Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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

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

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

Comparison of Financial Condition at December 31, 2025 and September 30, 2025

Total Assets.Total assets increased $47.8 million, or 4.8%, to $1.045 billion at December 31, 2025 from $997.7 million at September 30, 2025. The increase was attributable to larger interest-earning deposits with banks, investment securities and loans receivable.

Interest Earning Deposits. Total cash and cash equivalents increased $27.0 million, or 381.4%, to $34.1 million at December 31, 2025 from $7.1 million at September 30, 2025 resulting from higher deposits, partially offset by higher loans receivable and investments.

Loans Receivable.Total loans receivable increased $18.9 million, or 2.2%, to $877.8 million during the three months ended December 31, 2025 from $858.9 million at September 30, 2025. The increase in total loans receivable during the three months ended December 31, 2025 occurred primarily in commercial real estate loans, which increased by $15.7 million, or 2.9%, to $548.9 million, or 62.5% of loans. The Company also grew its construction and land loans, which increased by $5.4 million, or 18.6%, to $34.7 million. Partially offsetting these increases were one-to four-family residential real estate loans (including home equity lines of credit), which decreased by $983 thousand, commercial business loans, which decreased by $971 thousand, and other loans, which decreased by $280 thousand.

Given the significance of commercial real estate ("CRE") loans to our total loan portfolio, the following table further disaggregates these loans by occupied status and by collateral type as of December 31, 2025 and September 30, 2025:

		December 31, 2025								September 30, 2025
		Amount				Percent				Amount				Percent
		(Dollars in thousands)
Owner-occupied
Retail		$	43,206				7.9%			$	43,440				8.1%
Hotel/Motel			75,312				13.7%				75,380				14.1%
Professional			34,940				6.4%				34,328				6.4%
Office			15,428				2.8%				17,563				3.3%
Restaurant			25,225				4.6%				23,409				4.4%
Other			45,596				8.3%				39,722				7.4%
Total owner-occupied		$	239,707				43.7%			$	233,842				43.9%
Non-owner occupied
Retail		$	87,373				15.9%			$	85,574				16.0%
Multi-family			96,241				17.5%				95,794				18.0%
Professional			22,548				4.1%				17,514				3.3%
Office			28,729				5.2%				36,053				6.8%
Restaurant			7,878				1.4%				7,943				1.5%
Hotel/Motel			2,515				0.5%				2,526				0.5%
Other			63,944				11.6%				53,967				10.1%
Total non-owner occupied		$	309,228				56.3%			$	299,371				56.1%
Total commercial real estate loans		$	548,935				100.0%			$	533,213				100.0%

The Company obtains an appraisal of the real estate collateral securing a CRE loan prior to originating the loan. The appraised value is used to calculate the ratio of the outstanding loan balance to the value of the real estate collateral, or loan-to-value ratio ("LTV"). The original appraisal is used to monitor the LTVs within the CRE portfolio unless an updated appraisal is received, which may happen for a variety of reasons including, but not limited to, payment delinquency, additional loan requests using the same collateral, and loan modifications. The following table presents the ranges in the LTVs of our CRE loans at December 31, 2025 and September 30, 2025:

		December 31, 2025								September 30, 2025
		Number of								Number of
LTV range		Loans				Amount				Loans				Amount
(Dollars in thousands)
0%-25.0%			94				49,174				129			$	54,594
25.01%-50.0%			152				167,793				129				163,280
50.01%-60.0%			85				110,324				79				114,311
60.01%-70.0%			119				164,409				109				147,882
70.01%-75.0%			29				44,809				24				33,244
75.01%-80.0%			4				10,129				8				17,856
> 80.0%			9				2,297				2				2,046
Totals			492			$	548,935				480			$	533,213

As of December 31, 2025 and September 30, 2025, non-owner occupied commercial real estate loans (as defined by regulatory guidance) to total risk-based capital were estimated at approximately 276% and 267%, respectively. Management believes that Magyar Bank has implemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which include monitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions.

Our asset quality with respect to commercial real estate loans has remained strong despite recent economic and market conditions. As of December 31, 2025 and September 30, 2025, we had no non-performing commercial real estate loans.

Total non-performing loans decreased $90 thousand, or 20.0%, to $361 thousand at December 31, 2025 from $451 thousand at September 30, 2025. Non-performing loans consisted of three loans secured by one-to four family properties. The ratio of non-performing loans to total loans decreased to 0.04% at December 31, 2025 from to 0.05% at September 30, 2025.

Allowance for Credit Losses.The allowance for credit losses increased $73 thousand to $8.4 million, or 0.96% of total loans receivable, during the three months ended December 31, 2025. Growth in loans receivable during the quarter as well as an increase in specific reserves for individually evaluated loans resulted in additional provisions for credit losses that were largely offset by reductions resulting from lower adjustments to pooled loans for economic and business conditions.

Investment Securities.The investment securities increased $4.7 million, or 5.3%, to $93.1 million at December 31, 2025 from $88.4 million at September 30, 2025. The Company purchased two floating-rate mortgage-backed securities issued by U.S government agencies totaling $6.3 million during the quarter. Investment securities at December 31, 2025 consisted of $70.3 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, $9.5 million in U.S. government-sponsored enterprise debt securities, $9.8 million in corporate notes, $3.4 million in municipal bonds and $170 thousand in "private-label" mortgage-backed securities. There were no other-than-temporary-impairment charges for the Company's investment securities during the three months ended December 31, 2025.

Other Real Estate Owned. Other real estate owned ("OREO") decreased to $0 at December 31, 2025 from $2.2 million at September 30, 2025. The Company sold its only OREO property in November for a loss of $35 thousand.

Deposits.Total deposits increased $44.8 million, or 5.5%, to $859.1 million at December 31, 2025. The inflow in deposits occurred in certificates of deposit (including individual retirement accounts), which increased $26.3 million, or 12.5%, to $236.3, in non-interest bearing checking accounts, which increased by $25.7 million, or 22.0%, to $143.0 million, in money market accounts, which increased $12.3 million, or 4.6%, to $281.2 million, and in savings accounts, which increased $754 thousand, or 1.4%, to $55.2 million. Partially offsetting these increases was a $20.3 million, or 12.4%, decrease in interest-bearing checking accounts to $143.4 million.

Stockholders' Equity. Stockholders' equity increased $2.9 million, or 2.4%, to $121.7 million at December 31, 2025 from $118.8 million at September 30, 2025. The increase was due to the Company's results from operations, partially offset by $0.08 per share in dividends paid and 2,037 shares repurchased during the quarter at an average share price of $16.85. The Company's book value per share increased to $18.79 at December 31, 2025 from $18.34 at September 30, 2025.

Average Balance Sheets for the Three Months Ended December 31, 2025 and 2024

The following table presents certain information regarding the Company's financial condition and net interest income for the three months ended December 31, 2025 and 2024. 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. Interest income includes fees that we consider adjustments to yields.

		Three Months Ended December 31,
		2025												2024
		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		$	29,359			$	272				3.67%			$	33,054			$	370				4.44%
Loans receivable, net (1)			856,345				13,525				6.27%				786,040				11,864				5.99%
Securities
Taxable			86,477				684				3.14%				91,814				603				2.60%
Tax-exempt (2)			3,370				18				2.15%				3,370				18				2.15%
FHLBNY stock			3,401				62				7.21%				2,394				55				9.05%
Total interest-earning assets			978,952				14,561				5.90%				916,672				12,910				5.59%
Noninterest-earning assets			49,525												53,992
Total assets		$	1,028,477											$	970,664
Interest-bearing liabilities:
Savings accounts (3)		$	54,901				100				0.72%			$	53,440				90				0.67%
NOW accounts (4)			436,924				3,070				2.79%				465,382				3,540				3.02%
Time deposits (5)			222,463				2,124				3.79%				161,842				1,624				3.98%
Total interest-bearing deposits			714,288				5,294				2.94%				680,664				5,254				3.06%
Borrowings			49,111				406				3.28%				29,556				208				2.80%
Total interest-bearing liabilities			763,399				5,700				2.96%				710,220				5,462				3.05%
Noninterest-bearing liabilities			143,196												148,100
Total liabilities			906,595												858,320
Retained earnings			121,882												112,344
Total liabilities and retained earnings		$	1,028,477											$	970,664
Tax-equivalent basis adjustment							(4	)											(4	)
Net interest and dividend income						$	8,857											$	7,444
Interest rate spread											2.94%												2.54%
Net interest-earning assets		$	215,553											$	206,452
Net interest margin (6)											3.59%												3.22%
Average interest-earning assets to
average interest-bearing liabilities			128.24%												129.07%

⁽¹⁾The average balance of loans receivable, net includes non-accrual loans.

⁽²⁾Interest income and yield are calculated using the Company's 21% federal tax rate.

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

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

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

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

Comparison of Operating Results for the Three Months Ended December 31, 2025 and 2024

Net Income. Net income increased $1.1 million, or 50.4%, to $3.1 million for the three months ended December 31, 2025 compared with net income of $2.1 million for the three months ended December 31, 2024. The increase was due to higher net interest and dividend income, lower provisions for credit losses and lower other expenses, partially offset by lower other income.

Net Interest and Dividend Income.Net interest and dividend income increased $1.5 million, or 19.0%, to $8.9 million for the three months ended December 31, 2025 from $7.4 million for the three months ended December 31, 2024. The increase was attributable to a $62.3 million increase in the average balance of interest-earning assets between periods, as well as a 37-basis point increase in the Company's net interest margin to 3.59% for the three months ended December 31, 2025 from 3.22% for the three months ended December 31, 2024.

Interest and Dividend Income. Interest and dividend income increased $1.7 million, or 12.8%, to $14.6 million for the three months ended December 31, 2025 compared with $12.9 million for the three months ended December 31, 2024. The increase was attributable to a 31-basis point increase in the yield on interest-earning assets to 5.90% for the three months ended December 31, 2025 from 5.59% for the three months ended December 31, 2024 as well as a $70.3 million, or 8.9%, increase in the average balance of loans receivable, net. The increase in yield on the Company's assets was attributable to higher market interest rates on loans and investments between periods.

The average balance of loans receivable, net of allowance for credit losses, increased $70.3 million, or 8.9%, to $856.3 million during the three months ended December 31, 2025 from $786.0 million for the three months ended December 31, 2024, while the yield on loans receivable increased 28 basis points to 6.27% for the three months ended December 31, 2025 from 5.99% for the three months ended December 31, 2024. Contributing to the increase in yield on loans receivable are commercial term loan rates adjusting on their five-year anniversary to market rates that are significantly higher than they were five years ago.

Interest earned on investment securities, including interest-earning deposits and excluding FHLB stock, decreased $17 thousand, or 1.7%, to $970 thousand for the three months ended December 31, 2025 from $987 thousand for the three months ended December 31, 2024. The average balance of investment securities and interest-earning deposits decreased by $9.0 million, or 7.0%, to $119.2 million for the three months ended December 31, 2025 from $128.2 million for the three months ended December 31, 2024, while the average yield on such assets increased 18 basis points to 3.24% for the three months ended December 31, 2025 from 3.06% for the three months ended December 31, 2024.

Interest Expense.Interest expense increased $238 thousand, or 4.4%, to $5.7 million for the three months ended December 31, 2025 from $5.5 million for the three months ended December 31, 2024. The average balance of interest-bearing liabilities increased $53.2 million, or 7.5%, to $763.4 million for the three months ended December 31, 2025 from $710.2 million for the three months ended December 31, 2024, while the average cost on such interest-bearing liabilities decreased 9 basis points to 2.96% for the three months ended December 31, 2025 compared with 3.05% for the three months ended December 31, 2024. Lower short-term market interest rates were primarily responsible for the lower cost of the Company's interest-bearing liabilities for the three months ended December 31, 2025.

The average balance of interest-bearing deposits increased $33.6 million, or 4.9%, to $714.3 million for the three months ended December 31, 2025 from $680.7 million for the three months ended December 31, 2024. The average cost of such deposits decreased 12 basis points to 2.94% from 3.06%, while the interest paid on interest-bearing deposits increased $40 thousand to $5.29 million for the three months ended December 31, 2025 compared with $5.25 million for the three months ended December 31, 2024.

Interest expense on borrowings increased $198 thousand, or 95.2%, to $406 thousand for the three months ended December 31, 2025 from $208 thousand for the three months ended December 31, 2024, The average balance of borrowings increased by $19.6 million, or 66.2%, to $49.1 million with an annualized cost of 3.28% for the three months ended December 31, 2025 from $29.6 million with an annualized cost of 2.80% for the three months ended December 31, 2024. Higher borrowings reflect the Company's usage of long-term advances to fund five-year commercial term loans between periods.

Provision for Credit Losses.The provision for credit losses decreased $79 thousand, or 78.2%, to $23 thousand for the three months ended December 31, 2025 compared to $101 thousand for the three months ended December 31, 2024. Provisions for on-balance sheet credit losses were $71 thousand from growth in total loans receivable during the quarter, while $49 thousand was recovered from its reserves for off-balance sheet credit losses from contraction in unfunded loan commitments during the quarter. The Company recorded $2 thousand in net recoveries during the three months ended December 31, 2025 compared with $103 thousand in net recoveries during the three months ended December 31, 2024.

Other Income. Other income decreased $159 thousand, or 16.6%, to $797 thousand during the three months ended December 31, 2025 compared to $956 thousand for the three months ended December 31, 2024.

The decrease in other income was primarily due to the absence of gains from the sales of other real estate owned during the three months ended December 31, 2025 compared with $224 thousand in gains for the three months ended December 31, 2024. Partially offsetting this decrease were higher interest rate swap fees, which increased by $31 thousand, and higher gains from the sale of SBA loans, which increased by $23 thousand.

Other Expenses. Other expenses decreased by $54 thousand, or 1.0%, to $5.4 million for the three months ended December 31, 2025.

The decrease in other expenses was primarily attributable to lower occupancy expenses, which declined by $172 thousand, or 17.4%, to $819 thousand for the three months ended December 31, 2025 compared with $991 thousand for the three months ended December 31, 2024, due to lease termination expenses and ongoing savings related to the closure of the Bank's Bridgewater office in October 2024. Offsetting this decrease were higher compensation and benefit expenses, which increased by $88 thousand, or 2.9%, to $3.2 million, due to annual merit increases, and higher data processing expenses, which increased by $66 thousand, or 72.5%, to $157 thousand, due to one-time credits applied during the prior year period.

Income Tax Expense.The Company recorded tax expense of $1.1 million on pre-tax income of $4.3 million for the three months ended December 31, 2025, compared to tax expense of $805 thousand on pre-tax income of $2.9 million for the three months ended December 31, 2024. The Company's effective tax rate for the three months ended December 31, 2025 was 26.7% compared with 27.9% for the three months ended December 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Company's liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Company's short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new deposits, other borrowings, and new advances from the FHLBNY. Based on eligible loan collateral pledged to the FHLBNY at December31, 2025, we had an aggregate net borrowing capacity of $143.7 million. We also had the ability to borrow $106.8 million from the FRBNY at December 31, 2025 compared with $109.6 million at September 30, 2025. The Company did not have any borrowings outstanding with the FRBNY at December 31, 2025 and September 30, 2025. There has been no material adverse change during the three months ended December31, 2025 in the ability of the Company and its subsidiaries to fund their operations.

At December31, 2025, the Company had commitments outstanding under letters of credit totaling $820 thousand, commitments to originate loans totaling $19.3 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit totaling $80.1 million. There has been no material change during the three months ended December 31, 2025 in any of the Company's other contractual obligations or commitments to make future payments.

Capital Requirements

At December 31, 2025, the Bank's Tier 1 capital as a percentage of the Bank's total assets was 11.42%, and total qualifying capital as a percentage of risk-weighted assets was 15.77%.