UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT ~~UNDER~~PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2020~~2021

☐ 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)~~

(732) 342-7600

(Issuer’s Telephone Number including area code)

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

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

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

Yes ☑ No ☐

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

Yes ☑ No ☐

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

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

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

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

Yes ☐ No ☑

The number of shares outstanding of the issuer's common stock at February 1, ~~2021~~2022 was ~~5,810,746.~~7,097,825.

MAGYAR BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

PART I. FINANCIAL INFORMATION

		Page Number

Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34	31
Item 4.	Controls and Procedures	34	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35	32
Item 1A.	Risk Factors	35	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35	32
Item 3.	Defaults Upon Senior Securities	35	32
Item 4.	Mine Safety Disclosures	35	32
Item 5.	Other Information	35	32
Item 6.	Exhibits	35	32

Signature Pages		36	33

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

December 31, September 30,
2020 2020
(Unaudited)
Assets
Cash $ 1,645 $ 1,494
Interest earning deposits with banks 50,425 60,232
Total cash and cash equivalents 52,070 61,726

Investment securities - available for sale, at fair value 14,798 14,561
Investment securities - held to maturity, at amortized cost (fair value of
$32,893 and $30,899 at December 31, 2020 and September 30, 2020, respectively) 32,493 30,443
Federal Home Loan Bank of New York stock, at cost 1,981 1,981
Loans receivable, net of allowance for loan losses of $7,130 and $6,400
at December 31, 2020 and September 30, 2020, respectively 598,530 603,110
Bank owned life insurance 14,049 13,971
Accrued interest receivable 4,096 4,030
Premises and equipment, net 14,607 14,746
Other real estate owned ("OREO") 2,072 2,594
Other assets 7,088 6,835
Total assets $ 741,784 $ 753,997

Liabilities and Stockholders' Equity
Liabilities
Deposits $ 612,064 $ 618,330
Escrowed funds 2,655 2,413
Borrowings 60,260 67,410
Accrued interest payable 152 191
Accounts payable and other liabilities 8,452 8,803
Total liabilities 683,583 697,147

Stockholders' equity
Preferred stock: $.01 Par Value, 1,000,000 shares authorized; none issued — —
Common stock: $.01 Par Value, 8,000,000 shares authorized;
5,923,742 issued; 5,810,746 shares outstanding
at December 31, 2020 and September 30, 2020, at cost 59 59
Additional paid-in capital 26,279 26,294
Treasury stock: 112,996 shares
at December 31, 2020 and September 30, 2020 , at cost (1,242 ) (1,242 )
Unearned Employee Stock Ownership Plan shares — (65 )
Retained earnings 34,498 33,161
Accumulated other comprehensive loss (1,393 ) (1,357 )
Total stockholders' equity 58,201 56,850
Total liabilities and stockholders' equity $ 741,784 $ 753,997

	December 31,			September 30,
	2021			2021
	(Unaudited)
Assets
Cash	$	2,141		$	1,808
Interest earning deposits with banks		80,130			73,393
Total cash and cash equivalents		82,271			75,201

Investment securities - available for sale, at fair value		12,181			12,927
Investment securities - held to maturity, at amortized cost (fair value of $65,671 and $57,282 at December 31, 2021 and September 30, 2021, respectively)		66,467			57,660
Federal Home Loan Bank of New York stock, at cost		1,661			1,738
Loans receivable, net of allowance for loan losses of $8,228 and $8,075 at December 31, 2021 and September 30, 2021, respectively		574,266			585,301
Bank owned life insurance		17,375			14,288
Accrued interest receivable		3,584			3,533
Premises and equipment, net		14,199			14,331
Other real estate owned ("OREO")		649			636
Other assets		8,001			8,375
Total assets	$	780,654		$	773,990

Liabilities and Stockholders' Equity
Liabilities
Deposits	$	647,675		$	639,814
Escrowed funds		3,277			3,242
Borrowings		21,356			23,356
Accrued interest payable		81			85
Accounts payable and other liabilities		9,822			9,852
Total liabilities		682,211			676,349

Stockholders' equity
Preferred stock: $.01 Par Value, 500,000 shares authorized; at December 31, 2021 and September 30, 2021, NaN issued		0-			0-
Common stock: $.01 Par Value, 14,000,000 shares authorized; 7,097,825 shares issued; 7,097,825 shares outstanding at December 31, 2021 and September 30, 2021, at cost		71			71
Additional paid-in capital		63,681			63,713
Treasury stock: 112,996 shares at cost		(1,242	)		(1,242	)
Unearned Employee Stock Ownership Plan shares		(3,240	)		(3,235	)
Retained earnings		40,160			39,281
Accumulated other comprehensive loss		(987	)		(947	)
Total stockholders' equity		98,443			97,641
Total liabilities and stockholders' equity	$	780,654		$	773,990

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Data)

For the Three Months
Ended December 31,
2020 2019
(Unaudited)
Interest and dividend income
Loans, including fees $ 6,751 $ 6,397
Investment securities
Taxable 225 338
Federal Home Loan Bank of New York stock 25 37

Total interest and dividend income 7,001 6,772

Interest expense
Deposits 765 1,446
Borrowings 191 196

Total interest expense 956 1,642

Net interest and dividend income 6,045 5,130

Provision for loan losses 640 210

Net interest and dividend income after
provision for loan losses 5,405 4,920

Other income
Service charges 293 265
Income on bank owned life insurance 78 82
Other operating income 591 31
Gains on sales of loans 263 26

Total other income 1,225 404

Other expenses
Compensation and employee benefits 2,547 2,589
Occupancy expenses 725 744
Professional fees 528 349
Data processing expenses 132 154
OREO expenses 180 103
FDIC deposit insurance premiums 130 108
Loan servicing expenses 84 50
Insurance expense 48 52
Other expenses 350 384
Total other expenses 4,724 4,533

Income before income tax expense 1,906 791
Income tax expense 569 238

Net income $ 1,337 $ 553

Net income per share-basic and diluted $ 0.23 $ 0.10

Weighted average basic and diluted shares outstanding 5,810,746 5,820,746

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

	For the Three Months Ended December 31,
	2021		2020
	(Unaudited)
Interest and dividend income
Loans, including fees	$	6,721	$	6,751
Investment securities
Taxable		261		225
Tax-exempt		7		0-
Federal Home Loan Bank of New York stock		20		25

Total interest and dividend income		7,009		7,001

Interest expense
Deposits		451		765
Borrowings		119		191

Total interest expense		570		956

Net interest and dividend income		6,439		6,045

Provision for loan losses		101		640

Net interest and dividend income after provision for loan losses		6,338		5,405

Other income
Service charges		257		293
Income on bank owned life insurance		87		78
Fees for other customer services		0-		464
Interest rate swap fees		0-		102
Other operating income		25		25
Gains on sales of loans		281		263

Total other income		650		1,225

Other expenses
Compensation and employee benefits		2,702		2,547
Occupancy expenses		739		725
Professional fees		387		528
Data processing expenses		134		132
Marketing and business development		125		44
OREO expenses		34		180
FDIC deposit insurance premiums		57		130
Loan servicing expenses		46		84
Other expenses		397		354
Total other expenses		4,621		4,724

Income before income tax expense		2,367		1,906

Income tax expense		674		569

Net income	$	1,693	$	1,337

Net income per share-basic and diluted	$	0.25	$	0.19

Weighted average basic and diluted shares outstanding		6,792,477		7,096,664

~~Table of Contents~~

~~MAGYAR BANCORP, INC. AND SUBSIDIARY~~

~~Consolidated Statements of Comprehensive Income~~

~~(In Thousands)~~

For the Three Months
Ended December 31,
2020 2019
(Unaudited)
Net income $ 1,337 $ 553
Other comprehensive income
Unrealized loss on securities available for sale (51 ) (14 )
Other comprehensive loss, before tax (51 ) (14 )
Deferred income tax effect 15 4
Total other comprehensive loss (36 ) (10 )
Total comprehensive income $ 1,301 $ 543

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

~~Table of Contents~~

~~MAGYAR BANCORP, INC. AND SUBSIDIARY~~

~~Consolidated Statements of Changes in Stockholders' Equity~~

~~For the Three Months Ended December 31, 2020 and 2019~~

~~(In Thousands, Except for 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, 2020 5,810,746 59 $ 26,294 $ (1,242 ) $ (65 ) $ 33,161 $ (1,357 ) $ 56,850
Net income — — — — — 1,337 — 1,337
Other comprehensive income — — — — — — (36 ) (36 )
ESOP shares allocated — — (15 ) — 65 — — 50
Balance, December 31, 2020 5,810,746 59 $ 26,279 $ (1,242 ) $ — $ 34,498 $ (1,393 ) $ 58,201

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, 2019 5,820,746 59 $ 26,317 $ (1,152 ) $ (214 ) $ 30,971 $ (1,330 ) $ 54,651
Net income — — — — — 553 — 553
Other comprehensive income — — — — — — (10 ) (10 )
ESOP shares allocated — — 2 — 36 — — 38
Balance, December 31, 2019 5,820,746 59 $ 26,319 $ (1,152 ) $ (178 ) $ 31,524 $ (1,340 ) $ 55,232

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

~~Table of Contents~~

~~MAGYAR BANCORP, INC. AND SUBSIDIARY~~

~~Consolidated Statements of Cash Flows~~

~~(In Thousands)~~

For the Three Months Ended
December 31,
2020 2019
(Unaudited)
Operating activities
Net income $ 1,337 $ 553
Adjustment to reconcile net income to net cash provided by (used in) operating activities

Depreciation expense 207 217
Premium amortization on investment securities, net 33 28
Provision for loan losses 640 210
Provision for loss on other real estate owned 150 60
Originations of SBA loans held for sale (2,513 ) (262 )
Proceeds from the sales of SBA loans 2,776 288
Gains on sale of loans receivable (263 ) (26 )
Gains on the sales of other real estate owned (1 ) (11 )
ESOP compensation expense 50 38
Deferred income tax benefit (134 ) (135 )
(Increase) decrease in accrued interest receivable (66 ) 34
Increase in surrender value of bank owned life insurance (78 ) (82 )
(Increase) decrease in other assets (105 ) 92
Decrease in accrued interest payable (39 ) (31 )
Decrease in accounts payable and other liabilities (351 ) (1,730 )
Net income to net cash provided by (used in) operating activities 1,643 (757 )

Investing activities
Net decrease (increase) in loans receivable 3,940 (7,424 )
Purchases of investment securities held to maturity (4,652 ) (3,679 )
Purchases of investment securities available for sale (4,060 ) (1,516 )
Principal repayments on investment securities held to maturity 2,586 2,230
Principal repayments on investment securities available for sale 3,755 696
Purchases of premises and equipment (68 ) (16 )
Investment in other real estate owned (13 ) —
Proceeds from other real estate owned 387 17
Redemption of Federal Home Loan Bank stock — 257
Net cash provided by (used in) investing activities 1,875 (9,435 )

Financing activities
Net (decrease) increase in deposits (6,266 ) 13,579
Net increase in escrowed funds 242 74
Repayments of long-term advances (7,150 ) (5,701 )
Net cash (used in) provided by financing activities (13,174 ) 7,952
Net decrease in cash and cash equivalents (9,656 ) (2,240 )
Cash and cash equivalents, beginning of year 61,726 21,469

Cash and cash equivalents, end of year $ 52,070 $ 19,229

Supplemental disclosures of cash flow information
Cash paid for
Interest $ 995 $ 1,674
Initial recognition of lease liability and right-of-use asset $ — $ 3,835

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

5 2

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(In Thousands)

	For the Three Months Ended December 31,
	2021			2020
	(Unaudited)
Net income	$	1,693		$	1,337
Other comprehensive income
Unrealized loss on securities available for sale		(53	)		(51	)
Other comprehensive loss, before tax		(53	)		(51	)
Deferred income tax effect		13			15
Total other comprehensive loss	$	(40	)	$	(36	)
Total comprehensive income	$	1,653		$	1,301

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity

For the Three Months Ended December 31, 2021 and 2020

(In Thousands, Except for Share Amounts)

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

	Common Stock				Additional						Unearned					Accumulated Other
	Shares		Par		Paid-In			Treasury			ESOP			Retained		Comprehensive
	Outstanding		Value		Capital			Stock			Shares			Earnings		Loss			Total
	(Unaudited)
Balance, September 30, 2020		5,810,746	$	59	$	26,294		$	(1,242	)	$	(65	)	$	33,161	$	(1,357	)	$	56,850
Net income		-		-		-			-			-			1,337		-			1,337
Other comprehensive income		-		-		-			-			-			-		(36	)		(36	)
ESOP shares allocated		-		-		(15	)		-			65			-		-			50
Balance, December 31, 2020		5,810,746	$	59	$	26,279		$	(1,242	)	$	0-		$	34,498	$	(1,393	)	$	58,201

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

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In Thousands)

	For the Three Months Ended December 31,
	2021			2020
	(Unaudited)
Operating activities
Net income	$	1,693		$	1,337
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation expense		209			207
Premium amortization on investment securities, net		58			33
Provision for loan losses		101			640
Provision for loss on other real estate owned		0-			150
Originations of SBA loans held for sale		(2,437	)		(2,513	)
Proceeds from the sales of SBA loans		2,718			2,776
Gains on sale of loans receivable		(281	)		(263	)
Gains on the sales of other real estate owned		0-			(1	)
ESOP compensation expense		61			50
Deferred income tax expense (benefit)		26			(134	)
Increase in accrued interest receivable		(51	)		(66	)
Increase in surrender value of bank owned life insurance		(87	)		(78	)
Decrease (increase) in other assets		360			(105	)
Decrease in accrued interest payable		(4	)		(39	)
Increase in accounts payable and other liabilities		(30	)		(351	)
Net cash provided by operating activities		2,336			1,643

Investing activities
Net decrease in loans receivable		10,934			(3,940	)
Purchases of investment securities held to maturity		(10,064	)		(4,652	)
Purchases of investment securities available for sale		0-			(4,060	)
Principal repayments on investment securities held to maturity		1,221			2,586
Principal repayments on investment securities available for sale		671			3,755
Purchase of bank owned life insurance		(3,000	)		0-
Purchases of premises and equipment		(77	)		(68	)
Investment in other real estate owned		(12	)		(13	)
Proceeds from other real estate owned		0-			387
Redemption of Federal Home Loan Bank stock		77			0-
Net cash (used in) provided by investing activities		(250	)		1,875

Financing activities
Net increase (decrease) in deposits		7,861			(6,266	)
Purchase of common stock for ESOP		(98	)		0-
Net increase in escrowed funds		35			242
Repayments of long-term advances		(2,000	)		(7,150	)
Cash paid on common stock dividends		(814	)		0-
Net cash provided by (used in) financing activities		4,984			(13,174	)
Net increase (decrease) in cash and cash equivalents		7,070			(9,656	)
Cash and cash equivalents, beginning of year		75,201			61,726
Cash and cash equivalents, end of year	$	82,271		$	52,070

Supplemental disclosures of cash flow information
Cash paid for
Interest	$	575		$	995

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

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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 MagBank Investment Company. All material intercompany transactions and balances have been eliminated. The Company prepares its financial statements on the accrual basis and in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The unaudited information furnished herein reflects all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.

Operating results for the three months ended December 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021. The September 30, 2020 information has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete consolidated financial statements.

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

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, ~~2020~~2021 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

NOTE B-B – RECENT ACCOUNTING PRONOUNCEMENTS

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

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

In October 2019, the FASB voted to defer the effective date of ASU 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022 (October 1, 2023 for the Company), and interim periods within those fiscal years. The Company currently expects to continue to qualify as a smaller reporting company, based upon the current SEC definition, and as a result, will be able to defer implementation of the new standard for a period of time. The Company did not early adopt as of December 31, ~~2020,~~2021, but will continue to review factors that might indicate that the full deferral time period should not be used. The Company continues to evaluate the impact the new standard will have on the accounting for credit losses, but the Company may recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. The Company cannot yet determine the magnitude of any such one-time cumulative adjustment or of the overall impact of the new standard on its consolidated financial condition or results of operations.

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In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. The ASU removes the disclosures of 1) the amounts in accumulated other comprehensive income that the entity expects to recognize in net periodic benefit cost during the next fiscal year, 2) the amount and timing of plan assets expected to be returned to the employer and 3) certain related party disclosures. The ASU clarifies the disclosure requirements for the projected benefit obligation (“PBO”) and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation (“ABO”) and fair value of plan assets for plans with ABOs in excess of plan assets. The ASU adds disclosure requirements for the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and for an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. ASU 2018-14 iswas effective for ~~public business entities in fiscal years ending after December 15, 2020 (Beginning~~the Company beginning October 1, 2021 ~~for the Company). Early adoption is permitted. The Corporation is currently evaluating the~~and did not have a material impact ~~this ASU will have~~ on its consolidated financial condition or results of operations.

~~Table~~In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of ~~Contents~~

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

NOTE C -– CONTINGENCIES

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

NOTE D -– EARNINGS PER SHARE

~~Basic~~The following table presents a calculation of basic and diluted earnings per share for the three months ended December 31, ~~2020~~2021 and ~~2019~~2020. Basic and diluted earnings per share were calculated by dividing net income by the weighted-average number of shares outstanding for the ~~period considering~~periods. As a result of the ~~effect~~second-step conversion completed on July 14, 2021, the previously reported number of ~~dilutive equity options and stock awards~~shares for the ~~diluted earnings per share calculations.~~year ended December 31, 2020 were adjusted to reflect the 1.2213 exchange ratio for comparative purposes.

For the Three Months Ended December 31,
2020 2019
Weighted Per Weighted Per
average share average share
Income shares Amount Income shares Amount
(In thousands, except per share data)
Basic EPS
Net income available to common shareholders $ 1,337 5,811 $ 0.23 $ 553 5,821 $ 0.10

Effect of dilutive securities
Options and grants — — — — — —

Diluted EPS
Net income available to common shareholders plus assumed conversion $ 1,337 5,811 $ 0.23 $ 553 5,821 $ 0.10

	For the Three Months Ended December 31,
	2021						2020
			Weighted		Per				Weighted		Per
			average		share				average		share
	Income		shares		Amount		Income		shares		Amount
	(Dollars in thousands, except share and per share data)
Basic and diluted EPS
Net income available to weighted average common shareholders	$	1,693		6,792,477	$	0.25	$	1,337		7,096,664	$	0.19

There were no outstanding stock awards or options to purchase common stock at December 31, ~~2020~~2021 and ~~2019.~~2020.

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NOTE E – STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM

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

Stock options generally vest over a five-year service period and expire ten years from issuance. The fair values of all option grants were estimated using the Black-Scholes option-pricing model. Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the vesting period of the awards. Once vested, these awards are irrevocable.

There were no grants, vested shares or forfeitures of non-vested restricted stock awards for the three months ended December 31, ~~2020~~2021 and ~~2019.~~2020. There were also no stock option and stock award expenses included with compensation expense for the three months ended December 31, ~~2020~~2021 and ~~2019.~~

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2020.

The Company ~~announced~~completed its first stock repurchase program of 130,927 shares in November 2007, and announced its second stock repurchase program of up to 5% of its publicly-held outstanding shares of common stock, or 129,924 ~~shares.~~shares, in November 2007. Through December 31, ~~2020,~~2021, the Company had repurchased a total of 91,000 shares of its common stock at an average cost of $8.41 per share under this program. No

Under current federal regulations, subject to limited exceptions, the Company may not repurchase shares ~~were repurchased~~of our common stock during the first year following the completion of its second-step conversion offering, which was completed on July 14, 2021. The Company did not repurchase any shares of its common stock during the three months ended December 31, ~~2020~~2021 and ~~2019. Under the stock repurchase program, 38,924 shares of the 129,924 shares authorized remained available for repurchase as of December 31,~~ 2020. ~~The Company’s intended use of the repurchased shares is for general corporate purposes.~~ The Company held 112,996 total treasury stock shares at December 31, ~~2020.~~

2021.

The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of employees ~~of the Company and the Bank~~ who meet ~~the~~certain eligibility ~~requirements as defined in the plan. In 2006 the~~requirements. The ESOP trust ~~purchased 217,863~~purchases shares of common stock in the open market using proceeds of a loan from the Company. The ~~total cost~~loan is secured by shares of ~~shares purchased by~~ the ~~ESOP trust was $2.3 million, reflecting an average cost per share of $10.58.~~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. ~~The loan bears a variable interest rate that adjusts annually every January 1~~^st to the then published Prime Rate (4.75% at January 1, 2020) with principal and interest payable annually in equal installments over thirty years. The loan is secured by shares of the Company’s stock.

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”.~~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.

~~At December 31, 2020,~~The Company’s ESOP (“2006 ESOP”) was established in 2006 as part of the Company’s initial public offering. The total cost of the 217,863 shares purchased by the 2006 ESOP trust was $2.3 million, reflecting an average cost per share of $10.58. The 2006 ESOP loan was fully repaid during the year ended September 30, 2021, and all shares were allocated to ~~participants totaled 203,106. Unallocated~~participants.

In connection with the second-step conversion offering, the ESOP trustees purchased 8% of the shares ~~held~~sold in ~~suspense totaled 14,757~~the offering, or 312,800 shares (“2021 ESOP”). As a result of the second-step conversion offering being oversubscribed in the first tier of subscription priorities, the ESOP trustees were unable to purchase shares of the Company’s common stock in the second-step conversion offering. The total cost of the shares purchased by the 2021 ESOP trust was $3.4 million, reflecting an average cost per share of $10.77. The 2021 ESOP loan bears a variable interest rate that adjusts annually to Prime Rate (3.25% at January 1, 2022) with principal and ~~had a fair market value of $142,257.~~ interest payable annually in equal installments over thirty years.

The Company's contribution expense for the ESOP was ~~$50,000~~$61,000 and ~~$38,000~~$50,000 for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

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NOTE F – OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive loss and the related income tax effects are as follows:

Three Months Ended December 31,
2020 2019
Tax Net of Tax Net of
Before Tax (Benefit) Tax Before Tax (Benefit) Tax
Amount Expense Amount Amount Expense Amount
(In thousands)
Unrealized holding losses arising
during period on:
Available-for-sale investments $ (51 ) $ 15 $ (36 ) $ (14 ) $ 4 $ (10 )
Other comprehensive loss, net $ (51 ) $ 15 $ (36 ) $ (14 ) $ 4 $ (10 )

	Three Months Ended December 31,
	2021								2020
				Tax		Net of						Tax		Net of
	Before Tax			(Benefit)		Tax			Before Tax			(Benefit)		Tax
	Amount			Expense		Amount			Amount			Expense		Amount
	(In thousands)
Unrealized holding loss arising during period on:
Available-for-sale investments	$	(53	)	$	13	$	(40	)	$	(51	)	$	15	$	(36	)

Other comprehensive loss, net	$	(53	)	$	13	$	(40	)	$	(51	)	$	15	$	(36	)

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 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 ~~other real estate owned, or~~ 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 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.

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	~~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~~ -	Level 3 -Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

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

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

Securities available-for-sale

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

Derivatives

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

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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.

	Fair Value at December 31, 2020
	Total		Level 1		Level 2		Level 3
December 31, 2021									Total		Level 1		Level 2		Level 3
	(In thousands)								(In thousands)
Assets:
Securities available for sale:
Mortgage-backed securities	$	9,797	$	—	$	9,797	$	—	$	12,181	$	0-	$	12,181	$	0-
Debt securities		5,001		—		5,001		—		-		-		-		-
Total securities available for sale		14,798		—		14,798		—		12,181		0-		12,181		0-
Derivative assets		144		—		144		—		164		0-		164		0-
Total Assets	$	14,942	$	—	$	14,942	$	—	$	12,345	$	0-	$	12,345	$	0-

Liabilities:
Derivative liabilities	$	144	$	—	$	144	$	—	$	164	$	0-	$	164	$	0-
Total Liabilities	$	144	$	—	$	144	$	—	$	164	$	0-	$	164	$	0-

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Fair Value at September 30, 2020
Total Level 1 Level 2 Level 3
(In thousands)
Assets:
Securities available for sale:
Mortgage-backed securities $ 9,558 $ — $ 9,558 $ —
Debt securities 5,003 — 5,003 —
Total securities available for sale $ 14,561 $ — $ 14,561 $ —

September 30, 2021	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	186	$	0-	$	186	$	0-
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		12,741		0-		12,741		0-
Total securities available for sale	$	12,927	$	0-	$	12,927	$	0-
Derivative assets		183		0-		183		0-
Total assets	$	13,110	$	0-	$	13,110	$	0-

Liabilities:
Derivative liabilities	$	183	$	0-	$	183	$	0-
Total Liabilities	$	183	$	0-	$	183	$	0-

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

Mortgage Servicing Rights, net

Mortgage Servicing Rights (MSRs) are carried at the lower of cost or estimated fair value. The estimated fair value of MSRs is determined through a calculation of future cash flows, incorporating estimates of assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements and, as such, are classified as Level 3. The Company had MSRs totaling ~~$8,000~~$3,000 and ~~$12,000~~$4,000 at December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively.

Impaired Loans

Loans which meet certain criteria are evaluated individually for impairment. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Three impairment measurement methods are used, depending upon the collateral securing the asset: 1) the present value of expected future cash flows discounted at the loan’s effective interest rate (the rate of return implicit in the loan); 2) the asset’s observable market price; or 3) the fair value of the collateral, less anticipated selling and disposition costs, if the asset is collateral dependent. The regulatory agencies require the last method for loans from which repayment is expected to be provided solely by the underlying collateral. The Company’s impaired loans are generally collateral dependent and, as such, are carried at the estimated fair value of the collateral less estimated selling costs. Fair value is estimated through current appraisals, and adjusted by management as necessary, to reflect current market conditions and, as such, are generally classified as Level 3.

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Appraisals of collateral securing impaired loans are conducted by approved, qualified, and independent third-party appraisers. Such appraisals are ordered via the Company’s credit administration department, independent from the lender who originated the loan, once the loan is deemed impaired, as described in the previous paragraph. Impaired loans are generally re-evaluated with an updated appraisal within one year of the last appraisal. The Company discounts the appraised “as is” value of the collateral for estimated selling and disposition costs and compares the resulting fair value of collateral to the outstanding loan amount. If the outstanding loan amount is greater than the discounted fair value, the Company requires a reduction in the outstanding loan balance or additional collateral before considering an extension to the loan. If the borrower is unwilling or unable to reduce the loan balance or increase the collateral securing the loan, it is deemed impaired and the difference between the loan amount and the fair value of collateral, net of estimated selling and disposition costs, is charged off through a reduction of the allowance for loan loss.

Other Real Estate Owned

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

The following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a non-recurring basis at December 31, ~~2020~~2021 and September 30, ~~2020.~~2021.

December 31, 2021	Total		Level 1		Level 2		Level 3
	(In thousands)

Impaired loans	$	10,506	$	0-	$	0-	$	10,506
Other real estate owned		649		0-		0-		649
Total	$	11,155	$	0-	$	0-	$	11,155

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Fair Value at December 31, 2020
Total Level 1 Level 2 Level 3
(In thousands)

Impaired loans $ 13,033 $ — $ — $ 13,033
Other real estate owned 2,072 — — 2,072
Total $ 15,105 $ — $ — $ 15,105

Fair Value at September 30, 2020
Total Level 1 Level 2 Level 3
(In thousands)

Impaired loans $ 11,874 $ — $ — $ 11,874
Other real estate owned 2,594 — — 2,594
Total $ 14,468 $ — $ — $ 14,468

September 30, 2021	Total		Level 1		Level 2		Level 3
	(In thousands)

Impaired loans	$	11,134	$	0-	$	0-	$	11,134
Other real estate owned		636		0-		0-		636
Total	$	11,770	$	0-	$	0-	$	11,770

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

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

	~~Fair Value~~	~~Valuation~~
~~December 31, 2020~~	~~Estimate~~	~~Techniques~~	~~Unobservable Input~~	~~Range (Weighted Average)~~

~~Impaired loans~~	~~$ 13,033~~	~~Appraisal of~~ ~~collateral~~ ⁽¹⁾	~~Appraisal adjustments (2)~~	~~0% to -50.0% (-10.7%)~~
~~Other real estate owned~~	~~$ 2,072~~	~~Appraisal of~~ ~~collateral~~ ⁽¹⁾	~~Liquidation expenses (2)~~	~~-11.8% to -31.2% (-18.2%)~~

(Dollars in thousands)


December 31, 2021	Fair Value Estimate			Valuation Techniques	Unobservable Input	Range (Weighted Average)

Impaired loans		$	10,506	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	-8.0% to -42.8% (-25.0%)
Other real estate owned		$	649	Appraisal of collateral ⁽¹⁾	Liquidation expenses ⁽²⁾	-31.2% to -45.5% (-39.4%)

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

	~~Fair Value~~	~~Valuation~~
~~September 30, 2020~~	~~Estimate~~	~~Techniques~~	~~Unobservable Input~~	~~Range (Weighted Average)~~

~~Impaired loans~~	~~$ 11,874~~	~~Appraisal of~~ ~~collateral (1)~~	~~Appraisal adjustments (2)~~	~~0% to -50.0% (-11.6%)~~
~~Other real estate owned~~	~~$ 2,594~~	~~Appraisal of~~ ~~collateral (1)~~	~~Liquidation expenses (2)~~	~~-6.0% to -27.4% (-14.7%)~~


September 30, 2021	Fair Value Estimate			Valuation Techniques	Unobservable Input	Range (Weighted Average)

Impaired loans		$	11,134	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	-8.0% to -42.8% (-23.6%)
Other real estate owned		$	636	Appraisal of collateral ⁽¹⁾	Liquidation expenses ⁽²⁾	-31.2% to -45.5% (-39.4%)

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

~~(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.

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

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The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of December 31, ~~2020~~2021 and September 30, ~~2020.~~2021. For short-term financial assets such as cash and cash equivalents and accrued interest receivable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to these products being payable on demand and having no stated maturity.

	Carrying		Fair		Fair Value Measurement Placement
	Value		Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
December 31, 2021
Financial instruments - assets
Investment securities held to maturity	$	66,467	$	65,671	$	0-	$	65,671	$	0-
Loans		574,266		579,562		0-		0-		579,562

Financial instruments - liabilities
Certificates of deposit including retirement certificates		97,002		97,937		0-		97,937		0-
Borrowings		21,356		21,520		0-		21,520		0-

September 30, 2021
Financial instruments - assets
Investment securities held-to-maturity	$	57,660	$	57,282	$	0-	$	57,282	$	0-
Loans		585,301		594,674		0-		0-		594,674

Financial instruments - liabilities
Certificates of deposit		116,892		118,144		0-		118,144		0-
Borrowings		23,356		23,753		0-		23,753		0-

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Carrying Fair Fair Value Measurement Placement
Value Value (Level 1) (Level 2) (Level 3)
(In thousands)
December 31, 2020
Financial instruments - assets
Investment securities held to maturity $ 32,493 $ 32,893 $ — $ 32,893 $ —
Loans 598,530 611,760 — — 611,760

Financial instruments - liabilities
Certificates of deposit including retirement certificates 118,783 120,730 — 120,730 —
Borrowings 60,260 61,154 — 61,154 —

September 30, 2020
Financial instruments - assets
Investment securities held-to-maturity $ 30,443 $ 30,899 $ — $ 30,899 $ —
Loans 603,110 617,418 — — 617,418

Financial instruments - liabilities
Certificates of deposit 126,375 128,590 — 128,590 —
Borrowings 67,410 68,386 — 68,386 —

NOTE H – LEASES

The Company accounts for its leases in accordance with ASU 2016-02, Leases (Topic 842). Topic 842 requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset, measured at the present value of the future minimum lease payments, at the lease commencement date.

The Company ~~has~~holds operating leases for five branch locations. Our leases have remaining lease terms of up to 11 years, some of which include options to extend the leases for up to 10 additional years. Operating leases are recorded as ROU assets and lease liabilities and are included within Other assets and Accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

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

At December 31, ~~2020,~~2021, the Company’s operating lease right-of-use assets and operating lease liabilities totaled ~~$3.1~~$3.7 million and ~~$3.5~~$4.1 million, respectively.

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

December 31, 2020
(Dollars in thousands)

Operating lease right-of-use asset $ 3,091
Operating lease liabilities $ 3,475
Weighted average remaining lease term in years 7.3
Weighted average discount rate 2.2%

	December 31, 2021			September 30, 2021
	(Dollars in thousands)

Operating lease right-of-use asset	$	3,743		$	3,894
Operating lease liabilities	$	4,096		$	4,254
Weighted average remaining lease term in years		7.5			7.7
Weighted average discount rate		2.2	%		2.2	%

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The following table summarizes the maturity of our remaining lease liabilities by year:

December 31, 2020
(In thousands)
For the Year Ending:
2021 $ 530
2022 595
2023 602
2024 602
2025 378
2026 and thereafter 1,150
Total lease payments 3,857
Less imputed interest (382 )
Present value of lease liabilities $ 3,475

	December 31, 2021
	(In thousands)
For the Year Ending:
2022	$	550
2023		738
2024		747
2025		523
2026		455
2027 and thereafter		1,533
Total lease payments		4,546
Less imputed interest		(450	)
Present value of lease liabilities	$	4,096

Total ~~lease expenses~~leases expense recorded on the Consolidated Statements of Income within Occupancy expense were ~~$204,000~~$207,000 and ~~$198,000~~$204,000 for the three months ended December 31, 2021 and 2020, ~~and 2019,~~ respectively.

NOTE I -– INVESTMENT SECURITIES

The following ~~tables summarize~~table summarizes the amortized cost and fair values of securities ~~available for sale~~classified as available-for-sale and held-to-maturity at December 31, ~~2020 and September 30, 2020:~~

December 31, 2020
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential $ 275 $ 14 $ — $ 289
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential 9,455 80 (27 ) 9,508
Debt securities 5,000 1 — 5,001
Total securities available for sale $ 14,730 $ 95 $ (27 ) $ 14,798

September 30, 2020
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage backed securities - residential $ 350 $ 14 $ — $ 364
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential 9,092 108 (6 ) 9,194
Debt securities 5,000 3 — 5,003
Total securities available for sale $ 14,442 $ 125 $ (6 ) $ 14,561

2021:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	153	$	5	$	0-		$	158
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		12,255		23		(255	)		12,023
Total securities available-for-sale	$	12,408	$	28	$	(255	)	$	12,181
Securities held-to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	3,447	$	1	$	(25	)	$	3,423
Mortgage-backed securities - commercial		684		0-		0-			684
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed-securities - residential		41,939		308		(560	)		41,687
Debt securities		14,498		0-		(307	)		14,191
Private label mortgage-backed securities - residential		238		5		0-			243
Obligations of state and political subdivisions		2,661		1		(22	)		2,640
Corporate securities		3,000		0-		(197	)		2,803
Total securities held-to-maturity	$	66,467	$	315	$	(1,111	)	$	65,671
Total investment securities	$	78,875	$	343	$	(1,366	)	$	77,852

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The contractual maturities of mortgage-backed securities generally exceed 10 years; however, the effective lives are expected to be shorter due to anticipated prepayments. The maturities of the debt securities, municipal bonds and certain information regarding the ~~mortgage-backed~~mortgage backed securities ~~available for sale~~ at December 31, ~~2020~~2021 are summarized in the following table:

December 31, 2020
Amortized Fair
Cost Value
(In thousands)
Due within 1 year $ — $ —
Due after 1 but within 5 years 5,000 5,001
Due after 5 but within 10 years — —
Due after 10 years — —
Total debt securities 5,000 5,001

Mortgage-backed securities:
Residential 9,730 9,797
Commercial — —
Total $ 14,730 $ 14,798

	Amortized		Fair
	Cost		Value
	(In thousands)
Securities available-for-sale:
Mortgage-backed securities:
Residential		12,408		12,181
Commercial		0-		0-
Total		12,408		12,181

Securities held-to-maturity
Due within 1 year	$	0-	$	0-
Due after 1 but within 5 years		13,498		13,091
Due after 5 but within 10 years		6,146		6,035
Due after 10 years		515		508
Total debt securities		20,159		19,634

Mortgage-backed securities:
Residential		45,624		45,353
Commercial		684		684
Total	$	66,467	$	65,671

The following ~~tables summarize~~table summarizes the amortized cost and fair values of securities ~~held to maturity~~classified as available-for-sale and held-to-maturity at ~~December 31, 2020 and~~ September 30, ~~2020:~~2021:

	December 31, 2020											Gross		Gross
			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
	Amortized		Unrealized		Unrealized			Fair		Cost		Gains		Losses			Value
	Cost		Gains		Losses			Value		(In thousands)
	(In thousands)
Securities held to maturity:
Securities available-for-sale:
Obligations of U.S. government agencies:
Mortgage backed securities - residential										$	179	$	7	$	0-		$	186
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential											12,922		27		(208	)		12,741
Total securities available-for-sale										$	13,101	$	34	$	(208	)	$	12,927
Securities-held to-maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	$	1,172	$	10	$	(30	)	$	1,152	$	574	$	0-	$	(25	)	$	549
Mortgage-backed securities - commercial		757		—		—			757		703		0-		0-			703
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed-securities - residential		20,809		621		(3	)		21,427
Mortgage backed securities - residential											38,596		416		(389	)		38,623
Debt securities		6,500		1		(1	)		6,500		12,498		0-		(156	)		12,342
Private label mortgage-backed securities - residential		255		—		(2	)		253		242		6		0-			248
Corporate securities		3,000		—		(196	)		2,804		3,000		0-		(196	)		2,804
Total securities held to maturity	$	32,493	$	632	$	(232	)	$	32,893
Total securities held-to-maturity										$	57,660	$	422	$	(800	)	$	57,282
Total investment securities										$	70,761	$	456	$	(1,008	)	$	70,209

September 30, 2020
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
Securities held to maturity:
Obligations of U.S. government agencies:
Mortgage-backed securities - residential $ 1,453 $ 11 $ (33 ) $ 1,431
Mortgage-backed securities - commercial 775 — — 775
Obligations of U.S. government-sponsored enterprises:
Mortgage backed securities - residential 20,456 697 (3 ) 21,150
Debt securities 4,500 1 (16 ) 4,485
Private label mortgage-backed securities - residential 259 — (5 ) 254
Corporate securities 3,000 — (196 ) 2,804
Total securities held to maturity $ 30,443 $ 709 $ (253 ) $ 30,899

Table of Contents

~~The maturities of the debt securities and certain information regarding the mortgage backed securities held to maturity at December 31, 2020 are summarized in the following table:~~

December 31, 2020
Amortized Fair
Cost Value
(In  thousands)
Due within 1 year $ — $ —
Due after 1 but within 5 years 6,500 6,500
Due after 5 but within 10 years 3,000 2,804
Due after 10 years — —
        Total debt securities 9,500 9,304

Mortgage-backed securities:
Residential 22,236 22,832
Commercial 757 757
        Total $ 32,493 $ 32,893

NOTE J – IMPAIRMENT OF INVESTMENT SECURITIES

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

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

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. The following tables present the gross unrealized losses and fair value at December 31, ~~2020~~2021 and September 30, ~~2020~~2021 for both available for sale and held to maturity securities by investment category and time frame for which the loss has been outstanding:

December 31, 2020
Less Than 12 Months 12 Months Or Greater Total
Number of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses
(Dollars in thousands)
Obligations of U.S. government agencies:
Mortgage-backed securities - residential 2 $ — $ — $ 271 $ (30 ) $ 271 $ (30 )
Mortgage-backed securities - commercial 1 — — 757 — 757 —
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential 5 5,352 (21 ) 457 (9 ) 5,809 (30 )
Debt securities 1 1,499 (1 ) — — 1,499 (1 )
Private label mortgage-backed securities residential 1 — — 253 (2 ) 253 (2 )
Corporate securities 1 — — 2,804 (196 ) 2,804 (196 )
Total 11 $ 6,851 $ (22 ) $ 4,542 $ (237 ) $ 11,393 $ (259 )

			Less Than 12 Months					12 Months Or Greater					Total
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Securities		Value		Losses			Value		Losses			Value		Losses
			(Dollars in thousands)
December 31, 2021
Obligations of U.S. government agencies:
Mortgage-backed securities - residential		3	$	2,952	$	(3	)	$	401	$	(22	)	$	3,353	$	(25	)
Mortgage-backed securities - commercial		1		0-		0-			684		0-			684		0-
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential		24		42,010		(815	)		0-		0-			42,010		(815	)
Debt securities		8		9,774		(224	)		4,417		(83	)		14,191		(307	)
Obligations of state and political subdivisions		4		2,022		(22	)		0-		0-			2,022		(22	)
Corporate securities		1		0-		0-			2,804		(197	)		2,804		(197	)
Total		41	$	56,758	$	(1,064	)	$	8,306	$	(302	)	$	65,064	$	(1,366	)

September 30, 2021
Obligations of U.S. government agencies:
Mortgage-backed securities - residential	3	$	318	$	(12	)	$	232	$	(13	)	$	550	$	(25	)
Mortgage-backed securities - commercial	1		0-		0-			703		0-			703		0-
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential	20		33,690		(539	)		1,610		(58	)		35,300		(597	)
Debt securities	7		10,859		(139	)		1,483		(17	)		12,342		(156	)
Obligations of state and political subdivisions	4		2,013		(34	)		0-		0-			2,013		(34	)
Corporate securities	1		0-		0-			2,804		(196	)		2,804		(196	)
Total	36	$	46,880	$	(724	)	$	6,832	$	(284	)	$	53,712	$	(1,008	)

~~Table of Contents~~

September 30, 2020
Less Than 12 Months 12 Months Or Greater Total
Number of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses
(Dollars in thousands)
Obligations of U.S. government agencies:
Mortgage-backed securities - residential 2 $ — $ — $ 284 $ (33 ) $ 284 $ (33 )
Mortgage-backed securities - commercial 1 — — 775 — 775 —
Obligations of U.S. government-sponsored enterprises
Mortgage-backed securities - residential 2 2,854 (3 ) 533 (6 ) 3,387 (9 )
Debt securities 2 2,484 (16 ) — — 2,484 (16 )
Private label mortgage-backed securities residential 1 254 (5 ) — — 254 (5 )
Corporate securities 1 — — 2,804 (196 ) 2,804 (196 )
Total 9 $ 5,592 $ (24 ) $ 4,396 $ (235 ) $ 9,988 $ (259 )

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. At December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, there were 1141 and ~~nine,~~36, respectively, investment securities with unrealized losses.

The Company anticipates full recovery of amortized costs with respect to these securities. The Company does not intend to sell these securities and has determined that it is not more likely than not that the Company would be required to sell these securities prior to maturity or market price recovery. Management has considered factors regarding other than temporarily impaired securities and determined that there are no securities with impairment that is other than temporary as of December 31, ~~2020~~2021 and September 30, ~~2020.~~2021.

Table of Contents

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

Loans receivable, net were comprised of the following:

December 31, September 30,
2020 2020
(In thousands)

One-to-four family residential $ 208,404 $ 210,360
Commercial real estate 260,296 248,134
Construction 23,441 28,242
Home equity lines of credit 19,837 19,373
Commercial business 91,215 100,993
Other 3,837 4,157
Total loans receivable 607,030 611,259
Net deferred loan costs (1,370 ) (1,749 )
Allowance for loan losses (7,130 ) (6,400 )

Total loans receivable, net $ 598,530 $ 603,110

	December 31,			September 30,
	2021			2021
	(In thousands)

One-to-four family residential	$	200,807		$	203,019
Commercial real estate		278,989			280,848
Construction		24,282			20,350
Home equity lines of credit		17,667			17,930
Commercial business		58,320			68,719
Other		3,289			3,751
Total loans receivable		583,354			594,617
Net deferred loan costs		(860	)		(1,241	)
Allowance for loan losses		(8,228	)		(8,075	)

Total loans receivable, net	$	574,266		$	585,301

The Bank ~~is a participant~~participated in the Paycheck Protection Program (“PPP”), which was designed by the U.S. Treasury under the Coronavirus Aid, Relief and Economic Security Act of 2020 (subsequently extended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act) to provide liquidity using the SBA’s platform to small businesses and self-employed individuals to maintain their staff and operations through the COVID-19 pandemic. This liquidity is in the form of a loan, 100% guaranteed by the SBA, that is forgivable provided the funds are used on qualifying payroll costs, and to a lesser extent, rent, utilities and interest on qualifying mortgage payments. The ~~PPP~~ loans ~~which are included with the commercial business loans in the table above,~~ bear a fixed rate of 1.0% and loan payments are deferred ~~for the first 10 months following the covered period, which is eight to twenty-four weeks following~~through the date that the SBA remits the borrower’s loan ~~is made. The Company originated 350 “First Draw”~~forgiveness amount to the lender. Included in commercial business loans at December 31, 2021 were 52 PPP loans totaling ~~$56.0~~$14.8 million through December 31, 2020 for which it received $2.0 million in origination fees from the SBA. These fees are being amortized over the expected life of the loans, which is two years for loans originated prior to June 4, 2020 and five years for loans originated June 5, 2020 or later. Through December 31, 2020, 48compared with 111 PPP loans totaling ~~$10.0~~$25.1 million ~~had been forgiven by the SBA.~~

~~Table of Contents~~

On December 27, 2020 the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues (“Economic Aid”) Act was signed into law, extending the SBA’s authority to guarantee Second Draw PPP loans, under generally the same terms and conditions available under the First Draw program, through March 31,at September 30, 2021. ~~In order to qualify for a Second Draw PPP loan, an applicant must have experienced a revenue reduction of at least 25% in 2020 relative to 2019.~~ The Company expects ~~to provide Second Draw PPP~~most of these loans to ~~its eligible customers. The Economic Aid Act also expanded~~be approved for full forgiveness by the ~~eligible expenditures that a business could use PPP proceeds for and provided for a simplified forgiveness application for PPP loans $150,000 or less.~~

SBA.

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

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

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

Table of Contents

The following tables present impaired loans by class, segregated by those for which a specific allowance was required and charged-off and those for which a specific allowance was not necessary at the dates presented:

~~Table of Contents~~

Impaired
Loans with
Impaired Loans with No Specific
Specific Allowance Allowance Total Impaired Loans
Unpaid
Recorded Related Recorded Recorded Principal
December 31, 2020 Investment Allowance Investment Investment Balance
(In thousands)

One-to-four family residential $ — $ — $ 2,378 $ 2,378 $ 2,378
Commercial real estate 599 10 3,736 4,335 4,335
Construction 1,745 29 2,835 4,580 4,645
Commercial business — — 1,903 1,903 1,903
Total impaired loans $ 2,344 $ 39 $ 10,852 $ 13,196 $ 13,261

Impaired
Loans with
Impaired Loans with No Specific
Specific Allowance Allowance Total Impaired Loans
Unpaid
Recorded Related Recorded Recorded Principal
September 30, 2020 Investment Allowance Investment Investment Balance
(In thousands)

One-to-four family residential $ — $ — $ 2,601 $ 2,601 $ 2,601
Commercial real estate 599 46 3,806 4,405 4,405
Construction 2,306 175 2,835 5,141 5,206
Commercial business — — 2,014 2,014 2,218
Total impaired loans $ 2,905 $ 221 $ 11,256 $ 14,161 $ 14,430

					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
	(In thousands)
December 31, 2021
One-to-four family residential	$	0-	$	0-	$	2,217	$	2,217	$	2,217
Commercial real estate		0-		0-		2,202		2,202		2,202
Construction		2,835		224		1,745		4,580		4,645
Commercial business		0-		0-		1,506		1,506		1,506
Total impaired loans	$	2,835	$	224	$	7,670	$	10,505	$	10,570

September 30, 2021
One-to-four family residential	$	0-	$	0-	$	2,711	$	2,711	$	2,711
Commercial real estate		0-		0-		2,270		2,270		2,270
Construction		2,835		224		1,745		4,580		4,645
Commercial business		0-		0-		1,507		1,507		1,507
Total impaired loans	$	2,835	$	224	$	8,233	$	11,068	$	11,133

The average recorded investment in impaired loans was ~~$13.7~~$10.8 million and ~~$9.4~~$13.7 million for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s impaired loans include delinquent non-accrual loans and performing Troubled Debt Restructurings (“TDRs”), as TDRs remain impaired loans until fully repaid. There were no TDRs during the three months ended December 31, 2021 and there was one TDR totaling $218,000 during the three months ended December 31, ~~2020 and there were no TDRs during the three months ended December 31, 2019.~~

2020.

The following tables present the average recorded investment in impaired loans for the three and nine months ended December 31, ~~2020~~2021 and ~~2019.~~2020. There was no interest income recognized on impaired loans during the periods presented.

	Three Months
	Ended December 31, 2021
	(In thousands)

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

	Three Months
	Ended December 31, 2020
	(In thousands)

One-to-four family residential	$	2,490
Commercial real estate		4,370
Construction		4,861
Commercial business		1,959
Average investment in impaired loans	$	13,680

18 17

Table of Contents

Three Months
Ended December 31, 2019
(In thousands)

One-to-four family residential $ 1,401
Commercial real estate 3,608
Construction 2,900
Commercial business 1,467
Average investment in impaired loans $ 9,376

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

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as severe delinquency, bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s 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 Asset Review Committee performs monthly reviews of all commercial relationships internally rated 6 (“Watch”) or worse. Confirmation of the appropriate risk grade is performed by an external loan review company that semi-annually reviews and assesses loans within the portfolio. Generally, the external consultant reviews commercial relationships greater than $500,000 and/or criticized relationships greater than $250,000. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a monthly basis.

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the Bank’s internal risk rating system at the dates presented:

Special
Pass Mention Substandard Doubtful Total

(In thousands)
December 31, 2020
One-to-four family residential $ 206,680 $ — $ 1,724 $ — $ 208,404
Commercial real estate 253,958 2,735 3,603 — 260,296
Construction 18,861 — 4,580 — 23,441
Home equity lines of credit 19,837 — — — 19,837
Commercial business 89,521 176 1,518 — 91,215
Other 3,837 — — — 3,837
Total $ 592,694 $ 2,911 $ 11,425 $ — $ 607,030

			Special
	Pass		Mention		Substandard		Doubtful		Total
	(In thousands)
December 31, 2021
One-to-four family residential	$	198,911	$	997	$	899	$	0-	$	200,807
Commercial real estate		277,647		201		1,141		0-		278,989
Construction		19,702		0-		4,580		0-		24,282
Home equity lines of credit		19,702		0-		0-		0-		17,667
Commercial business		56,971		0-		1,349		0-		58,320
Other		3,289		0-		0-		0-		3,289
Total	$	574,187	$	1,198	$	7,969	$	0-	$	583,354

September 30, 2021
One-to-four family residential	$	201,512	$	0-	$	1,507	$	0-	$	203,019
Commercial real estate		272,408		6,679		1,761		0-		280,848
Construction		15,770		0-		4,580		0-		20,350
Home equity lines of credit		17,930		0-		0-		0-		17,930
Commercial business		67,360		10		1,349		0-		68,719
Other		3,751		0-		0-		0-		3,751
Total	$	578,731	$	6,689	$	9,197	$	0-	$	594,617

~~Table of Contents~~

Special
Pass Mention Substandard Doubtful Total

(In thousands)
September 30, 2020
One-to-four family residential $ 208,658 $ — $ 1,702 $ — $ 210,360
Commercial real estate 242,003 2,623 3,508 — 248,134
Construction 23,101 — 5,141 — 28,242
Home equity lines of credit 19,373 — — — 19,373
Commercial business 98,967 178 1,848 — 100,993
Other 4,157 — — — 4,157
Total $ 596,259 $ 2,801 $ 12,199 $ — $ 611,259

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

30-59 60-89
Days Days 90 Days + Total Non- Total
Current Past Due Past Due Past Due Past Due Accrual Loans
(In thousands)
December 31, 2020
One-to-four family residential $ 207,027 $ 433 $ — $ 944 $ 1,377 $ 944 $ 208,404
Commercial real estate 255,777 1,000 397 3,122 4,519 3,122 260,296
Construction 18,861 — — 4,580 4,580 4,580 23,441
Home equity lines of credit 19,837 — — — — — 19,837
Commercial business 89,697 — 123 1,395 1,518 1,395 91,215
Other 3,837 — — — — — 3,837
Total $ 595,036 $ 1,433 $ 520 $ 10,041 $ 11,994 $ 10,041 $ 607,030

30-59 60-89
Days Days 90 Days + Total Non- Total
Current Past Due Past Due Past Due Past Due Accrual Loans
(In thousands)
September 30, 2020
One-to-four family residential $ 209,455 $ — $ — $ 905 $ 905 $ 905 $ 210,360
Commercial real estate 245,029 — 886 2,219 3,105 2,219 248,134
Construction 23,101 — — 5,141 5,141 5,141 28,242
Home equity lines of credit 19,373 — — — — — 19,373
Commercial business 99,397 — 129 1,467 1,596 1,467 100,993
Other 4,157 — — — — — 4,157
Total $ 600,512 $ — $ 1,015 $ 9,732 $ 10,747 $ 9,732 $ 611,259

Table of Contents

			30-59		60-89
			Days		Days		90 Days +		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
	(In thousands)
December 31, 2021
One-to-four family residential	$	200,679	$	0-	$	98	$	30	$	128	$	30	$	200,807
Commercial real estate		278,735		0-		0-		254		254		254		278,989
Construction		19,702		0-		0-		4,580		4,580		4,580		24,282
Home equity lines of credit		17,667		0-		0-		0-		0-		0-		17,667
Commercial business		56,971		0-		0-		1,349		1,349		1,349		58,320
Other		3,289		0-		0-		0-		0-		0-		3,289
Total	$	577,043	$	0-	$	98	$	6,213	$	6,311	$	6,213	$	583,354

September 30, 2021
One-to-four family residential	$	201,868	$	0-	$	0-	$	1,151	$	1,151	$	1,151	$	203,019
Commercial real estate		279,769		0-		0-		1,079		1,079		1,079		280,848
Construction		15,770		0-		0-		4,580		4,580		4,580		20,350
Home equity lines of credit		17,930		0-		0-		0-		0-		0-		17,930
Commercial business		67,370		0-		0-		1,349		1,349		1,349		68,719
Other		3,751		0-		0-		0-		0-		0-		3,751
Total	$	586,458	$	0-	$	0-	$	8,159	$	8,159	$	8,159	$	594,617

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

loans.

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

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

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

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

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

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The following table summarizes the ALL by loan category and the related activity for the three months ended December 31, 2021 and 2020:

One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)

Balance- September 30, 2020 $ 1,035 $ 3,232 $ 672 $ 179 $ 1,034 $ 1 $ 247 $ 6,400
Charge-offs — — — — — — — —
Recoveries — — — — 90 — — 90
Provision (credit) 120 176 (202 ) 88 592 1 (135 ) 640
Balance- December 31, 2020 $ 1,155 $ 3,408 $ 470 $ 267 $ 1,716 $ 2 $ 112 $ 7,130

~~The following table summarizes the ALL by loan category and the related activity for the three months ended December 31, 2019:~~

One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)

Balance- September 30, 2019 $ 731 $ 2,066 $ 511 $ 138 $ 1,184 $ 8 $ 250 $ 4,888
Charge-offs — — — — — — — —
Recoveries 2 — — — — — — 2
Provision (credit) (26 ) (147 ) 63 2 311 (6 ) 13 210
Balance- December 31, 2019 $ 707 $ 1,919 $ 574 $ 140 $ 1,495 $ 2 $ 263 $ 5,100

	One-to-Four									Home Equity
	Family			Commercial						Lines of		Commercial
	Residential			Real Estate			Construction			Credit		Business		Other			Unallocated			Total
	(In thousands)

Balance- September 30, 2021	$	1,136		$	3,744		$	594		$	232	$	2,046	$	15		$	308		$	8,075
Charge-offs		0-			0-			0-			0-		0-		0-			0-			0-
Recoveries		0-			52			0-			0-		0-		0-			0-			52
Provision (credit)		(43	)		(90	)		130			0-		83		(14	)		35			101
Balance- December 31, 2021	$	1,093		$	3,706		$	724		$	232	$	2,129	$	1		$	343		$	8,228

Balance- September 30, 2020	$	1,035		$	3,232		$	672		$	179	$	1,034	$	1		$	247		$	6,400
Charge-offs		0-			0-			0-			0-		0-		0-			0-			0-
Recoveries		0-			0-			0-			0-		90		0-			0-			90
Provision (credit)		120			176			(202	)		88		592		1			(135	)		640
Balance- December 31, 2020	$	1,155		$	3,408		$	470		$	267	$	1,716	$	2		$	112		$	7,130

The following tables summarize the ALL by loan category, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, ~~2020~~2021 and September 30, ~~2020:~~ 2021:

	One-to-Four						Home Equity
	Family		Commercial				Lines of		Commercial
	Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total
	(In thousands)
Allowance for Loan Losses:
Balance - December 31, 2021	$	1,093	$	3,706	$	724	$	232	$	2,129	$	1	$	343	$	8,228
Individually evaluated for impairment		0-		0-		224		0-		0-		0-		0-		224
Collectively evaluated for impairment		1,093		3,706		500		232		2,129		1		343		8,004

Loans receivable:
Balance - December 31, 2021	$	200,807	$	278,989	$	24,282	$	17,667	$	58,320	$	3,289	$	0-	$	583,354
Individually evaluated for impairment		2,217		2,202		4,580		0-		1,506		0-		0-		10,505
Collectively evaluated for impairment		198,590		276,787		19,702		17,667		56,814		3,289		0-		572,849

	One-to- Four						Home Equity
	Family		Commercial				Lines of		Commercial
	Residential		Real Estate		Construction		Credit		Business		Other		Unallocated		Total
	(In thousands)
Allowance for Loan Losses:
Balance - September 30, 2021	$	1,136	$	3,744	$	594	$	232	$	2,046	$	15	$	308	$	8,075
Individually evaluated for impairment		0-		0-		224		0-		0-		0-		0-		224
Collectively evaluated for impairment		1,136		3,744		370		232		2,046		15		308		7,851

Loans receivable:
Balance - September 30, 2021	$	203,019	$	280,848	$	20,350	$	17,930	$	68,719	$	3,751	$	0-	$	594,617
Individually evaluated for impairment		2,711		2,270		4,580		0-		1,507		0-		0-		11,068
Collectively evaluated for impairment		200,308		278,578		15,770		17,930		67,212		3,751		0-		583,549

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One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)
Allowance for Loan Losses:
Balance - December 31, 2020 $ 1,155 $ 3,408 $ 470 $ 267 $ 1,716 $ 2 $ 112 $ 7,130
Individually evaluated
for impairment — 10 29 — — — — 39
Collectively evaluated
for impairment 1,155 3,398 441 267 1,716 2 112 7,091

Loans receivable:
Balance - December 31, 2020 $ 208,404 $ 260,296 $ 23,441 $ 19,837 $ 91,215 $ 3,837 $ — $ 607,030
Individually evaluated
for impairment 2,378 4,335 4,580 — 1,903 — — 13,196
Collectively evaluated
for impairment 206,026 255,961 18,861 19,837 89,312 3,837 — 593,834

One-to-Four Home Equity
Family Commercial Lines of Commercial
Residential Real Estate Construction Credit Business Other Unallocated Total
(In thousands)
Allowance for Loan Losses:
Balance - September 30, 2020 $ 1,035 $ 3,232 $ 672 $ 179 $ 1,034 $ 1 $ 247 $ 6,400
Individually evaluated
for impairment — 46 175 — — — — 221
Collectively evaluated
for impairment 1,035 3,186 497 179 1,034 1 247 6,179

Loans receivable:
Balance - September 30, 2020 $ 210,250 $ 248,134 $ 28,352 $ 19,373 $ 100,993 $ 4,157 $ — $ 611,259
Individually evaluated
for impairment 2,601 4,405 5,141 — 2,014 — — 14,161
Collectively evaluated
for impairment 207,649 243,729 23,211 19,373 98,979 4,157 — 597,098

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

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

A default on a TDR loan for purposes of this disclosure occurs when a borrower is 90 days past due or a foreclosure or repossession of the applicable collateral has occurred. There ~~was one TDR for the three months ended December 31, 2020, and there~~ were no TDRs for the three months ended December 31, ~~2019. The~~2021, and there was one TDR totaling $218,000 during the three months ended December 31, ~~2020 was performing in accordance with its restructured terms at December 31,~~ 2020.

	Three Months Ended December 31, 2020
	Number of		Investment Before		Investment After
	Loans		TDR Modification		TDR Modification
	(Dollars in thousands)
One-to-four family residential		1	$	218	$	249

Total		1	$	218	$	249

~~Table of Contents~~

Three Months Ended December 31, 2020
Number of Investment Before Investment After
Loans TDR Modification TDR Modification
(Dollars in thousands)
One-to four-family residential 1 $ 218 $ 249

Total 1 $ 218 $ 249

NOTE L -– DEPOSITS

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

December 31, September 30,
2020 2020
(In thousands)

Demand accounts $ 160,190 $ 163,562
Savings accounts 75,923 74,923
NOW accounts 76,986 65,447
Money market accounts 180,182 188,023
Certificates of deposit 103,443 110,650
Retirement certificates 15,340 15,725
Total deposits $ 612,064 $ 618,330

	December 31,		September 30,
	2021		2021
	(In thousands)

Demand accounts	$	182,411	$	181,975
Savings accounts		86,698		81,724
NOW accounts		83,736		71,325
Money market accounts		197,828		187,898
Certificates of deposit		82,503		101,888
Retirement certificates		14,499		15,004
Total deposits	$	647,675	$	639,814

NOTE M – INCOME TAXES

The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The valuation allowance is assessed by management on a quarterly basis and adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant. In assessing whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, management considers projections of future taxable income, the projected periods in which current temporary differences will be deductible, the availability of carry forwards, feasible and permissible tax planning strategies and existing tax laws and regulations. The Company did not have a valuation allowance against its net deferred tax assets at December 31, ~~2020~~2021 or September 30, ~~2020.~~2021.

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

For the Three Months
Ended December 31,
2020 2019
(In thousands)

Income tax expense at the statutory federal tax rate of 21%
for the three months ended December 31, 2020 and 2019 $ 400 $ 144
State tax expense 182 106
Other (13 ) (12 )
Income tax expense $ 569 $ 238

~~Table of Contents~~

	For the Three Months
	Ended December 31,
	2021			2020
	(In thousands)

Income tax expense at the statutory federal tax rate of 21% for the three months ended December 31, 2021 and 2020	$	497		$	400
State tax expense		194			182
Other		(17	)		(13	)
Income tax expense	$	674		$	569

~~On July 1, 2018,~~The Company’s statutory income tax rate in the State of New ~~Jersey's Assembly signed into law a new bill, effective January 1, 2018, that~~Jersey was 9.0% for the three months ending December 31, 2021 and 2020. The State of New Jersey imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million. The surtax ~~was~~is set at a rate of 2.5% ~~for tax years beginning on or after January 1, 2018 through December 31, 2019,~~ and at a rate of 1.5% for years beginning on or after January 1, 2020, through December 31, 2021. On September 29, 2020, the State of New Jersey's Assembly repealed the scheduled reduction in surtax and extended the temporary 2.5% surtax rateis currently effective through December 31, 2023. Accordingly, the Company ~~is using~~used an 11.5% State tax rate for the calculation of its State income tax expense ~~for~~ the three months ended December 31, 2021 and 2020.

NOTE N -– FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The ~~Bank occasionally uses~~Company may use derivative financial instruments, such as interest rate swaps and interest rate floors and caps, as part of its interest rate risk management. Interest rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a predetermined period of time if certain market interest rate thresholds are met. The ~~Bank~~Company considers the credit risk inherent in these contracts to be negligible.

The ~~Bank~~Company is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, the ~~Bank~~Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the ~~Bank~~Company executes with a third-party financial institution, such that the ~~Bank~~Company minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. The ~~Bank~~Company had ~~$200,000 and $0, respectively,~~$300,000 in cash pledged for collateral on its interest rate swaps with financial institutions at December 31, ~~2020~~2021 and September 30, ~~2020.~~

~~As of December 31, 2020 and September 30, 2020, the Company did not hold any interest rate floors or collars.~~

2021.

The following table presents summary information regarding these derivatives ~~for~~as of December 31, ~~2020. There were no derivatives as of~~2021 and September 30, ~~2020.~~2021.

	Notional Amount		Average Maturiy (Years)		Weighted Average Fixed Rate		Weighted Average Variable Rate	Fair Value		Notional Amount	Average Maturity (Years)	Weighted Average Fixed Rate	Weighted Average Variable Rate	Fair Value
	(Dollars in thousands)									(Dollars in thousands)
December 31, 2020
December 31, 2021
Classified in Other Assets:
Customer interest rate swaps	$	6,139		6.9		3.39%	1 Mo. LIBOR + 2.50	$	144	$ 19,971	6.6	3.61%	1 Mo. LIBOR + 2.50	$ 164
Classified in Other Liabilities:
3rd Party interest rate swaps	$	6,139		6.9		3.39%	1 Mo. LIBOR + 2.50	$	144	$ 19,971	6.6	3.61%	1 Mo. LIBOR + 2.50	$ 164

September 30, 2021
Classified in Other Assets:
Customer interest rate swaps										$ 20,111	6.9	3.61%	1 Mo. LIBOR + 2.50	$ 183
Classified in Other Liabilities:
3rd Party interest rate swaps										$ 20,111	6.9	3.61%	1 Mo. LIBOR + 2.50	$ 183

~~In the normal course~~22

Table of ~~business the Bank~~Contents

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

	December 31,		September 30,
	2021		2021
	(In thousands)
Financial instruments whose contract amounts represent credit risk
Letters of credit	$	2,808	$	2,901
Unused lines of credit		61,901		63,798
Fixed rate loan commitments		10,039		9,156
Variable rate loan commitments		18,502		14,558
Total	$	93,250	$	90,413

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December 31, September 30,
2020 2020
(In thousands)
Financial instruments whose contract amounts
represent credit risk
Letters of credit $ 1,041 $ 1,041
Unused lines of credit 80,529 78,632
Fixed rate loan commitments 7,509 5,240
Variable rate loan commitments 7,628 15,864
—
Total $ 96,707 $ 100,777

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

Forward-Looking Statements

When used in this filing and in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases, “anticipate,” “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “projected,” “believes”, or similar expressions are intended to identify “forward looking statements.” Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those risks previously disclosed by the Company in Item 1A of its Annual Report on Form 10-K as may be supplemented by Quarterly Reports on Form 10-Q filed with the SEC, general economic conditions, changes in interest rates, regulatory considerations, competition, technological developments, retention and recruitment of qualified personnel, and market acceptance of the Company’s pricing, products and services, and with respect to the loans extended by the ~~Bank~~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. In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. The adverse effect of the COVID-19 pandemic on the Company, its customers and the communities where it operates may adversely affect the Company’s business, results of operations and financial condition for an indefinite period of time.

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

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

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. Critical accounting policies may involve complex subjective decisions or assessments. We consider the following to be our critical accounting policies.

Allowance for Loan ~~Losses.~~Loss. The allowance for loan losses is the amount estimated by management as necessary to cover credit losses in the loan portfolio both probable and reasonably estimable at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical. Due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses, the methodology for determining the allowance for loan losses is considered a critical accounting policy by management.

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

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

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

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

Other Real Estate Owned. Real estate acquired through foreclosure, or a deed-in-lieu of foreclosure, is recorded at fair value less estimated selling costs at the date of acquisition or transfer, and subsequently at the lower of its new cost or fair value less estimated selling costs. Adjustments to the carrying value at the date of acquisition or transfer are charged to the allowance for loan losses. The carrying value of the individual properties is subsequently adjusted to the extent it exceeds estimated fair value less estimated selling costs, at which time a provision for losses on such real estate is charged to operations.

Appraisals are critical in determining the fair value of the other real estate owned amount. Assumptions for appraisals are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property. The assumptions supporting such appraisals are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable.

Investment Securities. If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are “temporary” or “other-than-temporary” in accordance with applicable accounting guidance. The Company accounts for temporary impairments based upon security classification as either available-for-sale, held-to-maturity, or trading. Temporary impairments on “available-for-sale” securities are recognized, on a tax-effected basis, through accumulated other comprehensive income (“AOCI”) with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Conversely, the Company does not adjust the carrying value of “held-to-maturity” securities for temporary impairments, although information concerning the amount and duration of impairments on held to maturity securities is generally disclosed in periodic financial statements. The carrying value of securities held in a trading portfolio is adjusted to their fair value through earnings on a daily basis. However, the Company maintained no securities in trading portfolios at or during the periods presented in these financial statements.

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The Company accounts for other-than-temporary impairments based upon several considerations. First, other-than-temporary impairments on securities that the Company has decided to sell as of the close of a fiscal period, or will, more likely than not, be required to sell prior to the full recovery of their fair value to a level equal to their amortized cost, are recognized in operations. If neither of these criteria apply, then the other-than-temporary impairment is separated into credit-related and noncredit-related components. The credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below its amortized cost while the noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. The Company recognizes credit-related, other-than-temporary impairments in earnings, while noncredit-related, other-than-temporary impairments on debt securities are recognized, net of deferred taxes, in AOCI. Management did not account for any other-than-temporary impairments at or during the periods presented in these financial statements.

~~Table of Contents~~

Fair Value. We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Our securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, we 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 other real estate owned. 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, Fair Value Measurements and Disclosures, we group our 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. We base our 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 us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Deferred Income Taxes. The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

Impact of the Coronavirus/COVID-19 Pandemic.

~~The~~During 2020 and continuing into 2021, the extraordinary impact of the ~~Coronavirus/~~COVID-19 ~~(“COVID-19”)~~ pandemic has created an unprecedented environment for consumers and businesses alike. To protect ~~its~~our employees and customers from potential exposure to the virus, all Magyar Bank lobbies and operational areas continue to observe best practice protocols to limit exposure and/or spread of the virus.

To assist ~~its~~our loan customers, ~~the~~Magyar Bank has offered loan payment deferrals to borrowers unable to make their contractual payments due to COVID-19. Loan payments are deferred until the contractual maturity of the loan. Deferral requests are considered on a case-by-case basis and are initially approved for a ~~three month~~three-month period for principal and interest payments or for ~~interest only~~interest-only payments depending on the borrower’s circumstances. An additional ~~three month~~three-month period is available for businesses that remain unable to operate and for consumers unable to make their mortgage or home equity payments due to COVID-19. Additional deferrals ~~will be~~were considered for businesses experiencing a prolonged impact from the COVID-19 pandemic, such as the accommodation and food service industries. ~~At December 31, 2020, the Bank had 33 loans totaling $23.2 million to businesses in these industries. The~~Magyar Bank’s loan portfolio does not have a significant exposure to the travel or entertainment industry.

Through December 31, ~~2020,~~2021, we had modified 284 loans aggregating $150.9 million for the deferral of principal and/or interest payments. ~~Details with respect to loan modifications as of December 31, 2020 are as follows:~~

Loan Type Number of
Loans Balance Weighted Average
Interest Rate
(In thousands)
One- to four-family residential real estate ⁽¹⁾ 89 $ 23,184 4.06%
Commercial real estate 139 109,953 4.72%
Construction 4 2,630 3.77%
Home equity lines of credit 8 1,238 4.24%
Commercial business 29 6,738 4.06%
Total 269 $ 143,743 4.56%

(1) Includes home equity loans.

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~~As of December 31, 2020, 258~~Of these loans, 105 loans totaling $52.6 million repaid their deferred payments in full and 178 loans aggregating ~~$134.9~~$96.9 million ~~had~~have resumed making their contractual loan payments, 15 loans totaling $7.2 million had paid off (including their deferred payments), nine loans totaling $7.3 million were currently deferred, and two loans totaling $1.5 million were past their deferral period and delinquent. Of the two delinquent loans, one commercial businesspayments. One loan totaling $1.4 million was past its deferral period and delinquent ~~more than 90 days~~ at December 31, ~~2020 and one residential~~2021. The Company was not deferring any additional loan ~~totaling $113,000 was delinquent 30 days~~payments due to the COVID-19 pandemic at December 31, ~~2020.~~2021. A total of $1.4 million in interest payments were deferred as of December 31, 2021.

The Bank participated in the ~~Paycheck Protection Program (“PPP”), which was designed by the U.S. Treasury under the Coronavirus, Aid, Relief, and Economic Security (“CARES”) Act~~PPP to provide liquidity using the ~~U.S. Small Business Administration’s (“SBA”)~~SBA platform to small businesses and self-employed individuals to maintain their staff and operations through the COVID-19 pandemic. This liquidity is in the form of a loan, 100% guaranteed by the SBA, that is forgivable provided the funds are used on qualifying payroll costs, and to a lesser extent, rent, utilities and interest on qualifying mortgage payments. The loans bear a fixed rate of 1.0% and loan payments are deferred for the first 10 months following the covered period, which is eight to twenty-four weeks following the date the loan is made. ~~The Company~~We originated ~~350 “First Draw”~~562 PPP loans totaling ~~$56.0~~$91.3 million ~~through December 31, 2020~~ for which itwe received ~~$2.0~~$3.5 million in origination fees from the SBA. These fees are being amortized over the ~~expected life~~five year contractual term of the ~~loans, which is two years for loans originated prior to June 4, 2020 and five years for loans originated June 5, 2020~~loan unless repaid or ~~later.~~forgiven sooner. Through December 31, ~~2020, 48~~2021, 510 loans totaling ~~$10.0~~$76.5 million had been ~~forgiven~~repaid, leaving 52 loans totaling $14.8 million at December 31, 2021. The Company expects most of these loans to be approved for full forgiveness by the SBA.

Table of at least 25% in 2020 relative to 2019. The Company expects to provide Second Draw PPP loans to its eligible customers. The Economic Aid Act also expanded the eligible expenditures that a business could use PPP proceeds for and provided for a simplified forgiveness application for PPP loans $150,000 or less.Contents

The Board of Governors of the Federal Reserve created the Paycheck Protection Program Lending Facility (“PPPLF”), to facilitate lending by eligible financial institutions to small businesses under the PPP. Under the PPPLF, the Federal Reserve Bank of New York provided advances with a fixed interest rate of 0.35% to Magyar Bank on a non-recourse basis, taking PPP loans as collateral. In addition, the Federal Deposit Insurance Corporation allows Magyar Bank to neutralize the effect of PPP loans financed under the PPPLF on Tier 1 leverage capital ratios. The Bank funded its PPP loans with $36.9 million in PPPLF, $29.8 million of which was outstanding at December 31, 2020.

The health of the banking industry is highly correlated with that of the economy. The temporary and/or partial closures of non-essential businesses in our local and national economies increases the likelihood of recession, which typically results in an increased level of credit losses. Accordingly, our provisions for loan ~~loss~~losses have increased and will be closely monitored throughout the pandemic. In addition to utilizing quantitative loss factors, the Company considers qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral, and the financial strength of the borrower. The impact of the COVID-19 pandemic on the performance of ~~the Company’s~~our loan portfolio in future quarters is unknown, however all of these factors are likely to be affected by the COVID-19 pandemic.

Comparison of Financial Condition at December 31, ~~2020~~2021 and September 30, ~~2020~~2021

Total Assets.Total assets ~~decreased $12.2~~increased $6.7 million, or ~~1.6%~~0.9%, to ~~$741.8~~$780.7 million during the three months ended December 31, ~~2020~~2021 from ~~$754.0~~$774.0 million at September 30, ~~2020.~~2021. The ~~decrease~~increase was primarily attributable to ~~lower~~increases in cash, ~~and~~ interest-earning deposits and investment securities, partially offset by lower balances of loans receivable, net of allowance for loan ~~loss, partially offset by higher balances of investment securities.~~loss.

Cash and Interest-Earning Deposits with Banks.Cash and interest-earning deposits with banks ~~decreased $9.7~~increased $7.1 million, or ~~15.6%~~9.4%, to ~~$52.1~~$82.3 million at December 31, ~~2020~~2021 from ~~$61.7~~$75.2 million at September 30, ~~2020 to repay maturing borrowed funds~~2021 from net loan repayments and ~~brokered deposits~~deposit inflows during the three months ended December 31, ~~2020.~~2021.

Total Loans Receivable. Total loans receivable decreased $11.3 million, or 1.9%, to $583.4 million at December 31, 2021 from $594.6 million at September 30, 2021. The loans receivable were comprised of $279.0 million (47.8%) in commercial real estate loans, $200.8 million (34.4%) in one-to four-family residential mortgage loans, $58.3 million (10.0%) in commercial business loans, $24.3 million (4.2%) in construction loans, $17.7 million (3.0%) in home equity lines of credit, and $3.3 million (0.6%) in other loans. Included with the commercial business loans were $14.8 million in PPP loans. The decrease in total loans receivable during the quarter occurred in commercial business loans, which decreased $10.4 million (PPP loans decreased $10.3 million), one-to four-family residential real estate loans (including home equity lines of credit), which decreased $2.5 million, commercial real estate loans, which decreased $1.9 million, and other loans, which decreased $462,000. Partially offsetting these decreases were construction loans, which increased $3.9 million during the quarter.

Total Non-Performing Loans. Total non-performing loans decreased $2.0 million, or 23.9%, to $6.2 million at December 31, 2021 from $8.2 million at September 30, 2021. Five loans totaling $1.5 million were brought current by payments from the borrowers. In addition, one non-performing residential mortgage loan totaling $473,000 was paid in full. There were no additions to the non-performing loans during the three months ended December 31, 2021.

Included in the non-performing loan totals were two construction loans totaling $4.6 million, one commercial business loan totaling $1.3 million, three commercial real estate loans totaling $254,000, and one residential mortgage loan totaling $30,000. The ratio of non-performing loans to total loans decreased to 1.1% at December 31, 2021 from 1.4% at September 30, 2021.

During the three months ended December 31, 2021, the allowance for loan losses increased $153,000 to $8.2 million from $8.1 million at September 30, 2021. The increase was attributable to provisions for loan losses totaling $101,000 and a $52,000 recovery from a loan previously charged off. The allowance for loan losses as a percentage of non-performing loans increased to 132.4% at December 31, 2021 from 99.0% at September 30, 2021. Our allowance for loan losses as a percentage of total loans was 1.41% at December 31, 2021 compared with 1.36% at September 30, 2021.

Future increases in the allowance for loan losses may be necessary based on possible future increases in non-performing loans and charge-offs, the possible deterioration of collateral values, and the possible deterioration of the current economic environment.

Investment Securities.At December 31, ~~2020,~~2021, investment securities totaled ~~$47.3~~$78.6 million, reflecting an increase of ~~$2.3~~$8.1 million, or ~~5.1%~~11.4%, from ~~$45.0 million at~~ September 30, ~~2020.~~2021. The Company purchased three mortgage-backed securities totaling ~~$6.7~~$7.5 million, ~~and~~ one callable U.S. government-sponsored enterprise bond totaling $2.0 million, and one municipal bond totaling $600,000 during the three months ended December 31, ~~2020. The~~2021. During the quarter, the Company received payments from mortgage-backed securities ~~and bond calls~~ totaling ~~$6.3~~$2.0 million. There were no sales of investment securities during the ~~quarter.~~period.

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Investment securities at December 31, ~~2020~~2021 consisted of ~~$32.5~~$58.2 million in mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises, ~~$11.5~~$14.5 million in U.S. government-sponsored enterprise debt securities, $3.0 million in corporate notes, $2.7 million in municipal bonds, and ~~$255,000~~$238,000 in “private-label” mortgage-backed securities. There were no other-than-temporary-impairment charges for the Company’s investment securities for the three months ended December 31, ~~2020.~~2021.

Total loans receivable decreased $4.2 million, or 0.7%, during the three months ended December 31, 2020 to $607.0 million and were comprised of $260.3 million (42.9%) in commercial real estate loans, $208.4 million (34.3%) in one- to four-family residential mortgage loans, $91.2 million (15.0%) in commercial business loans, $23.4 million (3.9%) in construction loans, $19.8 million (3.3%) in home equity lines of credit, and $3.9 million (0.6%) in other loans. Included with the commercial business loans were $46.0 million in PPP loans. The decrease in total loans receivable at December 31, 2020 occurred in commercial business loans, which decreased $9.8 million (PPP loans declined $10.0 million), construction loans, which decreased $4.8 million, one- to four-family residential real estate loans (including home equity lines of credit), which decreased $1.5 million, and other loans, which decreased $320,000. Partially offsetting these decreases were commercial real estate loans, which increased $12.2 million during the quarter.

Total non-performing loans increased $309,000, or 3.2% to $10.0 million at December 31, 2020 from $9.7 million at September 30, 2020. The increase was attributable to the addition of four loans totaling $1.4 million, partially offset by three payoffs totaling $830,000 and the restructure of one loan totaling $218,000. Due to the COVID-19 pandemic, foreclosures of collateral securing residential real estate loans have been temporarily suspended while the foreclosure proceedings of commercial real estate is expected to slow significantly as court hearings have been postponed until further notice.

The ratio of non-performing loans to total loans increased to 1.65% at December 31, 2020 from 1.59% at September 30, 2020. Included in the non-performing loan totals were nine commercial loans totaling $3.1 million, two construction loan totaling $4.6 million, two commercial business loans totaling $1.4 million and three residential mortgage loans totaling $944,000. During the quarter ended December 31, 2020, there were no charge offs and there were $90,000 in recoveries of previously charged-off non-performing loans.

During the three months ended December 31, 2020, the allowance for loan losses increased $730,000 to $7.1 million. The increase was attributable to $640,000 in provisions for loan loss and $90,000 in recoveries from loans previously charged off. The increased provisions for loss resulted from higher adjustments to the Company’s historical loan losses due to the prolonged economic impact of the COVID-19 pandemic on the consumer and business loan portfolios. The allowance for loan losses as a percentage of non-performing loans increased to 70.0% at December 31, 2020 compared with 65.8% at September 30, 2020. At December 31, 2020, the Company’s allowance for loan losses as a percentage of total loans was 1.17% compared with 1.05% at September 30, 2020.

Future increases in the allowance for loan losses may be necessary based on the growth of the loan portfolio, the change in composition of the loan portfolio, possible future increases in non-performing loans and charge-offs, and the possible deterioration of the current economic environment due to the COVID-19 pandemic.

Other Real Estate Owned.Other real estate owned ~~decreased $522,000,~~increased $13,000, or ~~20.1%~~2.0%, to ~~$2.1 million~~$649,000 at December 31, ~~2020. During the quarter ended~~2021 from $636,000 at September 30, 2021. The increase was due to capital improvements to one property in order to market it for sale. At December 31, ~~2020,~~2021, of the ~~Company sold~~two properties that remain in the OREO portfolio, one ~~property totaling $296,000~~was under contract of sale and the other was listed for ~~a $1,000 gain, established a $150,000 valuation allowance against one property, and received non-refundable deposits totaling $75,000 during the quarter with respect to a property.~~sale. The Company is determining the proper course of action for its remaining other real estate owned, which may include holding the properties until the real estate market further improves, leasing properties to offset carrying costs and selling the properties.

Total Deposits.Total deposits ~~decreased $6.3~~increased $7.9 million, or ~~1.0%~~1.2%, to ~~$612.1~~$647.7 million ~~during the three months ended~~at December 31, ~~2020.~~2021 from $639.8 million at September 30, 2021. The ~~outflow~~inflow in deposits occurred in interest-bearing checking accounts (NOW), which increased $12.4 million, or 17.4%, to $83.7 million, in money market accounts, which ~~decreased $7.8~~increased $9.9 million, or ~~4.2%~~5.3%, to ~~$180.2~~$197.8 million, in savings accounts, which increased $5.0 million, or 6.1%, to $86.7 million, and in non-interest bearing checking accounts, which increased $436,000, or 0.2%, to $182.4 million. Partially offsetting these increases were certificates of deposit (including individual retirement accounts), which decreased ~~$7.6~~$19.9 million, or ~~6.0%~~17.0%, to ~~$118.8 million and in non-interest-bearing checking accounts, which decreased $3.4 million, or 2.1%, to $160.2~~$97.0 million. Partially offsetting these decreases were interest-bearing checking accounts (NOW), which increased $11.5 million, or 17.6%, to $77.0 million and savings accounts, which increased $1.0 million, or 1.3%, to $75.9 million.

The Company held ~~$4.4 million and $9.4~~$6.0 million in brokered certificates of deposit at December 31, ~~2020~~2021 and September 30, ~~2020, respectively. A $5.0 million brokered certificate of deposit matured and was not replaced during the three months ended December 31, 2020.~~2021.

Borrowings.Borrowings decreased ~~$7.1~~$2.0 million, or ~~10.6%~~8.6%, to ~~$60.3~~$21.4 million at December 31, ~~2020~~2021 from ~~$67.4~~$23.4 million at September 30, ~~2020.~~2021. The Company repaid ~~$7.1~~a matured $2.0 million ~~in Paycheck Protection Program Liquidity Facility advances from the Federal Reserve Bank during the quarter as the PPP loans securing the advances were forgiven. Borrowings~~term borrowings from the Federal Home Loan Bank of New York ~~advances were unchanged at $30.5 million~~ during the quarter.

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Stockholders’ Equity.Stockholders’ equity increased ~~$1.4 million,~~$802,000, or ~~2.4%~~0.8%, to ~~$58.2~~$98.4 million at December 31, ~~2020~~2021 from ~~$56.9~~$97.6 million at September 30, ~~2020.~~2021. The Company’s book value per share increased to ~~$10.02~~$13.87 at December 31, ~~2020~~2021 from ~~$9.78~~$13.76 at September 30, ~~2020.~~2021. The increase in stockholders’ equity was attributable to the Company’s results from ~~operations.~~operations, partially offset by the special dividends paid during the quarter.

The Company did not repurchase shares of its common stock during the three months ended December 31, ~~2020.~~2021. Through December 31, ~~2020,~~2021, the Company had repurchased 91,000 shares at an average price of $8.41 pursuant to the second stock repurchase ~~plan, which has reduced outstanding shares to 5,810,746.~~plan.

Average Balance Sheet for the Three Months Ended December 31, ~~2020~~2021 and ~~2019~~2020

The following table presents certain information regarding the Company’s financial condition and net interest income for the three months ended December 31, ~~2020~~2021 and ~~2019.~~2020. The table presents the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the period indicated. Interest income includes fees that we consider adjustments to yields.

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	For the Three Months Ended December 31,
	2021							2020
	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	$	84,088	$	35			0.17%	$	54,463		$	20		0.14%
Loans receivable, net		579,131		6,721			4.60%		606,109			6,751		4.42%
Securities
Taxable		71,946		226			1.25%		47,624			205		1.71%
Tax-exempt ⁽¹⁾		2,198		9			1.63%		—			—		—
FHLBNY stock		1,676		20			4.81%		1,981			25		5.05%
Total interest-earning assets		739,039		7,011			3.76%		710,177			7,001		3.91%
Noninterest-earning assets		44,299							43,502
Total assets	$	783,338						$	753,679

Interest-bearing liabilities:
Savings accounts ⁽²⁾	$	84,542		36			0.17%	$	75,464	��		47		0.24%
NOW accounts ⁽³⁾		263,626		140			0.21%		256,876			262		0.40%
Time deposits ⁽⁴⁾		111,911		275			0.98%		120,898			456		1.50%
Total interest-bearing deposits		460,079		451			0.39%		453,238			765		0.67%
Borrowings		21,877		119			2.16%		65,387			191		1.16%
Total interest-bearing liabilities		481,956		570			0.47%		518,625			956		0.73%
Noninterest-bearing liabilities		202,334							176,867
Total liabilities		684,290							695,492
Retained earnings		99,048							58,187
Total liabilities and retained earnings	$	783,338						$	753,679

Tax-equivalent basis adjustment				(2	)							—
Net interest and dividend income			$	6,439							$	6,045
Interest rate spread							3.29%							3.18%
Net interest-earning assets	$	257,083						$	191,552
Net interest margin ⁽⁵⁾							3.46%							3.38%
Average interest-earning assets to
average interest-bearing liabilities		153.34%							136.93%

~~MAGYAR BANCORP, INC. AND SUBSIDIARY~~

~~Comparative Average Balance Sheets~~

~~(Dollars In Thousands)~~

For the Three Months Ended December 31,
2020 2019
Average
Balance Interest
Income/
Expense Yield/Cost
(Annualized) Average
Balance Interest
Income/
Expense Yield/Cost
(Annualized)

Interest-earning assets:
Interest-earning deposits $ 54,463 $ 20 0.14% $ 18,882 $ 71 1.50%
Loans receivable, net 606,109 6,751 4.42% 522,545 6,398 4.86%
Securities
Taxable 47,624 205 1.71% 47,361 266 2.23%
FHLB of NY stock 1,981 25 5.05% 2,143 37 6.86%
Total interest-earning assets 710,177 7,001 3.91% 590,931 6,772 4.55%
Noninterest-earning assets 43,502 47,096
Total assets $ 753,679 $ 638,027

Interest-bearing liabilities:
Savings accounts ⁽¹⁾ $ 75,464 47 0.24% $ 70,193 114 0.64%
NOW accounts ⁽²⁾ 256,876 262 0.40% 234,722 734 1.24%
Time deposits ⁽³⁾ 120,898 456 1.50% 122,560 598 1.93%
Total interest-bearing deposits 453,238 765 0.67% 427,475 1,446 1.34%
Borrowings 65,387 191 1.16% 34,447 196 2.26%
Total interest-bearing liabilities 518,625 956 0.73% 461,922 1,642 1.41%
Noninterest-bearing liabilities 176,867 120,885
Total liabilities 695,492 582,807
Retained earnings 58,187 55,220
Total liabilities and retained earnings $ 753,679 $ 638,027

Net interest and dividend income $ 6,045 $ 5,130
Interest rate spread 3.18% 3.14%
Net interest-earning assets $ 191,552 $ 129,009
Net interest margin ⁽⁴⁾ 3.38% 3.44%
Average interest-earning assets to
average interest-bearing liabilities 136.93% 127.93%

⁽¹⁾ Calculated using the Company's 21% federal tax rate.

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

⁽²⁾⁽³⁾ Includes interest-bearing checking and money market accounts.

⁽³⁾⁽⁴⁾ Includes certificates of deposits and individual retirement accounts.

⁽⁴⁾⁽⁵⁾ Calculated as annualized net interest income divided by average total interest-earning assets.

Comparison of Operating Results for the Three Months Ended December 31, ~~2020~~2021 and ~~2019~~2020

Net Income. Net income increased ~~$784,000,~~$356,000, or ~~141.8%~~26.6% to $1.7 million for the three-month period ended December 31, 2021 compared with net income of $1.3 million for the three-month period ended December 31, ~~2020 compared with the net income of $553,000 for the three-month period ended December 31, 2019,~~2020. The increase was due to higher net interest and dividend income, ~~and non-interest income, partially offset by higher~~lower provisions for loan loss and lower other ~~expenses.~~expenses, partially offset by lower non-interest income.

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Net Interest and Dividend Income. Net interest and dividend income increased ~~$915,000,~~$394,000, or ~~17.8%~~6.5%, to $6.4 million for the three months ended December 31, 2021 from $6.0 million for the three months ended December 31, ~~2020 from $5.1 million~~2020.

An eight basis point increase in the Company’s net interest margin to 3.46% for the three months ended December 31, ~~2019.~~

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A $119.2 million increase in the average net interest-earning assets as well as a $56.0 million increase in average non-interest-bearing liabilities more than offset a 6 basis point decline in the Company’s net interest margin to2021 from 3.38% for the three months ended December 31, 2020 ~~compared~~as well as a $28.9 million increase in average-interest-earning assets to ~~3.44%~~$739.0 million for the 2021 quarter from $710.1 million for the 2020 quarter resulted in higher net interest and dividend income.

The cost of the Company’s interest-bearing liabilities decreased 26 basis points to 0.47% for the three months ended December 31, ~~2019. The lower net interest margin reflected the lower market interest rate environment and the origination of $56.0 million in PPP loans earning 1.0% between the two comparative periods.~~

~~The yield on the Company’s interest-earning assets decreased 64 basis points to 3.91% for the three months ended December 31, 2020~~2021 from 4.55% for the three months ended December 31, 2019 due to lower yields on loans receivable, which decreased 44 basis points to 4.42% for the three months ended December 31, 2020 from 4.86% for the three months ended December 31, 2019, offset by higher average balances of loans receivable, net of allowance for loan losses, which increased $83.6 million between periods. The cost of interest-bearing liabilities decreased 68 basis points to 0.73% for the three months ended December 31, 2020 ~~from 1.41%~~due to lower market interest rates. The cost of interest-bearing deposits decreased 28 basis points to 0.39% for the three months ended December 31, ~~2019.~~2021 from 0.67% for the three months ended December 31, 2020. In addition, the average balance of non-interest bearing liabilities increased $28.1 million to $204.0 million for the three months ended December 31, 2021 from $175.9 million for the three months ended December 31, 2020. The increase in non-interest bearing liabilities was due to higher business checking account balances resulting from supply chain issues and a preference for liquidity during the COVID-19 pandemic.

Interest and Dividend Income. Interest and dividend income ~~increased $229,000, or 3.4%, to~~was unchanged at $7.0 million for the three months ended December 31, ~~2020 compared~~2021 and December 31, 2020. A $28.9 million, or 4.1%, increase in the average balance of interest-earning assets to ~~$6.8~~$739.0 million was entirely offset by a 15 basis point decrease in the yield on such assets to 3.76% for the three months ended December 31, ~~2019. The increase was attributable to higher average balances of interest-earning assets, which increased $119.2 million between periods.~~2021 compared with 3.91% the prior year period.

The ~~increase in~~yield on average ~~balances of interest-earning assets occurred in loans receivable, which increased $83.6 million, or 16.0%,~~investment securities and in interest-earning deposits which increased $35.6 million, or 188.4%. Growth in loans receivable was partially attributable to the origination of $56.0 million in Paycheck Protection Program (“PPP”) loans authorized by the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), of which $46.0 million were outstanding at December 31, 2020. The yield on interest-earning assets decreased 6419 basis points to ~~3.91%~~0.68% for the three months ended December 31, 2021 from 0.87% for the three months ended December 31, 2020 ~~from 4.55%~~due to lower market interest rates. Offsetting this decrease was an 18 basis point increase in the yield on loans receivable to 4.60% for the three months ended December 31, ~~2019.~~2021 from 4.42% for the three months ended December 31, 2020. Lower ~~market~~ interest ~~rates and~~income from lower average balances of loans receivable was offset by the ~~CARES Act mandated 1.0%~~receipt of $173,000 in interest ~~rate~~payments received during the current quarter on previously non-performing loans. Also included in the yield on loans receivable is the recognition of PPP loan fees, which have been accelerated with the repayment of PPP loans ~~accounted for~~through forgiveness by the ~~decline~~SBA. The Company recorded $407,000 in ~~yield on interest-earning assets.~~PPP fees during the three months ended December 31, 2021 compared with $417,000 during the three months ended December 31, 2020.

Interest earned on investment securities, including interest-earning deposits and excluding FHLB stock, ~~decreased $113,000,~~increased $43,000, or ~~33.4%~~19.1%, to ~~$225,000~~$268,000 for the quarter ended December 31, ~~2020~~2021 from ~~$338,000~~$225,000 for the prior year quarter. ~~The decrease was due to~~A $56.1 million, or 55.0%, increase in the ~~decrease in~~ average ~~yield on~~balance of investment securities and interest-earning deposits ~~which~~to $158.2 million for the quarter ended December 31, 2021 more than offset the 19 basis point decrease in their average yield.

Interest Expense. Interest expense decreased ~~115 basis points~~$386,000, or 40.4%, to ~~0.87%~~$570,000 for the three months ended December 31, ~~2020~~2021 from 2.02% for the three months ended December 31, 2019. The decrease in yield on interest-earning deposits reflected the lower interest rates paid on reserves by the Federal Reserve Bank between the comparable periods.

~~Interest Expense~~ ~~Interest expense decreased $686,000, or 41.8%, to~~ $956,000 for the three months ended December 31, ~~2020 compared with $1.6 million~~2020. A 26 basis point decrease in the cost of interest-bearing liabilities to 0.47% for the three months ended December 31, ~~2019. The~~2021 as well as a lower average balance of interest-bearing liabilities, ~~increased $56.7~~which decreased $36.7 million, or ~~12.3%~~7.1%, to ~~$518.6~~$482.0 million, ~~from $461.9 million between the two periods, while the cost of such liabilities decreased 68 basis points to 0.73%~~accounted for the ~~three months ended December 31, 2020 compared with 1.41% for the prior year period.~~lower interest expense between periods.

The average balance of interest-bearing deposits increased ~~$25.8~~$6.8 million, or 1.5%, to ~~$453.2~~$460.0 million for the quarter ended December 31, ~~2020~~2021 from ~~$427.5~~$453.2 million for the same quarter ended December 31, ~~2019,~~2020, while the average cost of such deposits decreased 6728 basis points to ~~0.67%~~0.39% from ~~1.34%~~0.67% between the two periods. As a result, interest paid on interest-bearing deposits decreased ~~$681,000~~$314,000 to $451,000 for the three months ended December 31, 2021 compared with $765,000 for the three months ended December 31, ~~2020 compared with $1.4 million~~2020.

Interest paid on borrowings decreased $72,000, or 37.7%, to $119,000 for the three months ended December 31, ~~2019.~~

~~Interest paid on advances decreased $5,000, or 2.6%, to~~2021 from $191,000 ~~for the three months ended December 31, 2020 from $196,000~~ for the prior year ~~period, while~~period. A $43.5 million decrease in the average balance of such borrowings ~~increased $30.9~~to $21.9 million tofor the quarter ended December 31, 2021 from $65.4 million for the quarter ended December 31, 2020 ~~from $34.4 million~~more than offset a 100 basis point increase in the cost of borrowings to 2.16% for the ~~quarter~~three months ended December 31, ~~2019. The average cost of advances decreased 110 basis points to~~2021 from 1.16% for the three months ended December 31, ~~2020 from 2.26% for the three months ended December 31, 2019.~~

~~Lower interest rates on money market~~2020. The reduction in average balances and ~~savings accounts contributed to the lower average~~corresponding increase in cost of ~~interest-bearing deposits while PPPLF advances contributed to~~borrowings between periods resulted from the ~~lower average cost~~repayment of ~~borrowings.~~$29.8 million in PPP Liquidity Facility borrowings costing 0.35% from the Federal Reserve Bank of New York.

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

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After an evaluation of these factors, management recorded a provision of $101,000 for the three months ended December 31, 2021 compared to $640,000 for the three months ended December 31, ~~2020 compared to $210,000~~2020. The decreased provision for loan losses resulted from contraction in the Company’s loan portfolio and a decrease in non-performing loans between periods. In addition, the Company recorded higher provisions during the three months ended December 31, ~~2019. The increased provisions for loss resulted from higher~~2020 related to COVID-19 pandemic adjustments to the ~~Company’s~~ historical ~~loan losses due to the prolonged economic impact of the COVID-19 pandemic on the consumer and business loan portfolios. In addition to the provisions, the~~loss rates used in its calculation. The Company recorded ~~$90,000~~$52,000 in net recoveries for the three months ended December 31, ~~2020~~2021 compared with ~~$2,000~~$90,000 in net recoveries during the three months ended December 31, ~~2019.~~2020.

Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, and establishes the provision for loan losses based on the factors set forth in the preceding paragraph. As management evaluates the allowance for loan losses, the increased risk associated with larger non-homogenous construction, commercial real estate and commercial business loans may result in larger additions to the allowance for loan losses in future periods. In addition, the ongoing effects of the COVID-19 pandemic on the Company’s loan portfolio may also result in larger additions to the allowance for loan losses in future periods.

Other Income. Other income ~~increased $821,000,~~decreased $575,000, or ~~203.2%~~46.9%, to ~~$1.2 million~~$650,000 during the three months ended December 31, ~~2020~~2021 compared to ~~$404,000~~$1.2 million for the three months ended December 31, ~~2019.~~2020.

~~Other operating income increased $560,000 between periods primarily due to~~Fees for other customer services were $0 for the three months ended December 31, 2021 compared with $464,000 for the three months ended December 31, 2020. The fees in ~~fees~~the 2020 quarter were earned from the ~~Middlesex County~~a local Small Business Relief ~~Grant. The~~Grant program offered in 2020 in response to the COVID-19 pandemic for which the Company received a fee of ~~three percent~~3.0% of the grants it assisted ~~the County~~ with processing. In addition, the Company ~~received a $101,000~~did not receive any interest rate swap ~~fee~~fees during the three months ended December 31, ~~2020 related to its new back-to-back interest rate swap loan product. The Company also recorded higher gains from the sales of SBA loans, which increased $237,000 to $263,000 for~~2021, compared with $102,000 during the three months ended December 31, 2020.

Other ~~Expense.~~Expenses. Other ~~expense increased $191,000,~~expenses decreased $103,000, or ~~4.2%~~2.2%, to ~~$4.7~~$4.6 million ~~for~~during the three months ended December 31, ~~2020 compared with $4.5~~2021 from $4.7 million ~~for~~during the three months ended December 31, ~~2019.~~2020.

The ~~increase~~decrease in other ~~expense~~expenses was primarily attributable to decreases in professional fees, which ~~increased $179,000~~decreased $141,000 to ~~$528,000,~~$387,000, due to ~~higher~~lower legal and consulting fees related to the collection and foreclosure of non-performing ~~loans. Other real estate owned~~loans, and in OREO expenses, ~~increased $77,000~~which decreased $146,000 to ~~$180,000~~$34,000, due to ~~higher~~lower valuation allowances ~~recorded during~~and fewer OREO properties between periods.

Partially offsetting the decrease in professional fees and OREO expenses were increases in compensation and benefit expenses as well as marketing and business development expenses. Compensation and benefit expense increased $155,000, or 6.1%, to $2.7 million for the three months ended December 31, 2021 from $2.5 million for the three months ended December 31, 2020 ~~compared with~~from the ~~prior~~addition of one commercial lending position as well as annual merit increases for employees and higher education and training expenses. Marketing and business development expense increased $81,000, or 184.1%, to $125,000 for the three months ended December 31, 2021 from $44,000 for the three months ended December 31, 2020 due to COVID-19 pandemic restrictions suppressing the 2020 spend and reflecting a higher spend in the current year ~~period.~~as the Company celebrates its 100^th year anniversary in 2022.

Income Tax Expense. The Company recorded tax expense of $674,000 on pre-tax income of $2.4 million for the three months ended December 31, 2021, compared to $569,000 on pre-tax income of $1.9 million for the three months ended December 31, ~~2020, compared to $238,000 on pre-tax income of $791,000 for the three months ended December 31, 2019.~~2020. The ~~increase was the result of higher income from operations. The~~Company’s effective tax rate for the three months ended December 31, ~~2020~~2021 was ~~29.9%~~28.5% compared with ~~30.1%~~29.9% for the three months ended December 31, ~~2019.~~2020.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Company’s liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Company’s short-term sources of liquidity include maturity, repayment and sales of assets, excess cash and cash equivalents, new deposits, other borrowings, and new advances from the Federal Home Loan Bank. There has been no material adverse change during the three months ended December 31, ~~2020~~2021 in the ability of the Company and its subsidiaries to fund their operations.

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Whether through significant deposit withdrawals, reductions in interest and principal payments on loans, or the tightening of the capital markets, it is possible that the COVID-19 pandemic will have a negative effect on the liquidity and capital resources of the Company. Under the PPPLF, the Federal Reserve Bank of New York provides advances to Magyar Bank on a non-recourse basis, taking PPP loans as collateral. At December 31, 2020, the Bank had borrowed $29.8 million in PPPLF advances from the Federal Reserve, pledging an equal amount of PPP loans as collateral.

At December 31, ~~2020,~~2021, the Company had commitments outstanding under letters of credit of ~~$1.0~~$2.8 million, commitments to originate loans of ~~$15.1~~$28.5 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit of ~~$80.5~~$61.9 million. There has been no material change during the three months ended December 31, ~~2020~~2021 in any of the Company’s other contractual obligations or commitments to make future payments.

~~Table of Contents~~

Capital Requirements

At December 31, ~~2020,~~2021, the Bank’s Tier 1 capital as a percentage of the Bank's total assets was ~~8.37%~~10.50%, and total qualifying capital as a percentage of risk-weighted assets was ~~13.23%~~17.18%.

Under section 1102 of the CARES Act, a PPP loan is assigned a risk weight of zero percent under the risk-based capital rules of the federal banking agencies. On April 9, 2020, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued an interim final rule to allow banking organizations to neutralize the effect of PPP loans financed under the ~~PPPLF~~PPP Liquidity Facility on Tier 1 leverage capital ratios. ~~At December 31, 2020, the Company used PPPLF borrowings to neutralize $29.8 million of the balance sheet growth impact on the calculation of the Bank’s Tier 1 leverage capital ratio.~~

Item 3- Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

Item 4 – Controls and Procedures

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

There has been no change in the Company's internal control over financial reporting during the three months ended December 31, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal proceedings

None.

Item 1A.

Risk Factors

Not applicable to smaller reporting companies.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

a.)

Not applicable.

b.)

Not applicable.

c.)

The Company did not repurchase ~~any~~shares of its common stock ~~stocks~~ during the three months ended December 31, ~~2020.~~2021. Through December 31, ~~2020,~~2021, the Company had repurchased 91,000 shares at an average price of $8.41 pursuant to the ~~Company’s~~second stock repurchase ~~plan, which has reduced outstanding shares to 5,810,746.~~plan.

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

a.)

Not applicable.

b.)

None.

Item 6.

Exhibits

31.1

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

31.2

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

32.1

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

32.2

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

101

Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, ~~2020~~2021 and September 30, ~~2020;~~2021; (ii) the Consolidated Statements of Operations for the three months ended December 31, ~~2020~~2021 and ~~2019;~~2020; (iii) the Consolidated Statements of Comprehensive Income for the three months ended December 31, ~~2020~~2021 and ~~2019;~~2020; (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the three months ended December 31, ~~2020~~2021 and ~~2019;~~2020; (v) the Consolidated Statements of Cash Flows for the three months ended December 31, ~~2020~~2021 and ~~2019;~~2020; and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.

104

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

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Signatures

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

	MAGYAR BANCORP, INC.
	(Registrant)




Date: February ~~12, 2021~~11, 2022	/s/ John S. Fitzgerald
	John S. Fitzgerald
	President and Chief Executive Officer



Date: February ~~12, 2021~~11, 2022	/s/ Jon R. Ansari
	Jon R. Ansari
	Executive Vice President and Chief Financial Officer

																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, 2020		5,810,746		59	$	26,294		$	(1,242	)	$	(65	)	$	33,161	$	(1,357	)	$	56,850
Net income		—		—		—			—			—			1,337		—			1,337
Other comprehensive income		—		—		—			—			—			—		(36	)		(36	)
ESOP shares allocated		—		—		(15	)		—			65			—		—			50
Balance, December 31, 2020		5,810,746		59	$	26,279		$	(1,242	)	$	—		$	34,498	$	(1,393	)	$	58,201

	For the Three Months Ended
	December 31,
	2020			2019
	(Unaudited)
Operating activities
Net income	$	1,337		$	553
Adjustment to reconcile net income to net cash provided by (used in) operating activities

Depreciation expense		207			217
Premium amortization on investment securities, net		33			28
Provision for loan losses		640			210
Provision for loss on other real estate owned		150			60
Originations of SBA loans held for sale		(2,513	)		(262	)
Proceeds from the sales of SBA loans		2,776			288
Gains on sale of loans receivable		(263	)		(26	)
Gains on the sales of other real estate owned		(1	)		(11	)
ESOP compensation expense		50			38
Deferred income tax benefit		(134	)		(135	)
(Increase) decrease in accrued interest receivable		(66	)		34
Increase in surrender value of bank owned life insurance		(78	)		(82	)
(Increase) decrease in other assets		(105	)		92
Decrease in accrued interest payable		(39	)		(31	)
Decrease in accounts payable and other liabilities		(351	)		(1,730	)
Net income to net cash provided by (used in) operating activities		1,643			(757	)

Investing activities
Net decrease (increase) in loans receivable		3,940			(7,424	)
Purchases of investment securities held to maturity		(4,652	)		(3,679	)
Purchases of investment securities available for sale		(4,060	)		(1,516	)
Principal repayments on investment securities held to maturity		2,586			2,230
Principal repayments on investment securities available for sale		3,755			696
Purchases of premises and equipment		(68	)		(16	)
Investment in other real estate owned		(13	)		—
Proceeds from other real estate owned		387			17
Redemption of Federal Home Loan Bank stock		—			257
Net cash provided by (used in) investing activities		1,875			(9,435	)

Financing activities
Net (decrease) increase in deposits		(6,266	)		13,579
Net increase in escrowed funds		242			74
Repayments of long-term advances		(7,150	)		(5,701	)
Net cash (used in) provided by financing activities		(13,174	)		7,952
Net decrease in cash and cash equivalents		(9,656	)		(2,240	)
Cash and cash equivalents, beginning of year		61,726			21,469

Cash and cash equivalents, end of year	$	52,070		$	19,229

Supplemental disclosures of cash flow information
Cash paid for
Interest	$	995		$	1,674
Initial recognition of lease liability and right-of-use asset	$	—		$	3,835

	Fair Value at September 30, 2020
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Securities available for sale:
Mortgage-backed securities	$	9,558	$	—	$	9,558	$	—
Debt securities		5,003		—		5,003		—
Total securities available for sale	$	14,561	$	—	$	14,561	$	—

	September 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Securities available for sale:
Obligations of U.S. government agencies:
Mortgage backed securities - residential	$	350	$	14	$	—		$	364
Obligations of U.S. government-sponsored enterprises:
Mortgage-backed securities-residential		9,092		108		(6	)		9,194
Debt securities		5,000		3		—			5,003
Total securities available for sale	$	14,442	$	125	$	(6	)	$	14,561

	Three Months
	Ended December 31, 2019
	(In thousands)

One-to-four family residential	$	1,401
Commercial real estate		3,608
Construction		2,900
Commercial business		1,467
Average investment in impaired loans	$	9,376

Loan Type	Number of Loans		Balance		Weighted Average Interest Rate
				(In thousands)
One- to four-family residential real estate ⁽¹⁾		89	$	23,184		4.06%
Commercial real estate		139		109,953		4.72%
Construction		4		2,630		3.77%
Home equity lines of credit		8		1,238		4.24%
Commercial business		29		6,738		4.06%
Total		269	$	143,743		4.56%

(1) Includes home equity loans.