UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-51726

Magyar Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-4154978
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

400 Somerset Street, New Brunswick, New Jersey	08901
(Address of Principal Executive Office)	(Zip Code)

(732) 342-7600

(Issuer’s Telephone Number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $.01 per share	MGYR	The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares outstanding of the issuer's common stock at February 1, 2023 was 6,742,934.

MAGYAR BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

PART I. FINANCIAL INFORMATION

	Page Number

Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

Signature Pages		34

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

	December 31,			September 30,
	2022			2022
	(Unaudited)
Assets
Cash	$	3,253		$	2,869
Interest earning deposits with banks		4,625			28,067
Total cash and cash equivalents		7,878			30,936

Investment securities - available for sale, at fair value		9,207			9,229
Investment securities - held to maturity, at amortized cost (fair value of $79,632 and $79,914 at December 31, 2022 and September 30, 2022, respectively)		90,630			91,646
Federal Home Loan Bank of New York stock, at cost		2,106			1,447
Loans receivable, net of allowance for loan losses of $8,750 and $8,433 at December 31, 2022 and September 30, 2022, respectively		666,080			619,843
Bank owned life insurance		17,755			17,660
Accrued interest receivable		3,826			3,478
Premises and equipment, net		13,683			13,880
Other real estate owned ("OREO")		292			281
Other assets		10,169			10,143
Total assets	$	821,626		$	798,543

Liabilities and Stockholders' Equity
Liabilities
Deposits	$	676,083		$	667,733
Escrowed funds		3,368			3,407
Borrowings		29,725			15,625
Accrued interest payable		162			85
Accounts payable and other liabilities		12,370			13,191
Total liabilities		721,708			700,041

Stockholders' equity

Preferred stock: $.01 Par Value, 500,000 shares authorized; at December 31, 2022 and September 30, 2022, none issued		—			—


Common stock: $.01 Par Value, 14,000,000 shares authorized; 7,097,825 shares issued; 6,742,934 and 6,745,128 shares outstanding at December 31, 2022 and September 30, 2022, respectively, at cost		71			71
Additional paid-in capital		63,931			63,734
Treasury stock: 467,887 and 465,693 shares at December 31, 2022 and September 30, 2022, respectively, at cost		(5,820	)		(5,793	)
Unearned Employee Stock Ownership Plan shares		(3,145	)		(3,169	)
Retained earnings		46,839			45,773
Accumulated other comprehensive loss		(1,958	)		(2,114	)
Total stockholders' equity		99,918			98,502
Total liabilities and stockholders' equity	$	821,626		$	798,543

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

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income

(In Thousands, Except Share and Per Share Data)

	Three Months
	Ended December 31,
	2022		2021
	(Unaudited)
Interest and dividend income
Loans, including fees	$	7,959	$	6,721
Investment securities
Taxable		504		261
Tax-exempt		14		7
Federal Home Loan Bank of New York stock		24		20
Total interest and dividend income		8,501		7,009

Interest expense
Deposits		1,474		451
Borrowings		136		119
Total interest expense		1,610		570
Net interest and dividend income		6,891		6,439
Provision for loan losses		317		101
Net interest and dividend income after
provision for loan losses		6,574		6,338

Other income
Service charges		245		257
Income on bank owned life insurance		95		87
Interest rate swap fees		57		—
Other operating income		20		25
Gains on sales of loans		180		281
Total other income		597		650

Other expenses
Compensation and employee benefits		2,822		2,702
Occupancy expenses		761		739
Professional fees		179		387
Data processing expenses		146		134
Marketing and business development		126		125
OREO expenses		16		34
FDIC deposit insurance premiums		54		57
Loan servicing expenses		31		46
Other expenses		446		397
Total other expenses		4,581		4,621
Income before income tax expense		2,590		2,367
Income tax expense		780		674
Net income	$	1,810	$	1,693

Net income per share-basic	$	0.28	$	0.25
Net income per share-diluted	$	0.28	$	0.25
Weighted average shares outstanding-basic		6,456,525		6,792,477
Weighted average shares outstanding-diluted		6,459,446		6,792,477

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

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(In Thousands)

	Three Months
	Ended December 31,
	2022			2021
	(Unaudited)
Net income	$	1,810		$	1,693
Other comprehensive income (loss)
Unrealized gain (loss) on securities available for sale		206			(53	)
Other comprehensive gain (loss), before tax		206			(53	)
Deferred income tax effect		(50	)		13
Total other comprehensive gain (loss)	$	156		$	(40	)
Total comprehensive income	$	1,966		$	1,653

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

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity

For the Three Months Ended December 31, 2022 and 2021

(In Thousands, Except for Share Amounts)

																	Accumulated
	Common Stock					Additional					Unearned						Other
	Shares			Par		Paid-In		Treasury			ESOP			Retained			Comprehensive
	Outstanding			Value		Capital		Stock			Shares			Earnings			Loss			Total
	(Unaudited)
Balance, September 30, 2022	$	6,745,128		$	71	$	63,734	$	(5,793	)	$	(3,169	)	$	45,773		$	(2,114	)	$	98,502
Net income		—			—		—		—			—			1,810			—			1,810
Dividends paid on common stock ($0.11 per share)		—			—		—		—			—			(744	)					(744	)
Other comprehensive income		—			—		—		—			—			—			156			156
ESOP shares allocated		—			—		17		—			24			—			—			41
Purchase of treasury stock		(2,194	)		—		—		(27	)		—			—			—			(27	)
Stock-based compensation expense		—			—		180		—			—			—			—			180
Balance, December 31, 2022	$	6,742,934		$	71	$	63,931	$	(5,820	)	$	(3,145	)	$	46,839		$	(1,958	)	$	99,918

																	Accumulated
	Common Stock				Additional						Unearned						Other
	Shares		Par		Paid-In			Treasury			ESOP			Retained			Comprehensive
	Outstanding		Value		Capital			Stock			Shares			Earnings			Loss			Total
	(Unaudited)
Balance, September 30, 2021		7,097,825	$	71	$	63,713		$	(1,242	)	$	(3,235	)	$	39,281		$	(947	)	$	97,641
Net income		—		—		—			—			—			1,693			—			1,693
Dividends paid on common stock ($0.12 per share)		—		—		—			—			—			(814	)		—			(814	)
Other comprehensive income		—		—		—			—			—			—			(40	)		(40	)
Common stock acquired by ESOP		—		—		—			—			(98	)		—			—			(98	)
ESOP shares allocated		—		—		(32	)		—			93			—			—			61
Balance, December 31, 2021		7,097,825	$	71	$	63,681		$	(1,242	)	$	(3,240	)	$	40,160		$	(987	)	$	98,443

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

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In Thousands)

	For the Three Months Ended
	December 31,
	2022			2021
	(Unaudited)
Operating activities
Net income	$	1,810		$	1,693
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense		208			209
Premium amortization on investment securities, net		43			58
Provision for loan losses		317			101
Originations of SBA loans held for sale		(1,825	)		(2,437	)
Proceeds from the sales of SBA loans		2,005			2,718
Gains on sale of loans receivable		(180	)		(281	)
ESOP compensation expense		41			61
Stock-based compensation expense		180			—
Deferred income tax expense (benefit)		(237	)		26
Increase in accrued interest receivable		(348	)		(51	)
Increase in surrender value of bank owned life insurance		(95	)		(87	)
Decrease in other assets		160			360
Increase (decrease) in accrued interest payable		77			(4	)
Decrease in accounts payable and other liabilities		(821	)		(30	)
Net cash provided by operating activities		1,335			2,336

Investing activities
Net (increase) decrease in loans receivable		(46,554	)		10,934
Purchases of investment securities held to maturity		—			(10,064	)
Principal repayments on investment securities held to maturity		992			1,221
Principal repayments on investment securities available for sale		209			671
Purchase of bank owned life insurance		—			(3,000	)
Purchases of premises and equipment		(10	)		(77	)
Investment in other real estate owned		(11	)		(12	)
(Purchase) redemption of Federal Home Loan Bank stock		(659	)		77
Net cash used in investing activities		(46,033	)		(250	)

Financing activities
Net increase in deposits		8,350			7,861
Purchase of common stock for ESOP		—			(98	)
Net (decrease) increase in escrowed funds		(39	)		35
Proceeds from long-term advances		3,000			—
Repayments of long-term advances		—			(2,000	)
Net change in short-term advances		11,100			—
Cash dividends paid on common stock		(744	)		(814	)
Purchase of treasury stock		(27	)		—
Net cash provided by financing activities		21,640			4,984
Net (decrease) increase in cash and cash equivalents		(23,058	)		7,070
Cash and cash equivalents, beginning of period		30,936			75,201

Cash and cash equivalents, end of period	$	7,878		$	82,271

Supplemental disclosures of cash flow information
Cash paid for
Interest	$	1,533		$	575

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

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A – BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Magyar Bancorp, Inc. (the “Company”), its wholly owned subsidiary, Magyar Bank (the “Bank”), and the Bank’s wholly owned subsidiaries Magyar Service Corporation, Hungaria Urban Renewal, LLC, and Magyar Investment Company. All material intercompany transactions and balances have been eliminated. The Company prepares its consolidated financial statements on the accrual basis and in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The unaudited information furnished herein reflects all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.

Operating results for the three months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023. The September 30, 2022 information has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete consolidated financial statements.

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of other real estate owned (“OREO”), and the assessment of realizability of deferred income tax assets.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2022 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

NOTE B- RECENT 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 B

SEC Form 10-Q filed by Magyar Bancorp Inc.