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What changed in Magyar Bancorp, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Magyar Bancorp, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+370 added−364 removedSource: 10-K (2023-12-15) vs 10-K (2022-12-22)

Top changes in Magyar Bancorp, Inc.'s 2023 10-K

370 paragraphs added · 364 removed · 281 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

168 edited+29 added−46 removed134 unchanged
Biggest changeThe allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. 14 Table of Contents % of Allowance % of Loans In Category to In Category to Amount Total Allowance Total Loans (Dollars in thousands) At September 30, 2022 One-to four-family residential $ 1,223 14.50% 34.10% Commercial real estate 4,612 54.69% 54.50% Construction 461 5.47% 2.40% Home equity lines of credit 263 3.12% 3.00% Commercial business 1,484 17.60% 5.50% Other 1 0.01% 0.50% Unallocated 389 4.61% 0.00% Total allowance for loan losses $ 8,433 100.00% 100.00% At September 30, 2021 One-to four-family residential $ 1,136 14.07% 34.20% Commercial real estate 3,744 46.36% 47.20% Construction 594 7.36% 3.40% Home equity lines of credit 232 2.87% 3.00% Commercial business 2,046 25.34% 11.60% Other 15 0.19% 0.60% Unallocated 308 3.81% 0.00% Total allowance for loan losses $ 8,075 100.00% 100.00% At September 30, 2020 One-to four-family residential $ 1,035 16.17% 34.41% Commercial real estate 3,232 50.49% 40.59% Construction 672 10.50% 4.62% Home equity lines of credit 179 2.80% 3.17% Commercial business 1,034 16.16% 16.52% Other 1 0.02% 0.68% Unallocated 247 3.86% 0.00% Total allowance for loan losses $ 6,400 100.00% 100.00% At September 30, 2019 One-to four-family residential $ 731 14.95% 36.41% Commercial real estate 2,066 42.28% 44.46% Construction 511 10.45% 5.44% Home equity lines of credit 138 2.82% 3.41% Commercial business 1,184 24.23% 9.32% Other 8 0.16% 0.95% Unallocated 250 5.11% 0.00% Total allowance for loan losses $ 4,888 100.00% 100.00% At September 30, 2018 One-to four-family residential $ 687 16.36% 36.15% Commercial real estate 1,540 36.67% 42.80% Construction 493 11.74% 5.93% Home equity lines of credit 109 2.60% 3.51% Commercial business 1,151 27.40% 10.40% Other 25 0.60% 1.20% Unallocated 195 4.63% 0.00% Total allowance for loan losses $ 4,200 100.00% 100.00% 15 Table of Contents Investments Our Board of Directors has adopted our Investment Policy.
Biggest changeThe allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. % of Loans In Category to Amount Total Loans (Dollars in thousands) At September 30, 2023 One-to four-family residential $ 1,259 34.1% Commercial real estate 5,277 55.8% Construction 472 3.1% Home equity lines of credit 207 2.4% Commercial business 939 4.3% Other 2 0.3% Unallocated 174 0.0% Total allowance for loan losses $ 8,330 100.0% At September 30, 2022 One-to four-family residential $ 1,223 34.1% Commercial real estate 4,612 54.5% Construction 461 2.4% Home equity lines of credit 263 3.0% Commercial business 1,484 5.5% Other 1 0.5% Unallocated 389 0.0% Total allowance for loan losses $ 8,433 100.0% Investments Our Board of Directors has adopted our Investment Policy.
General Our principal business consists of attracting retail deposits from the general public in the areas surrounding our main office in New Brunswick, New Jersey and our branch offices located in Middlesex and Somerset Counties, New Jersey, and investing those deposits, together with funds generated from operations and wholesale funding, in residential mortgage loans, home equity loans, home equity lines of credit, commercial real estate loans, commercial business loans, Small Business Administration (“SBA”) loans, construction loans and investment securities.
General Our principal business consists of attracting retail deposits from the general public in the areas surrounding our main office in New Brunswick, New Jersey and our branch offices located in Middlesex and Somerset Counties, New Jersey, and investing those deposits, together with funds generated from operations and wholesale funding, in commercial real estate loans, residential mortgage loans, commercial business loans, Small Business Administration (“SBA”) loans, home equity loans, home equity lines of credit, construction loans and investment securities.
In 2006, Magyar Bank acquired a 100% interest in Hungaria Urban Renewal, LLC, which has no other business other than owning Magyar Bank’s main office site. As part of a tax abatement agreement with the City of New Brunswick, Magyar Bank’s new office will remain in Hungaria Urban Renewal, LLC’s name.
In 2006, Magyar Bank acquired a 100% interest in Hungaria Urban Renewal, LLC, which has no other business other than owning Magyar Bank’s main office site. As part of a tax abatement agreement with the City of New Brunswick, Magyar Bank’s main office will remain in Hungaria Urban Renewal, LLC’s name.
Magyar Bancorp, Inc., as a bank holding company controlling Magyar Bank, is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), and the rules and regulations of the FRB under the BHCA and to the provisions of the New Jersey Banking Act of 1948 (the “New Jersey Banking Act”), and to the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies.
Magyar Bancorp, Inc., as a bank holding company controlling Magyar Bank, is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), the rules and regulations of the FRB under the BHCA the provisions of the New Jersey Banking Act of 1948 (the “New Jersey Banking Act”), and to the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies.
Federal regulations require FDIC-insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets, and a Tier 1 capital to total assets leverage ratio.
Federal regulations require FDIC-insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio, and a Tier 1 capital to total assets leverage ratio.
At September 30, 2022, Magyar Bank’s common equity Tier 1 capital to risk-based assets ratio was 15.22%, total capital to risk-based assets was 16.47%, and Tier 1 capital to total assets leverage ratio was 11.13%.
At September 30, 2022, Magyar Bank’s common equity Tier 1 capital to risk-based assets ratio was 15.22%, total capital to risk-based assets ratio was 16.47%, and Tier 1 capital to total assets leverage ratio was 11.13%.
The New Jersey Banking Act defines the terms “company” and “bank holding company” as such terms are defined under the BHCA. Each bank holding company controlling a New Jersey-chartered bank or savings bank must file certain reports with the Commissioner and is subject to examination by the Commissioner. Acquisition of Magyar Bancorp, Inc.
The New Jersey Banking Act defines the terms “company” and “bank holding company” as such terms are defined under the BHCA. Each bank holding company controlling a New Jersey-chartered bank or savings bank must file certain reports with the Commissioner and is subject to examination by the Commissioner. 24 Acquisition of Magyar Bancorp, Inc.
Legislation enacted in May 2018 required the federal banking agencies to establish an optional “community bank leverage ratio” of between 8% to 10% Tier 1 equity/consolidated assets (the “Community Bank Leverage Ratio”). The Community Bank Leverage Ratio is available to institutions with less than $10 billion of assets that meet certain other requirements.
Legislation enacted in 2018 required the federal banking agencies to establish an optional “community bank leverage ratio” of between 8% to 10% Tier 1 equity/consolidated assets (the “Community Bank Leverage Ratio”). The Community Bank Leverage Ratio is available to institutions with less than $10 billion of assets that meet certain other requirements.
We generally will not make residential mortgage loans with a loan-to-value ratio in excess of 95%, which is the upper limit that has been established by the Board of Directors. Mortgage loans have been primarily originated for terms of up to 30 years.
We generally will not make residential mortgage loans with a loan-to-value ratio in excess of 95%, which is the upper limit that has been established by the Board of Directors. Mortgage loans have been primarily 4 originated for terms of up to 30 years.
We also originate consumer loans, which consist primarily of secured demand loans. We originate loans primarily for our loan portfolio. However, from time to time we have sold some of our long-term, fixed-rate residential mortgage loans into the secondary market, while retaining the servicing rights for such loans.
We also originate consumer loans, which 2 consist primarily of secured demand loans. We originate loans primarily for our loan portfolio. However, from time to time we have sold some of our long-term, fixed-rate residential mortgage loans into the secondary market, while retaining the servicing rights for such loans.
Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. Personalized customer service, long-standing relationships with customers and an active marketing program are relied upon to attract and retain deposits.
Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by 14 competitors and growth goals. Personalized customer service, long-standing relationships with customers and an active marketing program are relied upon to attract and retain deposits.
For federal income tax purposes, Magyar Bancorp, Inc. reports its income and expenses on the accrual method of accounting and uses a tax year ending September 30th for filing its federal and state income tax returns. Bad Debt Reserves . Magyar Bank uses the direct charge off method to account for bad debt deductions for income tax purposes.
For federal income tax purposes, Magyar Bancorp, Inc. reports its income and expenses on the accrual method of accounting and uses a tax year ending September 30th for filing its federal and state income tax returns. 16 Bad Debt Reserves . Magyar Bank uses the direct charge off method to account for bad debt deductions for income tax purposes.
An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 19 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
The Commissioner also has authority to appoint a conservator or receiver for a savings bank under certain circumstances such as insolvency or unsafe or unsound condition to transact business. Federal Banking Regulation Capital Requirements.
The Commissioner also has authority to appoint a conservator or receiver for a savings bank under certain circumstances such as insolvency or unsafe or unsound condition to transact business. Federal Banking Regulation 18 Capital Requirements.
These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting loans and providing other services.
These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services.
The allowance for loan losses as of September 30, 2022 was maintained at a level that represents management’s best estimate of losses in the loan portfolio both probable and reasonably estimable. However, this analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available.
The allowance for loan losses as of September 30, 2023 was maintained at a level that represents management’s best estimate of losses in the loan portfolio both probable and reasonably estimable. However, this analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available.
Investment transactions are reviewed and ratified by the Board of Directors at their regularly scheduled meetings. Our investments portfolio may include U.S.
Investment transactions are reviewed and ratified by the Board of Directors at their regularly scheduled meetings. 12 Our investments portfolio may include U.S.
In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.
The Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.
The New Jersey Banking Act also provides that a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions of the New Jersey Banking Act. Federal Reserve System Federal Reserve Board regulations require all depository institutions to maintain reserves at specified levels against their transaction accounts (primarily NOW and regular checking accounts).
The New Jersey Banking Act also provides that a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions of the New Jersey Banking Act. Federal Reserve System FRB regulations require all depository institutions to maintain reserves at specified levels against their transaction accounts (primarily NOW and regular checking accounts).
Historically, we have not originated a significant number of loans for the purpose of reselling them in the secondary market. In the future, however, to help manage interest rate risk and to increase fee income, we may increase our origination and sale of residential mortgage loans. No loans were held for sale at September 30, 2022.
Historically, we have not originated a significant number of loans for the purpose of reselling them in the secondary market. In the future, however, to help manage interest rate risk and to increase fee income, we may increase our origination and sale of residential mortgage loans. No loans were held for sale at September 30, 2023.
Magyar Bank is a member of the Federal Home Loan Bank system, which consists of eleven regional federal home loan banks, each subject to supervision and regulation by the Federal Housing Finance Board. The federal home loan banks provide a central credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending.
Magyar Bank is a member of the Federal Home Loan Bank system, which consists of eleven regional federal home loan banks, each subject to supervision and regulation by the Federal Housing Finance Agency. The federal home loan banks provide a central credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending.
All one-to four-family residential mortgage loans that we sell in the secondary market are sold with servicing rights retained pursuant to master commitments negotiated with Freddie Mac. We sell our loans to Freddie Mac without recourse. No loans were held for sale at September 30, 2022.
All one-to four-family residential mortgage loans that we sell in the secondary market are sold with servicing rights retained pursuant to master commitments negotiated with Freddie Mac. We sell our loans to Freddie Mac without recourse. No loans were held for sale at September 30, 2023.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking as to be permissible are: · making or servicing loans; · performing certain data processing services; 28 Table of Contents · providing discount brokerage services, or acting as fiduciary, investment or financial advisor; · leasing personal or real property; · making investments in corporations or projects designed primarily to promote community welfare; and · acquiring a savings and loan association.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking as to be permissible are: ● making or servicing loans; ● performing certain data processing services; ● providing discount brokerage services, or acting as fiduciary, investment or financial advisor; ● leasing personal or real property; ● making investments in corporations or projects designed primarily to promote community welfare; and ● acquiring a savings and loan association.
There were no non-performing home equity loans at September 30 2022 and there were no charge-offs or recoveries for impaired home equity loans during the year ended September 30, 2022. We offer fixed-rate mortgage loans with terms of either 10, 15, 20 or up to 30 years.
There were no non-performing home equity loans at September 30, 2023 and there were no charge-offs or recoveries for impaired home equity loans during the year ended September 30, 2023. We offer fixed-rate mortgage loans with terms of either 10, 15, 20 or up to 30 years.
The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while continuing successful operations. Through teamwork and the adaptability of our management and staff, our branches and operations centers remained open and in-person during the year ended September 30, 2022.
The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while continuing successful operations. Through teamwork and the adaptability of our management and staff, our branches and operations centers remained open and in-person during the year ended September 30, 2023.
The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2023. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
On an ongoing 20 Table of Contents basis, we further promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, and keeping the employee portion of health care premiums to a minimum. Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a high-level service provider.
On an ongoing basis, we further promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, and keeping the employee portion of health care premiums to a minimum. Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a high-level service provider.
Magyar Bancorp, Inc., Magyar Bank, Magyar Service Corporation, and Magyar Investment Company have filed a New Jersey tax return on a consolidated basis for the year ended September 30, 2021 and intend to file on a consolidated basis for the year ended September 30, 2022.
Magyar Bancorp, Inc., Magyar Bank, Magyar Service Corporation, and Magyar Investment Company have filed a New Jersey tax return on a consolidated basis for the year ended September 30, 2022 and intend to file on a consolidated basis for the year ended September 30, 2023.
Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks, which is comparable to the loans-to-one-borrower limit applicable to Magyar Bank’s loans.
Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to member banks, which is comparable to the loans-to-one-borrower limit applicable to Magyar Bank’s loans.
Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed below and under “Risk Factors” in Part 1, Item 1A of this Annual Report on Form 10-K.
Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed below and under “Risk Factors” in Part 1, Item 1A of this Annual Report on Form 10-K. Magyar Bancorp, Inc. Magyar Bancorp, Inc.
Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate. The maximum amount of a commercial real estate loan is limited by our Board-established loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $14.4 million.
Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate. The maximum amount of a commercial real estate loan is limited by our Board-established loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $15.8 million.
A savings bank may also make other investments pursuant to “leeway” authority that permits investments not otherwise permitted by the New Jersey Banking Act. “Leeway” investments must comply with a number of limitations on the individual and aggregate amounts of “leeway” investments. A savings bank may also exercise trust powers upon approval 22 Table of Contents of the Commissioner.
A savings bank may also make other investments pursuant to “leeway” authority that permits investments not otherwise permitted by the New Jersey Banking Act. “Leeway” investments must comply with a number of limitations on the individual and aggregate amounts of “leeway” investments. A savings bank may also exercise trust powers upon approval of the Commissioner.
Federal regulation also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors of the bank, with any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed either (1) $250,000 or (2) the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus.
Federal regulation also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the Board of Directors of the bank, with any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus.
Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the 6 Table of Contents real estate market or the economy in general.
Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general.
Mortgage-backed securities present a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating 16 Table of Contents to such instruments that can change the net yield on the securities.
Mortgage-backed securities present a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments that can change the net yield on the securities.
A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.
A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution. Community Reinvestment Act.
If the estimate of construction cost is inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property. Additionally, if our estimate of the value of the completed property is inaccurate, our construction loan may exceed the value of the collateral. 7 Table of Contents Commercial Business Loans.
If the estimate of construction cost is inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property. Additionally, if our estimate of the value of the completed property is inaccurate, our construction loan may exceed the value of the collateral. Commercial Business Loans.
In addition, the Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage loans and 26 Table of Contents generally limits the ability of a mortgage originator to be compensated by others if compensation is received from a consumer.
In addition, the Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage loans and generally limits the ability of a mortgage originator to be compensated by others if compensation is received from a consumer.
Federal law may also limit the amount of dividends that may be paid by Magyar Bank. See “Federal Banking Regulation-Prompt Corrective Action” below. Minimum Capital Requirements. Regulations of the Commissioner impose on New Jersey-chartered depository institutions, including Magyar Bank, minimum capital requirements similar to those imposed by the Federal Deposit Insurance Corporation on insured state banks.
Federal law may also limit the amount of dividends that may be paid by Magyar Bank. See “Federal Banking Regulation-Prompt Corrective Action” below. Minimum Capital Requirements. Regulations of the Commissioner impose on New Jersey-chartered depository institutions, including Magyar Bank, minimum capital requirements similar to those imposed by the FDIC on insured state banks.
The 8 Table of Contents underwriting standards we use for home equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan.
The underwriting standards we use for home equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations, the ongoing payments on the proposed loan and the value of the collateral securing the loan.
Due to historically low interest rate levels, borrowers generally have preferred fixed-rate mortgage loans in recent years. Adjustable-rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing. However, these loans have other risks because, as interest rates increase, the underlying payments by the borrower increase, which increases the potential for default by the borrower.
Due to historically low interest rate levels until recently, borrowers generally have preferred fixed-rate mortgage loans. Adjustable-rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing. However, these loans have other risks because, as interest rates increase, the underlying payments by the borrower increase, which increases the potential for default by the borrower.
At September 30, 2022, construction loans for the development of one-to four-family residential properties totaled $9.6 million. These construction loans generally have a maximum term of 24 months. We provide financing for land acquisition, site improvement and construction of individual homes. Land acquisition loans are limited to 50% to 75% of the sale price of the land.
At September 30, 2023, construction loans for the development of one-to four-family residential properties totaled $10.9 million. These construction loans generally have a maximum term of 24 months. We provide financing for land acquisition, site improvement and construction of individual homes. Land acquisition loans are limited to 50% to 75% of the sale price of the land.
At September 30, 2022, our largest commercial real estate loan was $13.7 million to finance the purchase and operation of a nursing and rehabilitation home in Edison, New Jersey. The original loan amount was 65% of the purchase price, which was lower than the appraised value. The loan was performing in accordance with its terms at September 30, 2022.
At September 30, 2023, our largest commercial real estate loan was $13.5 million to finance the purchase and operation of a nursing and rehabilitation home in Edison, New Jersey. The original loan amount was 65% of the purchase price, which was lower than the appraised value. The loan was performing in accordance with its terms at September 30, 2023.
Further, the Consumer Financial Protection Bureau also has a broad mandate to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties.
Further, the Consumer Financial Protection Bureau has broad authority to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties.
A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any of certain entities affiliated with any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and its implementing regulations.
A bank’s loans to its executive officers, directors, any owner of 10% or more of its stock (each, an insider) and any entities controlled by any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and its implementing regulations.
Bank holding companies may elect to become a financial holding company if: · each of its depository institution subsidiaries is “well capitalized;” · each of its depository institution subsidiaries is “well managed;” · each of its depository institution subsidiaries has at least a “satisfactory” Community Reinvestment Act rating at its most recent examination; and · the bank holding company has filed a certification with the FRB stating that it elects to become a financial holding company.
Bank holding companies may elect to become a financial holding company if: ● each of its depository institution subsidiaries is “well capitalized;” ● each of its depository institution subsidiaries is “well managed;” ● each of its depository institution subsidiaries has at least a “satisfactory” CRA rating at its most recent examination; and ● the bank holding company has filed a certification with the FRB stating that it elects to become a financial holding company.
In this regard, transactions between an insured depository institution and its affiliates are limited to 10% of the institution’s unimpaired capital and unimpaired surplus for transactions with any one affiliate and 20% of unimpaired capital and unimpaired surplus for transactions in the aggregate with all affiliates.
In this regard, covered transactions between an insured depository institution and its affiliates are limited to 10% of the institution’s capital stock and surplus for transactions with any one affiliate, and 20% of the institution’s capital stock and surplus for transactions in the aggregate with all affiliates.
Magyar Bank and Magyar Bancorp are subject to federal and state laws designed to protect consumers and prohibit unfair, deceptive or abusive business practices, including the Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”), the Gramm-Leach Bliley Act, the Truth in Lending Act (“TILA”), the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts.
In addition, Magyar Bank and Magyar Bancorp are subject to other federal and state laws designed to protect consumers and prohibit unfair, deceptive or abusive business practices, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”), the Gramm-Leach Bliley Act, the Truth in Lending Act (“TILA”), the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts.
The Commissioner and the FDIC conduct periodic examinations to assess Magyar Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the deposit insurance fund and depositors.
The Commissioner and the FDIC conduct periodic examinations to assess Magyar Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the DIF and depositors.
The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to termination of its deposit insurance. 25 Table of Contents Transactions with Affiliates of Magyar Bank.
The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to termination of its deposit insurance. Transactions with Affiliates of Magyar Bank.
Magyar Bancorp, Inc., Magyar Bank, Magyar Service Corporation, and Magyar Investment Company are not currently under audit with respect to their New Jersey income tax returns. Their respective state tax returns have not been audited within the past three years. 21 Table of Contents Delaware and New Jersey State Taxation.
Magyar Bancorp, Inc., Magyar Bank, Magyar Service Corporation, and Magyar Investment Company are not currently under audit with respect to their New Jersey income tax returns. Their respective state tax returns have not been audited within the past three years. Delaware and New Jersey State Taxation.
The Company accounts for its impaired loans in accordance with generally accepted accounting principles, which require that a creditor measure impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate except that, as a practical expedient, a creditor may measure impairment based on a loan’s observable market price less estimated costs of disposal, or the fair value of the collateral less estimated costs of disposal if the loan is collateral dependent.
We account for our impaired loans in accordance with generally accepted accounting principles, which require that a creditor measure impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate except that, as a practical expedient, a creditor may measure impairment based on a loan’s observable market price less estimated costs of disposal, or the fair value of the collateral less estimated costs of disposal if the loan is collateral dependent.
The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon the occurrence of certain events, including: · insolvency, or when the assets of the bank are less than its liabilities to depositors and others; · substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; · existence of an unsafe or unsound condition to transact business; · likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in the normal course of business; and · insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.
The FDIC is required, with some exceptions, to appoint a receiver or conservator for an insured state bank if that bank is “critically undercapitalized.” The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon the occurrence of certain events, including: ● insolvency, or when the assets of the bank are less than its liabilities to depositors and others; ● substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; ● existence of an unsafe or unsound condition to transact business; ● likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in the normal course of business; and ● insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.
The maximum loan-to-value ratio limit applicable to these loans is 70% of the appraised value of the property. We may retain up to 10% of each loan advance until the property attains a 90% occupancy level. The maximum amount of a construction loan is limited by our loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $14.4 million.
The maximum loan-to-value ratio limit applicable to these loans is 75% of the appraised value of the property. We may retain up to 10% of each loan advance until the property attains a 90% occupancy level. The maximum amount of a construction loan is limited by our loans-to-one-borrower limit, which is currently 15% of Magyar Bank’s capital, or $15.8 million.
In addition, nearly all of our employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns associate and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our associates. At September 30, 2022, 32% of our current staff had been with us for fifteen years or more.
In addition, nearly all of our employees are stockholders of the Company through participation in our Employee Stock Ownership Plan, which aligns associate and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our associates. At September 30, 2023, 39% of our current staff had been with us for ten years or more.
Site improvement loans are limited to 100% of the bonded site improvement costs. Construction loans are limited to 75% of the lesser of the contract sale price or appraised value of the property (less funds already advanced for land acquisition and site improvement). At September 30, 2022, construction loans for the development of commercial properties totaled $4.0 million.
Site improvement loans are limited to 100% of the bonded site improvement costs. Construction loans are limited to 75% of the lesser of the contract sale price or appraised value of the property (less funds already advanced for land acquisition and site improvement). 6 At September 30, 2023, construction loans for the development of commercial properties totaled $7.0 million.
Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank. Lending Activities We originate residential mortgage loans to purchase or refinance residential real property. Residential mortgage loans represented $214.4 million, or 34.1% of our total loans at September 30, 2022.
Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank. Lending Activities We originate residential mortgage loans to purchase or refinance residential real property. Residential mortgage loans represented $237.7 million, or 34.1% of our total loans at September 30, 2023.
There is also reinvestment risk associated with the cash flows from such securities or if the securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates. Our mortgage-backed securities portfolio had a weighted average yield of 1.97% at September 30, 2022.
There is also reinvestment risk associated with the cash flows from such securities or if the securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates. Our mortgage-backed securities portfolio had a weighted average yield of 2.24% at September 30, 2023.
As of September 30, 2022, the aggregate loan-to-value ratio of the stock-secured portfolio was 15.8%. Loan Originations, Purchases, Participations and Servicing of Loans. Lending activities are conducted primarily by our loan personnel operating at our main and branch office locations. All loans originated by us are underwritten pursuant to our policies and procedures.
As of September 30, 2023, the aggregate loan-to-value ratio of the stock-secured portfolio was 16.7%. Loan Originations, Purchases, Participations and Servicing of Loans. Lending activities are conducted primarily by our loan personnel operating at our main and branch office locations. All loans originated by us are underwritten pursuant to our policies and procedures.
The following table sets forth the allowance for loan losses allocated by loan category, the percent of the allowance to the total allowance and the percent of loans in each category to total loans at the dates indicated.
The following table sets forth the allowance for loan losses allocated by loan category and the percent of the allowance to the total allowance at the dates indicated.
This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and to unsafe or unsound practices. Deposit Insurance.
This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations, unsafe or unsound practices or non-compliance with agency conditions or agreements. Deposit Insurance.
We may invest up to 25% of Magyar Bank’s investment portfolio in corporate debt obligations and up to 15% of Magyar Bank’s capital in any one issuer. Equity Securities. At September 30, 2022, we held no equity securities other than $1.4 million in Federal Home Loan Bank of New York (“FHLBNY”) stock.
We may invest up to 25% of Magyar Bank’s investment portfolio in corporate debt obligations and up to 15% of Magyar Bank’s capital in any one issuer. Equity Securities. At September 30, 2023, we held no equity securities other than $2.3 million in Federal Home Loan Bank of New York (“FHLBNY”) stock.
At September 30, 2022, Magyar Bank was in compliance with the Federal Reserve Board’s reserve requirements. Savings banks, such as Magyar Bank, are authorized to borrow from the Federal Reserve Bank “discount window.” Magyar Bank is deemed by the Federal Reserve Board to be generally sound and thus is eligible to obtain secondary credit from its Federal Reserve Bank.
At September 30, 2023, Magyar Bank was in compliance with the FRB’s reserve requirements. Savings banks, such as Magyar Bank, are authorized to borrow from the Federal Reserve Bank “discount window.” Magyar Bank is deemed by the FRB to be generally sound and thus is eligible to obtain secondary credit from its FRB.
According to the Federal Deposit Insurance Corporation’s annual Summary of Deposit report, at June 30, 2022, our market share of deposits was 1.11% and 0.42% in Middlesex and Somerset Counties, respectively. Our market share of deposits was 1.33% and 0.42%, respectively, at June 30, 2021.
According to the Federal Deposit Insurance Corporation’s annual Summary of Deposit report, at June 30, 2023, our market share of deposits was 1.26% and 0.38% in Middlesex and Somerset Counties, respectively. Our market share of deposits was 1.11% and 0.42%, respectively, at June 30, 2022.
At September 30, 2022, our largest fixed-rate residential mortgage loan was $1.7 million. The loan was performing in accordance with its contractual repayment terms at September 30, 2022. We also offer adjustable-rate residential mortgage loans with interest rates based on the weekly average yield on U.S.
At September 30, 2023, our largest fixed-rate residential mortgage loan was $10.0 million. The loan was performing in accordance with its contractual repayment terms at September 30, 2023. We also offer adjustable-rate residential mortgage loans with interest rates based on the weekly average yield on U.S.
We have policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations. Holding Company Regulation Federal Regulation. Magyar Bancorp, Inc. is regulated as a bank holding company.
We have policies, procedures and systems designed to comply with this Act and its implementing regulations, and we review and document such policies, procedures and systems to ensure continued compliance. Holding Company Regulation Federal Regulation. Magyar Bancorp, Inc. is regulated as a bank holding company.
We originate residential mortgage loans, most of which are secured by properties located in our primary market area and most of which we hold in portfolio. At September 30, 2022, $214.4 million, or 34.1% of our total loan portfolio, consisted of residential mortgage loans (including home equity loans).
We originate residential mortgage loans, most of which are secured by properties located in our primary market area and most of which we hold in portfolio. At September 30, 2023, $237.7 million, or 34.1% of our total loan portfolio, consisted of residential mortgage loans (including home equity loans).
These construction loans have a maximum term of 24 months. The maximum loan-to-value ratio limit applicable to these loans is 75% of the appraised value of the property. At September 30, 2022, construction loans for the development of town homes, condominiums and apartment buildings totaled $1.7 million.
These construction loans have a maximum term of 24 months. The maximum loan-to-value ratio limit applicable to these loans is 75% of the appraised value of the property. At September 30, 2023, construction loans for the development of town homes, condominiums and apartment buildings totaled $4.0 million.
With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus.
With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may not exceed the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus, and in no event more than $100,000.
Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities and investments of state-chartered Federal Deposit Insurance Corporation-insured banks and their subsidiaries to those 24 Table of Contents permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the Federal Deposit Insurance Corporation.
Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities and investments of state-chartered FDIC-insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the FDIC.
At September 30, 2022, stock-secured and other loans totaled $3.1 million, or 0.5% of our total net loan portfolio. Generally, we limit the aggregate amount of loans secured by the common stock of any one corporation to 15% of Magyar Bank’s capital, or $14.4 million.
At September 30, 2023, stock-secured and other loans totaled $2.4 million, or 0.3% of our total net loan portfolio. Generally, we limit the aggregate amount of loans secured by the common stock of any one corporation to 15% of Magyar Bank’s capital, or $15.8 million.
Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with these regulations.
Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with the BSA, USA PATRIOT Act, and regulations implemented thereunder.
We also originate construction and land acquisition loans for the development of one-to four-family homes, apartment buildings and commercial properties. Construction loans are generally offered to experienced local developers operating in our primary market area and to individuals for the construction of their personal residences. At September 30, 2022, our construction loans totaled $15.2 million, or 2.4% of total loans.
We also originate construction and land acquisition loans for the development of one-to four-family homes, apartment buildings and commercial properties. Construction loans are generally offered to experienced local developers operating in our primary market area and to individuals for the construction of their personal residences. At September 30, 2023, our construction loans totaled $21.9 million, or 3.1% of total loans.
The analysis must consider the effect of an investment or sale on our risk-based capital and prospects for yield and appreciation. At September 30, 2022, our securities portfolio totaled $100.9 million, or 12.6% of our total assets. Securities are classified as held-to-maturity or available-for-sale when purchased.
The analysis must consider the effect of an investment or sale on our risk-based capital and prospects for yield and appreciation. At September 30, 2023, our securities portfolio totaled $96.0 million, or 10.6% of our total assets. Securities are classified as held-to-maturity or available-for-sale when purchased.
Employees and Human Capital Resources At September 30, 2022 we employed 87 full-time employees and 7 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.
Employees and Human Capital Resources At September 30, 2023 we employed 89 full-time employees and eight part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.
Magyar Bank, as a member of the FHLBNY, is required to purchase and hold shares of capital stock in the FHLBNY in specified amounts. As of September 30, 2022, Magyar Bank was in compliance with these requirements. Enforcement. The Federal Deposit Insurance Corporation has extensive enforcement authority over insured savings banks, including Magyar Bank.
Magyar Bank, as a member of the FHLBNY, is required to purchase and hold shares of capital stock in the FHLBNY in specified amounts. 20 As of September 30, 2023, Magyar Bank was in compliance with these requirements. Enforcement. The FDIC has extensive enforcement authority over insured savings banks, including Magyar Bank.
The maximum amount of a home equity line of credit loan is limited by our loans-to-one-borrower limit, which is 15% of Magyar Bank’s capital, or $14.4 million. At September 30, 2022, our largest home equity line of credit loan was $1.1 million. The loan was performing according to its terms at September 30, 2022.
The maximum amount of a home equity line of credit loan is limited by our loans-to-one-borrower limit, which is 15% of Magyar Bank’s capital, or $15.8 million. At September 30, 2023, our largest home equity line of credit loan was $986,000. The loan was performing according to its terms at September 30, 2023.
At September 30, 2022, our commercial business loans totaled $34.7 million, or 5.5% of total loans. We make commercial business loans primarily in our market area to a variety of professionals, sole proprietorships and small and mid-sized businesses. Our commercial business loans include term loans and revolving lines of credit.
At September 30, 2023, our commercial business loans totaled $30.2 million, or 4.3% of total loans. We make commercial business loans primarily in our market area to a variety of professionals, sole proprietorships and small and mid-sized businesses. Our commercial business loans include term loans and revolving lines of credit.
At September 30, 2022, our portfolio of commercial business, commercial real estate and construction loans totaled $392.7 million, or 62.4% of our total loans, compared to $369.9 million, or 62.2% of our total loans, at September 30, 2021.
At September 30, 2023, our portfolio of commercial business, commercial real estate and construction loans totaled $441.2 million, or 63.2% of our total loans, compared to $392.7 million, or 62.4% of our total loans, at September 30, 2022.
We also accept brokered deposits when attractive rates and terms are available. We had $6.0 million in brokered deposits at September 30, 2022 and September 30, 2021. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.
We also accept brokered deposits when attractive rates and terms are available. At September 30, 2023, we had $13.8 million in brokered deposits. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company is subject to the following risks, any of which could have a material, adverse effect on the business, financial condition, liquidity, and results of operations of the Company: • risks to the capital markets that may impact the performance of the investment securities portfolio of the Company, as well as limit our access to capital markets and other funding sources; • effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the companies’ financial reporting and internal controls; • declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by the Company; • if the economy is unable to substantially reopen or reopen in an efficient manner, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; • collateral for loans, especially real estate, may continue to decline in value, which could cause loan losses to increase; • allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect net income; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on assets may decline to a greater extent than the decline in cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income; • cyber security risks are increased as the result of an increase in the number of employees working remotely; • declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments in the markets served by the Company; and • increasing or protracted volatility in the price of the Company’s common stock.
Biggest changeThe Company’s business, financial condition, results of operations and the trading price of its securities can be materially and adversely affected by many events and conditions including the following: • risks to the capital markets that may impact the performance of the investment securities portfolio of the Company, as well as limit our access to capital markets and other funding sources; • effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the companies’ financial reporting and internal controls; • declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio in the markets served by the Company; • if the economy is unable to substantially reopen or reopen in an efficient manner, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; 25 • collateral for loans, especially real estate, may continue to decline in value, which could cause loan losses to increase; • allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect net income; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; • as the result of the increase in the Federal Reserve Board’s target federal funds rate, the cost on interest-bearing liabilities may greater than the yield on interest-earning assets, or reducing the net interest margin, spread and reducing net income; • cyber security risks are increased as the result of an increase in the number of employees working remotely; • declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments in the markets served by the Company; and • increasing or protracted volatility in the price of the Company’s common stock.
Our profitability depends upon our continued ability to successfully compete in our market area. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest-earning assets.
Our profitability depends upon our continued ability to 26 successfully compete in our market area. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest-earning assets.
Because we plan to continue to emphasize the origination of these loans, it may be necessary to 32 Table of Contents increase our allowance for loan losses because of the increased credit risk associated with these types of loans. Any increase to our allowance for loan losses would adversely affect our earnings.
Because we plan to continue to emphasize the origination of these loans, it may be necessary to increase our allowance for loan losses because of the increased credit risk associated with these types of loans. Any increase to our allowance for loan losses would adversely affect our earnings.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or Other Laws and Regulations Could Result in Fines or Sanctions. 33 Table of Contents The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or Other Laws and Regulations Could Result in Fines or Sanctions. The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
Changes in Interest Rates May Hurt Our Profits and Asset Values. 31 Table of Contents Our earnings largely depend on our net interest income, which could be negatively affected by changes in interest rates.
Changes in Interest Rates May Hurt Our Profits and Asset Values. Our earnings largely depend on our net interest income, which could be negatively affected by changes in interest rates.
In recent periods, market interest rates have risen in response to the Federal Reserve Board’s recent rate increases. As discussed below, the increase in market interest rates could have an adverse effect on our net interest income and profitability.
The Federal Reserve Board increased benchmark interest rates significantly in response to control the inflation. In recent periods, market interest rates have risen in response to the Federal Reserve Board’s recent rate increases. As discussed below, the increase in market interest rates could have an adverse effect on our net interest income and profitability.
At September 30, 2022, in the event of an immediate 200 basis point decrease in interest rates, the model projects that we would experience a $946,000, or 3.3%, decrease in net interest income in the first year following the change in interest rates, and a $2.7 million, or 8.6%, decrease in net interest income in the second year following the change in interest rates.
At September 30, 2023, in the event of an immediate 200 basis point decrease in interest rates, the model projects that we would experience a $661,000, or 2.1%, decrease in net interest income in the first year following the change in interest rates, and a $2.3 million, or 6.9%, decrease in net interest income in the second year following the change in interest rates.
At September 30, 2022, our available-for-sale securities portfolio at fair value totaled $9.2 million, which consisted entirely of mortgage-backed securities. To the extent interest rates decrease and the value of our available-for-sale portfolio increases, our stockholders’ equity will be affected accordingly.
At September 30, 2023, our available-for-sale securities portfolio at fair value totaled $10.1 million, which consisted entirely of mortgage-backed securities. To the extent interest rates increase and the value of our available-for-sale portfolio increases, our stockholders’ equity will be affected accordingly.
If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers or otherwise, our business and operating results may be materially adversely affected.
If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers or otherwise, our business and operating results may be materially adversely affected. Our small size may make it more difficult for us to compete.
At September 30, 2022, in the event of an immediate 200 basis point increase in interest rates, the model projects that we would experience a $212,000, or 0.7%, decrease in net interest income in the first year following the change in interest rates, and a $1.1 million, or 3.4%, increase in net interest income in the second year following the change in interest rates.
At September 30, 2023, in the event of an immediate 200 basis point increase in interest rates, the model projects that we would experience a $391,000, or 1.3%, increase in net interest income in the first year following the change in interest rates, and a $1.8 million, or 5.3%, increase in net interest income in the second year following the change in interest rates.
At September 30, 2022, our portfolio of commercial real estate and commercial business loans totaled $377.5 million, or 60.0% of our total loans, compared to $349.6 million (including $25.1 million in PPP loans), or 58.8% of our total loans at September 30, 2021 and $349.1 million (including $56.0 million in PPP loans), or 57.1% of our total loans at September 30, 2020.
At September 30, 2023, our portfolio of commercial real estate and commercial business loans totaled $419.3 million, or 60.1% of our total loans, compared to $377.5 million, or 60.0% of our total loans at September 30, 2022 and $349.6 million, or 58.8% of our total loans at September 30, 2021.
ITEM 1A. Risk Factors In addition to factors discussed in the description of our business and elsewhere in this report, the following are factors that could adversely affect our future results of operations and financial condition. Economic and Market Area Inflation can have an adverse impact on our business and on our customers.
ITEM 1A. Risk Factors In addition to factors discussed in the description of our business and elsewhere in this report, the following are factors that could adversely affect our future results of operations and financial condition.
Such regulation and supervision govern the activities in which financial institutions and their holding companies may engage and are intended primarily for the protection of the federal deposit insurance fund and depositors.
As a bank holding company, Magyar Bancorp, Inc. is subject to regulation and supervision by the Federal Reserve Board. Such regulation and supervision govern the activities in which financial institutions and their holding companies may engage and are intended primarily for the protection of the federal deposit insurance fund and depositors.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. 29 Table of Contents The COVID-19 Pandemic Has and Will Continue to Pose Risks and Could Harm Our Business, Results of Operations and Prospects.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
The occurrence of a breach of security involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability.
We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses. 30 The occurrence of a breach of security involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability.
It is our intent to continue to emphasize the origination of commercial business and commercial real estate loans. Commercial business and commercial real estate loans generally have more risk than one-to four-family residential mortgage loans. At September 30, 2022, there were no non-performing commercial real estate and commercial business loans compared with $2.4 million at September 30, 2021.
It is our intent to continue to emphasize the origination of commercial business and commercial real estate loans. Commercial business and commercial real estate loans generally have more risk than one-to four-family residential mortgage loans.
This creates reinvestment risk, which is the risk that we may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.
This creates reinvestment risk, which is the risk that we may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities.
The allowance for loan losses as a percentage of non-performing loans increased to 297.5% at September 30, 2022 compared with 99.0% at September 30, 2021. At September 30, 2022 our allowance for loan losses as a percentage of total loans was 1.34%, compared with 1.36% at September 30, 2021.
At September 30, 2023 our allowance for loan losses as a percentage of total loans was 1.19%, compared with 1.34% at September 30, 2022.
In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. Based on this review, we believe our allowance for loan losses is adequate to absorb losses in our loan portfolio as of September 30, 2022.
In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions.
CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.
The implementation of CECL has been delayed for smaller reporting companies, such as the Company, until January 2023 (effective October 1, 2023 for the Company). CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.
Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations. Regulatory Matters We Operate in a Highly Regulated Environment and May Be Adversely Affected by Changes in Laws and Regulations.
Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations. We are subject to environmental liability risk associated with lending activities or properties we own.
Bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities will have a material adverse effect on our financial condition and results of operations.
Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities will have a material adverse effect on our financial condition and results of operations. The Financial Accounting Standards Board has adopted a new accounting standard that is referred to as Current Expected Credit Loss, or CECL.
Magyar Bank is subject to extensive regulation, supervision and examination by the NJDBI, its chartering authority, and by the Federal Deposit Insurance Corporation, which insures Magyar Bank’s deposits. As a bank holding company, Magyar Bancorp, Inc. is subject to regulation and supervision by the Federal Reserve Board.
Regulatory Matters We Operate in a Highly Regulated Environment and May Be Adversely Affected by Changes in Laws and Regulations. Magyar Bank is subject to extensive regulation, supervision and examination by the NJDBI, its chartering authority, and by the Federal Deposit Insurance Corporation, which insures Magyar Bank’s deposits.
As inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses.
In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses.
We evaluate interest rate sensitivity using models that estimate the change in Magyar Bank’s net interest income over a range of interest rate scenarios.
At September 30, 2023, the fair value of our total securities portfolio was $83.9 million. The unrealized net loss on securities totaled $14.1 million on a pre-tax basis at September 30, 2023. We evaluate interest rate sensitivity using models that estimate the change in Magyar Bank’s net interest income over a range of interest rate scenarios.
While we have developed policies and procedures designed to assist in compliance with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations. Security System Failure or Breaches of Our Network Security Could Subject Us to Increased Operating Costs as well as Litigation and Other Liabilities.
While we have developed policies and procedures 29 designed to assist in compliance with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations. The Federal Reserve Board may require us to commit capital resources to support Magyar Bank.
The allowance for loan losses increased by $358,000 during the year ended September 30, 2022 to $8.4 million from $8.1 million for the year ended September 30, 2021.
The allowance for loan losses decreased by $103,000 during the year ended September 30, 2023 to $8.3 million from $8.4 million for the year ended September 30, 2022. The allowance for loan losses as a percentage of non-performing loans decreased to 163.9% at September 30, 2023 compared with 297.5% at September 30, 2022.
Removed
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Added
Economic and Market Area Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.
Removed
Recently, there have been market indicators of a pronounced rise in inflation and the Federal Reserve Board has indicated its intention to raise certain benchmark interest rates in an effort to combat inflation.
Added
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
Removed
The COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the business of the Company, its customers, employees and third-party service providers.
Added
For example, on May 1, 2023, First Republic Bank went into receivership and its deposits and substantially all of its assets were acquired by JPMorgan Chase Bank, National Association. Similarly, on March 10, 2023, Silicon Valley Bank went into receivership, and on March 12, Signature Bank went into receivership.
Removed
The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened in an efficient manner.
Added
Inflation can have an adverse impact on our business and on our customers. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates.
Removed
Additionally, the responses of various governmental and nongovernmental authorities to curtail business and consumer activities in an effort to mitigate the pandemic will have material long-term effects on the Company and its customers which are difficult to quantify in the near-term or long-term.
Added
Although the Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25.0 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.
Removed
In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. The adverse effect of the COVID-19 pandemic on the Company, its customers and the communities 30 Table of Contents where it operates may adversely affect the Company’s business, results of operations and financial condition for an indefinite period of time.
Added
There is no guarantee that the Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
Removed
Interest Rate and Asset Quality The reversal of the historically low interest rate environment may adversely affect our net interest income and profitability. The Federal Reserve Board decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic. The Federal Reserve Board is reversing its policy of near zero interest rates given its concerns over inflation.
Added
Our asset size may make it more difficult to compete with other financial institutions that are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Accordingly, we are not always able to offer new products and services as quickly as our competitors.
Removed
Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At September 30, 2022, the fair value of our total securities portfolio was $89.1 million. The unrealized net loss on securities totaled $13.7 million on a pre-tax basis at September 30, 2022.
Added
Lower earnings may also make it more difficult to offer competitive salaries and benefits. In addition, our smaller customer base may make it difficult to generate meaningful non-interest income from such activities as securities and insurance brokerage.
Removed
The increases were attributable to the growth in loan receivable, which increased by $34.3 million to $628.9 million at September 30, 2022 from $594.6 million at September 30, 2021, and higher adjustments to the economic conditions.
Added
Finally, as an institution smaller than many in our market area, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations. Interest Rate and Asset Quality The reversal of the historically low interest rate environment may adversely affect our net interest income and profitability.
Removed
The Financial Accounting Standards Board has adopted a new accounting standard that is referred to as Current Expected Credit Loss, or CECL. The implementation of CECL has been delayed for smaller reporting companies, such as the Company, until January 2023 (effective October 1, 2023 for the Company).
Added
Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans. 27 Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates.
Removed
We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses.
Added
At September 30, 2023, there was one non-performing commercial real estate loan totaling $2.2 million and no non-performing commercial business loans compared with no non-performing commercial real estate or commercial business loans at September 30, 2022.
Added
Based on this review, we believe our allowance for loan losses is adequate to absorb losses in our loan portfolio as of September 30, 2023. 28 Bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs.
Added
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans.
Added
In doing so, there is a risk that hazardous or toxic substances could be found on these properties.
Added
If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property.
Added
Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.
Added
Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary bank.
Added
Under the “source of strength” doctrine, the Federal Reserve Board may require a holding company to make capital injections into a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank.
Added
A capital injection may be required at times when the holding company may not have the resources to provide it and therefore may be required to borrow the funds or raise capital. Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.
Added
In the event of a holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank.
Added
Thus, any borrowing that must be done by Magyar Bancorp to make a required capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. Security System Failure or Breaches of Our Network Security Could Subject Us to Increased Operating Costs as well as Litigation and Other Liabilities.
Added
Other Risks Associated with Our Business Our Certificate of Incorporation Provides That, Subject to Limited Exception, a State or Federal Court in the State of Delaware is the Sole and Exclusive Forum for Certain Stockholder Litigation Matters, Which Could Limit Our Stockholders’ Ability to Obtain a Favorable Judicial Forum for Disputes With Us or Our Directors, Officers, and Other Employees .
Added
The Company’s certificate of incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine will be conducted in a state or federal court in the State of Delaware, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Added
This exclusive forum provision does not apply to claims arising under the federal securities laws.
Added
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with the Company and its directors, officers, and other employees or may cause a stockholder to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both.
Added
In addition, if a court were to find this exclusive forum provision to be inapplicable or unenforceable in a particular action, we may incur additional costs associated with resolving the action in another jurisdiction, which could have a material adverse effect on our financial condition and results of operations.
Added
Our Funding Sources may Prove Insufficient to Replace Deposits at Maturity and Support Our Future Growth. A Lack of Liquidity Could Adversely Affect Our Financial Condition and Results of Operations and Result In Regulatory Limits Being Placed on Us. We must maintain sufficient funds to respond to the needs of depositors and borrowers.
Added
As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. These sources may include Federal Home Loan Bank advances, federal funds purchased and brokered certificates of deposit.
Added
While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.
Added
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates.
Added
Further, if we are required to rely more heavily on more expensive funding sources to support liquidity and future growth, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected.
Added
Alternatively, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators.
Added
Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.
Added
We rely on municipal deposits as a source of funds for our lending and investment activities. If we are unable to retain, or are forced to pay a higher rate on, these deposits, our net income and liquidity could be adversely affected. Municipal deposits are price sensitive and could result in an increase in interest expense or funding fluctuations.
Added
At September 30, 2023, $246.4 million, or 32.6% of our total deposits, consisted of municipal deposits from local government entities. Several of our municipal deposits have high average balances. Given our dependence on high-average balance municipal funds deposits as a source of funds, our inability to retain such funds could significantly and adversely affect our liquidity.
Added
If we are forced to pay higher rates on our municipal accounts to retain those funds, or if we are unable to retain such funds and we are forced to resort to other sources of funds for our lending and investment activities, the interest expense associated with these other 31 funding sources may be higher than the rates we are currently paying on our municipal deposits, which would adversely affect our net income.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The following table provides certain information with respect to our offices as of September 30, 2022: Leased or Original Year Year of Location Owned Leased or Acquired Lease Expiration Main Office: 400 Somerset Street Owned 2005 - New Brunswick, New Jersey, 08901 Full - Service Branches: 3050 State Route 27 Owned 1969 - Kendall Park, New Jersey, 08824 596 Milltown Road Leased 2002 2031 North Brunswick, New Jersey, 08902 1000 Route 202 South Leased 2006 2031 Branchburg, New Jersey, 08876 475 North Bridge Street Leased 2010 2025 Bridgewater, New Jersey, 08807 1167 Inman Avenue Leased 2011 2026 Edison, New Jersey, 08820 1199 Amboy Avenue Leased 2017 2027 Edison, New Jersey, 08837 The net book value of our premises, land and equipment was approximately $13.9 million and $14.3 million at September 30, 2022 and 2021, respectively.
Biggest changeProperties The following table provides certain information with respect to our offices as of September 30, 2023: Leased or Original Year Year of Location Owned Leased or Acquired Lease Expiration Main Office: 400 Somerset Street Owned 2005 — New Brunswick, New Jersey, 08901 Full - Service Branches: 3050 State Route 27 Owned 1969 — Kendall Park, New Jersey, 08824 596 Milltown Road Leased 2002 2031 North Brunswick, New Jersey, 08902 1000 Route 202 South Leased 2006 2031 Branchburg, New Jersey, 08876 475 North Bridge Street Leased 2010 2025 Bridgewater, New Jersey, 08807 1167 Inman Avenue Leased 2011 2026 Edison, New Jersey, 08820 1199 Amboy Avenue Leased 2017 2027 Edison, New Jersey, 08837 The net book value of our premises, land and equipment was approximately $13.3 million and $13.9 million at September 30, 2023 and 2022, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeAlthough the ultimate outcome and amount of liability, if any, with respect to these legal actions cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability is believed to be immaterial to our consolidated financial position, results of operations and cash flows. ITEM 4. Mine Safety Disclosures Not applicable.
Biggest changeAlthough the ultimate outcome and amount of liability, if any, with respect to these legal actions cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability as of September 30, 2023 is believed to be immaterial to our consolidated financial position, results of operations and cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−3 removed2 unchanged
Biggest changeRemaining Number Total Number Average of Shares That of Shares Price Paid May be Purchased Period Purchased Per Share Under the Plan July 1, 2022 through July 31, 2022 — $ — — August 1, 2022 through August 31, 2022 8,748 $ 12.13 346,143 September 1, 2022 through September 30, 2022 343,949 $ 12.92 2,194 Total 352,697 $ 12.90
Biggest changeThe following table reports information regarding repurchases of our common stock during the quarter ended September 30, 2023. 33 Weighted Remaining Number Total Number Average of Shares That of Shares Price Paid May be Purchased Periods Purchased Per Share Under the Plan July 1, 2023 through July 31, 2023 7,160 $ 11.99 254,624 August 1, 2023 through August 31, 2023 11,121 $ 12.15 243,503 September 1, 2023 through September 30, 2023 7,187 $ 11.48 236,316
Certain shares of Magyar Bancorp, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The Company declared four dividends totaling $0.21 per share paid to common shareholders during the year ended September 30, 2022.
Certain shares of Magyar Bancorp, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The Company declared five dividends totaling $0.20 per share paid to common shareholders during the year ended September 30, 2023.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities (a) Our shares of common stock are traded on the NASDAQ Global Market under the symbol “MGYR.” The approximate number of holders of record of Magyar Bancorp, Inc.’s common stock as of September 30, 2022 was 475.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities (a) Our shares of common stock are traded on the NASDAQ Stock Market LLC under the symbol “MGYR.” The approximate number of holders of record of Magyar Bancorp, Inc.’s common stock as of September 30, 2023 was 591.
In determining 35 Table of Contents whether and in what amount to pay a cash dividend, the Board will continue to take into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions.
In the future, the Company intends to continue to pay a regular cash dividend. In determining whether and in what amount to pay a cash dividend, the Board will continue to take into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions.
Number of securities to Number of be issued upon exercise Weighted securities remaining of outstanding options average exercise available for September 30, 2022 and rights price issuance under plan Stock options 293,200 $ 12.58 97,800 Shares of restricted stock 156,400 — — Total 449,600 $ — 97,800 (b) Not applicable. (c) Share repurchases.
Number of securities to Number of be issued upon exercise Weighted securities remaining of outstanding options average exercise available for September 30, 2023 and rights price* issuance under plan Stock options 293,200 $ 12.58 97,800 Shares of restricted stock 124,320 — — Total 417,520 $ 12.58 97,800 * Reflects exercise price of stock options only. (b) Not applicable.
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. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.
The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital.
Removed
In the future, the Company intends to continue to pay a regular cash dividend.
Added
(c) Share repurchases. 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.
Removed
The Company announced on July 21, 2022 that its Board of Directors authorized a third stock repurchase program pursuant to which the Company intends to repurchase up to 5% of its outstanding shares, or up to 354,891 shares.
Added
The Company announced its fourth authorization of an additional stock repurchase plan pursuant to which the Company intends to repurchase up to an additional 5% of its outstanding shares, or up to 337,146 shares, under which 100,830 shares had been repurchased at an average price of $11.80 at September 30, 2023.
Removed
Under the third stock repurchase program, the company repurchased 352,697 shares through September 30, 2022, increasing its total treasury shares to 465,693 at September 30, 2022. The following table reports information regarding repurchases of our common stock during the year ended September 30, 2022.
Added
Under this stock repurchase program, 236,316 shares of the 337,146 shares authorized remained available for repurchase as of September 30, 2023. The Company’s intended use of the repurchased shares is for general corporate purposes. The Company held treasury stock shares totaling 423,641 at September 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+21 added−23 removed30 unchanged
Biggest changeFor the Year Ended September 30, 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 $ 53,714 $ 264 0.49% $ 61,655 $ 88 0.14% Loans receivable, net 600,630 27,841 4.64% 605,176 27,551 4.55% Securities Taxable 89,001 1,279 1.44% 55,487 789 1.42% Tax-exempt (1) 2,769 52 1.89% 410 7 1.64% FHLBNY stock 1,547 78 5.02% 1,925 95 4.94% Total interest-earning assets 747,661 29,514 3.95% 724,653 28,530 3.94% Noninterest-earning assets 45,960 44,193 Total assets $ 793,621 $ 768,846 Interest-bearing liabilities: Savings accounts (2) $ 85,834 156 0.18% $ 87,812 $ 155 0.18% NOW accounts (3) 288,222 1,007 0.35% 258,261 707 0.27% Time deposits (4) 96,442 907 0.94% 116,944 1,425 1.22% Total interest-bearing deposits 470,498 2,070 0.44% 463,017 2,287 0.49% Borrowings 18,399 414 2.25% 47,220 654 1.39% Total interest-bearing liabilities 488,897 2,484 0.51% 510,237 2,941 0.58% Noninterest-bearing liabilities 200,702 188,084 Total liabilities 689,599 698,321 Retained earnings 104,022 70,525 Total liabilities and retained earnings $ 793,621 $ 768,846 Tax-equivalent basis adjustment (11 ) (2 ) Net interest and dividend income $ 27,019 $ 25,587 Interest rate spread 3.44% 3.36% Net interest-earning assets $ 258,764 $ 214,416 Net interest margin (5) 3.61% 3.53% Average interest-earning assets to average interest-bearing liabilities 152.93% 142.02% (1) Calculated using the Company's 21% federal tax rate.
Biggest changeInterest income on loans includes loan fees, but such amounts were not material for the years ended September 30, 2023 or 2022. 38 Year Ended September 30, 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 $ 22,616 $ 1,040 4.60% $ 53,714 $ 264 0.49% Loans receivable, net (1) 668,870 35,229 5.27% 600,630 27,841 4.64% Securities Taxable 94,519 1,602 1.69% 89,001 1,279 1.44% Tax-exempt (2) 3,370 73 2.17% 2,769 52 1.89% FHLBNY stock 2,020 139 6.89% 1,547 78 5.02% Total interest-earning assets 791,395 38,083 4.81% 747,661 29,514 3.95% Noninterest-earning assets 48,514 45,960 Total assets $ 839,909 $ 793,621 Interest-bearing liabilities: Savings accounts (3) $ 71,148 $ 342 0.48% $ 85,834 $ 156 0.18% NOW accounts (4) 340,126 7,332 2.16% 288,222 1,007 0.35% Time deposits (5) 90,385 1,814 2.01% 96,442 907 0.94% Total interest-bearing deposits 501,659 9,488 1.89% 470,498 2,070 0.44% Borrowings 25,604 846 3.31% 18,399 414 2.25% Total interest-bearing liabilities 527,263 10,334 1.96% 488,897 2,484 0.51% Noninterest-bearing liabilities 207,255 200,702 Total liabilities 734,518 689,599 Retained earnings 105,391 104,022 Total liabilities and retained earnings $ 839,909 $ 793,621 Tax-equivalent basis adjustment (15 ) (11 ) Net interest and dividend income $ 27,734 $ 27,019 Interest rate spread 2.85% 3.44% Net interest-earning assets $ 264,132 $ 258,764 Net interest margin (6) 3.50% 3.61% Average interest-earning assets to average interest-bearing liabilities 150.09% 152.93% (1) The average balance of loans receivable, net includes non-accrual loans.
As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of 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.
As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the 34 allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties.
The table presents 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 periods indicated.
The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities. We derived the yields and costs by dividing 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 periods indicated.
Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. Liquidity management is both a daily and long-term function of business management.
Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. 43 Liquidity management is both a daily and long-term function of business management.
As part of our ongoing asset-liability management, we seek to manage our exposure to interest rate risk by retaining in our loan portfolio fewer fixed-rate residential loans, by originating and retaining adjustable-rate loans in the residential, construction and commercial real estate loan portfolios, by using alternative funding sources, such as advances from the FHLBNY, to “match fund” longer-term residential and commercial mortgage loans, and by originating and retaining variable-rate home equity and short-term and medium-term fixed-rate commercial business loans.
As part of our ongoing asset-liability management, we seek to manage our exposure to interest rate risk by originating and retaining adjustable-rate loans in the residential, construction and commercial real estate loan portfolios, by using alternative funding sources, such as advances from the FHLBNY, to “match fund” longer-term residential and commercial mortgage loans, and by originating and retaining variable-rate home equity and short-term and medium-term fixed-rate commercial business loans.
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.
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.
By following these strategies, we believe that we are well-positioned to react to changes in market interest rates. Net Interest Income Analysis. The table below sets forth, as of September 30, 2022, the estimated changes in our Net Interest Income (“NII”) for each of the next two years that would result from the designated instantaneous changes in interest rates.
By following these strategies, we believe that we are well-positioned to react to changes in market interest rates. Net Interest Income Analysis. The table below sets forth, as of September 30, 2023, the estimated changes in our Net Interest Income (“NII”) for each of the next two years that would result from the designated instantaneous changes in interest rates.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit (including individual retirement accounts and brokered certificate deposit accounts) due on or before September 30, 2023.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit (including individual retirement accounts and brokered certificate deposit accounts) due on or before September 30, 2024.
The investment in bank-owned life insurance has no significant impact on our capital and liquidity. 45 Table of Contents Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, standby letters of credit and unused lines of credit.
The investment in bank-owned life insurance has no significant impact on our capital and liquidity. Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, standby letters of credit and unused lines of credit.
The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by average volume). The volume column shows the effects attributable to changes in volume (changes in average volume multiplied by prior rate).
The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by average volume). The volume column shows the effects attributable to changes in volume (changes in average volume multiplied by prior rate).
Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in 44 Table of Contents order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies. We seek to maintain a liquidity ratio of 5.0% of assets or greater.
Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies. We seek to maintain a liquidity ratio of 5.0% of assets or greater.
Our results of operations depend primarily on our net interest income which is the difference between the interest we 36 Table of Contents earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S.
Our results of operations depend primarily on our net interest income which is the difference between the interest we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S.
In addition to borrowings, the Bank has the ability to raise deposits on the brokered market or through deposit listing services. At September 30, 2022, the Bank held $6.0 million in brokered deposits and $14.6 million from deposit listing services. Magyar Bank is subject to various regulatory capital requirements, (see “Supervision and Regulation-Federal Banking Regulation-Capital Requirements”).
In addition to borrowings, the Bank has the ability to raise deposits on the brokered market or through deposit listing services. At September 30, 2023, the Bank held $13.8 million in brokered deposits and $14.0 million from deposit listing services. Magyar Bank is subject to various regulatory capital requirements, (see “Supervision and Regulation-Federal Banking Regulation-Capital Requirements”).
As of September 30, 2022, Magyar Bank’s Tier 1 capital as a percentage of the Bank’s average assets was 11.13% and the total qualifying capital as a percentage of risk-weighted assets was 16.47%. Bank-owned life insurance is a tax-advantaged financing transaction that is used to offset employee benefit plan costs.
As of September 30, 2023, Magyar Bank’s Tier 1 capital as a percentage of the Bank’s average assets was 11.11% and the total qualifying capital as a percentage of risk-weighted assets was 16.22%. Bank-owned life insurance is a tax-advantaged financing transaction that is used to offset employee benefit plan costs.
The Company’s effective tax rate for the year ended September 30, 2022 was 29.1% compared with 29.9% for the year ended September 30, 2021. Management of Market Risk General . The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk.
The Company’s effective tax rate for the year ended September 30, 2023 was 28.2% compared with 29.1% for the year ended September 30, 2022. Management of Market Risk General . The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk.
If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBNY, which provide an additional source of funds. FHLBNY advances totaled $15.6 million and $23.4 million at September 30, 2022 and September 30, 2021, respectively. FHLBNY advances have primarily been used to fund loan demand.
If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBNY, which provide an additional source of funds. FHLBNY advances totaled $29.5 million and $15.6 million at September 30, 202 and 2022, respectively. FHLBNY advances have primarily been used to fund loan demand.
The liquidity ratio is calculated by determining the sum of the difference between liquid assets (cash and unpledged investment securities) and short-term liabilities (estimated 30-day deposit outflows), plus our borrowing capacity from the FHLBNY and dividing the sum by total assets. At September 30, 2022, our liquidity ratio was 16.6% of assets.
The liquidity ratio is calculated by determining the sum of the difference between liquid assets (cash and unpledged investment securities) and short-term liabilities (estimated 30-day deposit outflows), plus our borrowing capacity from the FHLBNY and dividing the sum by total assets. At September 30, 2023, our liquidity ratio was 9.7% of assets.
On that date, we had an aggregate of $15.6 million in advances outstanding and $40.0 million in municipal letters of credit outstanding with the FHLBNY. Our cash flows are derived from operating activities, investing activities and financing activities as reported in our consolidated Statements of Cash Flows included in our consolidated Financial Statements.
On that date, we had an aggregate of $29.5 million in advances outstanding and $80.0 million in municipal letters of credit outstanding with the FHLBNY. Our cash flows are derived from operating activities, investing activities and financing activities as reported in our consolidated Statements of Cash Flows included in our consolidated Financial Statements.
The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2022, cash and cash equivalents totaled $30.9 million compared with $75.2 million at September 30, 2021.
The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2023, cash and cash equivalents totaled $72.5 million compared with $30.9 million at September 30, 2022.
Securities classified as available-for-sale, which provide additional sources of liquidity from sales, totaled $9.2 million at September 30, 2022 compared with $12.9 million at September 30, 2021. At September 30, 2022, we also had the ability to borrow $138.9 million from the FHLBNY compared with $151.2 million at September 30 2021.
Securities classified as available-for-sale, which provide additional sources of liquidity from sales, totaled $10.1 million at September 30, 2023 compared with $9.2 million at September 30, 2022. At September 30, 2023, we also had the ability to borrow $230.1 million from the FHLBNY compared with $138.9 million at September 30 2022.
The Company’s net interest and dividend income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, deposit flows and levels of nonperforming assets. During the year ended September 30, 2022, net interest and dividend income increased $1.4 million, or 5.6%, to $27.0 million compared to $25.6 million for the year ended September 30, 2021.
The Company’s net interest and dividend income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, deposit flows and levels of nonperforming assets. During the year ended September 30, 2023, net interest and dividend income increased $715,000, or 2.6%, to $27.7 million compared to $27.0 million for the year ended September 30, 2022.
Deferred tax assets are likely to be realized and therefore do not have a valuation allowance. Comparison of Financial Condition at September 30, 2022 and September 30, 2021 Total Assets. Total assets increased $24.6 million, or 3.2%, to $798.5 million during the year ended September 30, 2022 compared with $774.0 million at September 30, 2021.
Deferred tax assets are likely to be realized and therefore do not have a valuation allowance. Comparison of Financial Condition at September 30, 2023 and September 30, 2022 Total Assets. Total assets increased $108.7 million, or 13.6%, to $907.3 million during the year ended September 30, 2023 compared with $798.5 million at September 30, 2022.
We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, 37 Table of Contents 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.
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.
Investment securities at September 30, 2022 consisted of $64.3 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 $224,000 in “private-label” mortgage-backed securities.
Investment securities at September 30, 2023 consisted of $65.8 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $23.5 million in U.S. government-sponsored enterprise debt securities, $3.0 million in corporate notes, $3.5 million in municipal bonds and 36 $207,000 in “private-label” mortgage-backed securities.
(2) Includes passbook savings, money market passbook and club accounts. (3) Includes interest-bearing checking and money market accounts. (4) Includes certificates of deposits and individual retirement accounts. Interest and Dividend Income. Interest and dividend income increased $975,000, or 3.4%, to $29.5 million for the year ended September 30, 2022 from $28.5 million for the year ended September 30, 2021.
(2) Includes passbook savings, money market passbook and club accounts. (3) Includes interest-bearing checking and money market accounts. (4) Includes certificates of deposits and individual retirement accounts. Interest and Dividend Income. Interest and dividend income increased $8.6 million, or 29.0%, to $38.1 million for the year ended September 30, 2023 from $29.5 million for the year ended September 30, 2022.
The Company’s book value per share increased to $14.60 at September 30, 2022 from $13.76 at September 30, 2021, based on total equity of $98.5 million and 6,745,128 shares outstanding. Comparison of Operating Results for the Years Ended September 30, 2022 and 2021 Net Income.
The Company’s book value per share increased to $15.70, based on total equity of $104.8 million and 6,674,184 shares outstanding at September 30, 2023 from $14.60, based on total equity of $98.5 million and 6,745,128 shares outstanding.at September 30, 2022. 37 Comparison of Operating Results for the Years Ended September 30, 2023 and 2022 Net Income.
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. The provision for loan losses decreased $1.3 million, or 81.3%, to $304,000 for the year ended September 30, 2022 compared to $1.6 million for the year ended September 30, 2021.
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. The provision for loan losses increased $77,000, or 25.3%, to $381,000 for the year ended September 30, 2023 compared to $304,000 for the year ended September 30, 2022.
During the year ended September 30, 2022, there were no charge-offs against the allowance for loan loss for residential real estate loans while $1,000 was recovered from prior year charge-offs. There were no non-performing commercial real estate loans at September 30, 2022, compared with $1.1 million at September 30, 2021.
During the year ended September 30, 2023, there were no charge-offs against the allowance for loan loss for one-to four-family residential real estate loans while $4,000 was recovered from prior year charge-offs. There was one non-performing commercial real estate loan totaling $2.2 million at September 30, 2023, compared with none at September 30, 2022.
(2) Includes passbook savings, money market passbook and club accounts. (3) Includes interest-bearing checking and money market accounts. (4) Includes certificates of deposits and individual retirement accounts. (5) Calculated as annualized net interest income divided by average total interest-earning assets. 41 Table of Contents Rate/Volume Analysis.
(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. 39 Rate/Volume Analysis.
Lower market interest rates were primarily responsible for the drop in the cost of the Company’s interest-bearing liabilities for the year ended September 30, 2022.
Higher market interest rates were primarily responsible for the increase in the cost of the Company’s interest-bearing liabilities for the year ended September 30, 2023.
At September 30, 2022, we had $52.5 million in loan origination commitments outstanding. In addition to commitments to originate loans, we had $73.8 million in unused lines of credit to borrowers. Certificates of deposit due within one year of September 30, 2022 totaled $44.6 million, or 6.7% of total deposits.
At September 30, 2023, we had $30.1 million in loan origination commitments outstanding. In addition to commitments to originate loans, we had $89.9 million in unused lines of credit to borrowers. Certificates of deposit due within one year of September 30, 2023 totaled $43.8 million, or 5.8% of total deposits.
In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical.
The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical.
The average balance of interest-bearing deposits increased $7.5 million, or 1.6%, to $470.5 million for the year ended September 30, 2022 from $463.0 million for the prior year while the average cost of such deposits decreased 5 basis points to 0.44% from 0.49%.
The average balance of interest-bearing deposits increased $31.2 million, or 6.6%, to $501.7 million for the year ended September 30, 2023 from $470.5 million for the year ended September 30, 2022 while the average cost on such interest-bearing deposits increased 145 basis points to 1.89% from 0.44%.
The increase was attributable to the Company’s net income from operations totaling $7.9 million, partially offset by $4.5 million in share repurchases, $1.4 million in dividends paid, and $1.2 million in other comprehensive losses.
The increase was attributable to the Company’s net income from operations totaling $7.7 million, partially offset by $1.3 million in dividends paid to shareholders and $1.2 million in treasury share repurchases.
The Company’s net interest margin increased eight basis points to 3.61% for the year ended September 30, 2022 from 3.53% for the year ended September 30, 2021. 40 Table of Contents Average Balance Sheet. The following table presents certain information regarding our financial condition and net interest income for the years ended September 30, 2022, 2021 and 2020.
The Company’s net interest margin decreased 11 basis points to 3.50% for the year ended September 30, 2023 from 3.61% for the year ended September 30, 2022. Average Balance Sheet. The following table presents certain information regarding our financial condition and net interest income for the years ended September 30, 2023 and 2022.
We originated $159.2 million in loans and we purchased $41.1 million of investment securities for the year ended September 30, 2022. Comparatively, we originated $159.0 million in loans (including $35.3 million in PPP loans) and purchased $49.5 million of investment securities for the year ended September 30, 2021. Financing activities consist primarily of activity in deposit accounts and FHLBNY advances.
We originated $188.5 million in loans and purchased $6.6 million of investment securities during the year ended September 30, 2023. Comparatively, we originated $159.2 million in loans and purchased $41.1 million of investment securities during the year ended September 30, 2022. Financing activities consist primarily of activity in deposit accounts and FHLBNY advances.
We experienced a net increase in total deposits of $27.9 million, or 4.4%, to $667.7 million for the year ended September 30, 2022 compared with a net increase in total deposits of $21.5 million, or 3.5%, to $639.8 million for the year ended September 30, 2021.
We experienced a net increase in total deposits of $87.7 million, or 13.1%, to $755.5 million for the year ended September 30, 2023 compared with a net decrease in total deposits of $27.9 million, or 4.4%, to $667.7 million for the year ended September 30, 2022.
The Company recorded tax expense of $3.3 million on income of $11.2 million for the year ended September 30, 2022 compared with tax expense of $2.6 million on income of $8.7 million for the year ended September 30, 2021. The higher income tax expense resulted from a $2.5 million increase in the Company’s results from operations.
The Company recorded tax expense of $3.0 million on income of $10.7 million for the year ended September 30, 2023 compared with tax expense of $3.3 million on income of $11.2 million for the year ended September 30, 2022. The lower income tax expense resulted from a $428,000, or 3.8%, decrease in the Company’s results from operations.
Provisions for loan loss during the year ended September 30, 2022 were $304,000 while net recoveries were $54,000, compared with a provision of $1.6 million and net recoveries of $46,000 for the prior year period. The allowance for loan losses was 1.34% and 1.36% of gross loans outstanding at September 30, 2022 and 2021, respectively. Investment Securities.
Provisions for loan loss during the year ended September 30, 2023 were $381,000 while net charge-offs were $484,000, compared with a provision of $304,000 and a net recovery of $54,000 for the prior year. The allowance for loan losses was 1.19% and 1.34% of gross loans outstanding at September 30, 2023 and 2022, respectively.
The average cost of borrowings increased 86 basis points to 2.25% for the year ended September 30, 2022 from 1.39% for the year ended September 30, 2021 while the average balance of those borrowings decreased $28.8 million to $18.4 million for the year ended September 30, 2022 from $47.2 million the prior year. Provision for Loan Losses.
The average cost of borrowings increased 106 basis points to 3.31% for the year ended September 30, 2023 from 2.25% for the year ended September 30, 2022 while the average balance of those borrowings increased $7.2 million to $25.6 million for the year ended September 30, 2023 from $18.4 million the prior year. Provision for Loan Losses.
The increase was attributable to a 35 basis point increase in the average yield on investment securities and interest earned on deposits to 1.10% from 0.75%, and a $27.9 million, or 23.8%, increase in the average balance of investment securities and interest earning deposits to $145.5 million from $117.5 million during the year ended September 30, 2022. Interest Expense.
The increase was attributable to a 115 basis point increase in the average yield on investment securities and interest earned 40 on deposits to 2.25% from 1.10%, partially offset by a $25.0 million, or 17.2%, decrease in the average balance of investment securities and interest earning deposits to $120.5 million from $145.5 million during the year ended September 30, 2022.
The average balance of interest-earnings assets between the two periods increased $23.0 million, or 3.2%, to $747.7 million from $724.6 million, while the yield on such assets increased 1 basis point to 3.95% for the year ended September 30, 2022 from 3.94% for the year ended September 30, 2021.
The average balance of interest-earnings assets between the two periods increased $43.7 million, or 5.8%, to $791.4 million from $747.7 million, while the yield on such assets increased 86 basis point to 4.81% for the year ended September 30, 2023 from 3.95% for the year ended September 30, 2022.
The allowance for loan losses increased $358,000 to $8.4 million, or 297.5% of non-performing loans at September 30, 2022 compared with $8.1 million, or 99.0% of non-performing loans, at September 30, 2021.
The allowance for loan losses decreased $103,000 to $8.3 million, or 163.9% of non-performing loans at September 30, 2023 compared with $8.4 million, or 297.5% of non-performing loans at September 30, 2022.
During the year ended September 30, 2022 there were no charge-offs against the allowance for loan loss for commercial business loans and there were no recoveries from prior year charge-offs. Non-performing construction loans decreased $1.7 million, or 38.1%, to $2.8 million at September 30, 2022 from $4.6 million at September 30, 2021.
During the year ended September 30, 2023 there were two charge-offs totaling $488,000 against the allowance for loan loss for commercial business loans and no recoveries from prior year charge-offs. There were two non-performing construction loans totaling $2.5 million at September 30, 2023 compared with $2.8 million at September 30, 2022.
For comparison, total loans receivable at September 30, 2021 were comprised of $280.8 million (47.2%) in commercial real estate loans, $203.0 million (34.2%) in one- to four- family residential mortgage loans, $68.7 million (11.6%) in commercial business loans (including $25.1 million in PPP loans), $20.4 million (3.4%) in construction loans, and $21.7 million (3.6%) in home equity lines of credit and other loans.
Total loans receivable at September 30, 2023 were comprised of $389.1 million (55.8%) in commercial real estate loans, $237.7 million (34.1%) in one- to four- family residential mortgage loans, $30.2 million (4.3%) in commercial business loans, $21.9 million (3.1%) in construction loans, and $19.3 million (2.8%) in home equity lines of credit and other loans.
Interest income on loans increased $290,000, or 1.1%, to $27.8 million for the year ended September 30, 2022 from $27.5 million for the year ended September 30, 2021, while the average balance of loans decreased $4.5 million, or 0.8%, to $600.6 million from $605.2 million.
Interest income on loans increased $7.4 million, or 26.5%, to $35.2 million for the year ended September 30, 2023 from $27.8 million for the year ended September 30, 2022, while the average balance of loans increased $68.2 million, or 11.4%, to $668.9 million from $600.6 million.
The Company’s net income increased $1.8 million, or 29.4%, to $7.9 million during the year ended September 30, 2022 compared with $6.1 million for the year ended September 30, 2021 due to higher net interest and dividend income, lower provisions for loan losses, and lower non-interest expenses, partially offset by lower non-interest income. Net Interest and Dividend Income.
The Company’s net income decreased $210,000, or 2.7%, to $7.7 million during the year ended September 30, 2023 compared with $7.9 million for the year ended September 30, 2022 due to higher non-interest expenses, partially offset by higher net interest and dividend income. Net Interest and Dividend Income.
Growth occurred in commercial real estate loans, which increased $61.9 million, or 22.1%, to $342.8 million and in one-to four-family residential mortgage loans (including home equity lines of credit), which increased $12.1 million, or 5.5%, to $233.1 million.
Growth occurred in commercial real estate loans, which increased $46.3 million, or 13.5%, to $389.1 million, in one-to four-family residential mortgage loans (including home equity lines of credit), which increased $21.6 million, or 9.3%, to $254.7 million, and in construction loans, which increased $6.6 million, or 43.5%, to $21.9 million.
During the year ended September 30, 2022 there were no charge-offs against the allowance for loan loss and for commercial real estate loans while $53,000 was recovered from prior year charge-offs. There were no non-performing commercial business loans at September 30, 2022, compared with $1.3 million at September 30, 2021.
During the year ended September 30, 2023 there were no charge-offs against the allowance for loan loss or recoveries for commercial real estate loans. There were no non-performing commercial business loans at September 30, 2023 or 2022.
The Company’s deposit strategy in 2022 focused on growing its non-interest checking account balances and reducing the overall cost of its interest-bearing liabilities to offset rising market interest rates. Borrowed Funds. Borrowings decreased $7.7 million, or 33.1%, to $15.6 million at September 30, 2022 from $23.4 million at September 30, 2021.
The Company’s deposit strategy in 2023 focused on growing its non-interest checking account balances and managing the overall cost of its interest-bearing liabilities during a period of rapidly rising market interest rates. Borrowed Funds. Borrowings increased $13.9 million, or 88.9%, to $29.5 million at September 30, 2023 compared with $15.6 million at September 30, 2022.
There were no other-than-temporary-impairment charges for the Company’s investment securities for the year ended September 30, 2022. Securities available-for-sale decreased $3.7 million, or 28.6%, to $9.2 million at September 30, 2022 from $12.9 million at September 30, 2021. The decrease was attributable to $1.9 million in principal repayments and unrealized losses of $1.7 million.
There were no other-than-temporary-impairment charges for the Company’s investment securities for the year ended September 30, 2023. Securities available-for-sale increased $896,000, or 9.7%, to $10.1 million at September 30, 2023 from $9.2 million at September 30, 2022.
Interest expense decreased $457,000, or 15.5%, to $2.5 million for the year ended September 30, 2022 from $2.9 million for the year ended September 30, 2021.
Interest Expense. Interest expense increased $7.9 million, or 316.0%, to $10.3 million for the year ended September 30, 2023 from $2.5 million for the year ended September 30, 2022.
The average balance of interest-bearing liabilities decreased $21.3 million, or 4.2%, between the two periods while the cost of such liabilities decreased seven basis points to 0.51% for the year ended September 30, 2022 compared with the prior year period.
The average balance of interest-bearing liabilities increased $38.4 million, or 7.8%, to $527.3 million from $488.9 million between the two periods while the average cost on such interest-bearing liabilities increased 145 basis points to 1.96% for the year ended September 30, 2023 from 0.51% for the year ended September 30, 2022.
Interest expense on deposits decreased $217,000, or 9.5%, to $2.1 million for the year ended September 30, 2022 from $2.3 million for the year ended September 30, 2021. Interest expense on advances decreased $240,000, or 36.7%, to $414,000 for the year ended September 30, 2022 from $654,000 for the year ended September 30, 2021.
Average expense on interest-bearing deposits increased $7.4 million, or 358.4%, to 9.5 million at September 30, 2023 compared with $2.1 million at September 30, 2022. Interest expense on advances increased $432,000, or 104.3%, to $846,000 for the year ended September 30, 2023 from $414,000 for the year ended September 30, 2022.
The cash surrender value of life insurance held for directors and officers of Magyar Bank increased $3.4 million, or 23.6%, to $17.7 million at September 30, 2022 from $14.3 million at September 30, 2021.
The cash surrender value of life insurance held for directors and officers of Magyar Bank increased $370,000, or 2.7%, to $18.0 million at September 30, 2023 from $17.7 million at September 30, 2022. The change was due to an increase in the cash surrender value of the policies.
Total non-performing loans decreased $5.3 million, or 65.3%, to $2.8 million at September 30, 2022 from $8.2 million at September 30, 2021.
Total non-performing loans increased $2.2 million, or 79.3%, to $5.1 million at September 30, 2023 from $2.8 million at September 30, 2022. The ratio of non-performing loans to total loans was 0.7% at September 30, 2023 compared to 0.5% at September 30, 2022.
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.
Critical accounting policies may involve complex subjective decisions or assessments. We consider the following to be our 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.
Investment securities increased $30.3 million, or 42.9%, to $100.9 million at September 30, 2022 from $70.6 million at September 30, 2021.
Investment securities decreased $4.9 million, or 4.9%, to $96.0 million at September 30, 2023 from $100.9 million at September 30, 2022.
Interest and dividend income increased $975,000, or 3.4%, to $29.5 million at September 30, 2022 from $28.5 million at September 30, 2021, while interest expense decreased $457,000, or 15.5%, to $2.5 million at September 30, 2022 from $2.9 million at September 30, 2021.
Interest and dividend income increased $8.6 million, or 29.0%, to $38.1 million at September 30, 2023 from $29.5 million at September 30, 2022, while interest expense increased $7.6 million, or 316.0%, to $10.3 million at September 30, 2023 from $2.5 million at September 30, 2022.
The average yield on such loans increased nine basis points to 4.64% at September 30, 2022 from 4.55% for the year ended September 30, 2021. 42 Table of Contents Interest earned on investment securities, including interest earned on deposits but excluding FHLBNY stock, increased $702,000, or 79.6%, to $1.6 million for the year ended September 30, 2022 from $882,000 for fiscal 2021.
Interest earned on investment securities, including interest earned on deposits but excluding FHLBNY stock, increased $1.1 million, or 70.5%, to $2.7 million for the year ended September 30, 2023 from $1.6 million for fiscal 2022.
Offsetting these increases were decreases in commercial business loans, which decreased $34.0 million, or 49.5%, to $34.7 million, in construction loans, which decreased $5.1 million, or 25.2%, to $15.2 million and in other consumer loans, which decreased $621,000, or 16.6%, to $3.1 million. Included in the reduction of commercial business loans were the repayment of $25.1 million in PPP loans.
Offsetting these increases were decreases in commercial business loans, which decreased $4.5 million, or 12.9%, to $30.2 million and in other consumer loans, which decreased $771,000, or 24.6%, to $2.3 million.
Magyar Bank had begun foreclosure proceedings on the properties securing these loans at September 30, 2022. During the year ended September 30, 2022, there were no charge-offs or recoveries on construction loans. The ratio of non-performing loans and troubled debt restructurings to total loans receivable decreased to 0.53% at September 30, 2022 from 1.43% at September 30, 2021.
During the year ended September 30, 2023, there were no charge-offs against the allowance for loan loss or recoveries for construction loans. The ratio of non-performing loans to total loans receivable increased to 0.73% at September 30, 2023 from 0.45% at September 30, 2022.
The change was attributable to a $34.5 million, or 5.9%, increase in loans receivable, net of allowance of loss, to $619.8 million and a $30.3 million, or 42.9%, increase in investment securities to $100.9 million, partially offset by a $44.3 million decrease in cash and cash equivalents.
The change was attributable to a $69.2 million, or 11.2%. increase in loans receivable, net of allowance for loan loss, to $689.1 million and a $41.3 million, or 147.1%, increase in 35 interest-earning deposits with banks to $69.4 million, partially offset by a $4.9 million, or 4.9%, decrease in investment securities to $96.0 million. Loans Receivable.
The Company continues to focus on establishing relationships with business borrowers, seeking deposits as well as lending relationships. Total deposits increased $27.9 million, or 4.4%, to $667.7 million at September 30, 2022 from $639.8 million at September 30, 2021.
The Company offers a variety of products designed to attract and retain customers, with primary focus on building and expanding relationships. The Company continues to focus on establishing relationships with businesses, seeking deposits as well as lending relationships. Total deposits increased $87.7 million, or 13.1%, to $755.5 million at September 30, 2023 from $667.7 million at September 30, 2022.
Stockholders’ equity increased $861,000, or 0.9%, to $98.5 million at September 30, 2022 from $97.6 million at September 30, 2021. Loans Receivable. Total loan receivable increased $34.3 million, or 5.8%, to $628.9 million at September 30, 2022 from $594.6 million at September 30, 2021.
Total loans receivable increased $69.3 million, or 11.0%, to $698.2 million at September 30, 2023 from $628.9 million at September 30, 2022.
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 the following to be our critical accounting policies. Allowance for Loan Loss.
Throughout fiscal 2024, we expect to continue increasing our commercial real estate and commercial business loans while managing non-interest expenses in an effort to increase profitability of the Company. 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.
Offsetting these increases was a $34.3 million, or 29.3%, decrease in certificates of deposit (including individual retirement accounts), to $82.6 million. The Company’s net income increased $1.8 million, or 29.4%, to $7.9 million during the year ended September 30, 2022 compared with net income of $6.1 million for the year ended September 30, 2021.
Total deposits increased $87.7 million, or 13.1%, to $755.5 million and stockholders’ equity increased $6.3 million, or 6.4%, to $104.8 million during the year ended September 30, 2023 The Company’s net income decreased $210,000, or 2.7%, to $7.7 million during the year ended September 30, 2023 compared with net income of $7.9 million for the year ended September 30, 2022.
The increase in deposits during the twelve month ended September 30, 2022 occurred in money market account balances, which increased $34.3 million, or 18.3%, to $222.2 million, in interest-bearing checking account balances, which increased $27.3 million, or 38.3% to $98.6 million, in non-interest checking account balances, which increased 39 Table of Contents $442,000, or 0.2%, to $182.4 million, and in savings account balances, which increased $126,000, or 0.2%, to $81.9 million.
The increase in deposits during the year ended September 30, 2023 occurred in money market account balances, which increased $62.7 million, or 28.2%, to $284.9 million, in certificates of deposit (including individual retirement accounts) which increased $22.1 million, or 26.7%, to $104.7 million, in interest-bearing checking account balances, which increased $16.5 million, or 16.8% to $115.2 million, and in non-interest checking account balances, which increased $6.1 million, or 3.4%, to $188.5 million.
Actual loan losses may be significantly greater than the allowances we have established, which could have a material negative effect on our financial results. For the fiscal year ended September 30, 2022 and through the fiscal year ending September 30, 2023, we followed and will follow the incurred loss methodology for determining our allowance for loan loss.
Actual loan losses may be significantly greater than the allowances we have established, which could have a material negative effect on our financial results. The Company will adopt Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments on October 1, 2023, using a modified retrospective approach.
There were net recoveries of $54,000 during the year ended September 30, 2022 compared with net recoveries of $46,000 for the year ended September 30, 2021. Other Income. Other income decreased $694,000, or 20.4%, to $2.7 million during the twelve months ended September 30, 2022 compared to $3.4 million for the twelve months ended September 30, 2021.
There were $488,000 in loan charge-offs and $4,000 in loan recoveries for the year ended September 30, 2023 compared with no loan charge-offs and $54,000 in loan recoveries for the year ended September 30, 2022. Other Income.
The decrease was due to the repayment of maturing long-term FHLBNY advances. Stockholders’ Equity. Stockholders’ equity increased $861,000, or 0.9%, to $98.5 million at September 30, 2022 from $97.6 million at September 30, 2021.
The Company borrowed several long-term advances from the FHLBNY during the year ended September 30, 2023 to fund its loan originations. Stockholders’ Equity. Stockholders’ equity increased $6.3 million, or 6.4%, to $104.8 million at September 30, 2023 from $98.5 million at September 30, 2022.
During the twelve months ended September 30, 2022, the Company generated $76,000 in interest rate swap fees compared with $313,000 for the year ended September 30, 2021. Other Expenses. Other expenses decreased $381,000, or 2.0%, to $18.3 million compared to $18.6 million for the year ended September 30, 2021.
Service charge income increased $404,000, or 34.0%, to $1.6 million compared with $1.2 million for the prior year from higher commercial loan prepayment fees received during the current year. The Company received $423,000 in prepayment penalties during the year ended September 30, 2023, compared with $130,000 during the year ended September 30, 2022. Other Expenses.
The Bank sells the guaranteed portion of its SBA loans in the secondary market. During the year ended September 30, 2022, $9.5 million in loans were sold, generating $925,000 in gains compared with sales of $6.4 million and $749,000 in gains for the twelve months ended September 30, 2021.
Gains from the sale of SBA loans were $565,000 during the year ended September 30, 2023 compared with $925,000 during the year ended September 30, 2022 due to a reduction in the volume of loans sold.
During the year ended September 30, 2022, the Company’s total assets grew $24.6 million, or 3.2%, to $798.5 million.
During the year ended September 30, 2023, the Company’s total assets grew $108.7 million, or 13.6%, to $907.3 million compared with $798.5 million at September 30, 2022. The increase was attributable to a $69.2 million increase in net loans receivable and a $41.3 million increase in interest-earning deposits with banks, offset by a $4.9 million decrease in investment securities.
Modeling changes in net interest income require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
Modeling changes in net interest income require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. 42 Change in Estimated Increase Estimated Increase Interest rates Estimated (Decrease) in NII Year 1 Estimated (Decrease) in NII Year 2 (Basis Points) (1) NII Year 1 Amount Percentage NII Year 2 Amount Percentage (Dollars in thousands) +200 $ 31,325 $ 391 1.26% $ 35,685 $ 1,789 5.28% Unchanged 30,934 — — 33,896 — — -200 30,273 (661 ) -2.14% 31,547 (2,349 ) -6.93% (1) Assumes an instantaneous uniform change in interest rates at all maturities.
Deposits, which include noninterest-bearing demand deposits, interest-bearing demand deposits, money market deposits, savings deposits and time deposits, are the primary source of the Company’s funds. The Company offers a variety of products designed to attract and retain customers, with primary focus on building and expanding relationships.
The change was due to the capital improvements to the one OREO property held by the Bank, which was under contract for sale at September 30, 2023. Deposits. Deposits, which include noninterest-bearing demand deposits, interest-bearing demand deposits, money market deposits, savings deposits and time deposits, are the primary source of the Company’s funds.
The increase was the result of $41.1 million in security purchases, partially offset by $7.0 million in principal repayments and the amortization of $112,000 in net premiums paid during the year ended September 30, 2022. Bank-Owned Life Insurance.
The decrease was the attributable to principal repayments and maturities totaling $10.3 million and premium amortization of $85,000, partially offset by purchases totaling $4.6 million. Bank-Owned Life Insurance.
September 30, 2022 vs. 2021 Increase (decrease) due to Volume Rate Net (In thousands) Interest-earning assets: Interest-earning deposits $ (13 ) $ 189 $ 176 Loans (220 ) 510 290 Securities Taxable 479 11 490 Tax-exempt (1) 44 1 45 FHLBNY stock (19 ) 2 (17 ) Total interest-earning assets 272 712 984 Interest-bearing liabilities: Savings accounts (2) 1 0 1 NOW accounts (3) 84 216 300 Time deposits (4) (224 ) (294 ) (518 ) Total interest-bearing deposits (139 ) (78 ) (217 ) Borrowings (523 ) 283 (240 ) Total interest-bearing liabilities (661 ) 204 (457 ) Increase (decrease) in tax equivalent net interest income $ 933 $ 508 $ 1,441 Change in tax-equivalent basis adjustment (9 ) Increase in net interest income $ 1,432 (1) Calculated using the Company's 21% federal tax rate.
There were no out-of-period adjustments excluded from the table below September 30, 2023 vs. 2022 Increase (decrease) due to Volume Rate Net (In thousands) Interest-earning assets: Interest-earning deposits $ (235 ) $ 1,011 $ 776 Loans 3,366 4,022 7,388 Securities Taxable 85 238 323 Tax-exempt (1) 12 9 21 FHLBNY stock 27 34 61 Total interest-earning assets 3,256 5,313 8,569 Interest-bearing liabilities: Savings accounts (2) (31 ) 217 186 NOW accounts (3) 213 6,112 6,325 Time deposits (4) (60 ) 967 907 Total interest-bearing deposits 122 7,296 7,418 Borrowings 196 236 432 Total interest-bearing liabilities 318 7,532 7,850 Increase (decrease) in tax equivalent net interest income $ 2,938 $ (2,219 ) $ 719 Change in tax-equivalent basis adjustment (4 ) Increase in net interest income $ 715 (1) Calculated using the Company's 21% federal tax rate.
Removed
The increase was attributable to a $34.5 million increase, or 5.9%, to $619.8 million in loans receivable, net of allowance of loss and a $30.3 million increase, or 42.9%, to $100.9 million in investment securities, partially offset by a $44.3 million decrease in cash and cash equivalents.
Added
The Company’s implementation process includes scoping, segmentation and the design of a methodology appropriate for each respective financial instrument. The process also includes the development of loss forecasting models as well as the incorporation of qualitative adjustments.

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