branch offices in Middlesex and Somerset Counties in New Jersey.

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

Governors of the Federal Reserve System.

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

and the New Jersey Department of Banking and Insurance.

Investment Company, a New Jersey investment corporation subsidiary of the Bank, was formed in 2006 for the purpose of buying, selling

and holding investment securities.

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

Magyar Service Corporation, which

also operates under the name Magyar Financial Services, receives commissions from annuity and life insurance sales referred to a licensed,

non-bank financial planner.

Urban Renewal, LLC is a Delaware limited-liability corporation established in 2002 as a qualified intermediary operating for the purpose

of acquiring and developing the Bank’s new main office.

The Bank owns a 100 % interest in Hungaria Urban Renewal, LLC, which has

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

B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America

(“US GAAP”) and predominant practices within the banking industry.

The consolidated financial statements include the accounts

of the Company and its wholly owned subsidiary, the Bank, and its wholly-owned subsidiaries Magyar Investment Company, Magyar Service

Corporation, and Hungaria Urban Renewal, LLC.

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

Company has evaluated subsequent events and transactions occurring subsequent to the consolidated balance sheet date of September 30,

2025, for items that should potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted

through the date these consolidated financial statements were available to be issued.

preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported

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

reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The principal estimates

that are particularly susceptible to significant change in the near term relate to the allowance for credit losses and the deferred tax

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

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

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

However, actual losses on specific loans, which

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

The Company records

income taxes using the asset and liability method.

principal estimates that are particularly susceptible to significant change in the near term relate to the allowance for credit losses

and the deferred tax asset.

The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans

and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market

conditions, the capability of specific borrowers to pay specific loan obligations, as well as current loan collateral values.

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

Company records income taxes using the asset and liability method.

Accordingly, deferred tax assets and liabilities:

(i) are recognized for the expected

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

(ii) are attributable to

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

and (iii) are

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

Where applicable, deferred

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

The effect on deferred tax assets

and liabilities of a change in tax rates is recognized in income tax expense

MAGYAR BANCORP, INC.

(i) are recognized

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

attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective

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

to be recovered or settled.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

in the period of enactment.

The valuation allowance is adjusted,

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

Cash and Cash

For purposes of reporting

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

months and overnight deposits.

Investment Securities

and Allowance for Credit Losses

The Company classifies

its investment securities into one of two portfolios:

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

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

The valuation

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

Cash and Cash Equivalents

purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, time deposits with original

maturities less than three months and overnight deposits.

Investment Securities and Allowance for Credit Losses

Company classifies its investment securities into one of two portfolios:

held to maturity or available for sale.

Investments in debt securities that the

Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized

Debt securities not classified as held to maturity securities are classified as available for sale securities and reported at fair

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

component of stockholders’ equity.

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

recognized in net income.

If the fair value of

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

Management evaluates all securities with unrealized

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

applicable accounting guidance.

The Company accounts for temporary impairments based upon security classification as either available

for sale or held to maturity.

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

through AOCI with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes.

Conversely, the Company

does not adjust the carrying value of “held to maturity” securities for temporary impairments, although information concerning

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

The Company accounts

for other-than-temporary impairments based upon several considerations.

First, other-than-temporary impairments on securities that the

Company has decided to sell as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery

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

If neither of these criteria apply, then the

other-than-temporary impairment is separated into credit-related and noncredit-related components.

The credit-related impairment generally

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

security fall below its amortized cost while the noncredit-related component represents the remaining portion of the impairment not otherwise

designated as credit-related.

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

other-than-temporary impairments on debt securities are recognized, net of deferred taxes, in AOCI.

Premiums and discounts

on all securities are amortized or accreted to maturity by use of the level-yield method considering the impact of principal amortization

and prepayments on mortgage-backed securities.

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

Allowance for Credit

Losses on Held-to-Maturity Securities

The Company accounts

for its held-to-maturity securities in accordance with Accounting Standards Codification 326-20, Financial Instruments – Credit

Loss – Measured at Amortized Cost , which requires that the Company measure expected credit losses on held-to-maturity securities

on a collective basis by major security type.

The estimate of expected credit losses considers historical credit loss information that

is adjusted for current economic conditions and reasonable and supportable forecasts.

The Company classifies

its held-to-maturity debt securities into the following major security types:

Investments in debt

securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and

reported at amortized cost.

Debt securities not classified as held to maturity securities are classified as available for sale securities

and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other

comprehensive income (“AOCI”) component of stockholders’ equity.

Equity securities, with certain exceptions, are measured

at fair value with changes in fair value recognized in net income.

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

Management evaluates all securities

with unrealized losses quarterly to determine if such impairments are “temporary” or “other-than-temporary” in

accordance with applicable accounting guidance.

The Company accounts for temporary impairments based upon security classification as

either available for sale or held to maturity.

Temporary impairments on “available for sale” securities are recognized, on

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

Conversely, the Company does not adjust the carrying value of “held to maturity” securities for temporary impairments.

and discounts on all securities are amortized or accreted to maturity by use of the level-yield method considering the impact of principal

amortization and prepayments on mortgage-backed securities.

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

for Credit Losses on Held-to-Maturity Securities

Company accounts for its held-to-maturity securities in accordance with Accounting Standards Codification 326-20, Financial Instruments

– Credit Losses – Measured at Amortized Cost (“ASC 326”), which requires that the Company measure expected

credit losses on held-to-maturity securities on a collective basis by major security type.

The estimate of expected credit losses considers

historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts.

Company classifies its held-to-maturity debt securities into the following major security types:

obligations of U.S.

government agencies, obligations of

government-sponsored enterprises, private label mortgage-backed securities, obligations of state and political subdivisions and corporate

Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss,

are reviewed on a quarterly basis.

Based on the credit ratings of our held-to-maturity securities and our historical experience of no

losses, the Company determined that the expected credit losses on its held-to-maturity portfolio is not significant.

MAGYAR BANCORP, INC.

government agencies,

obligations of U.S.

government-sponsored enterprises, private label mortgage-backed securities, obligations of state and political subdivisions

and corporate securities.

Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected

credit loss, are reviewed on a quarterly basis.

Based on the credit ratings of our held-to-maturity securities and our historical experience

of no losses, the Company determined that the expected credit losses on its held-to-maturity portfolio is not significant.

interest receivable on held-to-maturity securities totaling $ 188 thousand and $ 225 thousand as of September 30, 2025 and 2024, respectively,

are included within accrued interest receivable on the Company’s Consolidated Balance Sheets.

This amount is excluded from the

estimate of expected credit losses.

Generally, held-to-maturity securities are classified as nonaccrual when the contractual payment

of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or

When held-to-maturity securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Accrued interest receivable

on held-to-maturity securities totaled $ 225 thousand as of September 30, 2024 and is included within accrued interest receivable on the

Company’s Consolidated Balance Sheets.

This amount is excluded from the estimate of expected credit losses.

Generally, held-to-maturity

securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management

has serious doubts about the further collectability of principal or interest.

When held-to-maturity securities are placed on nonaccrual

status, unpaid interest credited to income is reversed against interest income.

Allowance for Credit

Losses on Available-for-Sale Securities

The Company measures

expected credit losses on available-for-sale securities when the Bank intends to sell, or when it is not more likely than not that it

will be required to sell, the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement

to sell is met, the amortized cost basis of the security is written down to fair value through income.

For available-for-sale securities

that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses

or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes

to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared

to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost

basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value

is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized

in other comprehensive income.

The allowance for credit

loss on available-for-sale securities is included within the recorded balance of securities available-for-sale on the Consolidated Balance

Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income.

Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy

or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable

on available-for-sale securities totaled $ 162 thousand as of September 30, 2024 and is included within accrued interest receivable on

the Company’s Consolidated Balance Sheets.

This amount is excluded from the estimate of expected credit losses.

Generally, available-for-sale

securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management

has serious doubts about the further collectability of principal or interest.

When available-for-sale securities are placed on nonaccrual

status, unpaid interest credited to income is reversed against interest income.

Regulatory Stock,

Federal law requires

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

according to a predetermined formula.

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

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

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

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

FHLB stock can be sold back

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

Accordingly, the FHLB restricted stock

is carried at cost, less any applicable impairment charges.

Loans and Allowance

for Credit Losses

Loans that management

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

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

Interest on loans is accrued and credited

to operations based upon the principal amounts outstanding.

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

loan losses charged to operations.

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

of the principal is unlikely.

MAGYAR BANCORP, INC.

for Credit Losses on Available-for-Sale Securities

Company measures expected credit losses on available-for-sale securities when the Bank intends to sell, or when it is not more likely

than not that it will be required to sell, the security before recovery of its amortized cost basis.

If either of the criteria regarding

intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income.

For available-for-sale

securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from

credit losses or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized

cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among

other factors.

If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from

the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is

less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to

the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance

for credit losses is recognized in other comprehensive income.

allowance for credit loss on available-for-sale securities is included within the recorded balance of securities available-for-sale on

the Consolidated Balance Sheets.

Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated

Statements of Income.

Losses are charged against the allowance when the Company believes the collectability of an available-for-sale

security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

interest receivable on available-for-sale securities totaling $ 242 thousand and $ 162 thousand as of September 30, 2025 and 2024, respectively,

are included within accrued interest receivable on the Company’s Consolidated Balance Sheets.

This amount is excluded from the

estimate of expected credit losses.

Generally, available-for-sale securities are classified as nonaccrual when the contractual payment

of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or

When available-for-sale securities are placed on nonaccrual status, unpaid interest credited to income is reversed against

interest income.

Regulatory Stock, at Cost

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

its district FHLB according to a predetermined formula.

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

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

Although FHLB stock is an equity interest

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

FHLB stock can

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

Accordingly, the FHLB restricted

stock is carried at cost, less any applicable impairment charges.

Loans and Allowance for Credit Losses

that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of

unpaid principal, adjusted for net deferred loan fees and costs, and reduced by an allowance for credit losses.

Interest on loans is

accrued and credited to operations based upon the principal amounts outstanding.

The allowance for credit losses (“ACL”)

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

Loans are charged against the allowance for credit

losses when management believes that the collectability of the principal is unlikely.

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

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

is placed on non-accrual, all previously accrued and unpaid interest is reversed.

Loan origination fees and certain direct origination

costs are deferred and amortized over the life of the related loans as an adjustment to the yield on loans receivable using the effective

interest method.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Income recognition

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

A loan is generally

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

When a loan is placed on

non-accrual, all previously accrued and unpaid interest is reversed.

Loan origination fees and certain direct origination costs are deferred

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

Allowance for Credit

Losses on Loans

The Company maintains

its allowance for credit loss on loans (“ACL”) at a level that management believes to be appropriate to absorb estimated credit

losses as of the date of the Consolidated Balance Sheet.

The Company established its allowance in accordance with the guidance included

in Accounting Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”).

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 conditions.

The determination of an appropriate

ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main

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

The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during

economic cycles.

Historical credit loss

experience is the basis for the estimate of expected credit losses.

We apply our historical loss rates to pools of loans with similar

risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method.

The remaining contractual life of the

pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments.

After consideration of the

historical loss calculation, management applies qualitative adjustments to reflect qualitative changes not already reflected in the historical

loss information.

Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the United

States Government Publishing Office.

The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s

historical loss patterns.

for Credit Losses 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 Company established its allowance in accordance with the guidance included in Accounting

Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”).

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 conditions.

The determination of an appropriate ACL is inherently

subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components:

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

credit loss experience is the basis for the estimate of expected credit losses.

We apply our historical loss rates to pools of loans

with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method.

The remaining contractual

life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments.

After consideration

of the historical loss calculation, management applies qualitative adjustments to reflect qualitative changes not already reflected in

the historical loss information.

Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained

from the United States Government Publishing Office.

The Company selected eight qualitative metrics which were correlated with the Bank

and its peer group’s historical loss patterns.

The eight qualitative metrics include:

changes in lending policies and procedures, changes in national and local

economic conditions as well as business conditions, changes in the nature, complexity, and volume of the portfolio, changes in the experience,

ability, and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in

the value of collateral securing loans, changes in or the existence of credit concentrations, and changes in the legal and/or regulatory

changes in lending policies and procedures,

changes in national and local economic conditions as well as business conditions, changes in the nature, complexity and volume of the

portfolio, changes in the experience, ability and depth of lenders and lending management, changes in the volume and severity of past

due and classified loans, changes in the value of collateral securing loans, changes in or the existence of credit concentrations;

changes in the legal and/or regulatory landscape.

The adjustments are weighted for relevance before applying to each pool of loans.

Each quarter, management reviews the recommended

adjustment factors and applies any additional adjustments based on current conditions.

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:

(1) when 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 the ACL:

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

quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on current conditions.

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:

(1) when 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 the ACL:

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

effective interest rate;

(2) the loan’s observable market price;

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

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

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

Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral

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.

The Company has elected

to exclude $ 4.6 million of accrued interest receivable on loans as of September 30, 2024 from the measurement of its ACL.

is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

Accrued interest on loans is reported

in the accrued interest receivable line on the Consolidated Statements of Balance Sheet.

Allowance for Credit

Losses on Unfunded Loan Commitments

MAGYAR BANCORP, INC.

A charge-off is recorded when the estimated

fair value of the loan is less than the loan balance.

Company has elected to exclude $ 5.3 million and $ 4.6 million of accrued interest receivable on loans as of September 30, 2025 and 2024,

respectively, from the measurement of its ACL.

When a loan is placed on non-accrual status, any outstanding accrued interest is reversed

against interest income.

Accrued interest on loans is reported in the accrued interest receivable line on the Consolidated Balance Sheets.

for Credit Losses on Unfunded Loan Commitments

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 allowance for credit losses 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.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

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 allowance for credit losses 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.

Premises and Equipment

Premises and equipment

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

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

and renewals.

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

Depreciation is computed using the straight-line method based

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

income tax purposes.

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

The Company accounts

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

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

The Company had no impaired long-lived assets at September 30, 2024 and 2023.

Depreciation is computed using the straight-line

method based upon the estimated useful lives of the related assets for financial reporting purposes and using the mandated methods by

asset type for income tax purposes.

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

of the lease.

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

impairment of long-lived assets to be held and used or to be disposed of by sale.

The Company had no impaired long-lived assets at September

30, 2025 and 2024.

Revenue Recognition

The Company recognizes

revenue in the Consolidated Statements of Income as it is earned and when collectability is reasonably assured.

The primary source of

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

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

or other similar contracts.

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

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

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

The Company’s

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

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

accounts through a third party service provider.

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

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

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

The revenue resulting from

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

Revenue from contracts

with customers included in service charges was $ 1.1 million and $ 1.6 million for the years ended September 30, 2024 and 2023, respectively.

Revenue from contracts with customers included in other operating income was $ 81 thousand and $ 89 thousand for the years ended September

Company recognizes revenue in the Consolidated Statements of Income as it is earned and when collectability is reasonably assured.

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

the effective interest method.

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

securities contracts, or other similar contracts.

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

provided or as transactions occur.

Non-interest income includes earnings on bank-owned life insurance, deposit accounts, merchant services,

ATM and debit card fees, mortgage banking activities, commercial loan prepayment penalties and other miscellaneous services and transactions.

Company’s contracts with customers in the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification 606, Revenue from Contracts with Customers (“ASC 606”) are contracts for deposit accounts and contracts

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

Both types of contracts result in non-interest income

being recognized.

The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer

fees and out-of-network ATM transaction fees, is included as a component of service charges on the Consolidated Statements of Income.

revenue resulting from non-deposit investment accounts is included as a component of other operating income on the Consolidated Statements

from contracts with customers included in service charges was $ 1.4 million and $ 1.1 million for the years ended September 30, 2025

and 2024, respectively.

For our contracts with

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

For our deposit account revenue, we receive

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

basis from our third-party service provider as services are rendered.

Other Real Estate

Real estate acquired

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

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

Adjustments to the carrying value

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

The carrying value of the individual properties is

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

on such real estate is charged to operations.

The Company accounts

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

based methodology.

As it pertains to the criteria for determining how a contract

MAGYAR BANCORP, INC.

Revenue from contracts with customers included in other operating income was $ 58 thousand and $ 81 thousand

for the years ended September 30, 2025 and 2024, respectively.

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

For our deposit account

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

payment on a monthly basis from our third-party service provider as services are rendered.

Other Real Estate Owned

estate acquired through foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the

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

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

The carrying value of the

individual property is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time

a provision for losses on such real estate is charged to operations.

Company accounts for gains on sales of other real estate owned under ASC 606, Revenue from Contracts with Customers , which uses

a principles-based methodology.

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

judgment is required in evaluating if:

(a) a commitment on the buyer’s part exists;

(b) collection is probable in circumstances

where the initial investment is minimal;

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

of the ownership.

If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control

of the asset, then a gain cannot be recognized under the new guidance.

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

Losses on the disposition of real estate,

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

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

should be accounted for

under the new guidance, judgment is required in evaluating if:

(a) a commitment on the buyer’s part exists;

(b) collection is probable

in circumstances where the initial investment is minimal;

and (c) the buyer has obtained control of the asset, including the significant

risks and rewards of the ownership.

If there is no commitment on the buyer’s part, collection is not probable or the buyer has not

obtained control of the asset, then a gain cannot be recognized under the new guidance.

Operating expenses

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

Losses on the disposition of real estate, including

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

Pension and Postretirement

The Company sponsors a

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

The qualified defined benefit

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

Accounting for pensions and

other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over

the time period each employee works.

This involves extensive use of assumptions about inflation, investment returns, mortality, turnover,

and discount rates.

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

the level of plan funding;

Pension and Postretirement Plans

Company sponsors a qualified defined benefit pension plan and a supplemental executive retirement plan (“SERP”).

The qualified

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

for pensions and other post-retirement benefits involves estimating the cost of benefits to be provided well into the future and attributing

that cost over the time period each employee works.

This involves extensive use of assumptions about inflation, investment returns, mortality,

turnover, and discount rates.

Among other factors, changes in interest rates, investment returns and the market value of plan assets

(a) affect the level of plan funding;

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

and (c) increase our future contribution requirements.

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

our net periodic pension costs and adversely affect our results of operations.

A significant increase in our contribution requirements

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

Changes in the key actuarial

assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and other postretirement

benefit plan.

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

plans and the assumptions used.

The Company and its

subsidiaries file consolidated federal and state income tax returns.

Income taxes are allocated based on the contribution of their respective

income or loss to the consolidated income tax returns.

The Company records

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

Accordingly, deferred tax assets and liabilities are

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

and liabilities and their respective tax basis.

To the extent that current available evidence about the future raises doubt about the

realization of a deferred tax asset, a valuation allowance is established.

Deferred tax assets and liabilities are measured using enacted

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

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

The Company follows

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

financial statements.

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

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

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

At September 30, 2024 and

2023, no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets.

The Company’s

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

and (c) increase our future contribution

requirements.

A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates

could increase our net periodic pension costs and adversely affect our results of operations.

A significant increase in our contribution

requirements with respect to our qualified defined benefit pension plan could have an adverse impact on our cash flow.

Changes in the

key actuarial assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and

other postretirement benefit plan.

See Note L, “Pension Plan,” and Note M, “Non-Qualified Compensation Plan”

for information on these plans and the assumptions used.

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

Income taxes are allocated based on the contribution

of their respective income or loss to the consolidated income tax returns.

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

Accordingly, deferred tax assets and

liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts

of existing assets and liabilities and their respective tax basis.

To the extent that current available evidence about the future raises

doubt about the realization of a deferred tax asset, a valuation allowance is established.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered

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

the enactment date.

Company follows the provisions of FASB ASC 740, which provides clarification on accounting for uncertainty in income taxes recognized

in an enterprise’s financial statements.

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

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

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

September 30, 2025 and 2024, no significant income tax uncertainties have been included in the Company’s Consolidated Balance Sheets.

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

Statements of Income.

No interest and penalties were recorded during the years ended September 30, 2025 and 2024.

The tax years subject to examination

by the taxing authorities are the years ended September 30, 2019 and forward.

The tax years

subject to examination by the taxing authorities are the years ended September 30, 2021 and forward.

Advertising Costs

The Company expenses

advertising costs as incurred.

Share (“EPS”)

MAGYAR BANCORP, INC.

Company expenses advertising costs as incurred.

Earnings Per Share (“EPS”)

income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common

stock outstanding for the period.

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

income per share is calculated by adjusting the weighted average common shares outstanding to reflect the potential dilution that could

occur using the treasury stock method if securities or other contracts to issue common stock, such as stock options and unvested restricted

stock, were exercised and converted into common stock.

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

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

In periods of loss,

dilution is not calculated and diluted loss per share is equal to basic loss per share.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Basic income per share

is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding

for the period.

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

Diluted income per

share is calculated by adjusting the weighted average common shares outstanding to reflect the potential dilution that could occur using

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

were exercised and converted into common stock.

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

Shares issued

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

In periods of loss, dilution

is not calculated and diluted loss per share is equal to basic loss per share.

The following table

presents a calculation of basic and diluted earnings per share (“EPS”) for the years ended September 30, 2024 and 2023.

and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.

September 30,

(Dollars in thousands, except

share and per share data)

following table presents a calculation of basic and diluted EPS for the years ended September 30, 2025 and 2024.

Basic and diluted earnings

per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.

Years Ended September 30,

(Dollars in thousands, except share and per share data)

Income applicable to common shares

Weighted average shares outstanding - basic

Potential diliutive common stock equivalents

Effect of dilutive shares

Weighted average shares outstanding - diluted

1 unchanged sentence

Earnings per share - diluted

All options were anti-dilutive

at September 30, 2024 and 2023.

options were anti-dilutive at September 30, 2024.

Comprehensive Income and Accumulated Other Comprehensive Loss

Comprehensive

Income and Accumulated Other Comprehensive Loss

Comprehensive income

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

The other items allocated to

comprehensive income, as well as the related income tax effects, for the years ended September 30, 2024 and 2023 were as follows:

September 30,

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

The other items allocated

to comprehensive income, as well as the related income tax effects, for the years ended September 30, 2025 and 2024 were as follows:

Years Ended September 30,

(In thousands)

Unrealized holding gain (loss) arising during period on:

Unrealized holding gain arising during period on:

Available-for-sale investments

3 unchanged sentences

Other comprehensive income, net

(a) All amounts are net of tax.

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

investments and 28 % for pension plan.

MAGYAR BANCORP, INC.

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

28 % for pension plan.

BANCORP, INC.

AND SUBSIDIARY

1 unchanged sentence

September 30, 2025 and 2024

Details about the reclassification

of accumulated other comprehensive loss components and the affected line item in the Consolidated Statements of Income for the years ended

September 30, 2024 and 2023 were as follows:

about the reclassification of accumulated other comprehensive loss components and the affected line item in the Consolidated Statements

of Income for the years ended September 30, 2025 and 2024 were as follows:

Amount Reclassified From

Accumulated Other Comprehensive

Affected Line Item in the Consolidated

Loss For the Year Ended September 30,

Statements of Income

Accumulated Other Comprehensive Income

For the Years Ended

September 30,

Affected Line Item in the

Consolidated Statements of Income

(In thousands)

5 unchanged sentences

Total reclassification

(1) For additional details related to the defined benefit pension plan, see Note L- Pension Plan.

The components of accumulated

other comprehensive loss at September 30, 2024 and 2023 were as follows:

(1) For additional details related to the defined benefit pension

plan, see Note L- Pension Plan.

components of accumulated other comprehensive loss for the years ended September 30, 2025 and 2024 were as follows:

September 30,

3 unchanged sentences

Total accumulated other comprehensive loss

Bank-Owned Life

The Company has purchased

Bank-Owned Life Insurance (“BOLI”) policies.

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

officers of the Bank.

Bank-Owned Life Insurance

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

BOLI involves the purchasing of life insurance by the

Company on directors and officers of the Bank.

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

The Company is the owner and

beneficiary of the policies.

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

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

Off-Balance Sheet

Credit Related Financial Instruments

In the ordinary course

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

Such financial

instruments are recorded when they are funded.

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

“Financial Instruments With Off-Balance Risk.”

Company is the owner and beneficiary of the policies.

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

and changes in the cash surrender value are recorded in other income in the Consolidated Statements of Income.

Off-Balance Sheet Credit Related Financial Instruments

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

Such financial instruments are recorded when they are funded.

The Company does not engage in the use of derivative financial

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

Segment Reporting

The Company acts as

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

and government customers.

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

and demand deposits;

segments should be aggregated into one reportable segment if the operating segments have similar qualitative characteristics:

(2) type of customer and services;

(3) the nature of the regulatory environment;

and (4) business markets and geographic

Company acts as an independent, community, financial services provider, and offers traditional banking and related financial services

to individual, business and government customers.

The Company offers a full array of commercial and retail financial services, including

the taking of time, savings and demand deposits;

the making of commercial, consumer and home equity loans;

and the provision of other financial services.

MAGYAR BANCORP, INC.

and the provision of other

financial services.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Management does not

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

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

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

New Accounting

Pronouncements

In connection with

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

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

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

In June 2016, the FASB

issued ASU No.

2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments .

requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather

than the current “incurred loss” model.

These expected credit losses for financial assets held at the reporting date are to

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

This ASU requires enhanced disclosures

to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit

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

The Company adopted ASU 2016-13 on October

1, 2023 using the modified retrospective approach.

Results and disclosures for reporting periods

beginning after October 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously

applicable GAAP.

of the change from the incurred loss model to the current expected credit loss model using ACL is included in the following table:

October 1, 2023

(In thousands)

ACL on debt securities held-to-maturity

One-to-four family residential

Commercial real estate

Construction and land

Home equity loans and lines of credit

Commercial business

ACL on unfunded commitments

In March 2020, the

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

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

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

GAAP guidance on contract modifications and hedge accounting to ease

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

rates, such as the Secured Overnight Financing Rate.

Under the guidance, modifications of contracts due to reference rate reform will

not require contract remeasurement or reassessment of a previous accounting determination.

For hedge accounting, modification of critical

terms of the hedge due to changes in reference rate reform will not affect hedge accounting or dedesignate the hedging relationship.

guidance also provides specific expedients for fair value hedges, cash flow hedges, and excluded components.

Further, the guidance provides

a none-time election to sell or transfer held to maturity debt securities that are affected by the reference rate change.

is effective upon issuance through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic

Deferral of the Sunset Date of Topic 848 , which

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

extends the expiration date of Accounting Standards Codification (ASC) Topic

848 to December 31, 2024.

ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective

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

In March 2022, the FASB

issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , which

eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2022-02 and enhances the disclosure

requirements for modifications of receivables made with borrowers experiencing financial difficulty.

In addition, the amendments in this

ASU require disclosure of current period gross write-offs by year of origination for financing receivables in the existing vintage disclosures.

This ASU became effective on October 1, 2023 for the Company.

The adoption of this ASU resulted in updated disclosures within our financial

statements but otherwise did not have a material impact on the Company’s consolidated financial statements.

Although we have seven

operational branches, they are all located in New Jersey;

providing similar banking products and services to similar customers and markets;

and under the same regulatory environment, so we have one reportable segment which is Magyar Bancorp, Inc.

The chief operating decision

maker (CODM) is the President & Chief Executive Officer of the Company.

New Accounting Pronouncements

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

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

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

There were no such standards at September

14, 2023, the Financial Accounting Standards Board (FASB or Board) issued Accounting

Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09).

The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid.

ASU 2023-09 largely follows the proposed

ASU issued earlier in 2023 with several important modifications and clarifications discussed below.

ASU 2023-09 is effective for public

business entities for annual periods beginning after Dec.

15, 2024 (October 1, 2025 for the Company) and effective for all other business

entities one year later.

Entities should adopt this guidance on a prospective basis, though retrospective application is permitted.

will impact the Company in its fiscal year 2026.

2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages.

The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those

categories based on a quantitative threshold equal to 5 % or more of the amount determined by multiplying pretax income (loss) from continuing

operations by the applicable statutory rate.

For entities reconciling to the US statutory rate of 21 %, this would generally require disclosing

any reconciling items that impact the rate by 1.05 % or more.

Subsequent Events

On October 31, 2024,

the Company announced that its Board of Directors has approved a quarterly cash dividend of $ 0.05 per common share to shareholders of

record at the close of business on November 14, 2024, payable on November 27, 2024.

On November 22, 2024,

the Company declared a special dividend of $ 0.04 per common share, payable on December 20, 2024, to shareholders of record at the close

of business on December 6, 2024.

NOTE C – STOCK-BASED COMPENSATION AND STOCK

REPURCHASE PROGRAM

The Company follows

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

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

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

The cost is measured

based on the fair value of the equity or liability instruments issued.

ASC 718 also requires

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

deductions in excess of previously recognized tax benefits on compensation expense.

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

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

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

Stock options generally

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

Management recognizes compensation expense for all option grants

over the awards’ respective requisite service periods.

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

option-pricing model.

Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a

straight-line basis over the requisite service period of the awards.

Restricted shares generally

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

Once vested, these awards are irrevocable.

The product of the

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

under the Company’s restricted stock plans.

Management recognizes compensation expense for the fair value of restricted shares on

a straight-line basis over the requisite service period.

The Company’s

2022 Equity Compensation Plan provided for grants of up to 391,000 shares to be allocated between incentive and non-qualified stock options

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

At September 30, 2024, 293,200 options

and 124,320 shares of restricted stock had been awarded from the plan.

The following is a

summary of the status of the Company’s stock option activity and related information for the year ended September 30, 2024:

MAGYAR BANCORP, INC.

October 30, 2025, the Company announced that its Board of Directors has approved a quarterly dividend of $ 0.08 per share, which will

be paid on November 25, 2025 to stockholders of record as of November 13, 2025.

C – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

Company follows FASB ASC Section 718, Compensation-Stock Compensation (“ASC 718”), which covers a wide range of share-based

compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee

share purchase plans.

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

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

718 also requires the Company to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits

of realized tax deductions in excess of previously recognized tax benefits on compensation expense.

In accordance with SEC Staff Accounting

Bulletin (“SAB”) No.

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

“compensation and employee benefits” in the Consolidated Statements of Income to correspond with the same line item as the

cash compensation paid.

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

Management recognizes compensation expense

for all option grants over the awards’ respective requisite service periods.

The fair values of all option grants were estimated

using the Black-Scholes option-pricing model.

Management recognizes compensation expense for the fair values of these awards, which have

graded vesting, on a straight-line basis over the requisite service period of the awards.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

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

Once vested, these awards are irrevocable.

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

of restricted shares under the Company’s restricted stock plans.

Management recognizes compensation expense for the fair value

of restricted shares on a straight-line basis over the requisite service period.

Company’s 2022 Equity Compensation Plan provided for grants of up to 391,000 shares to be allocated between incentive and non-qualified

stock options and 156,400 of restricted stock awards to officers, employees and directors of the Company and Magyar Bank.

30, 2025, 293,200 options and 124,320 shares of restricted stock had been awarded from the plan.

following is a summary of the status of the Company’s stock option activity and related information for the year ended September

Shares Weighted

Exercise Price Weighted

Average Exercise

Price Weighted

Contractual Life

in Years Aggregate

Intrinsic Value

Balance at September 30, 2024 293,200 $ 12.58 7.98 $ -

Exercised ( 2,000 ) 12.25 - -

Forfeited ( 6,000 ) 12.70 - -

Balance at September 30, 2025 285,200 $ 12.58 6.98 $ 1,337,588

Exercisable at September 30, 2025 171,120 $ 12.58 6.98 $ 802,592

The following

is a summary of the status and changes of the Company’s non-vested restricted shares as of September 30, 2024 and during the year

following is a summary of the status and changes of the Company’s non-vested restricted shares as of September 30, 2025 and during

the year then ended:

Average Grant

2 unchanged sentences

Balance at September30, 2025

Stock option and

stock award expenses included with compensation expense were $ 254 thousand and $ 392 thousand, respectively, for the year ended September

option and stock award expenses included with compensation expense were $ 253 thousand and $ 367 thousand, respectively, for the year ended

September 30, 2025.

Stock option and stock award expenses included with compensation expense were $ 254 thousand and $ 392 thousand, respectively,

for the year ended September 30, 2024.

At September 30, 2024, total compensation

cost not yet recognized for the Company’s unvested stock options and stock awards was $ 1.9 million.

The Company had no other stock-based

compensation plans as of September 30, 2024 except as disclosed below.

The Company has an

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

The ESOP trust

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

The loan bears a fixed interest rate of

3.25 % with principal and interest payable annually in equal installments over 30 years and is secured by shares of the Company’s

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

to the Company.

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

Accordingly, the shares

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

The Company accounts for its ESOP in accordance

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

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

for earnings per share computations.

The following table presents the components

of the ESOP shares for the years ended September 30, 2024 and 2023:

MAGYAR BANCORP, INC.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

September 30, 2025, total compensation cost not yet recognized for the Company’s unvested stock options and stock awards was $ 1.2

The Company had no other stock-based compensation plans as of September 30, 2025 except as disclosed below.

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

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

The loan bears a fixed

interest rate of 3.25 % with principal and interest payable annually in equal installments over 30 years and is secured by shares of the

Company’s stock.

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

loan payments to the Company.

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

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

The Company accounts for its

ESOP in accordance with ASC 718, “ Employer’s Accounting for Employee Stock Ownership Plans .” As shares are released

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

for earnings per share computations.

following table presents the components of the ESOP shares for the years ended September 30, 2025 and 2024:

Unreleased shares at September 30, 2023

5 unchanged sentences

Total ESOP shares

At September 30, 2024,

ESOP shares allocated to participants totaled 186,940 .

Unallocated ESOP shares held in suspense totaled 278,163 with an aggregate fair

value of $ 3.4 million.

The Company's contribution expense for the ESOP was $ 155 thousand and $ 122 thousand for years ended September 30,

2024 and 2023, respectively.

In 2022, the Company announced

the authorization of a stock repurchase plan pursuant to which the Company intends to repurchase up to an additional 5 % of its outstanding

shares, or up to 337,146 shares, under which 296,736 shares had been repurchased at an average price of $ 11.92 through September 30, 2024.

Under this stock repurchase program, 40,410 shares of the 337,146 shares authorized remained available for repurchase as of September

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

The timing of the repurchases

will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity requirements

and alternative uses of capital.

NOTE D - INVESTMENT

The following table

summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at September 30, 2024:

September 30, 2025, ESOP shares allocated to participants totaled 179,375 .

Unallocated ESOP shares held in suspense totaled 265,925 with

an aggregate fair value of $ 4.6 million.

The Company’s contribution expense for the ESOP was $ 187 thousand and $ 155 thousand for years

ended September 30, 2025 and 2024, respectively.

May 22, 2025 the Company announced the authorization of its fifth stock repurchase program pursuant to which the Company intends to repurchase

up to an additional 5 % of its outstanding shares, or up to 323,547 shares.

The Company’s intended use of the repurchased shares

is for general corporate purposes.

The timing of the repurchases will depend on certain factors, including but not limited to, market

conditions and prices, the Company’s liquidity requirements and alternative uses of capital.

The Company repurchased 20,000 shares

of its common stock under this plan during the year ended September 30, 2025.

At September 30, 2025, the Company held 617,797 shares

in treasury that were repurchased at an average price of $ 12.69 .

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

D - INVESTMENT SECURITIES

following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at

September 30, 2025:

September 30, 2025

Allowance for

23 unchanged sentences

Total investment securities

The following table summarizes

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

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held to-maturity at

September 30, 2024:

September 30, 2024

Allowance for

(In thousands)

6 unchanged sentences

Mortgage-backed securities-residential

Corporate securities

Total securities available-for-sale

13 unchanged sentences

Total investment securities

The contractual

maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities available-for-sale

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

contractual maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities available-for-sale

at September 30, 2025 are summarized in the following table:

7 unchanged sentences

Mortgage-backed securities:

The contractual

maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities held-to-maturity at

September 30, 2024 are summarized in the following table:

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

contractual maturities of the debt securities, municipal bonds and certain information regarding the mortgage-backed securities held-to-maturity

at September 30, 2025 are summarized in the following table:

September 30, 2025

6 unchanged sentences

Mortgage backed securities:

There were no sales of securities

during the years ended September 30, 2024 and 2023.

As of September 30,

2024 and 2023, investment securities having a carrying amount of approximately $ 12.5 million and $ 13.9 million, respectively, were

pledged to secure public deposits.

Details of available-for-sale

securities with unrealized losses for which an allowance for credit losses has not been recorded at September 30, 2024 are as follows:

were no sales of securities during the years ended September 30, 2025 and 2024.

of September 30, 2025 and 2024, investment securities having a carrying amount of approximately $ 10.9 million and $ 12.5 million, respectively,

were pledged to secure public deposits.

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

of available-for-sale securities with unrealized losses for which an allowance for credit losses has not been recorded at September 30,

2025 and 2024 are as follows:

Less Than 12 Months

12 Months Or Greater

(Dollars in thousands)

September 30, 2024 Securities available-for-sale

September 30, 2025

Obligations of U.S.

4 unchanged sentences

Mortgage-backed securities - residential

Details of available-for-sale and

held-to-maturity securities with unrealized losses at September 30, 2023 are as follows:

Less Than 12 Months

12 Months Or Greater

(Dollars in thousands)

September 30, 2024

2 unchanged sentences

Mortgage-backed securities - residential

Obligations of U.S.

government-sponsored enterprises

Mortgage-backed securities - residential

Company monitors the credit quality of held-to-maturity debt securities, primarily through their credit ratings by nationally recognized

statistical ratings organizations, on a quarterly basis.

At September 30, 2025, there were no non-performing held-to-maturity debt securities

and no allowance for credit losses were required.

The majority of the investment securities are explicitly or implicitly guaranteed by

the United States government, and any estimate of expected credit losses would be insignificant to the Company.

following table summarizes the amortized cost of held-to-maturity debt securities at September 30, 2025 and 2024, aggregated by credit

quality indicator:

Credit Rating at Amortized Cost

(In thousands)

September 30, 2025

Obligations of U.S.

government agencies:

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

6 unchanged sentences

Corporate securities

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

The Company monitors

the credit quality of held-to-maturity debt securities, primarily through their credit ratings by nationally recognized statistical ratings

organizations, on a quarterly basis.

At September 30, 2024, there were no non-performing held-to-maturity debt securities and no allowance

for credit losses were required.

The majority of the investment securities are explicitly or implicitly guaranteed by the United States

government, and any estimate of expected credit losses would be insignificant to the Company.

The following table summarizes the amortized

cost of held-to-maturity debt securities at September 30, 2024, aggregated by credit quality indicator:

Credit Rating

September 30, 2024

(In thousands)

Securities held to maturity:

Obligations of U.S.

9 unchanged sentences

Corporate securities

Total held to maturity debt securities

The investment securities

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

The Company evaluated these

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

related to any company or industry specific event.

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

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

evaluated these securities and determined that the decline in value was primarily related to fluctuations in the interest rate environment

and were not related to any company or industry specific event.

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

The Company does not intend to sell these securities

and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or

market price recovery.

For individual debt securities classified as available-for-sale, we determine whether a decline in fair value below

the amortized cost has resulted from a credit loss or other factors.

If the decline in fair value is due to credit, we will record the

portion of the impairment loss relating to credit through an allowance for credit losses.

and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity

or market price recovery.

For individual debt securities classified as available-for-sale, we determine whether a decline in fair value

below the amortized cost has resulted from a credit loss or other factors.

If the decline in fair value is due to credit, we will record

the portion of the impairment loss relating to credit through an allowance for credit losses.

Impairment that has not been recorded through

an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.

NOTE E - LOANS

RECEIVABLE, NET

Loans receivable, net

allowance for credit losses were comprised of the following:

September 30,

E - LOANS RECEIVABLE, NET

receivable, net allowance for credit losses were comprised of the following:

Years Ended September 30,

(In thousands)

7 unchanged sentences

Total loans receivable, net

MAGYAR BANCORP, INC.

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

Such loans were made in the ordinary course of business at

the Bank’s normal credit terms, including interest rate and collateralization, and do not represent more than a normal risk of

Total loans receivable from directors and executive officers, and affiliates thereof, were approximately $ 3.2 million at

September 30, 2025 and $ 3.9 million at September 30, 2024.

There were $ 372 thousand and $ 854 thousand in new loans or advances on existing

lines of credit during the year ended September 30, 2025 and 2024, respectively.

Total principal repayments and/or reductions due to

retirements were approximately $ 163 thousand and $ 2.0 million for the year ended September 30, 2025 and 2024, respectively.

September 30, 2025 and 2024, the Company was servicing loans for others amounting to approximately $ 56.7 million and $ 50.2 million, respectively.

See Note J for additional information.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Certain directors and

executive officers of the Company have loans with the Bank.

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

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

loans receivable from directors and executive officers, and affiliates thereof, were approximately $ 3.9 million at September 30, 2024

and $ 5.1 million at September 30, 2023.

There were $ 854 thousand and $ 2.9 million in new loans or advances on existing lines of credit

during the year ended September 30, 2024 and 2023, respectively.

Total principal repayments and/or reductions due to retirements were

approximately $ 2.0 million and $ 142 thousand for the year ended September 30, 2024 and 2023, respectively.

At September 30, 2024

and 2023, the Company was servicing loans for others amounting to approximately $ 50.2 million and $ 48.1 million, respectively.

held mortgage servicing rights in the amount of $ 159 thousand and $ 28 thousand at September 30, 2024 and 2023, respectively.

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

foreclosure processing.

Loan servicing income is recorded on the cash basis and includes servicing fees from investors and certain charges

collected from borrowers, such as late payment fees.

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

balances of approximately $ 21 thousand and $ 27 thousand at September 30, 2024 and 2023, respectively.

The segments of the

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

The residential mortgage

loan segment is further disaggregated into two classes:

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

term loans and home equity lines of credit.

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

residential mortgage loan segment is further disaggregated into two classes:

first lien, amortizing term loans, and the combination of

second lien amortizing term loans and home equity lines of credit.

The commercial loan segment is further disaggregated into three classes:

loans secured by

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

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

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

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

Construction loans to developers

and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time

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

and consists of revolving lines of credit and loans partially guaranteed by the U.S.

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

non-residential properties.

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

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

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

loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally

not known at the time of the loan.

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

of commercial customers and consists of revolving lines of credit and loans partially guaranteed by the U.S.

Small Business Administration.

The consumer loan

segment consists primarily of stock-secured installment loans, but also includes unsecured personal loans and overdraft lines of credit

connected with customer deposit accounts.

Management uses a ten

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

The first six categories are considered

not criticized, and are aggregated as “Pass” rated.

The criticized rating categories utilized by management generally follow

bank regulatory definitions.

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

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

Loans in the Substandard

category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will

be sustained if the weaknesses are not corrected.

Loans classified Doubtful have all the weaknesses

inherent in loans classified Substandard with the added characteristic that collection or liquidation in full, on the basis of current

conditions and facts, is highly improbable.

The consumer loan segment consists primarily of stock-secured installment loans but also includes unsecured personal loans and overdraft

lines of credit connected with customer deposit accounts.

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

The first six categories are

considered not criticized and are aggregated as “Pass” rated.

The criticized rating categories utilized by management generally

follow bank regulatory definitions.

The Special Mention category includes assets that are currently protected but are potentially weak,

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

Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some

loss will be sustained if the weaknesses are not corrected.

Loans classified Doubtful have

all the weaknesses inherent in loans classified Substandard with the added characteristic that collection or liquidation in full, on

the basis of current conditions and facts, is highly improbable.

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

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

To help ensure that

risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured

loan rating process with several layers of internal and external oversight.

Generally, consumer and residential mortgage loans

are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to

raise awareness of a possible credit event.

The Company’s Commercial Loan Officers are responsible for the timely and accurate

risk rating of the loans in their portfolios at origination and on an ongoing basis.

The Company’s Asset Review Committee performs

monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse.

Confirmation of the appropriate

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

the external consultant reviews commercial relationships greater than $500 thousand and/or criticized relationships greater than $250

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

The following table

presents the classes of the loan portfolio by origination year summarized by the aggregate Pass and the criticized categories of Special

Mention, Substandard and Doubtful for loans subject to the Company’s internal risk rating system and by performing status for all

other loans as of September 30, 2024.

MAGYAR BANCORP, INC.

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

help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company

has a structured loan rating process with several layers of internal and external oversight.

Generally, consumer and residential

mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or

death occurs to raise awareness of a possible credit event.

The Company’s Commercial Loan Officers are responsible for the

timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis.

The Company’s Asset

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

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

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

relationships greater than $ 250 thousand.

Detailed reviews, including plans for resolution, are performed on loans classified as

Substandard on a monthly basis.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Revolving Loans

following tables present the classes of the loan portfolio by origination year summarized by the aggregate Pass and the criticized categories

of Special Mention, Substandard and Doubtful for loans subject to the Company’s internal risk rating system and by performing status

for all other loans as of September 30, 2025 and 2024.

September 30, 2025

Revolving Loans

Term Loans Amortized Cost Basis by Origination Fiscal Year

17 unchanged sentences

Current period gross charge-offs

Information presented

in the table above is not required for periods prior to the adoption of ASU 2016-13.

The following table presents more

comparable information of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention,

Substandard and Doubtful within the Bank’s internal risk rating system as of September 30, 2023.

MAGYAR BANCORP, INC.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

(In thousands)

September 30, 2024

Revolving Loans

Term Loans Amortized Cost Basis by Origination Fiscal Year

(In thousands)

One-to-four family residential

Non-performing

Current period gross charge-offs

Commercial real estate

Special Mention

Current period gross charge-offs

Construction and land

Special Mention

Current period gross charge-offs

Home equity loans and lines of credit

Non-performing

Current period gross charge-offs

Commercial business

Management further

monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of

time a recorded payment is past due.

Special Mention

Current period gross charge-offs

Non-performing

Current period gross charge-offs

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the

length of time a recorded payment is past due.

The Bank was not accruing interest on any loans delinquent 90 days or greater as of September

2024 or September 30, 2023.

The following table presents the classes of the loan portfolio summarized by the aging categories of performing

loans and nonaccrual loans for the periods presented:

30, 2025 and 2024.

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans

and nonaccrual loans for the periods presented:

(In thousands)

5 unchanged sentences

Commercial business

(In thousands)

September 30, 2024

4 unchanged sentences

Commercial business

The following tables present

our non-accrual loans by loan type as of September 30, 2024 and the non-accrual loans and specific reserves by loan type as of September

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

(In thousands)

September 30, 2024

One-to-four family residential

Commercial real estate

following table presents our non-accrual loans by loan type as of September 30, 2025 and 2024:

(In thousands)

1 unchanged sentence

One-to-four family residential

Commercial real estate

Construction and land

The following table

identifies our non-performing, collateral dependent loans by collateral type as of September 30, 2024:

Home loans and lines of credit

September 30, 2024

Real-estate type:

(In thousands)

One-to-four family residential

Commercial real estate

The Company’s

adoption of ASU 2016-13 eliminated the requirement to disclose impaired loans.

The following table presents impaired loans by class, segregated

by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2023:

Impaired Loans with

Specific Allowance

Total Impaired Loans

September 30, 2023

following table identifies our non-performing, collateral dependent loans by collateral type as of September 30, 2025 and 2024:

Years Ended September 30,

(In thousands)

Real-estate type:

One- to four-family residential

Commercial real estate

Construction and land

Commercial business

Total impaired loans

An allowance for credit

losses is maintained to absorb losses from the loan portfolio.

Management reviews the loan portfolio on a quarterly basis using a

defined, consistently applied process in order to make appropriate and timely adjustments to the ACL.

When information confirms all

or part of specific loans to be uncollectible, these amounts are

MAGYAR BANCORP, INC.

Home equity loans and lines of credit

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

promptly charged off against the

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

of the ACL for loans individually evaluated for impairment.

2016-13 requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred

loss model (in effect for periods prior to October 1, 2023).

Accordingly, the allowance for credit losses disclosures subsequent

to October 1, 2023 are not always comparable to prior dates.

In addition, certain new disclosures required under ASU 2016-13 are not applicable

to prior periods.

As a result, the following tables present disclosures separately for each period, where appropriate.

disclosures required under ASU 2016-13 are only shown for the current period.

Please refer to Note B “Summary of Significant

Accounting Policies” for a summary of the impact of adopting the provisions of ASU 2016-13 on October 1, 2023.

following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated.

portion of the allowance for credit losses allocated to each loan category does not represent the total available for future losses which

may occur within the loan category since the total allowance for credit losses is a valuation allocation applicable to the entire loan

The Company generally charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due and all

loans rated substandard or worse that are 90 days past due.

The following tables

present, by loan category, the changes in the allowance for credit losses for the year ended September 30, 2024 and 2023.

Loans and Lines

ACL is maintained to absorb losses from the loan portfolio.

Management reviews the loan portfolio on a quarterly basis using a defined,

consistently applied process in order to make appropriate and timely adjustments to the ACL.

When information confirms all or part

of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

Since loans individually evaluated for

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

following tables set forth the allocation of the Bank’s ACL by loan category at the dates indicated.

The portion of the ACL allocated

to each loan category does not represent the total available for future losses which may occur within the loan category since the total

ACL is a valuation allocation applicable to the entire loan portfolio.

The Company generally charges off the collateral or discounted

cash flow deficiency on all loans at 90 days past due and all loans rated substandard or worse that are 90 days past due.

following table presents, by loan category, the changes in the ACL for the year ended September 30, 2025 and 2024.

(In thousands)

3 unchanged sentences

Balance-September 30, 2024

Loans and Lines

(In thousands)

Balance-September 30, 2022

Provision (credit)

Balance-September 30, 2025

During the year ended

September 30, 2024, the provision for credit loss decreased $ 512 thousand for one-to four-family residential loans due primarily to economic

data indicating the appreciation in collateral values securing such loans while the provision for credit loss increased $ 646 thousand

for commercial real estate loans due to higher balances of such loans at September 30, 2024.

The following table

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

for loans collectively evaluated for impairment as of and September 30, 2023.

MAGYAR BANCORP, INC.

the year ended September 30, 2025, the changes in the ACL for each loan category were primarily due to fluctuations in the outstanding

balance of each segment of loans collectively evaluated for impairment.

Specifically, we experienced significant growth in our commercial

real estate and construction portfolios, partially offset by contraction in our commercial business loans, which require higher provisions

for credit loss, during the year ended September 30, 2025.

the year ended September 30, 2025, the Company did not make any loan modifications to borrowers experiencing financial difficulty.

were two residential loans totaling $ 294 thousand that were in the process of foreclosure at September 30, 2025.

loans pledged as collateral for Federal Home Loan Bank of New York (“FHLBNY”) borrowings were $ 466.5 million and $ 410.6 million

as of September 30, 2025 and 2024, respectively.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Loans and Lines

(In thousands)

Balance - September 30, 2023

Individually evaluated

for impairment

Collectively evaluated

for impairment

Loans receivable:

Balance - September 30, 2023

Individually evaluated

for impairment

Collectively evaluated

for impairment

During the year ended

September 30, 2024, the Company did not make any loan modifications to borrowers experiencing financial difficulty.

During the year ended

September 30, 2023, there was one loan modified that was identified as a troubled debt restructuring (“TDR”) and there were

no TDRs that subsequently defaulted within twelve months of modification.

The following table presents information on TDRs for the year

ended September 30, 2023:

Investment Before

Investment After

TDR Modification

(Dollars in thousands)

September 30, 2023

One-to four-family residential

There were no loans

in the process of foreclosure at September 30, 2024.

Total loans pledged

as collateral against Federal Home Loan Bank of New York (“FHLBNY”) borrowings were $ 410.6 million and $ 341.6 million as of

September 30, 2024 and 2023, respectively.

NOTE F - PREMISES

AND EQUIPMENTS

Premises and equipment

consist of the following:

September 30,

F - PREMISES AND EQUIPMENTS

and equipment consist of the following:

Estimated Years Ended September 30,

Useful Lives 2025 2024

(In thousands)

Buildings and improvements

10 - 40 years

Furniture, fixtures and equipment

Land Indefinite $ 3,095 $ 3,095

Buildings and improvements 10 - 40 years 22,730 22,441

Furniture, fixtures and equipment 5 - 10 years 4,425 4,154

Total 30,250 29,690

Less accumulated depreciation ( 18,068 ) ( 17,145 )

Premises and equipment, net $ 12,182 $ 12,545

For the years ended

September 30, 2024 and 2023, depreciation expense included in occupancy expense amounted to approximately $ 890 thousand and $ 840 thousand,

respectively.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

NOTE G - OTHER REAL ESTATE OWNED

The Company held $ 3.7

million of real estate owned properties at September 30, 2024 and $ 328 thousand at September 30, 2023.

The Company did not have any write-downs

on these properties for the years ended September 30, 2024 and 2023.

Further declines in real estate values may result in increased foreclosed

real estate expense in the future.

Routine holding costs are charged to expense as incurred and improvements to real estate owned that

enhance the value of the real estate are capitalized.

NOTE H - DEPOSITS

A summary of deposits

by type of account follows:

September 30,

(In thousands)

Demand accounts

Savings accounts

Money market accounts

Certificate of deposit

Retirement accounts

Total deposits

Included in the Company’s

deposits at September 30, 2024 were $ 29.6 million in brokered certificates of deposits and $ 20.0 million in certificates of deposits obtained

through a national deposit listing service.

At September 30, 2023 the Company had $ 13.8 million in brokered certificates of deposits and

$ 14.0 million in certificates of deposits obtained through a national deposit listing service.

At September 30, 2024,

certificates of deposit (including retirement accounts and brokered certificate deposit accounts) have contractual maturities as follows

the years ended September 30, 2025 and 2024, depreciation expense included in occupancy expense amounted to approximately $ 937 thousand

and $ 890 thousand, respectively.

G - OTHER REAL ESTATE OWNED

Company held $ 2.2 million of real estate owned properties at September 30, 2025 and $ 3.7 million at September 30, 2024.

The Company sold

two properties totaling $ 1.8 million and wrote down its remaining property by $ 57 thousand during the year ended September 30, 2025.

Further declines in real estate values may result in increased foreclosed real estate expense in the future.

Routine holding costs are

charged to expense as incurred and improvements to real estate owned that enhance the value of the real estate are capitalized.

summary of deposits by type of account follows:

Ended September 30,

(In thousands)

Years Ending September 30,

2030 and after

At September 30, 2024 and

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.

Related party deposits totaled $ 3.2 million and $ 3.5 million at September 30, 2024 and 2023,

respectively.

NOTE I - BORROWINGS

Federal Home Loan

Bank of New York Advances

Long term FHLBNY advances

at September 30, 2024 and 2023 totaled $ 28.6 million and $ 29.5 million, respectively.

The weighted average interest rates on advances

outstanding at September 30, 2024 and 2023 were 2.90 % and 3.27 %, respectively.

The advances were collateralized by unencumbered qualified

assets consisting of one-to-four family

MAGYAR BANCORP, INC.

market accounts

in the Company’s deposits at September 30, 2025 were $ 57.3 million in brokered certificates of deposits and $ 24.0 million in certificates

of deposits obtained through a national deposit listing service.

At September 30, 2024 the Company had $ 29.6 million in brokered certificates

of deposits and $ 20.0 million in certificates of deposits obtained through a national deposit listing service.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

residential and commercial real estate mortgage loans.

Advances are made pursuant to several different

credit programs offered from time to time by the FHLBNY.

Long term FHLBNY advances

as of September 30, 2024 mature as follows (in thousands):

Years Ending September 30,

Additionally, the Company has established

an Overnight Line of Credit arrangement with the FHLBNY.

The total amount available under the line of credit is based on the amount of

eligible collateral pledged to the FHLBNY.

At September 30, 2024 and 2023, the Company had available credit from the FHLBNY totaling $ 123.7

million and $ 122.2 million, respectively.

Information concerning short-term arrangement with the FHLBNY is summarized as follows:

September 30,

(Dollars in thousands)

September 30, 2025, certificates of deposit (including retirement accounts and brokered certificate deposit accounts) have contractual

maturities as follows (in thousands):

Ending September 30,

September 30, 2025 and 2024, the time deposits of $ 250 thousand or more totaled approximately $ 94.8 million and 59.3 million, respectively.

Related party deposits totaled $ 3.9 million and $ 3.2 million at September 30, 2025 and 2024, respectively.

I - BORROWINGS

Federal Home Loan Bank of New York Advances

term FHLBNY advances at September 30, 2025 and 2024 totaled $ 49.1 million and $ 28.6 million, respectively.

The weighted average interest

rates on advances outstanding at September 30, 2025 and 2024 were 3.26 % and 2.90 %, respectively.

The advances were collateralized by

unencumbered qualified assets consisting of one-to-four family residential and commercial real estate mortgage loans.

Advances are made

pursuant to several different credit programs offered from time to time by the FHLBNY.

term FHLBNY advances as of September 30, 2025 mature as follows (in thousands):

Ending September 30,

Additionally,

the Company has established an Overnight Line of Credit arrangement with the FHLBNY.

The total amount available under the line of credit

is based on the amount of eligible collateral pledged to the FHLBNY.

At September 30, 2025 and 2024, the Company had available credit

from the FHLBNY totaling $ 135.9 million and $ 123.7 million, respectively.

Information concerning short-term arrangement with the FHLBNY

is summarized as follows:

Ended September 30,

Balance at end of year

Weighted average balance during the year

Maximum month-end balance during the year

Average interest rate during the year

NOTE J – SERVICING POLICY

The Company originates

and sells loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed by the Small

Business Administration (the “SBA”).

The Company has sold loans on a servicing retained basis and on a servicing released

Loans sold with servicing retained and servicing released during the year ended September 30, 2024 were $ 6.4 million and $ 0 ,

respectively.

Loans sold with servicing retained and servicing released during the year ended September 30, 2023 were $ 6.5 million and

$ 0 , respectively.

The Company accounts for sales in accordance with ASC 860, Transfers and Servicing.

Upon sale, the receivables

are removed from the balance sheet, mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale,

if applicable, is recognized for the difference between the carrying value of the receivables and the sales proceeds, net of origination

Gains on sales of loans,

representing the difference between the total sales price received for the loans and the allocated cost of the loans, are recognized when

loans are sold and delivered to the purchasers.

Weighted average

balance during the year

Maximum month-end balance

during the year

Average interest rate during

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

J - SERVICING POLICY

Company originates and sells loans receivable secured by one-to four-family residential properties and commercial business loans guaranteed

The Company has sold loans on a service-retained basis and on a servicing-released basis.

Loans sold with servicing

retained and servicing released during the year ended September 30, 2025 were $ 19.0 million and $ 0 , respectively.

Loans sold with servicing

retained and servicing released during the year ended September 30, 2024 were $ 6.4 million and $ 0 , respectively.

The Company accounts

for sales in accordance with ASC 860, Transfers and Servicing .

Upon sale, the receivables are removed from the balance sheet,

mortgage servicing rights are recorded as an asset for servicing rights retained, and a gain on sale, if applicable, is recognized for

the difference between the carrying value of the receivables and the sales proceeds, net of origination costs.

on sales of loans, representing the difference between the total sales price received for the loans and the allocated cost of the loans,

are recognized when loans are sold and delivered to the purchasers.

Loans are accounted for as sold when control of the loan is surrendered.

over the loans is deemed surrendered when (a) the loans have been isolated from the Company;

over the loans is deemed surrendered when:

(a) the loans have been isolated from the Company;

(b) the buyer has the right (free of conditions

1 unchanged sentence

and (c) the Company does not maintain effective

control over the loans through either (a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before

maturity, or (b) the ability to unilaterally cause the buyer to return specific loans.

The Company services

one-to-four family residential mortgage loans and SBA 7(a) loans for investors in the secondary market, which are not included in the

Consolidated Balance Sheets.

The Company’s fee is a percentage of the principal balance and is recognized as income when received.

September 30, 2024 and 2023, the Company was servicing mortgage loans sold in the amount of $ 1.4 million and $ 1.9 million, respectively,

and SBA loans sold in the amount of $ 38.4 million and $ 35.5 million, respectively.

Loan servicing includes collecting and remitting loan

payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering

Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing revenues and are

included in other assets on the Consolidated Balance Sheets.

Activity in loan servicing rights during the years ended September 30,

2024 and 2023 are summarized as follows:

September 30,

control over the loans through either:

(a) an agreement that entitles and obligates the Company to repurchase or redeem the loans before

or (b) the ability to unilaterally cause the buyer to return specific loans.

Company services one-to-four family residential mortgage loans and SBA 7(a) loans for investors in the secondary market, which are not

included in the Consolidated Balance Sheets.

The Company’s fee is a percentage of the principal balance and is recognized

as income when received.

At September 30, 2025 and 2024, the Company was servicing mortgage loans sold in the amount of $ 1.1 million

and $ 1.4 million, respectively, and SBA loans sold in the amount of $ 39.8 million and $ 38.4 million, respectively.

Loan servicing includes

collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures

and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and

generally administering the loans.

Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing

revenues and are included in other assets on the Consolidated Balance Sheets.

Activity in loan servicing rights during the years

ended September 30, 2025 and 2024 is summarized as follows:

Ended September 30,

(In thousands)

Beginning balance

Origination of mortgage servicing rights

of mortgage servicing rights

Ending balance

Loan servicing rights

are carried at the lower of amortized cost or fair value.

Fair values are estimated using discounted cash flows based on a current market

interest rate.

NOTE K - INCOME TAXES

The Company’s

income tax expense is comprised of the following components for the years ended September 30, 2024 and 2023:

For the Year Ended

September 30,

(In thousands)

Total income tax expense

A reconciliation of

income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2024 and 2023 is as follows:

September 30,

servicing rights are carried at the lower of amortized cost or fair value.

Fair values are estimated using discounted cash flows based

on the current market interest rate.

K - INCOME TAXES

Company’s income tax expense is comprised of the following components for the years ended September 30, 2025 and 2024:

Ended September 30,

(In thousands)

Income tax expense at statutory rate

Increase (decrease) resulting from:

State income taxes, net of federal income tax benefit

Tax-exempt income, net

BOLI policy surrender tax

Nondeductible expenses

Share based compensation

Employee stock ownership plan

Total income tax expense

The major sources

of temporary differences and their deferred tax effect at September 30, 2024 and 2023 are as follows:

MAGYAR BANCORP, INC.

income tax expense

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

September 30,

reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2025 and

2024 is as follows:

Ended September 30,

(In thousands)

Allowance for credit losses

Net unrealized loss, investment securities available-for-sale

Income tax expense

at statutory rate

Increase (decrease) resulting

income taxes, net of federal income tax benefit

surrender tax

Nondeductible

based compensation

stock ownership plan

income tax expense

major sources of temporary differences and their deferred tax effect at September 30, 2025 and 2024 are as follows:

Ended September 30,

(In thousands)

Allowance for

credit losses

Net unrealized loss, investment

securities available-for-sale

Deferred loan fees

Unrealized loss, minimum pension liability

Unrealized loss, minimum pension

Employee benefits

Allowance for transaction expense

Straight line rent

Gross deferred tax asset

Mortgage servicing rights

Gross deferred tax liability

Net deferred tax asset, included in other assets

In assessing the realizability

of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will

not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the

periods in which temporary differences are deductible and carry forwards are available.

There were no valuation

allowances for the year ended September 30, 2024 and 2023.

The Company has considered future market growth, forecasted earnings, future

taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets.

If the Company

was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently

no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was

The Bank’s statutory

income tax rate in the State of New Jersey was 9.0 % for the years ending September 30, 2024 and 2023.

The State of New Jersey has imposed

a temporary surtax on corporations earning New Jersey allocated income in excess of $ 1 million for the Company’s tax year ended

September 30, 2023 and has imposed a surtax on corporations earning New Jersey allocated income in excess of $ 10 million for the Company’s

tax year ended September 30, 2024.

The surtax is set at a rate of 2.5 % and it currently effective through 2029.

Accordingly, the Company

used an 11.5 % State tax rate for the calculation of its State income tax expense for the years ended September 30, 2024 and 2023.

NOTE L - PENSION

The Company had a noncontributory

defined benefit pension plan (the “Plan”) covering all eligible employees.

On January 26, 2006, the Plan was frozen and amended

to eliminate future benefit accruals after February 15, 2006.

The following table

sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2024

and September 30, 2023.

MAGYAR BANCORP, INC.

Allowance for transaction

deferred tax asset

Unrealized gain, minimum pension

servicing rights

deferred tax liability

deferred tax asset, included in other assets

assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all

of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of

future taxable income during the periods in which temporary differences are deductible and carry forwards are available.

were no valuation allowances for the year ended September 30, 2025 and 2024.

The Company has considered future market growth, forecasted

earnings, future taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets.

If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which

there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such

determination was made.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

September 30,

Bank’s statutory income tax rate in the State of New Jersey was 9.0 % for the years ending September 30, 2025 and 2024.

of New Jersey has imposed a surtax on corporations earning New Jersey allocated income in excess of $ 10 million for the Company’s

tax years ended September 30, 2025 and 2024.

The surtax is set at a rate of 2.5 % and is currently effective through 2029.

the Company used an 11.5 % State tax rate for the calculation of its State income tax expense for the years ended September 30, 2025 and

L - PENSION PLAN

Company had a noncontributory defined benefit pension plan (the “Plan”) covering all eligible employees.

On January 26, 2006,

the Plan was frozen and amended to eliminate future benefit accruals after February 15, 2006.

following table sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at

September 30, 2025 and September 30, 2024.

Ended September 30,

(In thousands)

Actuarial present value of benefit obligations

present value of benefit obligations

Change in benefit obligations

Projected benefit obligation, beginning

Interest cost

Actuarial (gain) loss

Annuity payments and lump sum distributions

Projected benefit obligation, end

benefit obligation, beginning

payments and lump sum distributions

benefit obligation, end

Change in plan assets

Fair value of assets, beginning

Actual return on plan assets

Annuity payments and lump sum distributions

Fair value of assets, end

Funded status included with other assets

Net pension cost for

the years ended September 30, 2024 and 2023 included the following components:

September 30,

of assets, beginning

return on plan assets

payments and lump sum distributions

value of assets, end

status included with other assets

net pension (credit) cost for the years ended September 30, 2025 and 2024 included the following components:

Ended September 30,

(In thousands)

Service cost benefits earned during the year

Interest cost on projected benefit obligation

Interest cost

on projected benefit obligation

Expected return on plan assets

Amortization of unrecognized net loss

Net pension cost

Current Asset Allocation

The Plan’s weighted-average

asset allocations at September 30, 2024 and 2023, by asset category are as follows:

September 30,

Equity securities

Debt securities (bond mutual funds)

Other (money market fund)

Expected Contributions

For the fiscal year

ending September 30, 2025, the Company does not expect to make a contribution to the Plan.

Estimated Future

Benefit Payments

MAGYAR BANCORP, INC.

of unrecognized net loss

pension (credit) cost

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

The following benefit

payments are expected to be paid as follows (in thousands):

October 1, 2024 through September 30, 2025

October 1, 2025 through September 30, 2026

Asset Allocation

Plan’s weighted-average asset allocations at September 30, 2025 and 2024, by asset category are as follows:

Ended September 30,

Equity securities

Debt securities (bond mutual

(money market fund)

Contributions

the fiscal year ending September 30, 2026, the Company does not expect to make a contribution to the Plan.

Future Benefit Payments

following benefit payments are expected to be paid as follows (in thousands):

October 1, 2025

through September 30, 2026

October 1, 2026 through September

2 unchanged sentences

October 1, 2029 through September

in the funded status of the Plan at September 30, 2024 and 2023, are actuarial losses of $ 91 thousand and

$ 440 thousand , respectively.

These amounts are included, net of related income tax effects of $ 132

thousand in the accumulated other comprehensive loss component of stockholders’ equity at September

30, 2024 and 2023.

The following table

presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic

Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

See Note Q for further detail regarding fair value hierarchy.

Fair Value Measurements at Reporting Date Using:

1, 2030 through September 30, 2035

in the funded status of the Plan at September 30, 2025 and 2024, are actuarial gain and losses of $ 42 thousand and $ 91 thousand, respectively.

These amounts are included, net of related income tax effects of $ 13 thousand and $ 132 thousand, respectively, in the accumulated other

comprehensive loss component of stockholders’ equity at September 30, 2025 and 2024.

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

following table presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy

under ASC 820, F air Value Measurements and Disclosure ( “ASC 820”).

Financial assets are classified in their entirety

based on the lowest level of input that is significant to the fair value measurement.

See Note Q “Fair Value Disclosures”

for further detail regarding fair value hierarchy.

Value Measurements at Reporting Date

Quoted Prices

in Active Markets

for Identical

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

(In thousands)

At September 30, 2024

September 30, 2025

Investment Type

Mutual Funds - Equity

Large - Cap Value

Large - Cap Core

Mid - Cap Core

Small - Cap Core

Mutual Funds - Fixed Income

Intermediate Duration

Short - Duration Corporate

Cash Equivalents

Total Investment

At September 30, 2023

Funds - Equity

Funds - Fixed Income

Investment Type

Mutual Funds - Equity

Large - Cap Value

Large - Cap Core

Mid - Cap Core

Small - Cap Core

Mutual Funds - Fixed Income

Intermediate Duration

Short - Duration Corporate

Cash Equivalents

Total Investment

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

Equity and debt

securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments

Funds - Equity

Funds - Fixed Income

and debt securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments

(Level 1 inputs).

NOTE M - NONQUALIFIED

COMPENSATION PLAN

The Company maintains

a Supplemental Executive Retirement Plan (“SERP”) for the benefit of its senior officers.

In addition, the Company also adopted

voluntary Deferred Income and Retirement Plans on behalf of its directors.

The SERP provides the Company with the opportunity to supplement

the retirement income of selected officers to achieve equitable wage replacement at retirement while the Deferred Income Plan provides

participating directors with an opportunity to defer all or a portion of their fees into a tax deferred accumulation account for future

The Director Retirement Plan enables the Company to reward its directors for longevity of service in consideration of their

availability and consultation.

The SERP is based upon achieving a total retirement benefit equal to a percentage of the participants’

final annual salary.

Under the Director

Supplemental Retirement Income Plan (the “Plan”), directors that began service before 2002 are entitled to a benefit upon

attainment of his/her benefit age.

The directors will receive an annual amount in monthly installments based on his/her total Board and

Committee fees in the twelve months prior to attainment of his/her benefit age.

The amount will be 10% plus 2 1/2% for each year of service

as a Director, with a minimum of 50%, provided the Director has served for at least five years, and a maximum of 60%.

The maximum benefit

increases for any Director serving as Chairman of the Board for at least five years to 75%.

The Company funds the

plans through modified endowment contracts.

Income recorded for the plans represents life insurance income as recorded based on the projected

increases in cash surrender values of life insurance policies.

As of September 30, 2024 and 2023, the Company’s life insurance contracts

had cash surrender values of approximately $ 23.3 million and $ 18.0 million, respectively.

The Company is recording

benefit costs so that the cost of each participant’s retirement benefits is being expensed and accrued over the participant’s

active employment so as to result in a liability at retirement date equal to the present value of the benefits expected to be provided.

The total expense for nonqualified retirement benefits recorded during the years ended September 30, 2024 and 2023 was $ 384 thousand and

$ 375 thousand, respectively.

Included in accounts payable and other liabilities at September 30, 2024 and 2023 were accrued retirement

benefits totaling $ 1.0 million and $ 828 thousand, respectively, for these plans.

NOTE N - 401(K) EMPLOYEE

CONTRIBUTION PLAN

The Company has a defined

contribution 401(k) plan covering all employees, as defined under the plan document.

Employees may contribute to the plan, as defined

under the plan document, and the Company can make discretionary contributions.

The Company contributed $ 255 thousand and $ 257 thousand

to the plan for the years ended September 30, 2024 and 2023, and is included in compensation and employee benefits in the accompanying

Consolidated Statements of Income.

NOTE O - COMMITMENTS

Accounting Standard

Update ASC 842, “ Leases ” requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset,

measured at the present value of the future minimum lease payments, at the lease commencement date.

The Company has

operating leases for six branch locations.

Our leases have remaining lease terms of up to 10 years, some of which include options to extend

the leases for up to 10 additional years.

Operating leases are recorded as ROU assets and lease liabilities and are included within other

assets and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

MAGYAR BANCORP, INC.

M - NONQUALIFIED COMPENSATION PLAN

Company maintains a Supplemental Executive Retirement Plan (“SERP”) for the benefit of its senior officers.

the Company also adopted voluntary Deferred Income and Retirement Plans on behalf of its directors.

The SERP provides the Company with

the opportunity to supplement the retirement income of selected officers to achieve equitable wage replacement at retirement while the

Deferred Income Plan provides participating directors with an opportunity to defer all or a portion of their fees into a tax deferred

accumulation account for future retirement.

The Director Retirement Plan enables the Company to reward its directors for longevity of

service in consideration of their availability and consultation.

The SERP is based upon achieving a total retirement benefit equal to

a percentage of the participants’ final annual salary.

the Director Supplemental Retirement Income Plan (the “Plan”), directors that began service before 2002 are entitled to a

benefit upon attainment of his/her benefit age.

The directors will receive an annual amount in monthly installments based on his/her

total Board and Committee fees in the twelve months prior to attainment of his/her benefit age.

The amount will be 10% plus 2 1/2% for

each year of service as a Director, with a minimum of 50%, provided the Director has served for at least five years, and a maximum of

The maximum benefit increases for any Director serving as Chairman of the Board for at least five years to 75%.

Company funds the plans through modified endowment contracts.

Income recorded for the plans represents life insurance income as recorded

based on the projected increases in cash surrender values of life insurance policies.

As of September 30, 2025 and 2024, the Company’s

life insurance contracts had cash surrender values of approximately $ 19.0 million and $ 23.3 million, respectively.

Company is recording benefit costs so that the cost of each participant’s retirement benefits is being expensed and accrued over

the participant’s active employment so as to result in a liability at retirement date equal to the present value of the benefits

expected to be provided.

The total expense for non-qualified retirement benefits recorded during the years ended September 30, 2025 and

2024 was $ 399 thousand and $ 384 thousand, respectively.

Included in accounts payable and other liabilities at September 30, 2025 and

2024 were accrued retirement benefits totaling $ 1.2 million and $ 1.0 million, respectively, for these plans.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

On April 1, 2024,

the Bank entered into a lease agreement to rent a retail office space in Martinsville, New Jersey to increase its presence in Somerset

The initial term of the lease is for five years, ending on March 31, 2029, but does include the option for two additional terms

of five years each.

In accordance with ASC 842, a lease liability and ROU asset in the amount of $ 180 thousand was recognized on April

1, 2024 within accounts payable and other liabilities and other assets, respectively, on our Consolidated Balance Sheets.

rate used to determine the lease liability was 4.22 % and derived from the Federal Home Loan Bank of New York advance rate for the same

Operating lease

ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation

N - 401(K) EMPLOYEE CONTRIBUTION PLAN

Company has a defined contribution 401(k) plan covering all employees, as defined under the plan document.

Employees may contribute to

the plan, as defined under the plan document, and the Company can make discretionary contributions.

The Company contributed $ 278 thousand

and $ 255 thousand to the plan for the years ended September 30, 2025 and 2024 and is included in compensation and employee benefits in

the accompanying Consolidated Statements of Income.

O - COMMITMENTS

Lease Commitments

Standard Update ASC 842, “ Leases ” requires lessees to recognize a lease liability and a right-of-use (“ROU”)

asset, measured at the present value of the future minimum lease payments, at the lease commencement date.

Company has operating leases for five branch locations.

Our leases have remaining lease terms of up to 10 years, some of which include

options to extend the leases for up to 10 additional years.

Operating leases are recorded as ROU assets and lease liabilities and are

included within other assets and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation

to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at lease commencement base on the present

ROU assets and lease liabilities are recognized at lease commencement based on the present

value of the remaining lease payments using a discount rate that represents our incremental borrowing rate.

2 unchanged sentences

on the remaining lease term.

The following table

presents the balance sheet information related to our leases:

September 30, September 30,

following table presents the balance sheet information related to our leases:

Years Ended September 30,

(Dollars in thousands)

3 unchanged sentences

Weighted average discount rate 2.4 % 2.4 %

The following table

summarizes the maturity of our remaining lease liabilities by year:

following table summarizes the maturity of our remaining lease liabilities by year:

September 30,

3 unchanged sentences

Total lease payments

Less imputed interest

imputed interest

Present value of lease liabilities

rental expense, included in occupancy expense, was approximately $ 809 thousand for the years ended

September 30, 2024 and 2023.

Contingencies

The Company and its

subsidiaries, from time to time, are a party to routine litigation that arises in the normal course of business.

In the opinion of management,

the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position

or results of operations.

NOTE P - FINANCIAL

INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

may use derivative financial instruments, such as interest rate floors and collars, as part of its interest rate risk management.

rate caps and floors are agreements whereby one party agrees to pay or receive a floating

MAGYAR BANCORP, INC.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

rate of interest on a notional principal amount

rental expense, included in occupancy expense, was approximately $ 750 thousand and $ 809 thousand for the years ended September 30, 2025

and 2024, respectively.

Contingencies

Company and its subsidiaries, from time to time, are a party to routine litigation that arises in the normal course of business.

opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated

financial position or results of operations.

P - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

Company may use derivative financial instruments, such as interest rate floors and collars, as part of its interest rate risk management.

rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount

for a predetermined period of time if certain market interest rate thresholds are met.

2 unchanged sentences

As of September 30, 2025 and 2024, the Company did not hold any interest rate floors or collars.

The Company is

a party to interest rate derivatives that are not designated as hedging instruments.

Under a program, the Company executes interest rate

swaps with commercial lending customers to facilitate their respective risk management strategies.

These interest rate swaps with customers

are simultaneously offset by interest rate swaps that the Bank executes with a third-party financial institution, such that the Bank minimizes

its net risk exposure resulting from such transactions.

Because the interest rate swaps associated with this program do not meet the strict

hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in

The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined

by taking into consideration the risk rating, probability of default and loss given default for all counterparties and did not have a

significant impact on fair value.

The Company had $0 in cash pledged for collateral on its interest rate swaps with financial institutions

at September 30, 2024 and 2023.

The following table

presents summary information regarding these derivatives for September 30, 2024 and 2023.

Amount Average

(Years) Weighted

Rate Weighted Average

Variable Rate Fair Value

Company is a party to interest rate derivatives that are not designated as hedging instruments.

Under a program, the Company executes

interest rate swaps with commercial lending customers to facilitate their respective risk management strategies.

These interest rate

swaps with customers are simultaneously offset by interest rate swaps that the Bank executes with a third-party financial institution,

such that the Bank minimizes its net risk exposure resulting from such transactions.

Because the interest rate swaps associated with

this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting

swaps are recognized directly in earnings.

The changes in the fair value of the swaps offset each other, except for the credit risk of

the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for

all counterparties and did not have a significant impact on fair value.

The Company had $ 50 thousand and $ 0 in cash pledged for collateral

on its interest rate swaps with financial institutions at September 30, 2025 and 2024, respectively.

following table presents summary information regarding these derivatives for September 30, 2025 and 2024.

Average Weighted

Notional Maturity Average Weighted Average Fair

Amount (Years) Fixed Rate Variable Rate Value

(Dollars in thousands)

2 unchanged sentences

Customer interest rate swaps $ 43,122 3.6 5.75 % 1 Mo.

BSBY + 2.44 $ 1,405

SOFR + 2.66 $ 911

Total $ 43,122 3.6 5.75 % $ 911

1 unchanged sentence

3rd Party interest rate swaps $ 43,122 3.6 5.75 % 1 Mo.

BSBY + 2.44 $ 1,405

SOFR + 2.66 $ 911

Total $ 43,122 3.6 5.75 % $ 911

8 unchanged sentences

Total $ 34,890 3.2 4.96 % $ 1,405

At September 30, 2024

and 2023, the Company had outstanding commitments (substantially all of which expire within one year) to originate one-to four-family

residential loans, construction loans, commercial real estate loans, commercial business loans and consumer loans.

These commitments were

comprised of fixed and variable rate loans.

MAGYAR BANCORP, INC.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

September 30,

September 30, 2025 and 2024, the Company had outstanding commitments (substantially all of which expire within one year) to originate

one-to four-family residential loans, construction loans, commercial real estate loans, commercial business loans and consumer loans.

These commitments were comprised of fixed and variable rate loans.

Ended September 30,

(In thousands)

Financial instruments whose contract amounts

represent credit risk

Letters of credit

Unused lines of credit

Fixed rate loan commitments

Variable rate loan commitments

NOTE Q - FAIR

VALUE DISCLOSURES

The Company uses fair

value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company’s

securities available-for-sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required

to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing

rights, loans receivable and other real estate owned, or OREO.

These non-recurring fair value adjustments involve the application of lower-of-cost-or-market

accounting or write-downs of individual assets.

In accordance with

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), the Company groups its assets and liabilities at fair value

in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

instruments whose contract amounts represent credit

lines of credit

rate loan commitments

Q - FAIR VALUE DISCLOSURES

Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company’s securities available-for-sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the

Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities,

mortgage servicing rights, loans receivable and other real estate owned.

These non-recurring fair value adjustments involve the application

of lower-of-cost-or-market accounting or write-downs of individual assets.

accordance with ASC 820, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the

assets are traded and the reliability of the assumptions used to determine fair value.

These levels are:

Valuation is based upon quoted prices for identical instruments traded in active markets.

Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

Valuation is generated from model-based techniques that use significant assumptions not observable in the market.

These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability.

Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

The Company bases its

fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date.

ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable

inputs when measuring fair value.

The following is a

description of valuation methodologies used for assets measured at fair value on a recurring basis.

Securities available-for-sale

The Company’s

available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes,

reported as accumulated other comprehensive income (loss) in stockholders’ equity.

The securities available-for-sale portfolio consists

Valuation is based upon quoted prices for identical instruments

traded in active markets.

Valuation is based upon quoted

prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active

and model-based valuation techniques for which all significant assumptions are observable in the market.

Valuation is generated from

model-based techniques that use significant assumptions not observable in the market.

These unobservable assumptions reflect our own

estimates of assumptions that market participants would use in pricing the asset or liability.

Valuation techniques include the use

of option pricing models, discounted cash flow models and similar techniques.

The results cannot be determined with precision and may

not be realized in an actual sale or immediate settlement of the asset or liability.

Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

ASC 820 requires the Company to maximize the use of observable inputs and minimize

the use of unobservable inputs when measuring fair value.

following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

available-for-sale

Company’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses,

net of taxes, reported as accumulated other comprehensive income (loss) in stockholders’ equity.

The securities available-for-sale

portfolio consists of U.S.

government and government-sponsored enterprise obligations and mortgage-backed securities.

The fair values of these securities

are obtained from an independent nationally recognized pricing service.

An independent pricing service provides prices which are categorized

as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

The following tables

provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on

a recurring basis at September 30, 2024 and 2023:

MAGYAR BANCORP, INC.

The fair values

of these securities are obtained from an independent nationally recognized pricing service.

An independent pricing service provides prices

which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured

at fair value on a recurring basis at September 30, 2025 and 2024:

(In thousands)

2 unchanged sentences

Obligations of U.S.

government agencies:

Mortgage-backed securities - residential

Obligations of U.S.

Mortgage-backed

securities - residential

government-sponsored enterprises:

Mortgage-backed securities-residential

Corporate securities

Total securities available for sale

Derivative assets

Derivative liabilities

Total Liabilities

Mortgage-backed

securities-residential

securities available for sale

(In thousands)

September 30, 2024

1 unchanged sentence

Obligations of U.S.

government agencies:

Mortgage-backed securities - residential

Obligations of U.S.

Mortgage-backed

securities - residential

government-sponsored enterprises:

Mortgage-backed securities-residential

Total securities available for sale

Derivative assets

Derivative liabilities

Total Liabilities

The following is a

description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Impaired Loans

Loans which meet certain

criteria are evaluated individually for impairment.

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

the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.

All amounts due according

to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the

loan agreement.

Three impairment measurement methods are used, depending upon the collateral securing the asset:

1) the present value

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

2) the asset’s observable market price;

3) the fair value of the collateral if the asset is collateral dependent.

The regulatory agencies require this method for loans from which

repayment is expected to be provided solely by the underlying collateral.

The Company’s impaired loans are generally collateral

dependent and, as such, are carried at the estimated fair value of the collateral less estimated selling and disposition costs.

is estimated through current appraisals, and adjusted as necessary, by management, to reflect current market conditions and, as such,

are generally classified as Level 3.

There were no such loans at September 30, 2024.

MAGYAR BANCORP, INC.

Mortgage-backed

securities-residential

securities available for sale

following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Real Estate Owned

real estate owned is carried at lower of cost or estimated fair value less disposal costs.

The estimated fair value of the real estate

is determined through current appraisals, and adjusted as necessary, by management, to reflect current market conditions.

As such, other

real estate owned is generally classified as Level 3.

The Company sold two properties totaling $ 1.8 million and wrote down its remaining

property by $ 57 thousand during the year ended September 30, 2025.

Dependent Individually Evaluated Loans

dependent individually evaluated loans are measured and reported at fair value through specific allocations of the allowance for credit

losses based on the fair value of the underlying collateral.

At September 30, 2025 and 2024 there were no collateral dependent loans

with specific reserves.

BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

to Consolidated Financial Statements

September 30, 2025 and 2024

Appraisals of collateral

securing impaired loans are conducted by approved, qualified, and independent third-party appraisers.

Such appraisals are ordered via

the Bank’s credit administration department, independent from the lender who originated the loan, once the loan is deemed impaired,

as described in the previous paragraph.

Impaired loans are generally re-evaluated with an updated appraisal within one year of the last

However, the Company also obtains updated appraisals on performing construction loans that are approaching their maturity date

to determine whether or not the fair value of the collateral securing the loan remains sufficient to cover the loan amount prior to considering

an extension.

The Company discounts the appraised “as is” value of the collateral for estimated selling and disposition costs

and compares the resulting fair value of collateral to the outstanding loan amount.

If the outstanding loan amount is greater than the

discounted fair value, the Company requires a reduction in the outstanding loan balance or additional collateral before considering an

extension to the loan.

If the borrower is unwilling or unable to reduce the loan balance or increase the collateral securing the loan,

it is deemed impaired and the difference between the loan amount and the fair value of collateral, net of estimated selling and disposition

costs, is charged off through a reduction of the allowance for loan loss.

Other Real Estate

Other real estate owned

is carried at lower of cost or estimated fair value less disposal costs.

The estimated fair value of the real estate is determined through

current appraisals, and adjusted as necessary, by management, to reflect current market conditions.

As such, other real estate owned is

generally classified as Level 3.

There were no valuation write-downs for the years ended September 30, 2024 and 2023.

During the year

ended September 30, 2024, the Company recorded valuation write-ups on three properties received through foreclosure.

Dependent Loans

Collateral dependent

loans are measured and reported at fair value through specific allocations of the allowance for credit losses based on the fair value

of the underlying collateral.

The following table

provides the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value

on a non-recurring basis at September 30, 2024 and 2023:

September 30, 2024

following table provides the level of valuation assumptions used to determine the carrying value of the Company’s assets measured

at fair value on a non-recurring basis at September 30, 2025 and 2024:

(In thousands)

Other real estate owned

September 30, 2025

(In thousands)

Impaired loans

The following tables

present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Company has utilized

Level 3 inputs to determine fair value at September 30, 2024 and 2023:

real estate owned

following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which

Company has utilized Level 3 inputs to determine fair value at September 30, 2025 and 2024:

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

Fair Value Valuation

September 30, 2024 Estimate Techniques Unobservable Input Range (Weighted Average)

Value Valuation

September 30, 2025 Estimate Techniques Unobservable

(Weighted Average)

Other real estate owned $ 2,167 Appraisal Liquidation expenses (1) -1.5% to -1.5% (-1.5%)

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

Fair Value Valuation

September 30, 2023 Estimate Techniques Unobservable Input Range (Weighted Average)

Impaired loans $ 777 Appraisal of collateral (1) Appraisal adjustments (2) -50% to -8.0% (-19.4%)

(1) Fair value is generally determined through independent appraisals for the underlying collateral, which

generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated

liquidation expenses.

The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent

of the appraisal.

The following

presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments

Value Valuation

September 30, 2024 Estimate Techniques Unobservable

(Weighted Average)

Other real estate owned $ 1,501 Appraisal Liquidation expenses (1) -13.0% to -19.6% (-14.6%)

(1) Fair value is generally determined through independent appraisals for the underlying collateral, which generally include various level 3 inputs which are not identifiable.

BANCORP, INC.

AND SUBSIDIARY

to Consolidated Financial Statements

September 30, 2025 and 2024

following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments

carried at cost or amortized cost as of September 30, 2025 and 2024.

This table excludes financial instruments for which the

carrying amount approximates fair value, which includes cash and cash equivalents, FHLBNY stock, bank owned life insurance, accrued

interest receivable, interest and non-interest bearing demand, savings deposits, and accrued interest payable.

For short-term

financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively

short time between the origination of the instrument and its expected realization.

For financial liabilities such as

interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to

these products having no stated maturity.

The Company’s bank-owned life insurance is not a marketable asset and may generally

only be redeemed with the insurance company, and is therefore not included in the table below.

Fair Value Measurement Placement

This table excludes financial instruments for which the carrying

amount approximates fair value, which includes cash and cash equivalents, FHLBNY stock, bank owned life insurance, accrued interest receivable,

interest and non-interest bearing demand, savings deposits, and accrued interest payable.

For short-term financial assets such as cash

and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination

of the instrument and its expected realization.

For financial liabilities such as interest-bearing demand, NOW, and money market

savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

The Company’s

bank-owned life insurance is not a marketable asset and may generally only be redeemed with the insurance company and is therefore not

included in the table below.

Value Measurement Placement

(In thousands)

September 30, 2024

Financial instruments - assets

Investment securities held to maturity

Loan receivable net allowance for credit losses

securities held to maturity

Loan receivable

net allowance for credit losses

Financial instruments - liabilities

Certificates of deposit including retirement certificates

September 30, 2023

of deposit including retirement certificates

Financial instruments - assets

Investment securities held-to-maturity

Loan receivable net allowance for credit losses

securities held-to-maturity

Loan receivable

net allowance for credit losses

Financial instruments - liabilities

Certificates of deposit including retirement certificates

NOTE R - REGULATORY

The Company and Bank

are required to maintain minimum amounts of capital to total “risk-weighted” assets, as defined by the banking regulators.

of deposit including retirement certificates

R - REGULATORY CAPITAL

Bank is required to maintain minimum amounts of capital to total “risk-weighted” assets, as defined by the banking regulators.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if

1 unchanged sentence

Under capital adequacy guidelines and the

regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative

measures of the Company’s and Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory

accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components,

risk weightings and other factors.

MAGYAR BANCORP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2024 and 2023

As of September 30,

2024, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory

framework for prompt corrective action.

The following tables

set forth the Company’s and the Bank’s actual and required capital levels under those measures:

capitalized under

Required for capital

prompt corrective

regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures

of the Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices.

capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and

other factors.

of September 30, 2025, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework

for prompt corrective action.

following tables set forth the Company’s actual capital levels and the Bank’s actual and required capital levels under those

corrective action

September 30, 2025

adequacy purposes

action provisions

Tier 1 leverage ratio

Tier 1 risk-based capital ratio

Tier 1 leverage

Tier 1 risk-based capital

Total risk-based capital ratio

≥ 10.50 % (1)

September 30, 2023

Tier 1 leverage ratio

Tier 1 risk-based capital ratio

Tier 1 risk-based capital

Total risk-based capital ratio

1 unchanged sentence

2.50 % capital conservation buffer

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

In and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data