Magyar Bancorp Inc.
05/13/2026 | Press release | Distributed by Public on 05/13/2026 11:19
Quarterly Report for Quarter Ending March 31, 2026 (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 March 31, 2026 and September 30, 2025
Total Assets. Total assets increased by $70.7 million, or 7.1%, to $1.068 billion at March 31, 2026 from $997.7 million at September 30, 2025. The increase was attributable to higher balances of cash and cash equivalents and loans receivable.
Interest Earning Deposits. Total cash and cash equivalents increased by $40.6 million, or 572.4% to $47.6 million at March 31, 2026 from $7.1 million at September 30, 2025 resulting from higher deposits, partially offset by higher loans receivable and investments.
Investment securities. Investment securities totaled $99.2 million at March 31, 2026, reflecting an increase of $10.7 million, or 12.1%, from $88.4 million at September 30, 2025. The increase resulted from purchases of mortgage-backed securities totaling $14.5 million, partially offset by payments from mortgage-backed securities totaling $3.8 million during the six months ended March 31, 2026. There was no credit losses recorded for the Company's investment securities during the six months ended March 31, 2026.
Loans Receivable. Total loans receivable increased by $21.0 million, or 2.4%, to $879.9 million during the six months ended March 31, 2026 from $858.9 million at September 30, 2025. The increase in total loans receivable occurred in commercial real estate loans, which increased by $24.6 million, and in construction and land loans, which increased by $6.4 million. Partially offsetting these increases were one-to four-family residential real estate loans (including home equity lines of credit), which decreased by $9.5 million, commercial business loans, which decreased by $170 thousand and other loans, which decreased by $277 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 March 31, 2026 and September 30, 2025:
| March 31, 2026 | September 30, 2025 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Owner-occupied | ||||||||||||||||
| Retail | $ | 42,061 | 7.5% | $ | 43,440 | 8.1% | ||||||||||
| Hotel/Motel | 74,874 | 13.4% | 75,380 | 14.1% | ||||||||||||
| Professional | 36,362 | 6.5% | 34,328 | 6.4% | ||||||||||||
| Office | 14,507 | 2.6% | 17,563 | 3.3% | ||||||||||||
| Restaurant | 27,962 | 5.0% | 23,409 | 4.4% | ||||||||||||
| Other | 46,891 | 8.4% | 39,722 | 7.4% | ||||||||||||
| Total owner-occupied | $ | 242,657 | 43.5% | $ | 233,842 | 43.9% | ||||||||||
| Non-owner occupied | ||||||||||||||||
| Retail | $ | 86,873 | 15.6% | $ | 85,574 | 16.0% | ||||||||||
| Multi-family | 96,233 | 17.3% | 95,794 | 18.0% | ||||||||||||
| Professional | 22,372 | 4.0% | 17,514 | 3.3% | ||||||||||||
| Office | 31,432 | 5.6% | 36,053 | 6.8% | ||||||||||||
| Restaurant | 8,241 | 1.5% | 7,943 | 1.5% | ||||||||||||
| Hotel/Motel | 2,503 | 0.4% | 2,526 | 0.5% | ||||||||||||
| Other | 67,453 | 12.1% | 53,967 | 10.1% | ||||||||||||
| Total non-owner occupied | $ | 315,107 | 56.5% | $ | 299,371 | 56.1% | ||||||||||
| Total commercial real estate loans | $ | 557,764 | 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 March 31, 2026 and September 30, 2025:
| March 31, 2026 | September 30, 2025 | |||||||||||||||
| Number of | Number of | |||||||||||||||
| LTV range | Loans | Amount | Loans | Amount | ||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| 0%-25.0% | 142 | $ | 67,060 | 129 | $ | 54,594 | ||||||||||
| 25.01%-50.0% | 133 | 176,520 | 129 | 163,280 | ||||||||||||
| 50.01%-60.0% | 80 | 104,630 | 79 | 114,311 | ||||||||||||
| 60.01%-70.0% | 112 | 154,681 | 109 | 147,882 | ||||||||||||
| 70.01%-75.0% | 29 | 43,863 | 24 | 33,244 | ||||||||||||
| 75.01%-80.0% | 5 | 11,011 | 8 | 17,856 | ||||||||||||
| > 80.0% | - | - | 2 | 2,046 | ||||||||||||
| Total | 501 | $ | 557,765 | 480 | $ | 533,213 | ||||||||||
As of March 31, 2026 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 275% 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 March 31, 2026 and September 30, 2025, we had no non-performing commercial real estate loans.
Total non-performing loans decreased by $157 thousand, or 34.8%, to $294 thousand at March 31, 2026 from $451 thousand at September 30, 2025. Non-performing loans consisted of one loan secured by one-to four family property and one home equity line of credit. The ratio of non-performing loans to total loans decreased to 0.03% at March 31, 2026 from to 0.05% at September 30, 2025.
Allowance for Credit Losses. The allowance for on-balance sheet credit losses increased by $249 thousand to $8.6 million, or 0.98% of total loans receivable during the six months ended March 31, 2026 compared with $8.4 million at September 30, 2025, while the reserve for off-balance sheet commitments increased to $235 thousand at March 31, 2026 from $198 thousand at September 30, 2025. The higher provision for credit losses resulted from growth in loans receivable as well as higher specific reserves on construction loans, partially offset by lower expected loss rates driven by improving economic conditions impacting residential and commercial real estate loans.
Deposits. Total deposits increased by $64.1 million, or 7.9%, to $878.4 million at March 31, 2026 compared with $814.3 million at September 30, 2025. The inflow in deposits occurred in certificates of deposit (including individual retirement accounts), which increased by $28.1 million, or 13.4%, to $238.0 million, in non-interest bearing checking accounts, which increased by $16.5 million, or 14.1%, to $133.7 million, in money market accounts, which increased by $8.9 million, or 3.3%, to $277.8 million, in interest-bearing checking accounts, which increased by $7.8 million, or 4.8%, to $171.6 million, and in savings accounts, which increased by $2.8 million, or 5.2%, to $57.3 million.
The Company implemented a digital marketing campaign focused on the Bank's primary market area, targeting prospective customers with a competitive rate on short term certificates of deposit. The campaign produced positive results and was a contributor to the increase in deposits during the six months ended March 31, 2026.
Stockholders' Equity. Stockholders' equity increased by $5.3 million, or 4.5%, to $124.1 million at March 31, 2026 from $118.8 million at September 30, 2025. The increase was due to the Company's results from operations, partially offset by $0.18 in dividends paid and 10,925 shares repurchased during the six months ended March 31, 2026 at an average share price of $17.47. The Company's book value per share increased to $19.19 at March 31, 2026 from $18.34 at September 30, 2025.
Average Balance Sheets for the Three and Six Months Ended March 31, 2026 and 2025
The following tables present certain information regarding the Company's financial condition and net interest income for the three and six months ended March 31, 2026 and 2025. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we consider adjustments to yields.
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||
|
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 | $ | 53,065 | $ | 510 | 3.90% | $ | 64,690 | $ | 671 | 4.21% | ||||||||||||||
| Loans receivable, net (1) | 868,768 | 13,597 | 6.35% | 803,428 | 12,133 | 6.12% | ||||||||||||||||||
| Securities | ||||||||||||||||||||||||
| Taxable | 93,518 | 767 | 3.33% | 91,543 | 650 | 2.88% | ||||||||||||||||||
| Tax-exempt (2) | 3,370 | 18 | 2.20% | 3,370 | 18 | 2.20% | ||||||||||||||||||
| FHLBNY stock | 3,379 | 65 | 7.82% | 2,509 | 56 | 9.00% | ||||||||||||||||||
| Total interest-earning assets | 1,022,100 | 14,957 | 5.93% | 965,540 | 13,528 | 5.68% | ||||||||||||||||||
| Noninterest-earning assets | 53,407 | 52,716 | ||||||||||||||||||||||
| Total assets | $ | 1,075,507 | $ | 1,018,256 | ||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Savings accounts (3) | $ | 56,370 | 96 | 0.69% | $ | 54,443 | 97 | 0.72% | ||||||||||||||||
| NOW accounts (4) | 452,600 | 3,024 | 2.71% | 510,430 | 3,768 | 2.99% | ||||||||||||||||||
| Time deposits (5) | 237,094 | 2,204 | 3.77% | 161,860 | 1,560 | 3.91% | ||||||||||||||||||
| Total interest-bearing deposits | 746,064 | 5,324 | 2.89% | 726,733 | 5,425 | 3.03% | ||||||||||||||||||
| Borrowings | 49,055 | 397 | 3.28% | 32,119 | 223 | 2.81% | ||||||||||||||||||
| Total interest-bearing liabilities | 795,119 | 5,721 | 2.92% | 758,852 | 5,648 | 3.02% | ||||||||||||||||||
| Noninterest-bearing liabilities | 158,877 | 147,138 | ||||||||||||||||||||||
| Total liabilities | 953,996 | 905,990 | ||||||||||||||||||||||
| Retained earnings | 121,511 | 112,266 | ||||||||||||||||||||||
| Total liabilities and retained earnings | $ | 1,075,507 | $ | 1,018,256 | ||||||||||||||||||||
| Tax-equivalent basis adjustment | (4 | ) | (4 | ) | ||||||||||||||||||||
| Net interest and dividend income | $ | 9,232 | $ | 7,876 | ||||||||||||||||||||
| Interest rate spread | 3.01% | 2.66% | ||||||||||||||||||||||
| Net interest-earning assets | $ | 226,981 | $ | 206,688 | ||||||||||||||||||||
| Net interest margin (6) | 3.66% | 3.31% | ||||||||||||||||||||||
| Average interest-earning assets to | ||||||||||||||||||||||||
| average interest-bearing liabilities | 128.55% | 127.24% | ||||||||||||||||||||||
(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.
| Six Months Ended March 31, | ||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||
|
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 | $ | 41,082 | $ | 782 | 3.82% | $ | 48,698 | $ | 1,041 | 4.29% | ||||||||||||||
| Loans receivable, net (1) | 862,458 | 27,121 | 6.31% | 794,577 | 23,995 | 6.06% | ||||||||||||||||||
| Securities | ||||||||||||||||||||||||
| Taxable | 89,958 | 1,452 | 3.24% | 91,680 | 1,253 | 2.74% | ||||||||||||||||||
| Tax-exempt (2) | 3,370 | 36 | 2.17% | 3,370 | 36 | 2.17% | ||||||||||||||||||
| FHLBNY stock | 3,390 | 127 | 7.51% | 2,451 | 110 | 9.02% | ||||||||||||||||||
| Total interest-earning assets | 1,000,258 | 29,518 | 5.92% | 940,776 | 26,435 | 5.64% | ||||||||||||||||||
| Noninterest-earning assets | 51,446 | 53,361 | ||||||||||||||||||||||
| Total assets | $ | 1,051,704 | $ | 994,137 | ||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Savings accounts (3) | $ | 55,627 | $ | 197 | 0.71% | $ | 53,936 | $ | 186 | 0.69% | ||||||||||||||
| NOW accounts (4) | 444,676 | 6,093 | 2.75% | 487,658 | 7,307 | 3.01% | ||||||||||||||||||
| Time deposits (5) | 229,698 | 4,328 | 3.78% | 161,851 | 3,184 | 3.94% | ||||||||||||||||||
| Total interest-bearing deposits | 730,001 | 10,618 | 2.92% | 703,445 | 10,677 | 3.04% | ||||||||||||||||||
| Borrowings | 49,083 | 803 | 3.28% | 30,823 | 431 | 2.80% | ||||||||||||||||||
| Total interest-bearing liabilities | 779,084 | 11,421 | 2.94% | 734,268 | 11,108 | 3.03% | ||||||||||||||||||
| Noninterest-bearing liabilities | 147,838 | 145,177 | ||||||||||||||||||||||
| Total liabilities | 926,922 | 879,445 | ||||||||||||||||||||||
| Retained earnings | 124,782 | 114,692 | ||||||||||||||||||||||
| Total liabilities and retained earnings | $ | 1,051,704 | $ | 994,137 | ||||||||||||||||||||
| Tax-equivalent basis adjustment | (7 | ) | (7 | ) | ||||||||||||||||||||
| Net interest and dividend income | $ | 18,090 | $ | 15,320 | ||||||||||||||||||||
| Interest rate spread | 2.98% | 2.61% | ||||||||||||||||||||||
| Net interest-earning assets | $ | 221,174 | $ | 206,508 | ||||||||||||||||||||
| Net interest margin (6) | 3.63% | 3.27% | ||||||||||||||||||||||
| Average interest-earning assets to | ||||||||||||||||||||||||
| average interest-bearing liabilities | 128.39% | 128.12% | ||||||||||||||||||||||
(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 net interest income divided by average total interest-earning assets.
Comparison of Operating Results for the Three Months Ended March 31, 2026 and 2025
Net Income. Net income increased by $349 thousand, or 13.0%, to $3.0 million for the three months ended March 31, 2026 compared with net income of $2.7 million for the three months ended March 31, 2025. The increase was due to higher net interest income, partially offset by higher provisions for credit loss, lower non-interest income and higher other expenses.
Net Interest and Dividend Income. Net interest and dividend income increased by $1.4 million, or 17.2%, to $9.2 million for the three months ended March 31, 2026 from $7.9 million for the three months ended March 31, 2025. The increase was attributable to a 35-basis point increase in the Company's net interest margin to 3.66% for the three months ended March 31, 2026 from 3.31% for the three months ended March 31, 2025, as well as a $56.6 million increase in the average balance of interest-earning assets between the periods.
Interest and Dividend Income. Interest and dividend income increased by $1.4 million, or 10.6%, to $14.9 million for the three months ended March 31, 2026 compared with $13.5 million for the three months ended March 31, 2025. The increase was attributable to a 25-basis point increase in the yield on interest earning assets to 5.93% for the three months ended March 31, 2026 from 5.68% for the three months ended March 31, 2025, as well as an increase in the average balance of net loans receivable between the periods.
The average balance of loans receivable, net of allowance for credit losses, increased by $65.3 million, or 8.1%, to $868.7 million during the three months ended March 31, 2026 from $803.4 million for the three months ended March 31, 2025, while the yield on loans receivable increased 23 basis points to 6.35% for the three months ended March 31, 2026 from 6.12% for the three months ended March 31, 2025. 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 by $45 thousand, or 3.4%, to $1.3 million for the three months ended March 31, 2026. The average balance of investment securities and interest-earning deposits decreased by $9.6 million, or 6.0%, to $150.0 million for the three months ended March 31, 2026 from $159.6 million for the three months ended March 31, 2025, while the average yield on such assets increased 11 basis points to 3.51% for the three months ended March 31, 2026 from 3.40% for the three months ended March 31, 2025.
Interest Expense. Interest expense increased by $73 thousand, or 1.3%, to $5.7 million for the three months ended March 31, 2026 from $5.6 million for the three months ended March 31, 2025. The average balance of interest-bearing liabilities increased by $36.3 million, or 4.8%, to $795.1 million for the three months ended March 31, 2026 from $758.9 million for the three months ended March 31, 2025, while the average cost on such interest-bearing liabilities decreased 10 basis points to 2.92% for the three months ended March 31, 2026 compared with 3.02% for the three months ended March 31, 2025. 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 March 31, 2026.
The average balance of interest-bearing deposits increased $19.3 million, or 2.7%, to $746.0 million for the three months ended March 31, 2026 from $726.7 million for the three months ended March 31, 2025. The average cost of such deposits decreased 14 basis points to 2.89% from 3.03%, while the interest paid on interest-bearing deposits decreased $101 thousand to $5.3 million for the three months ended March 31, 2026 compared with $5.4 million for the three months ended March 31, 2025.
Interest expense on borrowings increased by $174 thousand, or 78.0%, to $397 thousand for the three months ended March 31, 2026 from $223 thousand for the three months ended March 31, 2025. The average balance of borrowings increased by $16.9 million, or 52.7%, to $49.0 million for the three months ended March 31, 2026 compared to $32.1 million for the three months ended March 31, 2025 while the average cost of the borrowings increased by 47 basis points to 3.28% from 2.81%, respectively.
Provision for Credit Losses. The provision for credit losses increased by $286 thousand, or 953.3%, to $256 thousand for the three months ended March 31, 2026 compared with a $30 thousand net recovery for the three months ended March 31, 2025. The higher provision for credit losses resulted from higher commercial real estate and construction loan balances, which generally require higher provisions for credit loss, that more than offset contraction in the Company's residential mortgage loan portfolio.
The Company recorded $3 thousand in net loan recoveries during the three months ended March 31, 2026 compared with $5 thousand in net loan recoveries during the three months ended March 31, 2025.
Other Income. Other income decreased by $411 thousand, or 32.4%, to $857 thousand during the three months ended March 31, 2026 compared to $1.3 million for the three months ended March 31, 2025 from lower gains on the sale of loans and lower service charge income.
The Company recorded lower gains from the sale of Small Business Administration 7(a) loans, which decreased by $343 thousand to $269 thousand for the three months ended March 31, 2026 from $612 thousand for the three months ended March 31, 2025. Contributing to the lower gains were fewer loans sold as well as lower premiums on the sales of loans. The Company sold $2.8 million in loans during the three months ended March 31, 2026 compared with sales totaling $6.5 million for the three months ended March 31, 2025.
Also contributing to the decline in other income was a $93 thousand decline in service charges, which included commercial loan prepayment charges and late fees. The Company recorded $196 thousand in prepayment and late fees during the three months ended March 31, 2026 compared with $260 thousand for the three months ended March 31, 2025. Commercial loan prepayment penalties are highly unpredictable in both amount and timing, as they are dependent upon our borrower's ability and intent to repay their loan before its scheduled rate reset date or maturity date, whichever occurs sooner. Late fees on commercial loans are also highly unpredictable in amount and timing, as they accumulate until paid, which may occur when a loan is repaid in full.
Other Expenses. Other expenses increased by $167 thousand, or 3.1%, to $5.6 million for the three months ended March 31, 2026 compared to $5.4 million for the three months ended March 31, 2025 from higher compensation, employee benefit and data processing expenses.
The increase in total other expenses was primarily attributable to higher compensation and benefit expense, which increased by $137 thousand, or 4.2%, to $3.4 million, due to higher medical benefits and incentive accruals as well as annual merit increases. Data processing expenses increased by $40 thousand, or 32.8%, to $162 thousand for the three months ended March 31, 2026 from $122 thousand for the three months ended March 31, 2025. The increase was attributable to the use of expiring flex credits from the Company's core service provider during the three months ended March 31, 2025.
Income Tax Expense. The Company recorded income tax expense of $1.2 million on pre-tax income of $4.3 million for the three months ended March 31, 2026, compared with $1.1 million on pre-tax income of $3.8 million for the three months ended March 31, 2025. The increase was driven by higher pre-tax income during the three months ended March 31, 2026. The Company's effective tax rate for the three months ended March 31, 2026 and 2025 was 29.0%.
Comparison of Operating Results for the Six Months Ended March 31, 2026 and 2025
Net Income. Net income increased by $1.4 million, or 29.4%, to $6.2 million during the six months period ended March 31, 2026 compared with $4.8 million for the six months period ended March 31, 2025. The increase was due to higher net interest income, partially offset by higher provisions for credit loss, lower other income, and higher other expenses.
Net Interest and Dividend Income. Net interest and dividend income increased by $2.8 million, or 18.1%, to $18.1 million for the six months ended March 31, 2026 from $15.3 million for the six months ended March 31, 2025. The increase was attributable to a $59.5 million, or 6.3%, increase in the average balance of interest earning assets between the periods as well as a 36 basis points increase in the Company's net interest margin to 3.63% for the six months ended March 31, 2026 from 3.27% for the six months ended March 31, 2025.
Interest and Dividend Income. Interest and dividend income increased by $3.1 million, or 11.7%, to $29.5 million for the six months ended March 31, 2026 from $26.4 million for the six months ended March 31, 2025. The increase was attributable to a 28 basis points increase in the yield on interest earning assets to 5.92% for the six months ended March 31, 2026 from 5.64% for the six months ended March 31, 2025, as well as an increase in the average balance of net loans receivable.
The average balance of loans receivable, net of allowance for credit losses, increased by $67.9 million, or 8.5%, to $862.5 million during the six months ended March 31, 2026 from $794.6 million during the six months ended March 31, 2025, while the yield on loans receivable increased 25 basis points to 6.31% for the six months ended March 31, 2026 from 6.06% for the six months ended March 31, 2025. The higher average balance and yield accounted for a $3.1 million, or 13.0%, increase in loan interest income between periods.
Interest earned on investment securities, including interest-earning deposits and excluding FHLBNY stock, decreased by $60 thousand, or 2.6%, to $2.26 million for the six months ended March 31, 2026 from $2.32 million for the six months ended March 31, 2025. The average balance of investment securities and interest-earning deposits decreased by $9.3 million, or 6.5%, to $134.4 million for the six months ended March 31, 2026 from $143.7 million for the six months ended March 31, 2025. Partially offsetting this decrease was a 14 basis point increase in the yield of such assets to 3.39% for the six months ended March 31, 2026 from 3.25% for the six months ended March 31, 2025.
Interest Expense. Interest expense increased by $313 thousand, or 2.8%, to $11.4 million for the six months ended March 31, 2026 compared with $11.1 million for the six months ended March 31, 2025. The average balance of interest-bearing liabilities increased by $44.8 million, or 6.1%, to $779.1 million from $734.3 million, while the cost of interest-bearing liabilities decreased nine basis points to 2.94% for the six months ended March 31, 2026 compared with 3.03% for the six months ended March 31, 2025.
The average balance of interest-bearing deposits increased by $26.6 million, or 3.8%, to $730.0 million for the six months ended March 31, 2026 from $703.4 million for the six months ended March 31, 2025, while the average cost of such deposits decreased 12 basis points to 2.92% from 3.04%. As a result, interest paid on interest-bearing deposits decreased by $59 thousand, or 0.6%, to $10.6 million for the six months ended March 31, 2026 from $10.7 million for the six months ended March 31, 2025.
Interest expense on borrowings increased by $372 thousand, or 86.3%, to $803 thousand for the six months ended March 31, 2026 from $431 thousand for the six months ended March 31, 2025. The cost of borrowings increased 48 basis points to 3.28% for the six months ended March 31, 2026 compared with 2.80% for the six months ended March 31, 2025, while the average balance of borrowings increased by $18.3 million, or 59.2%, to $49.1 million for the six months ended March 31, 2026 from $30.8 million for the six months ended March 31, 2025.
Provision for Credit Losses. The provision for credit losses increased by $209 thousand, or 294.4%, to $280 thousand for the six months ended March 31, 2026 compared with $71 thousand for the six months ended March 31, 2025. The higher provision for credit losses resulted from higher specific reserves on construction loans, partially offset by lower expected loss rates driven by improving economic conditions impacting residential and commercial real estate loans.
The Company recorded $6 thousand in net loan recoveries during the six months ended March 31, 2026 compared with $108 thousand in net loan recoveries during the six months ended March 31, 2025.
Other Income. Other income decreased by $606 thousand, or 27.2%, to $1.6 million during the six months ended March 31, 2026 compared to $2.2 million for the six months ended March 31, 2025 from lower gains on the sale of Small Business Administration and other real estate owned loans.
The Company recorded lower gains from the sale of Small Business Administration 7(a) and other real estate owned loans, which decreased $321 thousand and $237 thousand, respectively. Contributing to the lower gains were fewer loans sold as well as lower premiums on the sales of loans. The Company sold $6.2 million Small Business Administration loans during the six months ended March 31, 2026 compared with sales totaling $9.8 million for the six months ended March 31, 2025. The Company recorded a loss of $13 thousand on the sale of other real estate owned for the six months ended March 31, 2026 compared with a $224 thousand gain for the six months ended March 31, 2025.
Also contributing to the decline in other income was an $84 thousand decline in service charges, The Company recorded $93 thousand in late fees during the six months ended March 31, 2026 compared with $164 thousand for the six months ended March 31, 2025.
Other Expenses. Other expenses increased by $76 thousand, or 0.7%, to $10.9 million during the six months ended March 31, 2026 from $10.8 million during the six months ended March 31, 2025 from higher compensation, employee benefit and data processing expenses.
The increase in total other expenses was primarily attributable to higher compensation and benefit expense, which increased by $225 thousand, or 3.6%, to $3.4 million, due to higher medical benefits and incentive accruals as well as annual merit increases. Data processing expenses increased by $106 thousand, or 49.8%, to $319 thousand for the six months ended March 31, 2026 from $213 thousand for the six months ended March 31, 2025 from the use of expiring flex credits for the Bank's core service provider during the six months ended March 31, 2025.
Partially offsetting these increases was a $178 thousand, or 9.7%, decrease in occupancy expenses to $1.7 million for the six months ended March 31, 2026 from $1.8 million for the six months ended March 31, 2025. Rent and the depreciation of leasehold improvements decreased by $226 thousand between periods from the closure of the Bank's Bridgewater retail office and subsequent opening of its Martinsville retail office. Partially offsetting these savings were higher ice and snow removal expenses, which increased by $38 thousand between periods.
Income Tax Expense. The Company recorded tax expense of $2.4 million on pre-tax income of $8.5 million for the six months ended March 31, 2026, compared to $1.9 million on pre-tax income of $6.7 million for the six months ended March 31, 2025. The increase in income tax expense was driven by higher pre-tax income during the six months ended March 31, 2026. The Company's effective tax rate for the six months ended March 31, 2026 was 27.8% compared with 28.5% for the six months ended March 31, 2025.
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 March 31, 2026, we had an aggregate net borrowing capacity of $168.1 million. We also had the ability to borrow $110.5 million from the FRBNY at March 31, 2026 compared with $109.6 million at September 30, 2025. The Company did not have any borrowings outstanding with the FRBNY at March 31, 2026 and September 30, 2025. There has been no material adverse change during the six months ended March 31, 2026 in the ability of the Company and its subsidiaries to fund their operations.
At March 31, 2026, the Company had commitments outstanding under letters of credit totaling $870 thousand, commitments to originate loans totaling $28.9 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit totaling $85.3 million. There has been no material change during the six months ended March 31, 2026 in any of the Company's other contractual obligations or commitments to make future payments.
Capital Requirements
At March 31, 2026, the Bank's Tier 1 capital as a percentage of the Bank's total assets was 11.15%, and total qualifying capital as a percentage of risk-weighted assets was 15.86%.
Magyar Bancorp Inc. published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 17:19 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]