UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2024

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

For the transition period from __________ to _________

Commission File Number 000-51726

Magyar Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-4154978
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
400 Somerset Street, New Brunswick, New Jersey	08901
(Address of Principal Executive Office)	(Zip Code)

(732) 342-7600

(Issuer’s Telephone Number including area code)

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

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

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

Yes ☑    No ☐

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

Yes ☑    No ☐

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

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

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

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

Yes ☐    No ☑

The number of shares outstanding of the issuer's common stock at May 1, 2024 was 6,593,860

MAGYAR BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

PART I. FINANCIAL INFORMATION

	Page Number
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signature Pages		36

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

	March 31,			September 30,
	2024			2023
	(Unaudited)
Assets
Cash	$	3,413		$	3,179
Interest earning deposits with banks		46,576			69,353
Total cash and cash equivalents		49,989			72,532
Investment securities - available for sale, at fair value		11,913			10,125
Investment securities - at amortized cost (fair value of $74,104 and $73,728 at March 31, 2024 and September 30, 2023, respectively)		83,438			85,835
Federal Home Loan Bank of New York stock, at cost		2,272			2,286
Loans receivable		741,712			697,400
Allowance for credit losses-loans		(7,694	)		(8,330	)
Bank owned life insurance		18,217			18,030
Accrued interest receivable		4,752			4,337
Premises and equipment, net		12,436			13,339
Other real estate owned ("OREO")		1,170			328
Other assets		10,359			11,410
Total assets	$	928,564		$	907,292
Liabilities and Stockholders' Equity
Liabilities
Deposits	$	774,888		$	755,453
Escrowed funds		4,621			3,494
Borrowings		28,796			29,515
Accrued interest payable		689			443
Accounts payable and other liabilities		11,935			13,597
Total liabilities		820,929			802,502
Stockholders' equity
Preferred stock: $.01 Par Value, 500,000 shares authorized; at March 31, 2024 and September 30, 2023, none issued		—			—
Common stock: $.01 Par Value, 14,000,000 shares authorized; 7,097,825 shares issued; 6,602,439 and 6,674,184 shares outstanding at March 31, 2024 and September 30, 2023, respectively, at cost		71			71
Additional paid-in capital		63,133			62,801
Treasury stock: 495,386 and 423,641 shares at March 31, 2024 and September 30, 2023, respectively, at cost		(6,162	)		(5,362	)
Unearned Employee Stock Ownership Plan shares		(3,022	)		(3,097	)
Retained earnings		55,027			52,166
Accumulated other comprehensive loss		(1,412	)		(1,789	)
Total stockholders' equity		107,635			104,790
Total liabilities and stockholders' equity	$	928,564		$	907,292

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

1 

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income

(In Thousands, Except Share and Per Share Data)

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2024			2023		2024		2023
	(Unaudited)
Interest and dividend income
Loans, including fees	$	10,540		$	8,618	$	20,622	$	16,577
Investment securities
Taxable		1,310			512		2,716		1,015
Tax-exempt		14			14		29		29
Federal Home Loan Bank of New York stock		56			30		111		55
Total interest and dividend income		11,920			9,174		23,478		17,676
Interest expense
Deposits		4,775			2,009		8,853		3,483
Borrowings		222			219		457		355
Total interest expense		4,997			2,228		9,310		3,838
Net interest and dividend income		6,923			6,946		14,168		13,838
Provision for credit losses-loans		(74	)		195		407		513
Provision for credit losses-unfunded commitments		88			—		88		—
Total provision for credit losses		14			195		495		513
Net interest and dividend income after provision for credit losses		6,909			6,751		13,673		13,325
Other income
Service charges		294			320		597		565
Gains on sales of SBA loans		213			201		342		381
Income on bank owned life insurance		91			90		186		185
Interest rate swap fees		—			—		—		57
Gains on sales of premises and equipment		—			—		60		—
Other operating income		24			20		46		41
Total other income		622			631		1,231		1,229
Other expenses
Compensation and employee benefits		3,008			2,774		5,855		5,396
Occupancy expenses		803			792		1,593		1,553
Professional fees		178			205		404		384
Data processing expenses		147			149		287		295
Director fees and benefits		207			209		431		410
Marketing and business development		98			117		195		243
FDIC deposit insurance premiums		105			94		209		148
Other expenses		562			456		1,156		950
Total other expenses		5,108			4,796		10,130		9,379
Income before income tax expense		2,423			2,586		4,774		5,175
Income tax expense		526			790		1,225		1,569
Net income	$	1,897		$	1,796	$	3,549	$	3,606
Earnings per share - basic	$	0.30		$	0.28	$	0.56	$	0.56
Earnings per share - diluted	$	0.30		$	0.28	$	0.56	$	0.56
Weighted average shares outstanding - basic		6,372,034			6,431,471		6,360,801		6,431,109
Weighted average shares outstanding - diluted		6,372,034			6,432,052		6,360,801		6,432,742

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

2 

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(In Thousands)

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2024			2023			2024			2023
	(Unaudited)
Net income	$	1,897		$	1,796		$	3,549		$	3,606
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale		(84	)		177			500			384
Other comprehensive income (loss), before tax		(84	)		177			500			384
Deferred income tax effect		21			(44	)		(123	)		(95	)
Total other comprehensive income (loss)	$	(63	)	$	133		$	377		$	289
Total comprehensive income	$	1,834		$	1,929		$	3,926		$	3,895

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

3

 MAGYAR BANCORP, INC. AND SUBSIDIARY

 Consolidated Statements of Changes in Stockholders' Equity

 For the Three and Six Months Ended March 31, 2024 and 2023

 (In Thousands, Except for Share and Per-Share Amounts)

																	Accumulated
	Common Stock					Additional					Unearned						Other
	Shares			Par		Paid-In		Treasury			ESOP			Retained			Comprehensive
	Outstanding			Value		Capital		Stock			Shares			Earnings			Loss			Total
	(Unaudited)
Balance, September 30, 2023		6,674,184		$	71	$	62,801	$	(5,362	)	$	(3,097	)	$	52,166		$	(1,789	)	$	104,790
Net income		—			—		—		—			—			1,652			—			1,652
Dividends paid on common stock ($0.11 per share)		—			—		—		—			—			(716	)		—			(716	)
Effect of adopting ASU 2016-13		—			—		—		—			—			354			—			354
Other comprehensive income		—			—		—		—			—			—			440			440
ESOP shares allocated		—			—		—		—			50			—			—			50
Purchase of treasury stock		(19,232	)		—		—		(192	)		—			—			—			(192	)
Stock-based compensation expense		—			—		161		—			—			—			—			161
Balance, December 31, 2023		6,654,952		$	71	$	62,962	$	(5,554	)	$	(3,047	)	$	53,456		$	(1,349	)	$	106,539
Net income		—			—		—		—			—			1,897			—			1,897
Dividends paid on common stock ($0.05 per share)		—			—		—		—			—			(326	)		—			(326	)
Other comprehensive loss		—			—		—		—			—			—			(63	)		(63	)
ESOP shares allocated		—			—		9		—			25			—			—			34
Purchase of treasury stock		(52,513	)		—		—		(608	)		—			—			—			(608	)
Stock-based compensation expense		—			—		162		—			—			—			—			162
Balance, March 31, 2024		6,602,439		$	71	$	63,133	$	(6,162	)	$	(3,022	)	$	55,027		$	(1,412	)	$	107,635

																		Accumulated
	Common Stock					Additional						Unearned						Other
	Shares			Par		Paid-In			Treasury			ESOP			Retained			Comprehensive
	Outstanding			Value		Capital			Stock			Shares			Earnings			Loss			Total
	(Unaudited)
Balance, September 30, 2022		6,745,128		$	71	$	63,734		$	(5,793	)	$	(3,169	)	$	45,773		$	(2,114	)	$	98,502
Net income		—			—		—			—			—			1,810			—			1,810
Dividends paid on common stock ($0.11 per share)		—			—		—			—			—			(744	)		—			(744	)
Other comprehensive income		—			—		—			—			—			—			156			156
ESOP shares allocated		—			—		17			—			24			—			—			41
Purchase of treasury stock		(2,194	)		—		—			(27	)		—			—			—			(27	)
Stock-based compensation expense		—			—		180			—			—			—			—			180
Balance, December 31, 2022		6,742,934		$	71	$	63,931		$	(5,820	)	$	(3,145	)	$	46,839		$	(1,958	)	$	99,918
Net income		—			—		—			—			—			1,796			—			1,796
Dividends paid on common stock ($0.03 per share)		—			—		—			—			—			(179	)		—			(179	)
Other comprehensive income		—			—		—			—			—			—			133			133
Treasury stock used for restricted stock plan		1,000			—		(13	)		13			—			—			—			—
ESOP shares allocated		—			—		17			—			16			—			—			33
Purchase of treasury stock		(54,144	)		—		—			(697	)		—			—			—			(697	)
Stock-based compensation expense		—			—		161			—			—			—			—			161
Balance, March 31, 2023		6,689,790		$	71	$	64,096		$	(6,504	)	$	(3,129	)	$	48,456		$	(1,825	)	$	101,165

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

4

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In Thousands)

	For the Six Months Ended
	March 31,
	2024			2023
	(Unaudited)
Operating activities
Net income	$	3,549		$	3,606
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation expense		440			415
Premium amortization on investment securities, net		35			80
Provision for credit losses		495			513
Originations of SBA loans held for sale		(3,771	)		(3,887	)
Proceeds from the sales of SBA loans		4,113			4,268
Gains on sale of SBA loans		(342	)		(381	)
Gains on the sale of premises and equipment		(60	)		—
ESOP compensation expense		84			74
Stock-based compensation expense		323			341
Deferred income tax expense (benefit)		103			(357	)
Increase in accrued interest receivable		(415	)		(491	)
Income on bank owned life insurance		(186	)		(185	)
Decrease (increase) in other assets		825			(227	)
Increase in accrued interest payable		246			151
(Decrease) increase in accounts payable and other liabilities		(1,662	)		290
Net cash provided by operating activities		3,777			4,210
Investing activities
Net increase in loans receivable		(45,931	)		(40,845	)
Purchases of loans receivable		—			(7,091	)
Purchases of investment securities held-to-maturity		(4,000	)		—
Purchases of investment securities available-for-sale		(1,953	)		—
Principal repayments on investment securities held-to-maturity		6,367			1,878
Principal repayments on investment securities available-for-sale		660			421
Purchases of premises and equipment, net		(253	)		(140	)
Proceeds from the sale of land		776			—
Investment in other real estate owned		—			(11	)
Purchase of Federal Home Loan Bank stock		(120	)		(4,569	)
Redemption of Federal Home Loan Bank stock		133			4,080
Net cash used in investing activities		(44,321	)		(46,277	)
Financing activities
Net increase in deposits		19,435			30,158
Net increase (decrease) in escrowed funds		1,127			(1,857	)
Proceeds from long-term advances		1,690			13,000
Repayments of long-term advances		(2,409	)		(3,091	)
Cash dividends paid on common stock		(1,042	)		(923	)
Purchase of treasury stock		(800	)		(724	)
Net cash provided by financing activities		18,001			36,563
Net decrease in cash and cash equivalents		(22,543	)		(5,504	)
Cash and cash equivalents, beginning of period		72,532			30,936
Cash and cash equivalents, end of period	$	49,989		$	25,432
Supplemental disclosures of cash flow information
Cash paid for
Interest	$	9,064		$	3,687
Income taxes	$	1,570		$	1,850
Non-cash operating activities
Real estate acquired in full satisfaction of loans in foreclosure	$	842		$	—
Adoption of ASU 2016-13	$	354		$	—

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

5

MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A – BASIS OF PRESENTATION

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

Operating results for the six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending September 30, 2024. The September 30, 2023 information has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete consolidated financial statements.

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

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of March 31, 2024 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS

In connection with the preparation of quarterly and annual reports in accordance with the Securities and Exchange Commission’s (“SEC”) Securities Exchange Act of 1934, SEC Staff Accounting Bulletin Topic 11.M requires the disclosure of the impact that recently issued accounting standards will have on consolidated financial statements when they are adopted in the future.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which changed the impairment model for most financial assets. This update was intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses (“ACL”) should reflect management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This update is effective for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

6

The Company adopted ASU 2016-13 on October 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost, including loans, held-to-maturity debt securities and unfunded commitments. The Company recorded a cumulative effect increase to retained earnings of $492 thousand ($354 thousand net of taxes), which was comprised of a $1.0 million ($725 thousand net of tax) increase related to loans and $540 thousand ($379 thousand net of tax) decrease related to unfunded commitments. The Company determined that there was no impact to retained earnings related to held-to-maturity securities as a result of adopting this guidance. The results reported for periods beginning on or after October 1, 2023 are presented under Accounting Standards Codification (“ASC”) 326, while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

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

	October 1, 2023
			Adoption
	Pre-adoption		Impact			As Reported
	(In thousands)
Assets
ACL on debt securities held-to-maturity	$	—	$	—		$	—
ACL on loans
One-to-four family residential		1,259		7			1,266
Commercial real estate		5,277		(589	)		4,688
Construction and land		472		(55	)		417
Home equity lines of credit		207		(87	)		120
Commercial business		939		(133	)		806
Other		176		(175	)		1
Liabilities
ACL on unfunded commitments		—		540			540
Total	$	8,330	$	(492	)	$	7,838

Allowance for Credit Losses on Loans

The Company maintains its ACL at a level that management believes to be appropriate to absorb estimated credit losses as of the date of the Consolidated Statement of Financial Condition. The Company established its allowance in accordance with the guidance included in Accounting Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”). The ACL is a valuation reserve established and maintained by charges against income. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible. The ACL is an estimate of expected credit losses that considers our historical loss experience, the weighted average expected lives of loans, current economic conditions and forecasts of future economic conditions. The determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans. The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.

Historical credit loss experience is the basis for the estimate of expected credit losses. We apply our historical loss rates to pools of loans with similar risk characteristics using the Weighted-Average Remaining Maturity (“WARM”) method. The remaining contractual life of the pools of loans with similar risk characteristics is adjusted by expected scheduled payments and prepayments. After consideration of the historical loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. Our reasonable and supportable forecast adjustment is based on a regional economic indicator obtained from the United States Government Publishing Office. The Company selected eight qualitative metrics which were correlated with the Bank and its peer group’s historical loss patterns. The eight qualitative metrics include: changes in lending policies and procedures, changes in national and local economic conditions as well as business conditions, changes in the nature, complexity, and volume of the portfolio, changes in the experience, ability, and depth of lenders and lending management, changes in the volume and severity of past due and classified loans, changes in the value of collateral securing loans, changes in or the existence of credit concentrations, and changes in the legal and/or regulatory landscape. The adjustments are weighted for relevance before applying to each pool of loans. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on current conditions.

The Company has elected to exclude $4.4 million of accrued interest receivable on loans as of March 31, 2024 from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. Accrued interest on loans is reported in the accrued interest receivable line on the consolidated statements of financial condition.

7

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and, therefore, should be individually assessed. We individually evaluate loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, or (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Credit loss estimates are calculated based on the following three acceptable methods for measuring the ACL: (1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are reduced to consider expected disposition costs when appropriate. A charge-off is recorded when the estimated fair value of the loan is less than the loan balance.

Allowance for Credit Losses on Unfunded Loan Commitments

The Company estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on unfunded loan commitments is included in accounts payable and other liabilities in the Company’s Consolidated Balance Sheets and is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur, the amount of funding that will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses on Held-to-Maturity Securities

The Company accounts for its held-to-maturity securities in accordance with Accounting Standards Codification 326-20, Financial Instruments – Credit Loss – Measured at Amortized Cost, which requires that the Company measure expected credit losses on held-to-maturity debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current economic conditions and reasonable and supportable forecasts.

The Company classifies its held-to-maturity debt securities into the following major security types: obligations of U.S. government agencies, obligations of U.S. government-sponsored enterprises, private label mortgage-backed securities, obligations of state and political subdivisions and corporate securities. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience of no losses, the Company determined that the expected for credit losses on its’ held-to-maturity portfolio is not significant.

Accrued interest receivable on held-to-maturity debt securities totaled $228 thousand as of March 31, 2024 and is included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, held-to-maturity debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.

Allowance for Credit Losses on Available-for-Sale Securities

The Company measures expected credit losses on available-for-sale debt securities when the Bank intends to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the amortized cost basis of the security is written down to fair value through income. For available-for-sale debt securities that do not meet the previously mentioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

8

The ACL on available-for-sale debt securities is included within the recorded balance of securities available-for-sale on the Consolidated Balance Sheets. Changes in the allowance for credit losses are recorded within provision for credit losses on the Consolidated Statements of Income. Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $25 thousand as of March 31, 2024 and is included within accrued interest receivable on the Company’s Consolidated Balance Sheets. This amount is excluded from the estimate of expected credit losses. Generally, available-for-sale debt securities are classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed against interest income.

NOTE C - CONTINGENCIES

The Company, from time to time, is a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations as presented in this report.

NOTE D - EARNINGS PER SHARE

The following table presents a calculation of basic and diluted earnings per share for the three and six months ended March 31, 2024 and 2023. Basic and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the periods.

	Three Months				Six Months
	Ended March 31,				Ended March 31,
	2024		2023		2024		2023
	(Dollars in thousands, except share and per share data)
Income applicable to common shares	$	1,897	$	1,796	$	3,549	$	3,606
Weighted average common shares outstanding- basic		6,372,034		6,431,471		6,360,801		6,431,109
Weighted average common shares outstanding- diluted		6,372,034		6,432,052		6,360,801		6,432,742
Earnings per share - basic	$	0.30	$	0.28	$	0.56	$	0.56
Earnings per share - diluted	$	0.30	$	0.28	$	0.56	$	0.56

Options to purchase 293,200 shares of common stock at a weighted average strike price of $12.58 and 124,320 shares of restricted shares at a weighted average price of $12.63 were outstanding at March 31, 2024 but were not included in the calculation of diluted EPS because they were anti-dilutive. Options to purchase 293,200 shares of common stock at a weighted average strike price of $12.58 and 156,400 shares of restricted shares at a weighted average price of $12.63 were outstanding at March 31, 2023.

NOTE E – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

On August 25, 2022, the Company adopted the 2022 Equity Compensation Plan which provided for grants of up to 391,000 shares to be allocated between incentive and non-qualified stock options and up to 156,400 shares of restricted stock awards to officers, employees and directors of the Company and Magyar Bank. At March 31, 2024, 293,200 options and 156,400 shares of restricted stock had been awarded from the plan.

The following is a summary of the status of the Company’s stock option activity and related information for the six months ended March 31, 2024:

9

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at September 30, 2023		293,200	$	12.58		8.98	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Expired		—		—		—		—
Balance at March 31, 2024		293,200	$	12.58		8.48	$	—
Exercisable at March 31, 2024		58,640	$	12.58		8.48	$	—

The following is a summary of the status of the Company’s non-vested restricted shares for the six months ended March 31, 2024:

	Shares		Weighted Average Grant Date Fair Value
Balance at September 30, 2023		124,320	$	12.63
Granted		—		—
Vested		—		—
Forfeited		—		—
Balance at March 31, 2024		124,320	$	12.63

Stock option and stock award expenses included with compensation expense were $80 thousand and $81 thousand for the three months ended March 31, 2024 and $63 thousand and $98 thousand for the three months ended March 31, 2023, respectively. Stock option and stock award expenses included with compensation expense were $126 thousand and $196 thousand for the six months ended March 31, 2024 and $132 thousand and $209 thousand for the six months ended March 31, 2023, respectively.

At March 31, 2024, total compensation cost not yet recognized for the Company’s unvested stock options and stock awards was $2.3 million. The Company had no other stock-based compensation plans as of March 31, 2024 except as disclosed below.

On December 8, 2022, the Company announced the authorization of a second 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 172,575 shares had been repurchased at an average price of $11.53 through March 31, 2024. Under this stock repurchase program, 164,571 shares of the 337,146 shares authorized remained available for repurchase as of March 31, 2024. The Company’s intended use of the repurchased shares is for general corporate purposes. The Company held treasury stock shares totaling 495,386 at March 31, 2024. The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity requirements and alternative uses of capital.

The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees who meet certain eligibility requirements. The ESOP trust purchases shares of common stock in the open market using proceeds of a loan from the Company. The loan is secured by shares of the Company’s stock. The Bank makes cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company. As the debt is repaid, shares are released as collateral and allocated to qualified employees. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets. The Company accounts for its ESOP in accordance with FASB ASC Topic 718, “Employer’s Accounting for Employee Stock Ownership Plans.” As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.

In connection with the Company’s second-step stock offering during its fiscal year ending September 30, 2021, the ESOP trustees purchased 312,800 shares of the Company’s common stock for $3.4 million, reflecting an average cost per share of $10.77. The ESOP loan bears a fixed interest rate of 3.25% with principal and interest payable annually in equal installments over 30 years.

10

At March 31, 2024, ESOP shares allocated to participants totaled 186,940. Unallocated ESOP shares held in suspense totaled 278,163 with an aggregate fair value of $3.1 million. The Company's contribution expense for the ESOP was $35 thousand and $33 thousand for the three months ended March 31, 2024 and 2023, and $84 thousand and $74 thousand for the six months ended March 31, 2024 and 2023, respectively.

NOTE F – OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net income as well as certain other items which result in a change to equity during the period. The Company recorded no reclassification adjustments during the three and six months ended March 31, 2024 and 2023. The components of other comprehensive income (loss) and the related income tax effects are as follows:

	Three Months Ended March 31,
	2024								2023
				Tax		Net of					Tax			Net of
	Before Tax			(Benefit)		Tax			Before Tax		(Benefit)			Tax
	Amount			Expense		Amount			Amount		Expense			Amount
	(In thousands)
Unrealized holding gain (loss) arising during period on:
Available-for-sale investments	$	(84	)	$	21	$	(63	)	$	177	$	(44	)	$	133
Other comprehensive income (loss), net	$	(84	)	$	21	$	(63	)	$	177	$	(44	)	$	133

	Six Months Ended March 31,
	2024							2023
			Tax			Net of				Tax			Net of
	Before Tax		(Benefit)			Tax		Before Tax		(Benefit)			Tax
	Amount		Expense			Amount		Amount		Expense			Amount
	(In thousands)
Unrealized holding gain arising during period on:
Available-for-sale investments	$	500	$	(123	)	$	377	$	384	$	(95	)	$	289
Other comprehensive income, net	$	500	$	(123	)	$	377	$	384	$	(95	)	$	289

(a) All amounts are net of tax. Related income tax expense or benefit calculated using an income tax rate approximating 25% for available-for-sale investments.

NOTE G – FAIR VALUE DISCLOSURES

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The securities available-for-sale and the Company’s derivative assets and liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, loans receivable and OREO. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

In accordance with ASC 820, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 -	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 -	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 -	Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

11

The Company based its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

Securities available-for-sale

The securities available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. The securities available-for-sale portfolio consists of U.S government-sponsored mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides the Company with prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities in the Company’s portfolio. Various modeling techniques are used to determine pricing for Company’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

Derivatives

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

The following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a recurring basis.

March 31, 2024	Total		Level 1		Level 2		Level 3
Assets:	(In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	90	$	—	$	90	$	—
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		11,823		—		11,823		—
Total securities available for sale		11,913		—		11,913		—
Derivative assets		2,011		—		2,011		—
Total assets	$	13,924	$	—	$	13,924	$	—
Liabilities:
Derivative liabilities	$	2,011	$	—	$	2,011	$	—
Total Liabilities	$	2,011	$	—	$	2,011	$	—
September 30, 2023
Assets:
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	92	$	—	$	92	$	—
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		10,033		—		10,033		—
Total securities available for sale		10,125		—		10,125		—
Derivative assets		2,579		—		2,579		—
Total assets	$	12,704	$	—	$	12,704	$	—
Liabilities:
Derivative liabilities	$	2,579	$	—	$	2,579	$	—
Total Liabilities	$	2,579	$	—	$	2,579	$	—

12

The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Collateral Dependent Loans

Collateral dependent loans are measured and reported at fair value through specific allocations of the allowance for credit losses based on the fair value of the underlying collateral.

There were no assets measured at fair value on a non-recurring basis at March 31, 2024. The following table provides the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a non-recurring basis at September 30, 2023.

	Total		Level 1		Level 2		Level 3
September 30, 2023	(In thousands)
Impaired loans	$	777	$	—	$	—	$	777
Total	$	777	$	—	$	—	$	777

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

Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)
	Fair Value		Valuation
September 30, 2023	Estimate		Techniques	Unobservable Input	Range (Weighted Average)
Impaired loans	$	777	Appraisal of collateral (1)	Appraisal adjustments (2)	-50% to -8.0% (-19.4%)

⁽¹⁾ Fair value is generally determined through independent appraisals for the underlying collateral, which generally include various level 3 inputs which are not identifiable.

⁽²⁾ Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of March 31, 2024 and September 30, 2023.  For short-term financial assets such as cash and cash equivalents and accrued interest receivable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to these products being payable on demand and having no stated maturity.

13

	Carrying		Fair		Fair Value Measurement Placement
	Value		Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
March 31, 2024
Financial instruments - assets
Investment securities held to maturity	$	83,438	$	74,104	$	—	$	74,104	$	—
Loan receivable net allowance for credit losses		734,018		716,318		—		—		716,318
Financial instruments - liabilities
Certificates of deposit including retirement certificates		134,955		132,689		—		132,689		—
Borrowings		28,796		27,768		—		27,768		—
September 30, 2023
Financial instruments - assets
Investment securities held-to-maturity	$	85,835	$	73,728	$	—	$	73,728	$	—
Loan receivable net allowance for credit losses		689,070		664,331		—		—		664,331
Financial instruments - liabilities
Certificates of deposit including retirement certificates		104,668		101,216		—		101,216		—
Borrowings		29,515		28,177		—		28,177		—

NOTE H - INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair values of securities classified as available-for-sale and held-to-maturity at March 31, 2024:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
March 31, 2024	Cost		Gains		Losses			Value
	(In thousands)
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	100	$	—	$	(10	)	$	90
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		13,277		18		(1,472	)		11,823
Total securities available-for-sale	$	13,377	$	18	$	(1,482	)	$	11,913
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	4,887	$	—	$	(728	)	$	4,159
Mortgage-backed securities - commercial		4,425		—		(35	)		4,390
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed-securities - residential		46,471		—		(6,605	)		39,866
Debt securities		20,999		—		(1,369	)		19,630
Private label mortgage-backed securities - residential		199		—		(10	)		189
Obligations of state and political subdivisions		3,457		2		(392	)		3,067
Corporate securities		3,000		—		(197	)		2,803
Total securities held-to-maturity	$	83,438	$	2	$	(9,336	)	$	74,104
Total investment securities	$	96,815	$	20	$	(10,818	)	$	86,017

The Company monitors the credit quality of held-to-maturity debt securities, primarily through their credit ratings by nationally recognized statistical ratings organizations, on a quarterly basis. At March 31, 2024, there were no non-performing held-to-maturity debt securities and no allowance for credit losses were required. The majority of the investment securities are explicitly or implicitly guaranteed by the United States government, and any estimate of expected credit losses would be insignificant to the Company. The following table summarizes the amortized cost of held-to-maturity debt securities at March 31, 2024, aggregated by credit quality indicator:

14

	Credit Rating at Amortized Cost
	AAA/AA/A		BBB/BB/B		Non-rated
March 31, 2024		(In thousands)
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	4,887	$	—	$	—
Mortgage-backed securities - commercial		4,425		—		—
Obligations of U.S. government-sponsored enterprises:
Mortgage backed securities - residential		46,471		—		—
Debt securities		20,999		—		—
Private label mortgage-backed securities - residential		—		—		199
Obligations of state and political subdivisions		3,457		—		—
Corporate securities		—		3,000		—
Totals	$	80,239	$	3,000	$	199

The contractual maturities of debt securities, municipal bonds and certain information regarding mortgage-backed securities at March 31, 2024 are summarized in the following table:

	March 31, 2024
	Amortized		Fair
	Cost		Value
	(In thousands)
Due within 1 year	$	6,499	$	6,335
Due after 1 but within 5 years		16,027		14,952
Due after 5 but within 10 years		4,930		4,213
Due after 10 years		—		—
Total debt securities		27,456		25,500
Mortgage backed securities:
Residential		64,934		56,127
Commercial		4,425		4,390
Total	$	96,815	$	86,017

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

15

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
September 30, 2023	Cost		Gains		Losses			Value
	(In thousands)
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage backed securities - residential	$	106	$	—	$	(14	)	$	92
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		11,984		—		(1,951	)		10,033
Total securities available for sale	$	12,090	$	—	$	(1,965	)	$	10,125
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	5,070	$	—	$	(850	)	$	4,220
Mortgage-backed securities - commercial		2,509		—		(16	)		2,493
Obligations of U.S. government-sponsored enterprises:
Mortgage backed securities - residential		48,086		—		(8,480	)		39,606
Debt securities		23,497		—		(1,947	)		21,550
Private label mortgage-backed securities - residential		207		—		(12	)		195
Obligations of state and political subdivisions		3,466		—		(605	)		2,861
Corporate securities		3,000		—		(197	)		2,803
Total securities held to maturity	$	85,835	$	—	$	(12,107	)	$	73,728
Total investment securities	$	97,925	$	—	$	(14,072	)	$	83,853

As of March 31, 2024 investment securities having an estimated fair value of approximately $11.8 million were pledged to secure public deposits.

NOTE I – UNREALIZED LOSSES ON INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The Company recognizes an allowance for credit losses on debt securities in earnings through a provision for credit losses while noncredit-related impairment on debt securities not expected to be sold are recognized in other comprehensive income.

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

Investment securities with fair values greater than their amortized cost contain unrealized gains. Investment securities with fair values less than their amortized cost contain unrealized losses. Details of available-for-sale securities with unrealized losses at March 31, 2024 are as follows:

			Less Than 12 Months				12 Months Or Greater					Total
	Number of		Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
	Securities		Value		Losses		Value		Losses			Value		Losses
March 31, 2024			(Dollars in thousands)
Obligations of U.S. government agencies:
Mortgage-backed securities - residential		1	$	—	$	—	$	91	$	(10	)	$	91	$	(10	)
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential		9		26		—		7,684		(1,472	)		7,710		(1,472	)
Total		10	$	26	$	—	$	7,775	$	(1,482	)	$	7,801	$	(1,482	)

16

Prior to the adoption of ASU 2016-13, details of our entire investment portfolio were required to be disclosed. Accordingly, details of our held-to-maturity and available-for-sale investment securities with unrealized losses at September 30, 2023 were as follows:

			Less Than 12 Months					12 Months Or Greater					Total
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Securities		Value		Losses			Value		Losses			Value		Losses
September 30, 2023			(Dollars in thousands)
Obligations of U.S. government agencies:
Mortgage-backed securities - residential		6	$	—	$	—		$	4,312	$	(864	)	$	4,312	$	(864	)
Mortgage-backed securities - commercial		2		1,926		(14	)		567		(2	)		2,493		(16	)
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential		50		4,938		(49	)		44,485		(10,382	)		49,423		(10,431	)
Debt securities		12		—		—			21,550		(1,947	)		21,550		(1,947	)
Private label mortgage-backed securities residential		1		—		—			195		(12	)		195		(12	)
Obligations of state and political subdivisions		7		789		(43	)		2,072		(562	)		2,861		(605	)
Corporate securities		1		—		—			2,803		(197	)		2,803		(197	)
Total		79	$	7,653	$	(106	)	$	75,984	$	(13,966	)	$	83,637	$	(14,072	)

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

The Company anticipates full recovery of amortized costs with respect to these securities. The Company does not intend to sell these securities and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery. Management has considered factors regarding credit losses and determined that no allowance for credit loss was required as of March 31, 2024.

NOTE J – LOANS RECEIVABLE, NET AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net were comprised of the following:

	March 31,			September 30,
	2024			2023
	(In thousands)
One-to-four family residential	$	231,945		$	237,683
Commercial real estate		429,133			389,134
Construction and land		29,199			21,853
Home equity loans and lines of credit		22,937			16,983
Commercial business		26,956			30,194
Other		2,516			2,359
Total loans receivable		742,686			698,206
Net deferred loan costs		(974	)		(806	)
Total loans receivable, net	$	741,712		$	697,400

The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The residential mortgage loan segment is further disaggregated into two classes: first lien, amortizing term loans, and the combination of second lien amortizing term loans and home equity lines of credit. The commercial loan segment is further disaggregated into three classes: loans secured by multifamily structures, loans secured by owner-occupied commercial structures, and loans secured by non-owner occupied nonresidential properties. The construction loan segment consists primarily of developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures and to a lesser extent one-to-four family residential construction loans made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Construction loans to developers and investors have a higher risk profile because the ultimate buyer, once development is completed, is generally not known at the time of the loan. The commercial business loan segment consists of loans made for the purpose of financing the activities of commercial customers and consists of revolving lines of credit and loans partially guaranteed by the U.S. Small Business Administration. The consumer loan segment consists primarily of stock-secured installment loans, but also includes unsecured personal loans and overdraft lines of credit connected with customer deposit accounts.

17

Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. All loans greater than three months past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Company’s Asset Review Committee performs monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse.  Confirmation of the appropriate risk grade is performed by an external loan review company that semi-annually reviews and assesses loans within the portfolio.  Generally, the external consultant reviews commercial relationships greater than $500 thousand and/or criticized relationships greater than $250 thousand. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.

The following table presents the classes of the loan portfolio by origination year summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful for loans subject to the Company’s internal risk rating system and by performing status for all other loans as of March 31, 2024.

18

													Revolving Loans
	March 31, 2024												Amortized		Converted
	Term Loans Amortized Cost Basis by Origination Fiscal Year												Cost Basis		to Term		Total
	2024		2023		2022		2021		2020		Prior
	(In thousands)
One-to-four family residential
Performing	$	10,883	$	42,985	$	32,288	$	27,245	$	30,901	$	87,129	$	84	$	—	$	231,515
Non-performing		—		—		282		—		23		125		—		—		430
Total	$	10,883	$	42,985	$	32,570	$	27,245	$	30,924	$	87,254	$	84	$	—	$	231,945
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial real estate
Pass	$	44,337	$	83,625	$	68,461	$	65,616	$	30,241	$	128,962	$	5,219	$	—	$	426,461
Special Mention		—		—		201		—		—		247		—		—		448
Substandard		—		—		2,224		—		—		—		—		—		2,224
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	44,337	$	83,625	$	70,886	$	65,616	$	30,241	$	129,209	$	5,219	$	—	$	429,133
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction and land
Pass	$	4,564	$	13,330	$	2,074	$	300	$	1,756	$	4,753	$	725	$	—	$	27,502
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		1,697		—		—		1,697
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	4,564	$	13,330	$	2,074	$	300	$	1,756	$	6,450	$	725	$	—	$	29,199
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Home equity loans and lines of credit
Performing	$	870	$	1,385	$	502	$	274	$	226	$	2,904	$	16,234	$	306	$	22,701
Non-performing		—		—		—		—		—		—		236		—		236
Total	$	870	$	1,385	$	502	$	274	$	226	$	2,904	$	16,470	$	306	$	22,937
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial business
Pass	$	1,401	$	533	$	2,631	$	1,688	$	914	$	2,887	$	16,603	$	299	$	26,956
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	1,401	$	533	$	2,631	$	1,688	$	914	$	2,887	$	16,603	$	299	$	26,956
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Other
Performing	$	318	$	—	$	60	$	1	$	12	$	1,783	$	342	$	—	$	2,516
Non-performing		—		—		—		—		—		—		—		—		—
Total	$	318	$	—	$	60	$	1	$	12	$	1,783	$	342	$	—	$	2,516
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Information presented in the table above is not required for periods prior to the adoption of ASU 2016-13. The following table presents more comparable information of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the Bank’s internal risk rating system as of September 30, 2023.

19

			Special
	Pass		Mention		Substandard		Doubtful		Total
	(In  thousands)
September 30, 2023
One-to-four family residential	$	236,876	$	—	$	807	$	—	$	237,683
Commercial real estate		386,794		116		2,224		—		389,134
Construction and land		19,379		—		2,474		—		21,853
Home equity lines of credit		16,983		—		—		—		16,983
Commercial business		30,194		—		—		—		30,194
Other		2,359		—		—		—		2,359
Total	$	692,585	$	116	$	5,505	$	—	$	698,206

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The Bank was not accruing interest on any loans delinquent greater than 90 days as of March 31, 2024 or September 30, 2023. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans for the periods presented:

			30-59		60-89
			Days		Days		90 Days +		Total
	Current		Past Due		Past Due		Past Due		Loans
	(In  thousands)
March 31, 2024
One-to-four family residential	$	230,780	$	735	$	—	$	430	$	231,945
Commercial real estate		425,250		1,211		448		2,224		429,133
Construction and land		27,502		—		—		1,697		29,199
Home equity lines of credit		22,701		—		—		236		22,937
Commercial business		26,044		912		—		—		26,956
Other		2,516		—		—		—		2,516
Total	$	734,793	$	2,858	$	448	$	4,587	$	742,686

			30-59		60-89
			Days		Days		90 Days +		Total
	Current		Past Due		Past Due		Past Due		Loans
	(Iin  thousands)
September 30, 2023
One-to four-family residential	$	236,729	$	—	$	568	$	386	$	237,683
Commercial real estate		386,794		—		116		2,224		389,134
Construction and land		19,379		—		—		2,474		21,853
Home equity lines of credit		16,983		—		—		—		16,983
Commercial business		30,047		147		—		—		30,194
Other		2,359		—		—		—		2,359
Total	$	692,291	$	147	$	684	$	5,084	$	698,206

The following tables present our non-accrual loans and the related allowance for credit loss by loan type as of March 31, 2024 and the non-accrual loans and specific reserves by loan type as of September 30, 2023.

20

	Total		Non-Accrual		Non-Accrual
	Non-Accrual		with ACL		without ACL
	(In thousands)
March 31, 2024
One-to-four family residential	$	430	$	—	$	430
Commercial real estate		2,224		—		2,224
Construction and land		1,697		—		1,697
Home loans and lines of credit		236		—		236
Total	$	4,587	$	—	$	4,587

	Total		Specific
	Non-Accrual		Reserve
	(In thousands)
September 30, 2023
One-to four-family residential	$	386	$	—
Commercial real estate		2,224		—
Construction and land		2,474		—
Total	$	5,084	$	—

The following table identifies our non-performing, collateral dependent loans by collateral type as of March 31, 2024:

	March 31,
	2024
	(In thousands)
One-to-four family residential	$	666
Commercial real estate		2,224
Construction and land		1,697
Total	$	4,587

The Company’s adoption of ASU 2016-13 eliminated the requirement to disclose impaired loans. The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2023:

					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
	Investment		Allowance		Investment		Investment		Balance
September 30, 2023	(In thousands)
One-to four-family residential	$	—	$	—	$	2,031	$	2,031	$	2,031
Commercial real estate		—		—		2,969		2,969		2,969
Construction and land		—		—		2,474		2,474		2,539
Commercial business		—		—		147		147		147
Total impaired loans	$	—	$	—	$	7,621	$	7,621	$	7,686

The following table presents the average recorded investment in impaired loans and the interest income recognized on impaired loans for the three and six months ended March 31, 2023.

21

	Three Months Ended		Six Months Ended
	March 31, 2023		March 31, 2023
	(In thousands)
One-to-four family residential	$	1,574	$	1,553
Commercial real estate		1,262		1,227
Construction and land		2,835		2,835
Commercial business		395		314
Average investment in impaired loans	$	6,066	$	5,929
Interest income recognized on
an accrual basis on impaired loans	$	36	$	71
Interest income recognized on
a cash basis on impaired loans		—		—

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

ASU 2016-13 requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to October 1, 2023).  Accordingly, the allowance for credit losses disclosures subsequent to October 1, 2023 are not always comparable to prior dates. In addition, certain new disclosures required under ASU 2016-13 are not applicable to prior periods.  As a result, the following tables present disclosures separately for each period, where appropriate.  New disclosures required under ASU 2016-13 are only shown for the current period.  Please refer to Note B “Summary of Significant Accounting Policies” for a summary of the impact of adopting the provisions of ASU 2016-13 on October 1, 2023.

The following tables set forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated. The portion of the credit loss allowance allocated to each loan category does not represent the total available for future losses which may occur within the loan category since the total credit loss allowance is a valuation allocation applicable to the entire loan portfolio. The Company generally charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due and all loans rated substandard or worse that are 90 days past due.

The following tables present, by loan category, the changes in the allowance for credit losses for the three and six months ended March 31, 2024 and the allowance for credit losses for the three and six months ended March 31, 2023.

	One-to-Four						Construction			Home Equity
	Family			Commercial			and			Lines of			Commercial
	Residential			Real Estate			Land			Credit			Business			Other			Unallocated			Total
	(In  thousands)
Balance- September 30, 2023	$	1,259		$	5,277		$	472		$	207		$	939		$	2		$	174		$	8,330
Effect of adopting ASU 2016-13		7			(589	)		(55	)		(87	)		(133	)		(1	)		(174	)		(1,032	)
Charge-offs		—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			—			—
Provision (credit)		(75	)		161