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~~March 31, ~~2022~~2023

☐ 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~~May 1, 2023 was ~~6,742,934.~~6,688,790.

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	2523
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	3233
Item 4.	Mine Safety Disclosures	3233
Item 5.	Other Information	3233
Item 6.	Exhibits	3233

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

	March 31,			September 30,
	2023			2022
	(Unaudited)
Assets
Cash	$	3,044		$	2,869
Interest earning deposits with banks		22,388			28,067
Total cash and cash equivalents		25,432			30,936

Investment securities - available for sale, at fair value		9,158			9,229
Investment securities - held to maturity, at amortized cost (fair value of $79,957 and $79,914 at March 31, 2023 and September 30, 2022, respectively)		89,722			91,646
Federal Home Loan Bank of New York stock, at cost		1,936			1,447
Loans receivable, net of allowance for loan losses of $8,844 and $8,433 at March 31, 2023 and September 30, 2022, respectively		667,266			619,843
Bank owned life insurance		17,845			17,660
Accrued interest receivable		3,969			3,478
Premises and equipment, net		13,605			13,880
Other real estate owned ("OREO")		291			281
Other assets		10,633			10,143

Total assets	$	839,857		$	798,543

Liabilities and Stockholders' Equity
Liabilities
Deposits	$	697,891		$	667,733
Escrowed funds		1,550			3,407
Borrowings		25,534			15,625
Accrued interest payable		236			85
Accounts payable and other liabilities		13,481			13,191

Total liabilities		738,692			700,041

Stockholders' equity
Preferred stock: $.01 Par Value, 500,000 shares authorized; at March 31, 2023 and September 30, 2022, none issued		—			—
Common stock: $.01 Par Value, 14,000,000 shares authorized; 7,097,825 shares issued; 6,689,790 and 6,745,128 shares outstanding at March 31, 2023 and September 30, 2022, respectively, at cost		71			71
Additional paid-in capital		64,096			63,734

Treasury stock: 521,031 and 465,693 shares at March 31, 2023 and September 30, 2022, respectively, at cost		(6,504	)		(5,793	)
Unearned Employee Stock Ownership Plan shares		(3,129	)		(3,169	)
Retained earnings		48,456			45,773
Accumulated other comprehensive loss		(1,825	)		(2,114	)

Total stockholders' equity		101,165			98,502

Total liabilities and stockholders' equity	$	839,857		$	798,543

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income

(In Thousands, Except Share and Per Share Data)

	Three Months				Three Months				Six Months
	Ended December 31,				Ended March 31,				Ended March 31,
	2022		2021		2023		2022		2023		2022
	(Unaudited)				(Unaudited)
Interest and dividend income
Loans, including fees	$	7,959	$	6,721	$	8,618	$	6,543	$	16,577	$	13,263
Investment securities
Taxable		504		261		512		334		1,015		594
Tax-exempt		14		7		14		8		29		16
Federal Home Loan Bank of New York stock		24		20		30		18		55		39
Total interest and dividend income		8,501		7,009		9,174		6,903		17,676		13,912

Interest expense
Deposits		1,474		451		2,009		415		3,483		867
Borrowings		136		119		219		111		355		230
Total interest expense		1,610		570		2,228		526		3,838		1,097
Net interest and dividend income		6,891		6,439		6,946		6,377		13,838		12,815
Provision for loan losses		317		101		195		71		513		171
Net interest and dividend income after
provision for loan losses		6,574		6,338
Net interest and dividend income after provision for loan losses						6,751		6,306		13,325		12,644

Other income
Service charges		245		257		320		319		565		575
Income on bank owned life insurance		95		87		90		93		185		181
Interest rate swap fees		57		—		—		—		57		—
Other operating income		20		25		20		21		41		46
Gains on sales of loans		180		281		201		139		381		420
Total other income		597		650		631		572		1,229		1,222

Other expenses
Compensation and employee benefits		2,822		2,702		2,983		2,694		5,806		5,395
Occupancy expenses		761		739		792		765		1,552		1,505
Professional fees		179		387		205		270		384		658
Data processing expenses		146		134		149		139		295		273
Marketing and business development		126		125		117		84		243		209
OREO expenses		16		34		8		14		25		48
FDIC deposit insurance premiums		54		57		94		49		148		106
Loan servicing expenses		31		46		40		38		71		83
Other expenses		446		397		408		456		855		853
Total other expenses		4,581		4,621		4,796		4,509		9,379		9,130
Income before income tax expense		2,590		2,367		2,586		2,369		5,175		4,736
Income tax expense		780		674		790		690		1,569		1,364
Net income	$	1,810	$	1,693	$	1,796		1,679	$	3,606		3,372

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
Earnings per share - basic					$	0.28	$	0.25	$	0.56	$	0.50
Earnings per share - diluted					$	0.28	$	0.25	$	0.56	$	0.50
Weighted average shares outstanding - basic						6,431,471		6,796,566		6,431,109		6,796,598
Weighted average shares outstanding - diluted						6,432,052		6,796,566		6,432,742		6,796,598

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(In Thousands)

	Three Months						Three Months						Six Months
	Ended December 31,						Ended March 31,						Ended March 31,
	2022			2021			2023			2022			2023			2022
	(Unaudited)						(Unaudited)
Net income	$	1,810		$	1,693		$	1,796		$	1,679		$	3,606		$	3,372
Other comprehensive income (loss)
Unrealized gain (loss) on securities available for sale		206			(53	)		177			(742	)		384			(795	)
Other comprehensive gain (loss), before tax		206			(53	)
Deferred income tax effect		(50	)		13			(44	)		183			(95	)		196
Total other comprehensive gain (loss)	$	156		$	(40	)
Total other comprehensive income (loss)							$	133		$	(559	)	$	289		$	(599	)
Total comprehensive income	$	1,966		$	1,653		$	1,929		$	1,120		$	3,895		$	2,773

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity

For the Three and Six Months Ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022

(In Thousands, Except for Share and Per-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
Net income		—			—		—			—			—			1,796			—			1,796
Dividends paid on common stock ($0.03 per share)		—			—		—			—			—			(179	)		—			(179	)
Other comprehensive income		—			—		—			—			—			—			133			133
Treasury stock used for restricted stock plan		1,000			—		(13	)		13			—			—			—			—
ESOP shares allocated		—			—		17			—			16			—			—			33
Purchase of treasury stock		(54,144	)		—		—			(697	)		—			—			—			(697	)
Stock-based compensation expense		—			—		161			—			—			—			—			161
Balance, March 31, 2023		6,689,790		$	71	$	64,096		$	(6,504	)	$	(3,129	)	$	48,456		$	(1,825	)	$	101,165

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

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

																	Accumulated																						Accumulated
	Common Stock				Additional						Unearned						Other						Common Stock				Additional						Unearned						Other
	Shares		Par		Paid-In			Treasury			ESOP			Retained			Comprehensive						Shares		Par		Paid-In			Treasury			ESOP			Retained			Comprehensive
	Outstanding		Value		Capital			Stock			Shares			Earnings			Loss			Total			Outstanding		Value		Capital			Stock			Shares			Earnings			Loss			Total
	(Unaudited)																						(Unaudited)
Balance, September 30, 2021		7,097,825	$	71	$	63,713		$	(1,242	)	$	(3,235	)	$	39,281		$	(947	)	$	97,641			7,097,825	$	71	$	63,713		$	(1,242	)	$	(3,235	)	$	39,281		$	(947	)	$	97,641
Net income		—		—		—			—			—			1,693			—			1,693			—		—		—			—			—			1,693			—			1,693
Dividends paid on common stock ($0.12 per share)		—		—		—			—			—			(814	)		—			(814	)		—		—		—			—			—			(814	)		—			(814	)
Other comprehensive income		—		—		—			—			—			—			(40	)		(40	)		—		—		—			—			—			—			(40	)		(40	)
Common stock acquired by ESOP		—		—		—			—			(98	)		—			—			(98	)		—		—		—			—			(98	)		—			—			(98	)
ESOP shares allocated		—		—		(32	)		—			93			—			—			61			—		—		(32	)		—			93			—			—			61
Balance, December 31, 2021		7,097,825	$	71	$	63,681		$	(1,242	)	$	(3,240	)	$	40,160		$	(987	)	$	98,443			7,097,825	$	71	$	63,681		$	(1,242	)	$	(3,240	)	$	40,160		$	(987	)	$	98,443
Net income																								—		—		—			—			—			1,679			—			1,679
Dividends paid on common stock ($0.03 per share)																																					(205	)					(205	)
Other comprehensive income																								—		—		—			—			—			—			(559	)		(559	)
ESOP shares allocated																								—		—		16			—			24			—			—			40
Balance, March 31, 2022																							$	7,097,825	$	71	$	63,697		$	(1,242	)	$	(3,216	)	$	41,634		$	(1,546	)	$	99,398

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In Thousands)

	For the Three Months Ended						For the Six Months Ended
	December 31,						March 31,
	2022			2021			2023			2022
	(Unaudited)						(Unaudited)
Operating activities
Net income	$	1,810		$	1,693		$	3,606		$	3,372
Adjustments to reconcile net income to net cash provided by
operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		208			209			415			417
Premium amortization on investment securities, net		43			58			80			104
Provision for loan losses		317			101			513			171
Originations of SBA loans held for sale		(1,825	)		(2,437	)		(3,887	)		(3,591	)
Proceeds from the sales of SBA loans		2,005			2,718			4,268			4,011
Gains on sale of loans receivable		(180	)		(281	)
Gains on sale of SBA loans								(381	)		(420	)
ESOP compensation expense		41			61			74			101
Stock-based compensation expense		180			—			341			—
Deferred income tax expense (benefit)		(237	)		26
Deferred income tax (benefit) expense								(357	)		85
Increase in accrued interest receivable		(348	)		(51	)		(491	)		(49	)
Increase in surrender value of bank owned life insurance		(95	)		(87	)		(185	)		(181	)
Decrease in other assets		160			360
Increase in other assets								(227	)		(845	)
Increase (decrease) in accrued interest payable		77			(4	)		151			(12	)
Decrease in accounts payable and other liabilities		(821	)		(30	)
Increase (decrease) in accounts payable and other liabilities								290			(416	)
Net cash provided by operating activities		1,335			2,336			4,210			2,747

Investing activities
Net (increase) decrease in loans receivable		(46,554	)		10,934
Net increase in loans receivable								(40,845	)		(24,283	)
Purchases of loans receivable								(7,091	)		—
Purchases of investment securities held to maturity		—			(10,064	)		—			(29,297	)
Principal repayments on investment securities held to maturity		992			1,221			1,878			2,595
Principal repayments on investment securities available for sale		209			671			421			1,103
Purchase of bank owned life insurance		—			(3,000	)
Purchases of bank owned life insurance								—			(3,000	)
Purchases of premises and equipment		(10	)		(77	)		(140	)		(161	)
Investment in other real estate owned		(11	)		(12	)		(11	)		(12	)
(Purchase) redemption of Federal Home Loan Bank stock		(659	)		77			(489	)		177
Net cash used in investing activities		(46,033	)		(250	)		(46,277	)		(52,878	)

Financing activities
Net increase in deposits		8,350			7,861			30,158			35,435
Purchase of common stock for ESOP		—			(98	)		—			(98	)
Net (decrease) increase in escrowed funds		(39	)		35			(1,857	)		117
Proceeds from long-term advances		3,000			—			13,000			—
Repayments of long-term advances		—			(2,000	)		(3,091	)		(4,206	)
Net change in short-term advances		11,100			—
Cash dividends paid on common stock		(744	)		(814	)		(923	)		(1,019	)
Purchase of treasury stock		(27	)		—			(724	)		—
Net cash provided by financing activities		21,640			4,984			36,563			30,229
Net (decrease) increase in cash and cash equivalents		(23,058	)		7,070
Cash and cash equivalents, beginning of period		30,936			75,201
Net decrease in cash and cash equivalents								(5,504	)		(19,902	)
Cash and cash equivalents, beginning of year								30,936			75,201

Cash and cash equivalents, end of period	$	7,878		$	82,271
Cash and cash equivalents, end of year							$	25,432		$	55,299

Supplemental disclosures of cash flow information
Cash paid for
Interest	$	1,533		$	575		$	3,687		$	1,108
Income taxes							$	1,850		$	1,500

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

~~(Unaudited)~~

(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~~six months ended ~~December~~March 31, ~~2022~~2023 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 available-for-sale investment securities, 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~~March 31, ~~2022~~2023 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

NOTE B-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 Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on consolidated financial statements when they are adopted in the future.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In October 2019, the FASB voted to defer the effective date of ASU 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022 (October 1, 2023 for the Company), and interim periods within those fiscal years. The Company currently expects to continue to qualify as a smaller reporting company, based upon the current SEC definition, and as a result, will be able to defer implementation of the new standard until October 1, 2023. The Company did not early adopt as of December 31, 2022, but will continue to review factors that might indicate that the full deferral time period should not be used. The Company continues to evaluate the impact the new standard will have on the accounting for credit losses, but the Company may recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on its consolidated financial condition or results of operations.

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~~In January 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020~~, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU were effective for all entities upon issuance through December 31, 2022 and did not impact the Company’s financial position or results of operations.

In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures as an update to Financial Instruments—Credit Losses (Topic 326). The amendments in this ASU eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. In addition, ASU 2022-02 requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The amendments in ASU 2022-02 will be effective for the Company with its adoption of ASU 2016-13.

NOTE C - CONTINGENCIES

The Company, from time to time, is 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 D - EARNINGS PER SHARE

The following table presents a calculation of basic and diluted earnings per share for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021.~~2022. Basic and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.

	For the Three Months				For the Three Months				For the Six Months
	Ended December 31,				Ended March 31,				Ended March 31,
	2022		2021		2023		2022		2023		2022
	(Dollars in thousands, except share and per share data)				(Dollars in thousands, except share and per share data)

Income applicable to common shares	$	1,810	$	1,693	$	1,796	$	1,679	$	3,606	$	3,372
Weighted average common shares outstanding- basic		6,456,525		6,792,477
Potential diliutive common stock equivalents		2,921		—
Weighted average common shares outstanding- diluted		6,459,446		6,792,477
Weighted average shares outstanding - basic						6,431,471		6,796,566		6,431,109		6,796,598
Weighted average shares outstanding - diluted						6,432,052		6,796,566		6,432,742		6,796,598
Earnings per share - basic	$	0.28	$	0.25	$	0.28	$	0.25	$	0.56	$	0.50
Earnings per share - diluted	$	0.28	$	0.25	$	0.28	$	0.25	$	0.56	$	0.50

Options to purchase 293,200 shares of common stock at a weighted average strike price of $12.58 and 156,400 shares of restricted shares at a weighted average price of $12.63 were outstanding at ~~December~~March 31, ~~2022.~~2023. There were no outstanding stock awards or options to purchase common stock at ~~December~~March 31, ~~2021.~~2022.

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NOTE E – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

The Company follows FASB Accounting Standards Codification (“ASC”) Section 718, Compensation-Stock Compensation, which covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in consolidated financial statements. The cost is measured based on the fair value of the equity or liability instruments issued.

ASC 718 also requires the Company to realize as a financing cash flow rather than an operating cash flow, as previously required, the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation for employees and outside directors within “compensation and employee benefits” in the Consolidated Statements of Income to correspond with the same line item as the cash compensation paid.

Stock options generally vest over a five-year service period and expire ten years from issuance. Management recognizes compensation expense for all option grants over the awards’ respective requisite service periods. The fair values of all option grants were estimated using the Black-Scholes option-pricing model. Management considered historical information on the volatility of the Company’s stock in determining the assumed volatility rate used in the estimation of fair value. Management estimated the expected life of the options using the simplified method allowed under SAB No. 107. The 7-year Treasury yield in effect at the time of the grant provided the risk-free rate for periods within the contractual life of the option. Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. Management estimated a 95% retention rate for stock option recipients. Once vested, these awards are irrevocable. Shares will be obtained from either the open market or treasury stock upon share option exercise.

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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.

On August 25, 2022, the Company adopted the 2022 Equity ~~Incentive~~Compensation Plan which provided for grants of up to 547,400 shares to be allocated between incentive and non-qualified stock options and restricted stock awards to officers, employees and directors of the Company and Magyar Bank. At ~~December~~March 31, ~~2022,~~2023, 293,200 options and 156,400 shares of restricted stock had been awarded from the plan.

The following is a summary of the status of the Company’s stock option activity and related information for its option plan for the ~~three~~six months ended ~~December~~March 31, ~~2022:~~2023:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value		Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value

Balance at September 30, 2022		293,200	$	12.58		10.0	$	—		293,200	$	12.58		10.0	$	—
Granted		—		—		—		—		—		—		—		—
Exercised		—		—		—		—		—		—		—		—
Forfeited		—		—		—		—		—		—		—		—
Expired		—		—		—		—		—		—		—		—
Balance at December 31, 2022		293,200	$	12.58		9.7	$	70,374
Balance at March 31, 2023										293,200	$	12.58		9.5	$	—

Exercisable at December 31, 2022		—	$	—		—	$	—
Exercisable at March 31, 2023										—	$	—		—	$	—

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The following is a summary of the status of the Company’s non-vested restricted shares for the ~~three~~six months ended ~~December~~March 31, ~~2022:~~2023:

Shares Weighted
Average Grant
Date Fair Value
Balance at September 30, 2022 156,400 12.63
Granted — —
Vested — —
Forfeited — —
Balance at December 31, 2022 156,400 $ 12.63

	Shares		Weighted Average Grant Date Fair Value
Balance at September 30, 2022		156,400		12.63
Granted		—		—
Vested		—		—
Forfeited		—		—
Balance at March 31, 2023		156,400	$	12.63

Stock option and stock award expenses included with compensation expense were ~~$69,000~~$132,000 and ~~$111,000,~~$209,000, respectively, for the ~~three~~six months ended ~~December~~March 31, ~~2022.~~2023. There was no stock option or stock award expense for the ~~three~~six months ended ~~December~~March 31, ~~2021.~~2022. The Company had no other stock-based compensation plans as of ~~December~~March 31, ~~2022~~2023 except as disclosed below.

On December 8, 2022, the Company announced the completion of its third stock repurchase program, under which 354,891 shares had been repurchased at an average price of $12.90. The Company also announced the authorization of an additional stock repurchase plan pursuant to which the Company intends to repurchase up to an additional 5% of its outstanding shares, or up to 337,146 ~~shares.~~shares, under which 54,144 shares had been repurchased at an average price of $12.87. Under this stock repurchase program, 283,002 shares of the 337,146 shares authorized remained available for repurchase as of March 31, 2023. The Company’s intended use of the repurchased shares is for general corporate purposes. The Company held treasury stock shares totaling 522,031 at March 31, 2023. The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital.

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The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees who meet certain eligibility requirements. The ESOP trust purchases shares of common stock in the open market using proceeds of a loan from the Company. The loan is secured by shares of the Company’s stock. The Bank makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company. 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.

In connection with the Company’s second-step stock offering during its fiscal year ending September 30, 2021, the ESOP trustees purchased 312,800 shares of the Company’s common stock for $3.4 million, reflecting an average cost per share of $10.77. The ESOP loan bears a variable interest rate that adjusts annually to Prime Rate ~~(3.25% at January 1, 2022, adjusting to 7.50%~~(7.50% on January 1, 2023) with principal and interest payable annually in equal installments over thirty years.

At ~~December~~March 31, ~~2022,~~2023, ESOP shares allocated to participants totaled 22,487. Unallocated ESOP shares held in suspense totaled 290,313 at ~~December~~March 31, ~~2022~~2023 and the aggregate fair value was ~~$3.7~~$3.1 million. The Company's contribution expense for the ESOP was ~~$41,000~~$74,000 and ~~$61,000~~$99,000 for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

NOTE F – OTHER COMPREHENSIVE INCOME (LOSS)

The Company recorded no reclassification adjustments during the three and six month periods ending March 31, 2023. The components of other comprehensive income (loss) and the related income tax effects are as follows:

	Three Months Ended December 31,															Three Months Ended March 31,
	2022							2021								2023							2022
			Tax			Net of					Tax		Net of					Tax			Net of					Tax		Net of
	Before Tax		(Benefit)			Tax		Before Tax			(Benefit)		Tax			Before Tax		(Benefit)			Tax		Before Tax			(Benefit)		Tax
	Amount		Expense			Amount		Amount			Expense		Amount			Amount		Expense			Amount		Amount			Expense		Amount
	(In thousands)															(In thousands)
Unrealized holding gain (loss) arising during period on:
Available-for-sale investments	$	206	$	(50	)	$	156	$	(53	)	$	13	$	(40	)	$	177	$	(44	)	$	133	$	(742	)	$	183	$	(559	)
Other comprehensive income (loss), net	$	206	$	(50	)	$	156	$	(53	)	$	13	$	(40	)	$	177	$	(44	)	$	133	$	(742	)	$	183	$	(559	)

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	Six Months Ended March 31,
	2023							2022
			Tax			Net of					Tax		Net of
	Before Tax		(Benefit)			Tax		Before Tax			(Benefit)		Tax
	Amount		Expense			Amount		Amount			Expense		Amount
	(In thousands)
Unrealized holding gain (loss) arising during period on:
Available-for-sale investments	$	384	$	(95	)	$	289	$	(795	)	$	196	$	(599	)
Other comprehensive income (loss), net	$	384	$	(95	)	$	289	$	(795	)	$	196	$	(599	)

NOTE G – 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 securities available-for-sale and the Company’s derivative assets and liabilities 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 OREO. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

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In 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:

	Level 1 -	Valuation is based upon quoted prices for identical instruments traded in active markets.

	Level 2 -	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.

	Level 3 -	Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect 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 based 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 securities 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-sponsored mortgage-backed ~~securities and private label mortgage-backed~~ securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides the Company with prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities in the Company’s portfolio. Various modeling techniques are used to determine pricing for Company’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

Derivatives

Magyar Bank executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. The fair values of such derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).

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.

March 31, 2023	Total		Level 1		Level 2		Level 3
Assets:	(In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	104	$	—	$	104	$	—
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		9,054		—		9,054		—
Total securities available for sale	$	9,158	$	—	$	9,158	$	—
Derivative assets		2,206		—		2,206		—
Total assets	$	11,364	$	—	$	11,364	$	—

Liabilities:
Derivative liabilities	$	2,206	$	—	$	2,206	$	—
Total Liabilities	$	2,206	$	—	$	2,206	$	—

September 30, 2022
Assets:
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	107	$	—	$	107	$	—
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities - residential		9,122		—		9,122		—
Total securities available for sale	$	9,229	$	—	$	9,229	$	—
Derivative assets		2,487		—		2,487		—
Total assets	$	11,716	$	—	$	11,716	$	—

Liabilities:
Derivative liabilities	$	2,487	$	—	$	2,487	$	—
Total Liabilities	$	2,487	$	—	$	2,487	$	—

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December 31, 2022 Total Level 1 Level 2 Level 3
Assets: (In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential $ 104 $ — $ 104 $ —
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential 9,103 — 9,103 —
Total securities available for sale $ 9,207 $ — $ 9,207 $ —
Derivative assets 2,471 — 2,471 —
Total assets $ 11,678 $ — $ 11,678 $ —

Liabilities:
Derivative liabilities $ 2,471 $ — $ 2,471 $ —
Total Liabilities $ 2,471 $ — $ 2,471 $ —

September 30, 2022
Assets:
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential $ 107 $ — $ 107 $ —
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential 9,122 — 9,122 —
Total securities available for sale $ 9,229 $ — $ 9,229 $ —
Derivative assets 2,487 — 2,487 —
Total assets $ 11,716 $ — $ 11,716 $ —

Liabilities:
Derivative liabilities $ 2,487 $ — $ 2,487 $ —
Total Liabilities $ 2,487 $ — $ 2,487 $ —

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 (the rate of return implicit in the loan); 2) the asset’s observable market price; or 3) the fair value of the collateral, less anticipated selling and disposition costs, if the asset is collateral dependent. The regulatory agencies require the last 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 costs. Fair value is estimated through current appraisals, and adjusted by management as necessary, to reflect current market conditions and, as such, are generally classified as Level 3.

Appraisals of collateral securing impaired loans are conducted by approved, qualified, and independent third-party appraisers. Such appraisals are ordered via the Company’s credit administration department, independent from the lender who originated the loan, once the loan is deemed impaired, as described in the previous paragraph. Impaired loans are generally re-evaluated with an updated appraisal within one year of the last appraisal. 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.

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Other Real Estate Owned

The fair value of other real estate owned is determined through current appraisals, and adjusted as necessary, by management, to reflect current market conditions and anticipated selling and disposition costs. As such, other real estate owned is generally classified as Level 3.

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 non-recurring basis at ~~December~~March 31, ~~2022~~2023 and September 30, 2022.

December 31, 2022	Total		Level 1		Level 2		Level 3
March 31, 2023									Total		Level 1		Level 2		Level 3
	(In thousands)								(In thousands)

Impaired loans	$	5,847	$	—	$	—	$	5,847	$	2,835	$	—	$	—	$	2,835
Other real estate owned		291		—		—		291
Total	$	6,138	$	—	$	—	$	6,138	$	2,835	$	—	$	—	$	2,835

September 30, 2022 Total Level 1 Level 2 Level 3
(In thousands)

Impaired loans $ 5,659 $ — $ — $ 5,659
Other real estate owned 281 — — 281
Total $ 5,940 $ — $ — $ 5,940

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September 30, 2022	Total		Level 1		Level 2		Level 3
	(In thousands)

Impaired loans	$	5,659	$	—	$	—	$	5,659
Total	$	5,659	$	—	$	—	$	5,659

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)

Fair Value Valuation
December 31, 2022 Estimate Techniques Unobservable Input Range (Weighted Average)

Impaired loans $ 5,847 Appraisal of collateral ⁽¹⁾ Appraisal adjustments ⁽²⁾ 0% to -31.7% (-11.4%)
Other real estate owned $ 291 Appraisal of collateral ⁽¹⁾ Liquidation expenses ⁽²⁾ -25.3% to -25.3% (-25.3%)

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in thousands)

	Fair Value		Valuation
March 31, 2023	Estimate		Techniques	Unobservable Input	Range (Weighted Average)

Impaired loans	$	2,835	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	0% to -12.0% (-6.0%)

Fair Value

Valuation

Fair Value

Valuation

September 30, 2022

Estimate

Techniques

Unobservable Input

Range (Weighted Average)

Estimate

Techniques

Unobservable Input

Range (Weighted Average)

Impaired loans

5,659

Appraisal of collateral ⁽¹⁾

Appraisal adjustments ⁽²⁾

0% to -31.7% (-9.9%)

5,659

Appraisal of
collateral ⁽¹⁾

Appraisal adjustments ⁽²⁾

0% to -31.7% (-9.9%)

Other real estate owned

281

Appraisal of collateral ⁽¹⁾

Liquidation expenses ⁽²⁾

-28.0% to -28.0% (-28.0%)

⁽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.

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The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of ~~December~~March 31, ~~2022~~2023 and September 30, 2022. For short-term financial assets such as cash and cash equivalents and accrued interest receivable, 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 being payable on demand and having no stated maturity.

	Carrying		Fair		Fair Value Measurement Placement						Carrying		Fair		Fair Value Measurement Placement
	Value		Value		(Level 1)		(Level 2)		(Level 3)		Value		Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)										(In thousands)
December 31, 2022
March 31, 2023
Financial instruments - assets
Investment securities held to maturity	$	90,630	$	79,632	$	—	$	79,632	$	—	$	89,722	$	79,957	$	—	$	79,957	$	—
Loans		666,080		641,727		—		—		641,727		667,266		640,741		—		—		640,741

Financial instruments - liabilities
Certificates of deposit including retirement certificates		84,412		83,345		—		83,345		—		89,720		89,026		—		89,026		—
Borrowings		29,725		28,946		—		28,946		—		25,534		24,914		—		24,914		—

September 30, 2022
Financial instruments - assets
Investment securities held-to-maturity	$	91,646	$	79,914	$	—	$	79,914	$	—	$	91,646	$	79,914	$	—	$	79,914	$	—
Loans		619,843		592,804		—		—		592,804		619,843		592,804		—		—		592,804

Financial instruments - liabilities
Certificates of deposit		82,609		81,289		—		81,289		—		82,609		81,289		—		81,289		—
Borrowings		15,625		14,762		—		14,762		—		15,625		14,762		—		14,762		—

~~NOTE H – LEASES~~

~~The Company accounts for its leases in accordance with ASU 2016-02,~~ ~~Leases (Topic 842)~~~~. Topic 842 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 holds operating leases for five branch locations. Our leases have remaining lease terms of up to nine years, some of which include options to extend the leases for up to 10 additional years. Operating leases are recorded as ROU assets and lease liabilities and are included within Other assets and Accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement base on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate. The incremental borrowing rate used by the Company to value its operating leases is based on the interpolated term advance rate available from the Federal Home Loan Bank of New York, based on the remaining lease term.

~~At December~~ 31~~, 2022, the Company’s operating lease ROU assets and operating lease liabilities totaled $3.1 million and $3.4 million, respectively.~~

~~The following table presents the balance sheet information related to our leases:~~

December 31, September 30,
2022 2022
(Dollars in thousands)

Operating lease right-of-use asset $ 3,141 $ 3,292
Operating lease liabilities $ 3,440 $ 3,605
Weighted average remaining lease term in years 6.8 7.0
Weighted average discount rate 2.2% 2.2%

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~~The following table summarizes the maturity of our remaining lease liabilities by year (in thousands):~~

December 31, 2022
(In thousands)
For the Year Ending:
2023 $ 554
2024 747
2025 523
2026 455
2027 334
2028 and thereafter 1,199
Total lease payments 3,812
Less imputed interest (372 )
Present value of lease liabilities $ 3,440

~~Total leases expense recorded on the Consolidated Statements of Income within Occupancy expense were $196,000 and $207,000 for the three months ended December~~ 31~~, 2022 and 2021, respectively.~~

NOTE IH - INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at ~~December~~March 31, ~~2022:~~2023:

			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
December 31, 2022	Cost		Gains		Losses			Value
March 31, 2023										Cost		Gains		Losses			Value
	(In thousands)									(In thousands)
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	114	$	—	$	(10	)	$	104	$	112	$	—	$	(8	)	$	104
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		10,805		—		(1,702	)		9,103
Mortgage-backed securities - residential											10,580		1		(1,527	)		9,054
Total securities available-for-sale	$	10,919	$	—	$	(1,712	)	$	9,207	$	10,692	$	1	$	(1,535	)	$	9,158
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	5,413	$	—	$	(717	)	$	4,696	$	5,300	$	—	$	(643	)	$	4,657
Mortgage-backed securities - commercial		615		—		(1	)		614		599		—		(2	)		597
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed-securities - residential		48,077		—		(7,203	)		40,874		47,302		—		(6,528	)		40,774
Debt securities		24,826		—		(2,234	)		22,592		24,830		—		(1,864	)		22,966
Private label mortgage-backed securities - residential		220		—		(14	)		206		216		—		(17	)		199
Obligations of state and political subdivisions		3,479		2		(435	)		3,046		3,475		17		(332	)		3,160
Corporate securities		8,000		—		(396	)		7,604		8,000		—		(396	)		7,604
Total securities held-to-maturity	$	90,630	$	2	$	(11,000	)	$	79,632	$	89,722	$	17	$	(9,782	)	$	79,957
Total investment securities	$	101,549	$	2	$	(12,712	)	$	88,839	$	100,414	$	18	$	(11,317	)	$	89,115

~~Table~~The contractual maturities of ~~Contents~~the debt securities, municipal bonds and certain information regarding to the mortgage-backed securities available-for-sale at March 31, 2023 are summarized in the following table:

	March 31, 2023
	Amortized		Fair
	Cost		Value
	(In thousands)
Due within 1 year	$	—	$	—
Due after 1 but within 5 years		—		—
Due after 5 but within 10 years		—		—
Due after 10 years		—		—
Total debt securities		—		—

Mortgage-backed securities:
Residential		10,692		9,158
Commercial		—		—
Total	$	10,692	$	9,158

The contractual maturities of the debt securities, municipal bonds and certain information regarding to the mortgage-backed securities held-to-maturity at ~~December~~March 31, ~~2022~~2023 are summarized in the following table:

December 31, 2022
Amortized Fair
Cost Value
(In thousands)
Due within 1 year $ 8,829 $ 8,643
Due after 1 but within 5 years 22,525 20,460
Due after 5 but within 10 years 4,438 3,734
Due after 10 years 513 405
Total debt securities 36,305 33,242

Mortgage-backed securities:
Residential 53,710 45,776
Commercial 615 614
Total $ 90,630 $ 79,632

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	March 31, 2023
	Amortized		Fair
	Cost		Value
	(In thousands)
Due within 1 year	$	10,831	$	10,623
Due after 1 but within 5 years		20,527		18,833
Due after 5 but within 10 years		4,435		3,846
Due after 10 years		512		428
Total debt securities		36,305		33,730

Mortgage-backed securities:
Residential		52,818		45,630
Commercial		599		597
Total	$	89,722	$	79,957

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

			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
September 30, 2022	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(In thousands)									(In thousands)
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage backed securities - residential	$	118	$	—	$	(11	)	$	107	$	118	$	—	$	(11	)	$	107
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		11,029		—		(1,907	)		9,122
Mortgage-backed securities - residential											11,029		—		(1,907	)		9,122
Total securities available for sale	$	11,147	$	—	$	(1,918	)	$	9,229	$	11,147	$	—	$	(1,918	)	$	9,229
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	5,525	$	—	$	(717	)	$	4,808	$	5,525	$	—	$	(717	)	$	4,808
Mortgage-backed securities - commercial		631		—		—			631		631		—		—			631
Obligations of U.S. government-sponsored enterprises:
Mortgage backed securities - residential		48,961		12		(7,548	)		41,425		48,961		12		(7,548	)		41,425
Debt securities		24,821		—		(2,395	)		22,426		24,821		—		(2,395	)		22,426
Private label mortgage-backed securities - residential		224		—		(10	)		214		224		—		(10	)		214
Obligations of state and political subdivisions		3,484		—		(638	)		2,846		3,484		—		(638	)		2,846
Corporate securities		8,000		—		(436	)		7,564		8,000		—		(436	)		7,564
Total securities held to maturity	$	91,646	$	12	$	(11,744	)	$	79,914	$	91,646	$	12	$	(11,744	)	$	79,914
Total investment securities	$	102,793	$	12	$	(13,662	)	$	89,143	$	102,793	$	12	$	(13,662	)	$	89,143

As of March 31, 2023 investment securities having an estimated fair value of approximately $49.5 million were pledged to secure public deposits.

NOTE JI – IMPAIRMENT OF INVESTMENT SECURITIES

The Company recognizes credit-related other-than-temporary impairment on debt securities in earnings while noncredit-related other-than-temporary impairment on debt securities not expected to be sold are recognized in other comprehensive income.

The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market. The Company evaluates its intent and ability to hold debt securities based upon its investment strategy for the particular type of security and its cash flow needs, liquidity position, capital adequacy and interest rate risk position. In addition, the risk of future other-than-temporary impairment may be influenced by prolonged recession in the U.S. economy, changes in real estate values and interest deferrals.

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Investment securities with fair values greater than their amortized cost contain unrealized gains. Investment securities with fair values less than their amortized cost contain unrealized losses. Details of securities with unrealized losses at ~~December~~March 31, ~~2022~~2023 and September 30, 2022 are as follows:

			Less Than 12 Months					12 Months Or Greater					Total							Less Than 12 Months					12 Months Or Greater					Total
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Securities		Value		Losses			Value		Losses			Value		Losses			Securities		Value		Losses			Value		Losses			Value		Losses
December 31, 2022			(Dollars in thousands)
March 31, 2023																				(Dollars in thousands)
Obligations of U.S. government agencies:
Mortgage-backed securities - residential		6	$	2,306	$	(138	)	$	2,494	$	(589	)	$	4,800	$	(727	)		6	$	2,201	$	(118	)	$	2,560	$	(533	)	$	4,761	$	(651	)
Mortgage-backed securities - commercial		1		613		(1	)		—		—			613		(1	)		1		597		(2	)		—		—			597		(2	)
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential		49		15,061		(2,020	)		34,658		(6,885	)		49,719		(8,905	)		49		3,405		(162	)		46,185		(7,893	)		49,590		(8,055	)
Debt securities		14		9,870		(457	)		12,722		(1,777	)		22,592		(2,234	)		14		—		—			22,966		(1,864	)		22,966		(1,864	)
Private label mortgage-backed securities residential		1		206		(14	)		—		—			206		(14	)		1		—		—			199		(17	)		199		(17	)
Obligations of state and political subdivisions		6		526		(2	)		2,213		(433	)		2,739		(435	)		5		—		—			2,310		(332	)		2,310		(332	)
Corporate securities		2		2,661		(339	)		4,943		(57	)		7,604		(396	)		2		—		—			7,604		(396	)		7,604		(396	)
Total		79	$	31,243	$	(2,971	)	$	57,030	$	(9,741	)	$	88,273	$	(12,712	)		78	$	6,203	$	(282	)	$	81,824	$	(11,035	)	$	88,027	$	(11,317	)

September 30, 2022
Obligations of U.S. government agencies:
Mortgage-backed securities - residential		6	$	2,364	$	(140	)	$	2,551	$	(588	)	$	4,915	$	(728	)		6	$	2,364	$	(140	)	$	2,551	$	(588	)	$	4,915	$	(728	)
Mortgage-backed securities - commercial		1		631		—			—		—			631		—			1		631		—			—		—			631		—
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential		49		21,180		(2,795	)		29,088		(6,660	)		50,268		(9,455	)		49		21,180		(2,795	)		29,088		(6,660	)		50,268		(9,455	)
Debt securities		14		11,664		(660	)		10,763		(1,735	)		22,427		(2,395	)		14		11,664		(660	)		10,763		(1,735	)		22,427		(2,395	)
Private label mortgage-backed securities residential		1		215		(10	)		—		—			215		(10	)		1		215		(10	)		—		—			215		(10	)
Obligations of state and political subdivisions		7		1,268		(181	)		1,577		(457	)		2,845		(638	)		7		1,268		(181	)		1,577		(457	)		2,845		(638	)
Corporate securities		2		2,646		(353	)		4,917		(83	)		7,563		(436	)		2		2,646		(353	)		4,917		(83	)		7,563		(436	)
Total		80	$	39,968	$	(4,139	)	$	48,896	$	(9,523	)	$	88,864	$	(13,662	)		80	$	39,968	$	(4,139	)	$	48,896	$	(9,523	)	$	88,864	$	(13,662	)

The investment securities listed above currently have fair values less than amortized cost and therefore contain unrealized losses. The Company evaluated these securities and determined that the decline in value was primarily related to fluctuations in the interest rate environment and were not related to any company or industry specific event.

The Company anticipates full recovery of amortized costs with respect to these securities. The Company does not intend to sell these securities and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery. Management has considered factors regarding other than temporarily impaired securities and determined that there are no securities with impairment that is other than temporary as of ~~December~~March 31, ~~2022~~2023 and September 30, 2022.

~~Table of Contents~~

NOTE KJ – LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR LOAN LOSSES

Loans receivable, net were comprised of the following:

December 31, September 30,
2022 2022
(In thousands)

One-to-four family residential $ 215,263 $ 214,377
Commercial real estate 389,247 342,791
Construction 17,880 15,230
Home equity lines of credit 18,471 18,704
Commercial business 31,616 34,672
Other 3,260 3,130
Total loans receivable 675,737 628,904
Net deferred loan costs (907 ) (628 )
Allowance for loan losses (8,750 ) (8,433 )
Total loans receivable, net $ 666,080 $ 619,843

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	March 31,			September 30,
	2023			2022
	(In thousands)

One-to-four family residential	$	223,030		$	214,377
Commercial real estate		392,246			342,791
Construction		19,456			15,230
Home equity lines of credit		17,633			18,704
Commercial business		21,997			34,672
Other		2,568			3,130
Total loans receivable		676,930			628,904
Net deferred loan costs		(820	)		(628	)
Allowance for loan losses		(8,844	)		(8,433	)
Total loans receivable, net	$	667,266		$	619,843

The segments of the ~~Bank’s~~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. The commercial loan segment is further disaggregated into three classes: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties. The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Construction loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the loan. The commercial business loan segment consists of loans made for the purpose of financing the activities of commercial customers and consists primarily of revolving lines of credit. The consumer loan segment consists primarily of stock-secured installment loans, but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.

Management evaluates individual loans in all segments for possible impairment if the loan either is in nonaccrual status, or is risk rated Substandard and is 90 days or more past due. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Once the determination has been made that a loan is impaired, the recorded investment in the loan is compared to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s current observable market price; or (c) the fair value of the collateral securing the loan, less anticipated selling and disposition costs. The method is selected on a loan-by loan basis, with management primarily utilizing the fair value of collateral method. If there is a shortfall between the fair value of the loan and the recorded investment in the loan, the Company charges the difference to the allowance for loan loss as a charge-off and carries the impaired loan on its books at fair value. It is the Company’s policy to evaluate impaired loans on an annual basis to ensure the recorded investment in a loan does not exceed its fair value.

~~Table of Contents~~

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

Impaired
Loans with
Impaired Loans with No Specific
Specific Allowance Allowance Total Impaired Loans
Unpaid
Recorded Related Recorded Recorded Principal
Investment Allowance Investment Investment Balance
December 31, 2022 (In thousands)

One-to-four family residential $ — $ — $ 1,381 $ 1,381 $ 1,381
Commercial real estate — — 1,378 1,378 1,378
Construction 2,835 114 — 2,835 2,900
Commercial business 102 102 151 253 253
Total impaired loans $ 2,937 $ 216 $ 2,910 $ 5,847 $ 5,912

September 30, 2022

One-to four-family residential $ — $ — $ 1,512 $ 1,512 $ 1,512
Commercial real estate — — 1,159 1,159 1,159
Construction 2,835 114 — 2,835 2,900
Commercial business — — 153 153 153
Total impaired loans $ 2,835 $ 114 $ 2,824 $ 5,659 $ 5,724

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					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance
March 31, 2023	(In thousands)

One-to-four family residential	$	—	$	—	$	1,766	$	1,766	$	1,766
Commercial real estate		—		—		1,145		1,145		1,145
Construction		—		—		2,835		2,835		2,900
Commercial business		386		386		150		536		536
Total impaired loans	$	386	$	386	$	5,896	$	6,282	$	6,347

September 30, 2022

One-to four-family residential	$	—	$	—	$	1,512	$	1,512	$	1,512
Commercial real estate		—		—		1,159		1,159		1,159
Construction		2,835		114		—		2,835		2,900
Commercial business		—		—		153		153		153
Total impaired loans	$	2,835	$	114	$	2,824	$	5,659	$	5,724

~~The average recorded investment in impaired loans was $5.8 million and $10.8 million for the three months ended December 31, 2022 and 2021, respectively.~~ The Company’s impaired loans include delinquent non-accrual loans and performing Troubled Debt Restructurings (“TDRs”), as TDRs remain impaired loans until fully repaid. There was one TDR loan totaling ~~$97,000~~$107,000 during the ~~three~~six months ~~December~~ended March 31, ~~2022~~2023 and there were no TDRs during the ~~three~~six months ended ~~December~~March 31, ~~2021.~~2022.

The following tables present the average recorded investment in impaired loans and the interest income recognized on ~~such~~impaired loans for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021.~~2022.

	Three Months		Three Months		Six Months
	Ended December 31, 2022		Ended March 31, 2023		Ended March 31, 2023
	(In thousands)		(In thousands)

One-to-four family residential	$	1,447	$	1,574	$	1,553
Commercial real estate		1,269		1,262		1,227
Construction		2,835		2,835		2,835
Commercial business		203		395		314
Average investment in impaired loans	$	5,754	$	6,066	$	5,929

Interest income recognized on
an accrual basis on impaired loans	$	36
Interest income recognized on
a cash basis on impaired loans	$	—
Interest income recognized on an accrual basis on impaired loans			$	36	$	71

	Three Months		Six Months
	Ended March 31, 2022		Ended March 31, 2022
	(In thousands)

One-to-four family residential	$	1,877	$	2,155
Commercial real estate		1,690		1,883
Construction		4,580		4,580
Commercial business		1,505		1,506
Average investment in impaired loans	$	9,652	$	10,124

Interest income recognized on an accrual basis on impaired loans	$	45	$	93

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Three Months
Ended December 31, 2021
(In thousands)

One-to-four family residential $ 2,464
Commercial real estate 2,236
Construction 4,580
Commercial business 1,507
Average investment in impaired loans $ 10,787

Interest income recognized on
an accrual basis on impaired loans $ 48
Interest income recognized on
a cash basis on impaired loans $ —

Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory 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. All loans greater than three months past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the ~~Bank~~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 ~~Bank’s~~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 ~~Bank’s~~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. Generally, the external consultant reviews commercial relationships greater than $500,000 and/or criticized relationships greater than $250,000. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.

~~Table of Contents~~

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

			Special										Special
	Pass		Mention		Substandard		Doubtful		Total		Pass		Mention		Substandard		Doubtful		Total
	(In thousands)										(In thousands)
December 31, 2022
March 31, 2023
One-to-four family residential	$	214,067	$	974	$	222	$	—	$	215,263	$	221,670	$	968	$	392	$	—	$	223,030
Commercial real estate		388,662		197		388		—		389,247		391,662		196		388		—		392,246
Construction		13,310		—		4,570		—		17,880		14,894		—		4,562		—		19,456
Home equity lines of credit		18,471		—		—		—		18,471		17,633		—		—		—		17,633
Commercial business		31,514		102		—		—		31,616		21,611		386		—		—		21,997
Other		3,260		—		—		—		3,260		2,568		—		—		—		2,568
Total	$	669,284	$	1,273	$	5,180	$	—	$	675,737	$	670,038	$	1,550	$	5,342	$	—	$	676,930

September 30, 2022
One-to-four family residential	$	213,173	$	980	$	224	$	—	$	214,377	$	213,173	$	980	$	224	$	—	$	214,377
Commercial real estate		342,593		198		—		—		342,791		342,593		198		—		—		342,791
Construction		10,652		—		4,578		—		15,230		10,652		—		4,578		—		15,230
Home equity lines of credit		18,704		—		—		—		18,704		18,704		—		—		—		18,704
Commercial business		34,672		—		—		—		34,672		34,672		—		—		—		34,672
Other		3,130		—		—		—		3,130		3,130		—		—		—		3,130
Total	$	622,924	$	1,178	$	4,802	$	—	$	628,904	$	622,924	$	1,178	$	4,802	$	—	$	628,904

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans for the periods presented:

30-59 60-89
Days Days 90 Days + Total Non- Total
Current Past Due Past Due Past Due Past Due Accrual Loans
(In thousands)
December 31, 2022
One-to-four family residential $ 214,955 $ — $ 308 $ — $ 308 $ — $ 215,263
Commercial real estate 388,676 67 116 388 571 388 389,247
Construction 15,045 — — 2,835 2,835 2,835 17,880
Home equity lines of credit 18,471 — — — — — 18,471
Commercial business 31,514 102 — — 102 — 31,616
Other 2,584 — — 676 676 676 3,260
Total $ 671,245 $ 169 $ 424 $ 3,899 $ 4,492 $ 3,899 $ 675,737

September 30, 2022
One-to four-family residential $ 213,903 $ 300 $ 174 $ — $ 474 $ — $ 214,377
Commercial real estate 342,404 — 387 — 387 — 342,791
Construction 12,395 — — 2,835 2,835 2,835 15,230
Home equity lines of credit 18,704 — — — — — 18,704
Commercial business 34,672 — — — — — 34,672
Other 3,130 — — — — — 3,130
Total $ 625,208 $ 300 $ 561 $ 2,835 $ 3,696 $ 2,835 $ 628,904

Table of Contents

			30-59		60-89
			Days		Days		90 Days +		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
	(In thousands)
March 31, 2023
One-to-four family residential	$	222,187	$	537	$	134	$	172	$	843	$	172	$	223,030
Commercial real estate		388,979		2,879		—		388		3,267		388		392,246
Construction		16,621		—		—		2,835		2,835		2,835		19,456
Home equity lines of credit		17,633		—		—		—		—		—		17,633
Commercial business		21,611		—		386		—		386		—		21,997
Other		2,568		—		—		—		—		—		2,568
Total	$	669,599	$	3,416	$	520	$	3,395	$	7,331	$	3,395	$	676,930

September 30, 2022
One-to four-family residential	$	213,903	$	300	$	174	$	—	$	474	$	—	$	214,377
Commercial real estate		342,404		—		387		—		387		—		342,791
Construction		12,395		—		—		2,835		2,835		2,835		15,230
Home equity lines of credit		18,704		—		—		—	��	—		—		18,704
Commercial business		34,672		—		—		—		—		—		34,672
Other		3,130		—		—		—		—		—		3,130
Total	$	625,208	$	300	$	561	$	2,835	$	3,696	$	2,835	$	628,904

An allowance for loan losses (“ALL”) is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

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

~~Table of Contents~~

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative and economic factors.

The loans are segmented into classes based on their inherent varying degrees of risk, as described above. Management tracks the historical net charge-off activity by segment and utilizes this figure, as a percentage of the segment, as the general reserve percentage for pooled, homogenous loans that have not been deemed impaired. Typically, an average of losses incurred over five historical years is used.

Non-impaired credits are segregated for the application of qualitative factors. Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources include: national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL. Since loans individually evaluated for impairment are promptly written down to their fair value, typically there is no portion of the ALL for loans individually evaluated for impairment.

The following table summarizes the ALL by loan category and the related activity for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021:~~2022:

One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)
Balance- September 30, 2022 $ 1,223 $ 4,612 $ 461 $ 263 $ 1,484 $ 1 $ 389 $ 8,433
Charge-offs — — — — — — — —
Recoveries — — — — — — — —
Provision (credit) 12 518 65 (7 ) (109 ) — (162 ) 317
Balance- December 31, 2022 $ 1,235 $ 5,130 $ 526 $ 256 $ 1,375 $ 1 $ 227 $ 8,750

Balance- September 30, 2021 $ 1,136 $ 3,744 $ 594 $ 232 $ 2,046 $ 15 $ 308 $ 8,075
Charge-offs — — — — — — — —
Recoveries — 52 — — — — — 52
Provision (credit) (43 ) (90 ) 130 — 83 (14 ) 35 101
Balance- December 31, 2021 $ 1,093 $ 3,706 $ 724 $ 232 $ 2,129 $ 1 $ 343 $ 8,228

Table of Contents

	One-to-Four									Home Equity
	Family			Commercial						Lines of			Commercial
	Residential			Real Estate			Construction			Credit			Business			Other			Unallocated			Total
	(In thousands)
Balance- September 30, 2022	$	1,223		$	4,612		$	461		$	263		$	1,484		$	1		$	389		$	8,433
Charge-offs		—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			—			—
Provision (credit)		12			518			65			(7	)		(109	)		—			(162	)		317
Balance- December 31, 2022	$	1,235		$	5,130		$	526		$	256		$	1,375		$	1		$	227		$	8,750
Charge-offs		—			—			—			—			(102	)		—			—			(102	)
Recoveries		1			—			—			—			—			—			—			1
Provision (credit)		34			280			(58	)		(10	)		62			—			(113	)		195
Balance- March 31, 2023	$	1,270		$	5,410		$	468		$	246		$	1,335		$	1		$	114		$	8,844

Balance- September 30, 2021	$	1,136		$	3,744		$	594		$	232		$	2,046		$	15		$	308		$	8,075
Charge-offs		—			—			—			—			—			—			—			—
Recoveries		—			53			—			—			—			—			—			53
Provision (credit)		(43	)		(90	)		130			—			83			(14	)		35			100
Balance- December 31, 2021	$	1,093		$	3,706		$	724		$	232		$	2,129		$	1		$	343		$	8,228
Charge-offs		—			—			—			—			—			—			—			—
Recoveries		1			—			—			—			—			—			—			1
Provision (credit)		19			376			79			(12	)		(290	)		1			(102	)		71
Balance- March 31, 2022	$	1,113		$	4,082		$	803		$	220		$	1,839		$	2		$	241		$	8,300

The following tables summarize the ALL by loan category, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of ~~December~~March 31, ~~2022~~2023 and September 30, 2022:

	One-to-Four						Home Equity										One-to-Four						Home Equity
	Family		Commercial				Lines of		Commercial								Family		Commercial				Lines of		Commercial
	Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total		Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total
	(In thousands)																(In thousands)
Allowance for Loan Losses:
Balance - December 31, 2022	$	1,235	$	5,130	$	526	$	256	$	1,375	$	1	$	227	$	8,750
Balance - March 31, 2023																	$	1,270	$	5,410	$	468	$	246	$	1,335	$	1	$	114	$	8,844
Individually evaluated for impairment		—		—		114		—		102		—		—		216		—		—		—		—		386		—		—		386
Collectively evaluated for impairment		1,235		5,130		412		256		1,273		1		227		8,534		1,270		5,410		468		246		949		1		114		8,458

Loans receivable:
Balance - December 31, 2022	$	215,263	$	389,247	$	17,880	$	18,471	$	31,616	$	3,260	$	—	$	675,737
Balance - March 31, 2023																	$	223,030	$	392,246	$	19,456	$	17,633	$	21,997	$	2,568	$	—	$	676,930
Individually evaluated for impairment		1,381		1,378		2,835		—		253		—		—		5,847		1,766		1,145		2,835		—		536		—		—		6,282
Collectively evaluated for impairment		213,882		387,869		15,045		18,471		31,363		3,260		—		669,890		221,264		391,101		16,621		17,633		21,461		2,568		—		670,648

Table of Contents

	One-to-Four						Home Equity
	Family		Commercial				Lines of		Commercial
	Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total
	(In thousands)
Allowance for Loan Losses:
Balance - September 30, 2022	$	1,223	$	4,612	$	461	$	263	$	1,484	$	1	$	389	$	8,433
Individually evaluated for impairment		—		—		114		—		—		—		—		114
Collectively evaluated for impairment		1,223		4,612		347		263		1,484		1		389		8,319

Loans receivable:
Balance - September 30, 2022	$	214,377	$	342,791	$	15,230	$	18,704	$	34,672	$	3,130	$	—	$	628,904
Individually evaluated for impairment		1,512		1,159		2,835		—		153		—		—		5,659
Collectively evaluated for impairment		212,865		341,632		12,395		18,704		34,519		3,130		—		623,245

One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)
Allowance for Loan Losses:
Balance - September 30, 2022 $ 1,093 $ 3,706 $ 724 $ 263 $ 2,129 $ 1 $ 343 $ 8,259
Individually evaluated for impairment — — 114 — — — — 114
Collectively evaluated for impairment 1,093 3,706 610 263 2,129 1 343 8,145

Loans receivable:
Balance - September 30, 2022 $ 214,377 $ 342,791 $ 15,230 $ 18,704 $ 34,672 $ 3,130 $ — $ 628,904
Individually evaluated for impairment 1,512 1,159 2,835 — 153 — — 5,659
Collectively evaluated for impairment 212,865 341,632 12,395 18,704 34,519 3,130 — 623,245

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the segmentation of the loan portfolio into homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

A TDR is a loan that has been modified whereby the Bank has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Bank to maximize the ultimate recovery of a loan. TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower. The types of concessions granted generally include, but are not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

A default on a TDR loan for purposes of this disclosure occurs when a borrower is 90 days past due or a foreclosure or repossession of the applicable collateral has ~~occurred.~~ occurred within twelve months of the restructure. The Company did not have any TDRs default during the three or six months ended March 31, 2023.

During the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 there was one new TDR loan totaling ~~$387,000 that became delinquent greater than 90 days. The loan~~$107,000 and there were no new TDRs during the six months ended March 31, 2022. Information on the new TDR is ~~secured by commercial real estate and was~~summarized as follows:

	Six Months Ended March 31, 2023
	Number of		Investment Before		Investment After
	Loans		TDR Modification		TDR Modification
	(Dollars in thousands)
One-to four-family residential		1	$	97	$	107

Total		1	$	97	$	107

There no residential mortgage loans in the process of foreclosure at ~~December~~March 31, ~~2022.~~

~~There was one TDR loan during the three months ended December 31, 2022~~2023 and ~~no TDRs during the three months ended December 31, 2021.~~

~~Table of Contents~~

September 30, 2022.

Three Months Ended December 31, 2022
Number of Investment Before Investment After
Loans TDR Modification TDR Modification
(Dollars in thousands)
One-to four-family residential 1 $ 97 $ 107

Total 1 $ 97 $ 107

NOTE LK - DEPOSITS

A summary of deposits by type of account are summarized as follows:

December 31, September 30,
2022 2022
(In thousands)

Demand accounts $ 188,424 $ 182,417
Savings accounts 76,105 81,850
NOW accounts 93,436 98,643
Money market accounts 233,706 222,214
Certificates of deposit 71,975 69,929
Retirement certificates 12,437 12,680
Total deposits $ 676,083 $ 667,733

~~NOTE M – INCOME TAXES~~

The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or tax returns; (ii) are attributable to differences between the consolidated 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 valuation allowance is assessed by management on a quarterly basis and adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant. In assessing whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, management considers projections of future taxable income, the projected periods in which current temporary differences will be deductible, the availability of carry forwards, feasible and permissible tax planning strategies and existing tax laws and regulations. The Company did not have a valuation allowance against its net deferred tax assets at December 31, 2022 or September 30, 2022.

A reconciliation of income tax between the amounts calculated based upon pre-tax income at the Company’s federal statutory rate and the amounts reflected in the consolidated statements of operations are as follows:

For the Three Months
Ended December 31,
2022 2021
(In thousands)

Income tax expense at the statutory federal tax rate of 21% $ 544 $ 497
State tax expense 233 194
Other 3 (17 )
Total income tax expense $ 780 $ 674

The Company’s statutory income tax rate in the State of New Jersey was 9.0% for the three months ending December 31, 2022 and 2021. The State of New Jersey has imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million. The surtax is set at a rate of 2.5% and is currently effective through December 31, 2023. Accordingly, the Company used an 11.5% State tax rate for the calculation of its State income tax expense for the three months ended December 31, 2022 and 2021.

Table of Contents

	March 31,		September 30,
	2023		2022
	(In thousands)

Demand accounts	$	198,031	$	182,417
Savings accounts		72,416		81,850
NOW accounts		95,322		98,643
Money market accounts		242,402		222,214
Certificates of deposit		77,463		69,929
Retirement certificates		12,257		12,680
Total deposits	$	697,891	$	667,733

Included in Company’s deposits at March 31, 2023 were $11.4 million in brokered certificates of deposits and $13.6 million in certificate of deposits through a national deposit listing service. At September 30, 2022 the Company had $6.0 million in brokered certificates of deposits and $14.6 million in certificate of deposits obtained from a national deposit listing service.

The current FDIC insurance limit on bank deposit accounts is $250,000. The aggregate amount of deposit accounts with a denomination of $250,000 or more was approximately $399.8 million at March 31, 2023 compared with $399.9 million at September 30, 2022.

The aggregate amount of deposit accounts of State and local municipalities was $201.6 million at March 31, 2023 compared with $140.6 million at September 30, 2022. The largest municipal depositor held $101.4 million at March 31, 2023 compared with $50.6 million at September 30, 2022. State and local municipality deposits in excess of $250,000 are collateralized by investment securities and municipal lines of credit with the Federal Home Loan Bank of New York (FHLBNY”).

NOTE NL - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company may use derivative financial instruments, such as interest rate swaps and interest rate floors and caps, as part of its interest rate risk management. Interest rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a predetermined period of time if certain market interest rate thresholds are met. The Company considers the credit risk inherent in these contracts to be negligible. As of ~~December~~March 31, ~~2022,~~2023, 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 Company executes with a third-party financial institution, such that the Company minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. The Company was not required to pledge any collateral for its interest rate swaps with financial institutions at ~~December~~March 31, ~~2022~~2023 and September 30, 2022.

The following table presents summary information regarding these derivatives as of ~~December~~March 31, ~~2022~~2023 and September 30, 2022.

Notional
Amount Average
Maturiy
(Years) Weighted
Average
Fixed Rate Weighted Average
Variable Rate Fair Value
(Dollars in thousands)
December 31, 2022
Classified in Other Assets:
Customer interest rate swaps $ 36,833 4.9 4.95% 1 Mo. BSBY + 2.44 $ 2,471

Classified in Other Liabilities:
3rd Party interest rate swaps $ 36,833 4.9 4.95% 1 Mo. BSBY + 2.44 $ 2,471

September 30, 2022
Classified in Other Assets:
Customer interest rate swaps $ 19,512 5.9 3.63% 1 Mo. LIBOR + 2.50 $ 2,275
$ 6,940 4.6 6.13% 1 Mo. BSBY + 3.00 $ 212
Total $ 26,452 5.2 4.88% $ 2,487

Classified in Other Liabilities:
3rd Party interest rate swaps $ 19,512 5.9 3.63% 1 Mo. LIBOR + 2.50 $ 2,275
$ 6,940 4.6 6.13% 1 Mo. BSBY + 3.00 $ 212
Total $ 26,452 5.2 4.88% $ 2,487

Table of Contents

	Notional Amount		Average Maturity (Years)		Weighted Average Fixed Rate		Weighted Average Variable Rate	Fair Value
	(Dollars in thousands)
March 31, 2023
Classified in Other Assets:
Customer interest rate swaps	$	36,565		4.7		4.95%	1 Mo. BSBY + 2.44	$	2,206
Total	$	36,565		4.7		4.95%		$	2,206

Classified in Other Liabilities:
3rd Party interest rate swaps	$	36,565		4.7		4.95%	1 Mo. BSBY + 2.44	$	2,206
Total	$	36,565		4.7		4.95%		$	2,206


September 30, 2022
Classified in Other Assets:
Customer interest rate swaps	$	19,512		5.9		3.63%	1 Mo. LIBOR + 2.50	$	2,275
	$	6,940		4.6		6.13%	1 Mo. BSBY + 3.00	$	212
Total	$	26,452		5.2		4.88%		$	2,487

Classified in Other Liabilities:
3rd Party interest rate swaps	$	19,512		5.9		3.63%	1 Mo. LIBOR + 2.50	$	2,275
	$	6,940		4.6		6.13%	1 Mo. BSBY + 3.00	$	212
Total	$	26,452		5.2		4.88%		$	2,487

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and are summarized in the below table. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

~~Table of Contents~~

	March 31,		September 30,
	2023		2022
	(In thousands)

Financial instruments whose contract amounts represent credit risk (in thousands)
Letters of credit	$	939	$	740
Unused lines of credit		94,762		73,825
Fixed rate loan commitments		670		2,550
Variable rate loan commitments		23,876		49,913

Totals	$	120,247	$	127,028

December 31, September 30,
2022 2022
(In thousands)

Financial instruments whose contract amounts
represent credit risk (in thousands)
Letters of credit $ 740 $ 740
Unused lines of credit 85,702 73,825
Fixed rate loan commitments 13 2,550
Variable rate loan commitments 15,482 49,913
Totals $ 101,937 $ 127,028

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

When used in this filing and in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases, “anticipate,” “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “projected,” “believes”, or similar expressions are intended to identify “forward looking statements.” Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those risks previously disclosed by the Company in Item 1A of its Annual Report on Form 10-K as may be supplemented by Quarterly Reports on Form 10-Q filed with the SEC, general economic conditions, changes in interest rates, regulatory considerations, competition, technological developments, retention and recruitment of qualified personnel, and market acceptance of the Company’s pricing, products and services, and with respect to the loans extended by the Company and real estate owned, the following: risks related to the economic environment in the market areas in which the Bank operates, particularly with respect to the real estate market in New Jersey; the risk that the value of the real estate securing these loans may decline in value; and the risk that significant expense may be incurred by the Company in connection with the resolution of these loans.

Table of Contents

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors, including regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investing activities, and competitive and regulatory factors, could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected.

The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. Critical accounting policies may involve complex subjective decisions or assessments. ~~We consider~~Please refer to the ~~following to be our~~Company’s Form 10-K for the Company’s critical accounting policies.

~~Allowance for Loan Loss.~~ The allowance for loan losses is the amount estimated by management as necessary to cover credit losses in the loan portfolio both probable and reasonably estimable at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes There were no significant estimates and has identified this policy as one of our most critical. Due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the ~~amount of the recorded allowance for loan losses, the methodology for determining the allowance for loan losses is considered a~~Company’s critical accounting ~~policy by management.~~

~~As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of~~policies during the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans.

~~Table of Contents~~

Management performs a quarterly evaluation of the adequacy of the allowance for loan losses. We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based on changes in economic and real estate market conditions.

The evaluation has a specific and general component. The specific component relates to loans that are delinquent or otherwise identified as impaired through the application of our loan review process and our loan grading system. All such loans are evaluated individually, with principal consideration given to the value of the collateral securing the loan and discounted cash flows. Specific impairment allowances are established as required by this analysis. However, the Bank’s Federal and State regulators generally require that the specific reserve against impaired collateral-dependent loans be charged-off, reducing the carrying balance of the loan and allowance for loan loss. The general component is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations in establishing the general portion of the reserve. This analysis establishes factors that are applied to the loan groups to determine the amount of the general component of the allowance for loan losses.

~~Actual loan losses may be significantly greater than the allowances we have established, which could have a material negative effect on our financial results.~~

~~We intend to adopt the Current Expected Credit Losses (CECL) Methodology effective October 1,~~six months ended March 31, 2023. The adoption of the CECL standard for determining the amount of our allowance for credit losses may increase our allowance for loan and lease losses upon adoption and cause our historic allowance for loan and lease losses not to be indicative of how we will maintain our allowance for credit losses beginning October 1, 2023.

~~Deferred Income Taxes.~~ The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or tax returns; (ii) are attributable to differences between the consolidated 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.

~~Deferred tax assets are likely to be realized and therefore do not have a valuation allowance.~~

Comparison of Financial Condition at ~~December~~March 31, ~~2022~~2023 and September 30, 2022

Total Assets. Total assets increased ~~$23.1~~$41.3 million, or ~~2.9%~~5.2%, to ~~$821.6~~$839.9 million at ~~December~~March 31, ~~2022 compared with~~2023 from $798.5 million at September 30, 2022. The increase was attributable to higher balances of loans receivable, net of allowance for loan loss, partially offset by lower interest-earning deposits with ~~banks.~~banks and investment securities.

Cash and Interest-Earning Deposits.Cash and interest-earning deposits with banks decreased ~~$23.1~~$5.5 million, or ~~74.5%~~17.8% to ~~$7.9~~$25.4 million at ~~December~~March 31, ~~2022~~2023 from $30.9 million at September 30, 2022 resulting primarily from deployment of these funds into loans receivable during the ~~three~~six months ended ~~December~~March 31, 2023.

Investment Securities. At March 31, 2023, investment securities decreased $2.0 million, or 2.0 %, to $98.9 million from $100.9 million at September 30, 2022.

The Company did not purchase or sell any investment securities during the six months ended March 31, 2023. The decrease resulted from payments from mortgage-backed securities totaling $2.3 million during the six months ended March 31, 2023 that were used to fund new loan originations. Investment securities at March 31, 2023 consisted of $62.4 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $24.8 million in U.S. government-sponsored enterprise debt securities, $8.0 million in corporate notes, $3.5 million in municipal bonds, and $216,000 in private-label mortgage-backed securities. There were no other-than-temporary-impairment charges for the Company’s investment securities for the six months ended March 31, 2023.

Loans Receivable. Total loans receivable increased ~~$46.8~~$48.0 million, or ~~7.4%~~7.6%, to ~~$675.7~~$676.9 million at ~~December~~March 31, ~~2022~~2023 from $628.9 million ~~for the year ended~~at September 30, 2022. ~~Growth~~The increase in total loans receivable during the six months ended March 31, 2023 occurred in commercial real estate loans, which increased ~~$46.5~~$49.5 million, or ~~13.6%~~14.4%, to ~~$389.2~~$392.2 million, ~~in construction loans, which increased $2.6 million, or 17.4%, to $17.9 million, in~~ one-to four-family residential mortgage loans (including home equity lines of credit), which increased ~~$653,000,~~$7.6 million, or ~~0.3%~~3.3%, to ~~$233.7~~$240.7 million, and in ~~other consumer~~construction loans, which increased ~~$130,000,~~$4.2 million, or ~~4.2%~~27.7%, to ~~$3.3~~$19.5 million. ~~Offsetting~~Partially offsetting these increases ~~was a $3.0 million, or 8.8%, decrease in~~were commercial business loans, which decreased $12.7 million, or 36.6%, to ~~$31.6 million.~~$22.0 million and other loans, which decreased $562,000, or 18.0%, to $2.6 million during the six months period.

Total loans receivable at ~~December~~March 31, ~~2022~~2023 were comprised of ~~$389.2~~$392.2 million ~~(57.6%~~(58.0%) in commercial real estate loans, ~~$215.3~~$223.0 million ~~(31.9%~~(32.9%) in one-to four-family residential mortgage loans, ~~$31.6~~$22.0 million ~~(4.7%~~(3.2%) in commercial business loans, ~~$17.9~~$19.5 million ~~(2.6%~~(2.9%) in construction loans, ~~$18.5~~$17.6 million ~~(2.7%~~(2.6%) in home equity lines of credit, and ~~$3.2~~$2.6 million ~~(0.5%~~(0.4%) in other loans. For comparison, total loans receivable at September 30, 2022 were comprised of $342.8 million (54.5%) in commercial real estate loans, $214.4 million (34.1%) in one- to four- family residential mortgage loans, $34.7 million (5.5%) in commercial business loans, $15.2 million (2.4%) in construction loans, and $21.8 million (3.5%) in home equity lines of credit and other loans.

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Total non-performing loans increased ~~$1.1 million,~~$560,000, or ~~37.5%~~19.8%, to ~~$3.9~~$3.4 million at ~~December~~March 31, ~~2022~~2023 from $2.8 million at September 30, 2022. The addition of one ~~consumer loan secured by shares of Johnson & Johnson stock totaling $676,000 and one~~ commercial real estate loan totaling ~~$387,000~~$388,000 and one residential mortgage loans totaling $172,000 accounted for the increase in non-performing loans during the ~~quarter.~~six months ended March 31, 2023. The ratio of non-performing loans to total loans increased to ~~0.58%~~0.50% at ~~December~~March 31, ~~2022~~2023 from 0.45% at September 30, 2022.

The allowance for loan losses increased ~~$317,000~~$411,000 during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 to $8.8 million. ~~The $46.8 million~~Growth in the Company’s loan portfolio and an increase in ~~loans receivable as well as the increase in~~delinquent and non-performing loans accounted for the increase in the Company’s allowance for loan loss.

The allowance for loan losses as a percentage of non-performing loans decreased to ~~224.4%~~260.5% at ~~December~~March 31, ~~2022~~2023 from 297.5% at September 30, 2022. Our allowance for loan losses as a percentage of total loans was ~~1.29%~~1.31% at ~~December~~March 31, ~~2022~~2023 compared with 1.34% at September 30, 2022. Future increases in the allowance for loan losses may be necessary based on possible future increases in non-performing loans and charge-offs, the possible deterioration of collateral values, and the possible deterioration of the current economic ~~environment.~~

~~Investment Securities.~~ ~~At December 31, 2022, investment securities totaled $99.8 million, reflecting a decrease~~environment as well as our adoption of ~~$1.0 million, or 1.0% from $100.9 million at September 30, 2022.~~

The Company did not purchase or sell any new investment securities during the three months ended December 31, 2022. The Company received payments from mortgage-backed securities totaling $1.2 million during the quarter that were used to fund new loan originations. Investment securities at December 31, 2022 consisted of $63.3 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $24.8 million in U.S. government-sponsored enterprise debt securities, $8.0 million in corporate notes, $3.5 million in municipal bonds, and $220,000 in private-label mortgage-backed securities. There were no other-than-temporary-impairment charges for the Company’s investment securities for the three months ended December 31, 2022.ASU 2016-13.

Bank-Owned Life Insurance. The Company’s carrying value of its life insurance policies held for directors and officers of Magyar Bank increased ~~$95,000,~~$185,000, or ~~0.5%~~1.0%, to $17.8 million at ~~December~~March 31, ~~2022~~2023 from $17.7 million at September 30, 2022. The increase was attributable to an increase in the cash surrender value of the policies during the ~~three~~six months ended ~~December~~March 31, ~~2022.~~2023.

Other Real Estate Owned. ~~OREO~~Other real estate owned increased ~~$11,000,~~$10,000, or ~~3.9%~~3.6%, to ~~$292,000~~$291,000 at ~~December~~March 31, ~~2022~~2023 from capital improvements to one property in order to market it for sale. The property was under contract for sale at ~~December~~March 31, ~~2022.~~2023.

Deposits. Total deposits increased ~~$8.4~~$30.2 million, or ~~1.3%~~4.5%, to ~~$676.1~~$697.9 million at ~~December~~March 31, ~~2022~~2023 from $667.7 million at September 30, 2022.

The increase in deposits during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 occurred in money market accounts, which increased ~~$11.5~~$20.2 million, or ~~5.2%~~9.1%, to ~~$233.7~~$242.4 million, in non-interest bearing checking accounts, which increased ~~$6.0~~$15.6 million, or ~~3.3%~~8.6%, to ~~$188.4~~$198.0 million, and in certificates of deposit (including individual retirement accounts), which increased ~~$1.8~~$7.1 million, or ~~2.2%~~8.6%, to ~~$84.4~~$89.7 million. Partially offsetting these increases were decreases in savings accounts, which decreased ~~$5.7~~$9.4 million, or ~~7.0%~~11.5%, to ~~$76.1~~$72.4 million and in interest-bearing checking accounts (NOW), which decreased ~~$5.2~~$3.3 million, or ~~5.3%~~3.4%, to ~~$93.5~~$95.3 million. Included in the ~~certificates~~Company’s total deposits was an estimated $101.4 million that exceeded the Federal Deposit Insurance Corporation’s insurance coverage limit of $250,000.

The aggregate amount of deposit ~~were $11.4~~accounts of State and local municipalities was $201.6 million at March 31, 2023 compared with $140.6 million at September 30, 2022. The aggregate deposits of the Company’s largest municipal depositor was $101.4 million at March 31, 2023 compared with $50.6 million at September 30, 2022. State and local municipality deposits in ~~brokered certificates~~excess of ~~deposit.~~the $250,000 FDIC insurance limit are collateralized by investment securities and municipal lines of credit with the FHLBNY.

Borrowed Funds. Borrowings increased ~~$14.1~~$9.9 million, or ~~90.2%~~63.4%, to ~~$29.7~~$25.5 million at ~~December~~March 31, ~~2022~~2023 from $15.6 million at September 30, 2022.

The Company borrowed ~~$11.1 million in overnight advances and $3.0~~$13.0 million in term advances and repaid $3.1 million in matured advances from the ~~Federal Home Loan Bank of New York~~FHLBNY during the ~~quarter~~six months period to fund ~~its loan originations.~~the growth in loans receivable.

Stockholders’ Equity. Stockholders’ equity increased ~~$1.4~~$2.7 million, or ~~1.4%~~2.7%, to ~~$99.9~~$101.2 million at ~~December~~March 31, ~~2022~~2023 from $98.5 million at September 30, 2022. The increase was due to ~~net income of $1.8 million during~~ the ~~quarter,~~Company’s results from operations, partially offset by ~~$744,000~~$923,000 in dividends paid and ~~2,194~~56,338 shares repurchased during the ~~quarter~~six months ended March 31, 2023 at ana weighted average share price of ~~$12.54.~~$12.86. The Company’s book value per share increased to ~~$14.82~~$15.12 at ~~December~~March 31, ~~2022~~2023 from $14.60 at September 30, 2022, ~~and 6,742,934~~based on the 6,688,790 shares that were outstanding at ~~December~~March 31, ~~2022.~~2023.

~~Table of Contents~~

Average Balance Sheet for the Three and Six Months Ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022

The following ~~table presents~~tables present certain information regarding the Company’s financial condition and net interest income for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021.~~2022. The ~~table presents~~tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the period indicated. Interest income includes fees that we consider adjustments to yields.

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For the Three Months Ended December 31,
2022 2021
Average
Balance Interest
Income/
Expense Yield/Cost
(Annualized) Average
Balance Interest
Income/
Expense Yield/Cost
(Annualized)
(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits $ 14,984 $ 109 2.88% $ 84,088 $ 35 0.17%
Loans receivable, net 643,206 7,959 4.91% 579,131 6,721 4.60%
Securities
Taxable 97,121 395 1.61% 71,946 226 1.25%
Tax-exempt ⁽¹⁾ 3,370 18 2.15% 2,198 9 1.63%
FHLBNY stock 1,613 24 6.00% 1,676 20 4.81%
Total interest-earning assets 760,294 8,505 4.44% 739,039 7,011 3.76%
Noninterest-earning assets 48,415 44,299
Total assets $ 808,709 $ 783,338

Interest-bearing liabilities:
Savings accounts ⁽²⁾ $ 78,263 82 0.41% $ 84,542 36 0.17%
NOW accounts ⁽³⁾ 325,295 1,177 1.44% 263,626 140 0.21%
Time deposits ⁽⁴⁾ 79,535 215 1.07% 111,911 275 0.98%
Total interest-bearing deposits 483,093 1,474 1.21% 460,079 451 0.39%
Borrowings 19,067 136 2.83% 21,877 119 2.16%
Total interest-bearing liabilities 502,160 1,610 1.27% 481,956 570 0.47%
Noninterest-bearing liabilities 206,197 202,334
Total liabilities 708,357 684,290
Retained earnings 100,352 99,048
Total liabilities and retained earnings $ 808,709 $ 783,338

Tax-equivalent basis adjustment (4 ) (2 )
Net interest and dividend income $ 6,891 $ 6,439
Interest rate spread 3.17% 3.29%
Net interest-earning assets $ 258,134 $ 257,083
Net interest margin ⁽⁵⁾ 3.60% 3.46%
Average interest-earning assets to
average interest-bearing liabilities 151.40% 153.34%


	Three Months Ended March 31,
	2023							2022
	Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)		Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits	$	11,527	$	110			3.87%	$	72,144	$	35			0.19%
Loans receivable, net ⁽¹⁾		666,301		8,618			5.25%		585,199		6,543			4.44%
Securities
Taxable		96,158		402			1.69%		88,835		299			1.33%
Tax-exempt ⁽²⁾		3,370		18			2.20%		2,550		10			1.67%
FHLBNY stock		1,967		30			6.29%		1,612		18			4.53%
Total interest-earning assets		779,323		9,178			4.78%		750,340		6,905			3.65%
Noninterest-earning assets		48,256							45,700
Total assets	$	827,579						$	796,040

Interest-bearing liabilities:
Savings accounts ⁽³⁾	$	74,439		90			0.49%	$	87,494		37			0.17%
NOW accounts ⁽⁴⁾		328,023		1,563			1.93%		288,921		145			0.20%
Time deposits ⁽⁵⁾		87,747		356			1.65%		95,904		233			0.97%
Total interest-bearing deposits		490,209		2,009			1.66%		472,319		415			0.35%
Borrowings		26,595		219			3.34%		20,277		111			2.17%
Total interest-bearing liabilities		516,804		2,228			1.75%		492,596		526			0.42%
Noninterest-bearing liabilities		211,245							205,216
Total liabilities		728,049							697,812
Retained earnings		99,530							98,228
Total liabilities and retained earnings	$	827,579						$	796,040

Tax-equivalent basis adjustment				(4	)						(2	)
Net interest and dividend income			$	6,946						$	6,377
Interest rate spread							3.03%							3.23%
Net interest-earning assets	$	262,519						$	257,744
Net interest margin ⁽⁶⁾							3.61%							3.37%
Average interest-earning assets to average interest-bearing liabilities		150.80%							152.32%

⁽¹⁾ Includes balance of loans on non-accrual.

⁽²⁾ Calculated using the Company's 21% federal tax rate.

⁽²⁾⁽³⁾ Includes passbook savings, money market passbook and club accounts.

⁽³⁾⁽⁴⁾ Includes interest-bearing checking and money market accounts.

⁽⁴⁾⁽⁵⁾ Includes certificates of deposits and individual retirement accounts.

⁽⁵⁾⁽⁶⁾ Calculated as annualized net interest income divided by average total interest-earning assets.

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	Six Months Ended March 31,
	2023							2022
	Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)		Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)
	(Dollars In Thousands)
Interest-earning assets:
Interest-earning deposits	$	13,274	$	219			3.31%	$	78,182	$	71			0.18%
Loans receivable, net ⁽¹⁾		654,558		16,577			5.08%		582,108		13,263			4.57%
Securities
Taxable		96,645		796			1.65%		80,298		523			1.31%
Tax-exempt ⁽¹⁾		3,370		36			2.17%		2,372		20			1.67%
FHLBNY stock		1,788		55			6.15%		1,645		39			4.72%
Total interest-earning assets		769,635		17,683			4.61%		744,605		13,916			3.75%
Noninterest-earning assets		48,337							44,991
Total assets	$	817,972						$	789,596

Interest-bearing liabilities:
Savings accounts ⁽²⁾	$	76,372	$	171			0.45%	$	86,001	$	73			0.17%
NOW accounts ⁽³⁾		326,644		2,741			1.68%		276,135		285			0.21%
Time deposits ⁽⁴⁾		83,596		571			1.37%		103,995		509			0.98%
Total interest-bearing deposits		486,612		3,483			1.44%		466,131		867			0.37%
Borrowings		22,790		355			3.12%		21,086		230			2.19%
Total interest-bearing liabilities		509,402		3,838			1.51%		487,217		1,097			0.45%
Noninterest-bearing liabilities		206,822							202,050
Total liabilities		716,224							689,267
Retained earnings		101,748							100,329
Total liabilities and retained earnings	$	817,972						$	789,596

Tax-equivalent basis adjustment				(7	)						(4	)
Net interest and dividend income			$	13,838						$	12,815
Interest rate spread							3.10%							3.30%
Net interest-earning assets	$	260,233						$	257,388
Net interest margin ⁽⁵⁾							3.61%							3.45%
Average interest-earning assets to average interest-bearing liabilities		151.09%							152.83%

⁽¹⁾ Includes balance of loans on non-accrual.

⁽²⁾ Calculated using the Company's 21% federal tax rate.

⁽³⁾ Includes passbook savings, money market passbook and club accounts.

⁽⁴⁾ Includes interest-bearing checking and money market accounts.

⁽⁵⁾ Includes certificates of deposits and individual retirement accounts.

⁽⁶⁾ Calculated as annualized net interest income divided by average total interest-earning assets.

Comparison of Operating Results for the Three Months Ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022

Net Income. Net income increased $117,000, or ~~6.9%~~7.0% to $1.8 million for the three-month period ended ~~December~~March 31, ~~2022~~2023 compared with net income of $1.7 million for the ~~three-month~~three month period ended ~~December~~March 31, ~~2021.~~2022. The increase was due to higher net interest and ~~lower~~dividend income and other ~~expenses,~~income, partially offset by higher provision for loan loss and ~~lower~~higher other ~~income.~~expenses.

Net Interest and Dividend Income. Net interest and dividend income increased ~~$453,000,~~$569,000, or ~~7.0%~~8.9%, to $6.9 million for the three months ended ~~December~~March 31, ~~2022~~2023 from $6.4 million for the three months ended ~~December~~March 31, ~~2021.~~2022. The increase was attributable to a 1424 basis point increase in the Company’s net interest margin to ~~3.60%~~3.61% for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~3.46%~~3.37% for the three months ended ~~December~~March 31, ~~2021.~~2022, as well as an $81.1 million increase in the average balance of loans receivable, net allowance for loan loss between the periods.

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Interest and Dividend Income. Interest and dividend income increased ~~$1.5~~$2.3 million, or ~~21.3%~~32.9%, to ~~$8.5~~$9.2 million for the three months ended ~~December~~March 31, ~~2022~~2023 compared with ~~$7.0~~$6.9 million for the three months ended ~~December~~March 31, ~~2021.~~2022. The increase was attributable to a 68113 basis point increase in the yield on interest-earning assets to ~~4.44%~~4.78% for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~3.76%~~3.65% for the three months ended ~~December~~March 31, ~~2021~~2022 as well as a ~~$21.3~~$29.0 million, or ~~2.9%~~3.9%, increase in the average balance of interest-earning ~~assets. There~~assets to $779.3 million from $750.3 million. Higher balances of higher yielding loans receivable funded by lower yielding interest-earning deposits with the Federal Reserve Bank as well as higher market interest rates contributed to the increase in the Company’s interest and dividend income between periods. Partially offsetting the increases were no Paycheck Protection Program loan fees included in interest income on loans receivable for the three months ended ~~December~~March 31, ~~2022,~~2023, compared with ~~$407,000~~$322,000 for the three months ended ~~December~~March 31, ~~2021.~~2022.

The average ~~balance of~~interest earned on loans receivable, net of allowance for loan loss, increased ~~$64.1~~$2.1 million, or 31.7%, to ~~$643.2~~$8.6 million for the three months ended March 31, 2023 from $6.5 million for the same period prior year. The increase resulted from an 81 basis point increase in the yield on interest-earning assets to 5.25% for the three months ended March 31, 2023 from 4.44% for the three months ended March 31, 2022 as well as an $81.1 million, or 13.9%, increase in the average balance of loans receivable to $666.3 million during the three months ended ~~December~~March 31, ~~2022~~2023 from ~~$579.1~~$585.2 million during the three months ended ~~December~~March 31, 2021 while the yield on loans receivable increased 31 basis points to 4.91% for the three months ended December 31, 2022 from 4.60% for the three months ended December 31, 2021 due to higher market interest rates. The higher average balance and yield accounted for a $1.2 million, or 18.4%, increase in loan interest income between periods.2022.

Interest earned on investment securities, including interest-earning deposits and excluding ~~FHLB~~FHLBNY stock, increased ~~$250,000,~~$184,000, or ~~93.3%~~53.8%, to ~~$518,000~~$526,000 for the ~~quarter~~three months ended ~~December~~March 31, ~~2022~~2023 from ~~$268,000~~$342,000 for the ~~prior year quarter. A 111~~three months ended March 31, 2022. The increase was attributable to a 110 basis point increase in the yield on such assets to ~~1.79%~~1.93% for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~0.69%~~0.83% for the three months ended ~~December~~March 31, ~~2021,~~2022, partially offset by a ~~$42.7~~$52.5 million, or ~~27.0%,~~32.1% decrease in the average balance of investment securities and interest-earning deposits to ~~$115.5~~$111.0 million for the ~~quarter~~three months ended ~~December~~March 31, ~~2022, accounted~~2023 from $163.5 million for the ~~increase.~~three months ended March 31, 2022.

Interest Expense. Interest expense increased ~~$1.0~~$1.7 million, or ~~182.5%~~323.6%, to ~~$1.6~~$2.2 million for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~$570,000~~$526,000 for the three months ended ~~December~~March 31, ~~2021.~~2022. The cost of interest-bearing liabilities increased 80133 basis points to ~~1.27%~~1.75% for the three months ended ~~December~~March 31, ~~2022~~2023 compared with ~~0.47%~~0.42% for the three months ended ~~December~~March 31, ~~2021~~2022 resulting primarily from higher ~~market~~cost interest ~~rates. Between periods,~~bearing deposits. In addition, the average balance of interest-bearing liabilities increased ~~$20.2~~$24.2 million, or ~~4.2%~~4.9%, to ~~$502.2 million.~~$516.8 million during the three months ended March 31, 2023 from $487.2 during the three months ended March 31, 2022.

The ~~average balance~~cost of interest-bearing deposits increased ~~$23.0 million, or 5.0%,~~131 basis points to ~~$483.0 million~~1.66% for the quarter ended ~~December~~March 31, ~~2022~~2023 from ~~$460.0 million~~0.35% for the quarter ended ~~December~~March 31, ~~2021,~~2022 due to the higher market interest rate environment while the average ~~cost of such deposits~~balance increased ~~82 basis points~~$17.9 million, or 3.8%, to ~~1.21%~~$490.2 million from ~~0.39%.~~$472.3 million. As a result, interest paid on interest-bearing deposits increased ~~$1.0~~$1.6 million to ~~$1.5~~$2.0 million for the three months ended ~~December~~March 31, ~~2022~~2023 compared with ~~$451,000~~$415,000 for the three months ended ~~December~~March 31, ~~2021 due to higher market interest rate environment.~~2022.

Interest ~~paid~~expense on borrowings increased ~~$17,000,~~$108,000, or ~~14.3%~~97.3%, to ~~$136,000~~$219,000 for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~$119,000 for the prior year period. The increase was the result of~~$111,000 at March 31, 2022. Higher market interest rates resulted in a 67117 basis point increase in the cost of borrowings to ~~2.83%~~3.34% for the three months ended ~~December~~March 31, ~~2022~~2023 from ~~2.16%~~2.17% for the three months ended ~~December~~March 31, ~~2021, partially offset by a $2.8 million decrease in the~~2022. The average balance of ~~such~~ borrowings increased $6.3 million to ~~$19.1~~$26.6 million for the quarter ended ~~December~~March 31, ~~2022~~2023 from ~~$21.9~~$20.3 million for the quarter ended ~~December~~March 31, ~~2021.~~2022 to partially fund the growth in the Company’s loans receivable.

Provision for Loan Losses. We establish provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur.

~~Table of Contents~~

After an evaluation of these factors, management recorded a provision of ~~$317,000~~$195,000 for the three months ended ~~December~~March 31, ~~2022~~2023 compared to ~~$101,000~~$71,000 for the three months ended ~~December~~March 31, ~~2021.~~2022. The higher provision for loan losses resulted from growth in the Company’s loan portfolio and an increase in ~~non-performing~~delinquent loans during the three months ended ~~December~~March 31, ~~2022.~~2023. The Company ~~did not record any~~recorded $102,000 in net loan charge-offs ~~or recoveries for~~during the three months ended ~~December~~March 31, ~~2022~~2023 compared with ~~$52,000~~$1,000 in net recoveries during the three months ended ~~December~~March 31, ~~2021.~~2022.

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Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, and establishes the provision for loan losses based on the factors set forth in the preceding paragraph. As management evaluates the allowance for loan losses, the increased risk associated with larger non-homogenous construction, commercial real estate and commercial business loans may result in larger additions to the allowance for loan losses in future periods.

Other Income. Other income increased $59,000, or 10.3%, to $631,000 during the three months ended March 31, 2023 compared to $572,000 for the three months ended March 31, 2022. The increase was due to higher gains from the sale of Small Business Administration 7(a) loans, which increased $62,000 to $201,000 for the three months ended March 31, 2023 from $139,000 for the three months ended March 31, 2022.

Other Expenses. Other expenses increased $287,000, or 6.4%, to $4.8 million during the three months ended March 31, 2023 compared to $4.5 million at March 31, 2022.

The increase in other expenses was primarily attributable to higher compensation and benefit expense, which increased $289,000, or 10.7%, to $3.0 million at three months ended March 31, 2023 from $2.7 million at March 31, 2022, due to stock award and stock option expenses related to the Company’s 2022 Equity Incentive Plan and increased director fees resulting from the addition of three new directors on September 22, 2022. Higher FDIC deposit insurance premiums, marketing, business development, and occupancy expenses were offset by lower professional fees and other expenses.

Income Tax Expense. The Company recorded tax expense of $790,000 on pre-tax income of $2.6 million for the three months ended March 31, 2023, compared to $690,000 on pre-tax income of $2.4 million for the three months ended March 31, 2022. The Company’s effective tax rate for the three months ended March 31, 2023 was 30.5% compared with 29.1% for the three months ended March 31, 2022.

Comparison of Operating Results for the Six Months Ended March 31, 2023 and 2022

Net Income. Net income increased $234,000 or 6.9%, to $3.6 million during the six month period ended March 31, 2023 compared with $3.4 million for the six-month period ended March 31, 2022. The increase was due to higher net interest and dividend income and other income, partially offset by higher provisions for loan loss and higher other expenses.

Net Interest and Dividend Income. Net interest and dividend income increased $1.0 million, or 8.0%, to $13.8 million for the six months ended March 31, 2023 from $12.8 million for the six months ended March 31, 2022. The increase was attributable to a 16 basis point increase in the Company’s net interest margin to 3.61% for the six months ended March 31, 2023 from 3.45% for the six months ended March 31, 2022 as well as a $72.5 million increase in the average balance of loans receivable, net allowance for loan loss between the periods.

Interest and Dividend Income. Interest and dividend income increased $3.8 million, or 27.1%, to $17.7 million for the six months ended March 31, 2023 from $13.9 million for the six months ended March 31, 2022. The increase was attributable to an 86 basis point increase in the yield to 4.61% for the six months ended March 31, 2023 from 3.75% for the prior year period, as well as a $25.0 million, or 3.4%, increase in the average balance of interest-earning assets to $769.6 million from $744.6 million. Higher balances of higher yielding loans receivable funded by lower yielding interest-earning deposits with the Federal Reserve Bank as well as higher market interest rates contributed to the increase in the Company’s interest and dividend income between periods. Partially offsetting the increases were no Paycheck Protection Program loan fees included in interest income on loans receivable for the six months ended March 31, 2023, compared with $730,000 for the six months ended March 31, 2022.

The average interest earned on loans receivable, net of allowance for loan loss, increased $3.3 million, or 25.0%, to $16.6 million for the six months ended March 31, 2023 from $13.3 million for the same period prior year. The increase resulted from an 51 basis point increase in the yield on interest-earning assets to 5.08% for the six months ended March 31, 2023 from 4.57% for the six months ended March 31, 2022 as well as a $72.5 million, or 12.4%, increase in the average balance of loans receivable to $654.6 million during the six months ended March 31, 2023 from $582.1 million during the six months ended March 31, 2022.

Interest earned on investment securities, including interest-earning deposits and excluding FHLBNY stock, increased $434,000, or 71.1%, to $1.0 million for the six months ended March 31, 2023 from $610,000 for the six months ended March 31, 2022. The increase was attributable to a 109 basis point increase in the yield to 1.86% for the six months ended March 31, 2023 from 0.77% for the six months ended March 31, 2022, partially offset by a $47.6 million, or 29.6% decrease in the average balance of investment securities and interest-earning deposits to $113.3 million for the six months ended March 31, 2023 from $160.9 million for the six months ended March 31, 2022.

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Interest Expense. Interest expense increased $2.7 million, or 249.9%, to $3.8 million for the six months ended March 31, 2023 compared with $1.1 million for the six months ended March 31, 2022. The cost of interest-bearing liabilities increased 106 basis points to 1.751% for the six months ended March 31, 2023 compared with 0.45% for the six months ended March 31, 2022 resulting primarily from higher cost interest bearing deposits. In addition, the average balance of interest-bearing liabilities increased $22.2 million, or 4.6%, to $509.4 million during the six months ended March 31, 2023 from $487.2 million during the six months ended March 31, 2022.

The cost of interest-bearing deposits increased 107 basis points increase in the average cost to 1.44% for the six months ended March 31, 2023 from 0.37% for the six months ended March 31, 2022 due to the higher market interest rate environment while the average balance increased $20.6 million, or 4.4%, to $486.6 million for the six months ended March 31, 2023 from $466.1 million for the six months ended March 31, 2022. As a result, interest paid on interest-bearing deposits increased $2.6 million to $3.5 million for the six months ended March 31, 2023 from $867,000 for the six months ended March 31, 2022.

Interest expense on borrowings increased $125,000, or 54.3%, to $355,000 for the six months ended March 31, 2023 from $230,000 for the prior year period. Higher market interest rates resulted in a 93 basis point increase in the cost of borrowings to 3.12% for the six months ended March 31, 2023 from 2.19% for the six months ended March 31, 2022. The average balance of borrowings increased $1.7 million to $22.8 million for the six months ended March 31, 2023 from $21.1 million for the six months ended March 31, 2022 to partially fund the growth in the Company’s loans receivable.

Provision for Loan Losses. We establish provisions for loan losses, which are charged to earnings, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur.

After an evaluation of these factors, management recorded a provision of $513,000 for the six months ended March 31, 2023 compared to $171,000 for the six months ended March 31, 2022. The higher provision for loan losses resulted from growth in the Company’s loan portfolio and an increase in delinquent loans during the six months ended March 31, 2023. The Company recorded $102,000 in net loan charge-offs during the six months ended March 31, 2023 compared with $54,000 in net recoveries during the six months ended March 31, 2022.

Other Income. Other income ~~decreased $52,000,~~increased $7,000, or ~~8.0%~~0.6%, to ~~$598,000~~$1.2 million during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 compared to ~~$650,000~~$1.2 million for the ~~three~~six months ended ~~December~~March 31, ~~2021.~~

~~Gains from~~2022. Higher interest rate swap fees during the six months ended March 31, 2023 were offset by lower gains on the sale of Small Business Administration 7(a) loans decreased $101,000 to $180,000 for the three months ended December 31, 2022 from $281,000 for the three months ended December 31, 2021. Partially offsetting this decrease were $57,000 in interest rate swap fees received during the three months ended December 31, 2022, compared with no fees during the three months ended December 31, 2021.and lower service charge income.

Other Expenses. Other expenses ~~decreased $38,000,~~increased $249,000, or ~~0.8%~~2.7%, to ~~$4.6~~$9.4 million during the ~~three~~six months ended ~~December~~March 31, 2023 from $9.1 million during the six months ended March 31, 2022.

The ~~decrease~~increase in other expenses was primarily attributable to decreases in professional fees, which decreased $208,000, or 53.7%, to $179,000, due to lower legal and consulting fees related to the collection and foreclosure of non-performing loans, and OREO expenses, which decreased $18,000 to $16,000, from fewer OREO properties between periods. Offsetting the decrease was higher compensation and benefit expense, which increased ~~$121,000,~~$411,000, or ~~4.5%~~7.6%, to ~~$2.8~~$5.8 million for the six months ended March 31, 2023 from $5.4 million, due to stock award and stock option expenses related to the Company’s 2022 Equity Incentive ~~Plan.~~Plan and increased director fees resulting from the addition of three new directors on September 22, 2022. Higher occupancy expenses, FDIC deposit insurance premiums, marketing, and business development expenses were more than offset by lower professional fees. Professional fees decreased from lower legal and consulting fees related to the collection and foreclosure of non-performing loans.

Income Tax Expense. The Company recorded tax expense of ~~$780,000~~$1.6 million on pre-tax income of ~~$2.6~~$5.2 million for the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, compared to ~~$674,000~~$1.4 million on pre-tax income of ~~$2.4~~$4.7 million for the ~~three~~six months ended ~~December~~March 31, ~~2021.~~2022. The Company’s effective tax rate for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 was ~~30.1%~~30.3% compared with ~~28.5%~~28.8% for the ~~three~~six months ended ~~December~~March 31, ~~2021.~~2022.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Company’s liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Company’s short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new deposits, other borrowings, and new advances from the ~~Federal Home Loan Bank.~~FHLBNY. Based on eligible loan collateral pledged to the FHLBNY at March 31, 2023, we had an aggregate borrowing capacity of $102.7 million. There has been no material adverse change during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 in the ability of the Company and its subsidiaries to fund their operations.

At ~~December~~March 31, ~~2022,~~2023, the Company had commitments outstanding under letters of credit ~~of $740,000,~~totaling $939,000, commitments to originate loans ~~of $15.5~~totaling $24.5 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit ~~of $85.7~~totaling $94.8 million. There has been no material change during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 in any of the Company’s other contractual obligations or commitments to make future payments.

Capital Requirements

At ~~December~~March 31, ~~2022,~~2023, the Bank’s Tier 1 capital as a percentage of the ~~Bank's~~Bank’s total assets was ~~11.23%~~11.21%, and total qualifying capital as a percentage of risk-weighted assets was ~~15.83%~~15.87%.

~~Table of Contents~~

Item 3- Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

Item 4 – Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There has been no change in the Company's internal control over financial reporting during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal proceedings

None.

Item 1A.

Risk Factors

~~Not applicable~~There were no material changes to ~~smaller reporting~~the risk factors relevant to the Company’s operations as described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022 filed on December 22, 2022.

Recent Negative Developments Affecting the Banking Industry, and Resulting Media Coverage, Have Eroded Customer Confidence in the Banking System

The recent high-profile bank failures have generated significant market volatility among publicly traded bank holding companies. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.

Rising Interest Rates Have Decreased the Value of the Company’s Securities Portfolio, and the Company Would Realize Losses if it Was Required to Sell Such Securities to Meet Liquidity Needs

As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios. While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

a.)

Not applicable.

b.)

Not applicable.

c.)

The Company repurchased ~~2,194~~54,144 shares of its common stock during the three months ended ~~December~~March 31, ~~2022.~~2023. Through ~~December~~March 31, ~~2022,~~2023, the Company ~~had 467,887~~held 521,031 shares in treasury that were repurchased at ana weighted average price of ~~$12.44~~$12.86 pursuant to stock repurchase plans. On December 8, 2022, the Company announced a stock repurchase program of up to 5% of its outstanding shares of common stock, or 337,146 ~~shares.~~shares, 283,002 shares of which remained subject to repurchase under the plan.

The following table reports information regarding repurchases of our common stock during the three months ended ~~December~~March 31, ~~2022.~~2023.

Remaining Number
Total Number Average of Shares That
of Shares Price Paid May be Purchased
Period Purchased Per Share Under the Plan
October 1, 2022 through October 31, 2022 1,752 $ 12.52 442
November 1, 2022 through November 31, 2022 442 $ 12.58 —
December 1, 2022 through December 31, 2022 — $ — 337,146
Total 2,194 $ 12.54

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			Weighted		Remaining Number
	Total Number		Average		of Shares That
	of Shares		Price Paid		May be Purchased
Period	Purchased		Per Share		Under the Plan

January 1, 2023 through January 31, 2023		50,000	$	12.92		287,146
February 1, 2023 through February 28, 2023		1,732	$	12.65		285,414
March 1, 2023 through March 31, 2023		2,412	$	11.99		283,002
Total for the quarter ended March 31, 2023		54,144		12.87

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

a.)

Not applicable.

b.)

None.

~~Table of Contents~~

Item 6.

Exhibits

~~Exhibits~~

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at ~~December~~March 31, ~~2022~~2023 and September 30, 2022; (ii) the Consolidated Statements of Income for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021;~~2022; (iii) the Consolidated Statements of Comprehensive Income for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021;~~2022; (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021;~~2022; (v) the Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021;~~2022; and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.

104

Cover Page Interactive Data File (embedded within Inline XBRL document contained in Exhibit 101).

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MAGYAR BANCORP, INC.
	(Registrant)




Date: ~~February 13,~~May 12, 2023	/s/ John S. Fitzgerald
	John S. Fitzgerald
	President and Chief Executive Officer



Date: ~~February 13,~~May 12, 2023	/s/ Jon R. Ansari
	Jon R. Ansari
	Executive Vice President and Chief Financial Officer

	December 31, 2022
	(In thousands)
For the Year Ending:
2023	$	554
2024		747
2025		523
2026		455
2027		334
2028 and thereafter		1,199
Total lease payments		3,812
Less imputed interest		(372	)
Present value of lease liabilities	$	3,440

	Three Months
	Ended December 31, 2021
	(In thousands)

One-to-four family residential	$	2,464
Commercial real estate		2,236
Construction		4,580
Commercial business		1,507
Average investment in impaired loans	$	10,787

Interest income recognized on
an accrual basis on impaired loans	$	48
Interest income recognized on
a cash basis on impaired loans	$	—

	Three Months Ended December 31, 2022
	Number of		Investment Before		Investment After
	Loans		TDR Modification		TDR Modification
	(Dollars in thousands)
One-to four-family residential		1	$	97	$	107

Total		1	$	97	$	107

	Notional Amount		Average Maturiy (Years)		Weighted Average Fixed Rate		Weighted Average Variable Rate	Fair Value
	(Dollars in thousands)
December 31, 2022
Classified in Other Assets:
Customer interest rate swaps	$	36,833		4.9		4.95%	1 Mo. BSBY + 2.44	$	2,471

Classified in Other Liabilities:
3rd Party interest rate swaps	$	36,833		4.9		4.95%	1 Mo. BSBY + 2.44	$	2,471


September 30, 2022
Classified in Other Assets:
Customer interest rate swaps	$	19,512		5.9		3.63%	1 Mo. LIBOR + 2.50	$	2,275
	$	6,940		4.6		6.13%	1 Mo. BSBY + 3.00	$	212
Total	$	26,452		5.2		4.88%		$	2,487

Classified in Other Liabilities:
3rd Party interest rate swaps	$	19,512		5.9		3.63%	1 Mo. LIBOR + 2.50	$	2,275
	$	6,940		4.6		6.13%	1 Mo. BSBY + 3.00	$	212
Total	$	26,452		5.2		4.88%		$	2,487

	For the Three Months Ended December 31,
	2022							2021
	Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)		Average Balance		Interest Income/ Expense			Yield/Cost (Annualized)
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits	$	14,984	$	109			2.88%	$	84,088	$	35			0.17%
Loans receivable, net		643,206		7,959			4.91%		579,131		6,721			4.60%
Securities
Taxable		97,121		395			1.61%		71,946		226			1.25%
Tax-exempt ⁽¹⁾		3,370		18			2.15%		2,198		9			1.63%
FHLBNY stock		1,613		24			6.00%		1,676		20			4.81%
Total interest-earning assets		760,294		8,505			4.44%		739,039		7,011			3.76%
Noninterest-earning assets		48,415							44,299
Total assets	$	808,709						$	783,338

Interest-bearing liabilities:
Savings accounts ⁽²⁾	$	78,263		82			0.41%	$	84,542		36			0.17%
NOW accounts ⁽³⁾		325,295		1,177			1.44%		263,626		140			0.21%
Time deposits ⁽⁴⁾		79,535		215			1.07%		111,911		275			0.98%
Total interest-bearing deposits		483,093		1,474			1.21%		460,079		451			0.39%
Borrowings		19,067		136			2.83%		21,877		119			2.16%
Total interest-bearing liabilities		502,160		1,610			1.27%		481,956		570			0.47%
Noninterest-bearing liabilities		206,197							202,334
Total liabilities		708,357							684,290
Retained earnings		100,352							99,048
Total liabilities and retained earnings	$	808,709						$	783,338

Tax-equivalent basis adjustment				(4	)						(2	)
Net interest and dividend income			$	6,891						$	6,439
Interest rate spread							3.17%							3.29%
Net interest-earning assets	$	258,134						$	257,083
Net interest margin ⁽⁵⁾							3.60%							3.46%
Average interest-earning assets to
average interest-bearing liabilities		151.40%							153.34%