The following excerpt is from the company's SEC filing.
New Brunswick, New Jersey, November 3, 2021
– Magyar Bancorp (NASDAQ: MGYR) (the “Company”), parent company of Magyar Bank, reported today the results of its operations
for the three months and fiscal year ended September 30, 2021.
The Company reported a 96% increase in its income
for the three months ended September 30, 2021, to $1,610,000 compared with net income of $823,000 for the three months ended September
30, 2020. The Company also reported net income of $6,120,000 for the year ended September 30, 2021 compared with $2,190,000 for the year
ended September 30, 2020.
The Company’s basic
and diluted earnings per
share were $0.23 and $1.01 for the three and twelve months ended September 30, 2021, compared with basic and diluted earnings per share
for the three months and twelve months ended September 30, 2020 of $0.12 and $0.31, respectively.
President and Chief Executive Officer John Fitzgerald
said “Despite the pandemic and the economic uncertainty that it brought, Magyar Bancorp was able to produce record earnings for
our 2021 fiscal year. This is a testament to the hard work that everyone at Magyar put in during the past 12 months that positively impacted
the Company’s bottom line, and made a difference to thousands of families and businesses in the communities we serve.”
Mr. Fitzgerald continued, “While we benefited
from income generated by temporary programs including the Paycheck Protection Program (PPP), our core business continued to grow during
the year, and we are confident that our strong balance sheet will allow Magyar to continue to generate solid earnings in the year ahead.
In addition, the assistance we provided to our customers in the form of loan deferrals, as well as to the community at large through the
PPP, will ensure that our community is ready to take advantage of the positive momentum generated by the continued reopening of our economy.”
Completion of Stock Offering
On July 14, 2021, the Company announced that Magyar
Bancorp, MHC completed its conversion from the mutual holding company to the stock holding company form of organization, and the Company
had completed its related stock offering.
The offering was completed at the maximum of the offering
range, resulting in the sale of 3,910,000 shares of Company common stock at $10.00 per share for gross offering proceeds of $39.1 million.
In the offering, the Company incurred $1.7 million in offering expenses, which was netted against the gross proceeds, resulting in a $37.4
million increase to its additional paid in capital. The Company subsequently contributed $18.7 million of the net offering proceeds to
the Bank to support the continuing operations of the Bank.
As part of the conversion transaction, each existing
share of common stock of the Company owned as of the closing date by the Company’s public stockholders (stockholders other than
the MHC) was converted into new shares of the Company at an exchange ratio equal to 1.2213 shares of Company common stock for each share
of Company common stock. Cash was issued in lieu of a fractional share based on the offering price of $10.00 per share. At September 30,
2021, 7,097,825 shares of the Company’s common stock were outstanding after the completion of the conversion and offering.
Coronavirus/COVID-19 Update
The extraordinary impact of the Coronavirus/COVID-19
(“COVID-19”) pandemic has created an unprecedented environment for consumers and businesses alike. To protect its employees
and customers from potential exposure to the virus, all Magyar Bank lobbies continue to observe best practice protocols to limit exposure
and/or spread of the virus.
To assist its loan customers, the Bank has offered
loan payment deferrals to borrowers unable to make their contractual payments due to COVID-19. Deferral requests are considered on a case-by-case
basis and are initially approved for a three month period for principal and interest payments or for interest only payments depending
on the borrower’s circumstances. An additional 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 are available for businesses
experiencing a prolonged impact from the COVID-19 pandemic, such as hotels and restaurants.
Through September 30, 2021, we had modified 284 loans
aggregating $150.9 million for the deferral of principal and/or interest payments. Of these loans, 56 loans totaling $28.1 million repaid
their deferred payments in full and 227 loans aggregating $121.4 million had resumed making their contractual loan payments. One loan
totaling $1.4 million was past its deferral period and delinquent at September 30, 2021. The Company was not deferring any loan payments
due to the COVID-19 pandemic at September 30, 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 Act to provide
liquidity using the U.S. Small Business Administration’s (“SBA”) platform to small businesses and self-employed individuals
to maintain their staff and operations through the 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. We originated 350 “First Draw” loans totaling $56.0
million for which we received $2.0 million in origination fees from the SBA. At September 30, 2021, all 350 loans totaling $56.0 million
had been repaid or forgiven by the SBA.
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, 2021, subsequently extended by the Paycheck Protection Program Extension Act of 2021 to May 31, 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. As of September
30, 2021, the Company originated 212 PPP loans totaling $35.3 million under the Economic Aid Act to its eligible customers, for which
it received $1.5 million in origination fees from the SBA. These fees are being amortized over the expected life of the loans, which is
five years. The Economic Aid Act also expanded the eligible expenditures for which a business could use PPP proceeds for and provided
for a simplified forgiveness application for PPP loans $150,000 or less. Through September 30, 2021, 101 loans totaling $10.2 million
had been forgiven by the SBA, leaving 111 PPP loans totaling $25.1 million outstanding at September 30, 2021.
Results of Operations
Net income was $1,610,000 during the three-month period
ended September 30, 2021 compared with $823,000 for the three-month period ended September 30, 2020. Net income increased $3.9 million,
or 179.5%, to $6.1 million during the year ended September 30, 2021 compared with $2.2 million for the year ended September 30, 2020 due
to higher net interest and dividend income and higher non-interest income, partially offset by higher non-interest expenses.
Net interest and dividend income increased $1.0 million,
or 18.0%, to $6.7 million for the three months ended September 30, 2021 from the three months ended September 30, 2020. The Company’s
net interest margin increased by 34 basis points to 3.57% for the quarter ended September 30, 2021 compared to 3.23% for the quarter ended
September 30, 2020.
Interest and dividend income increased $540,000, or
8.0%, to $7.3 million for the three months ended September 30, 2021 from $6.8 million to the three months ended September 30, 2020. The
average balance of interest-earning assets increased $46.0 million, or 6.6%, while the yield on such assets increased five basis points
to 3.89% for the three months ended September 30, 2021 compared with the prior year period. The recognition of PPP loans fees totaling
$578,000 during the three months ended September 30, 2021 compared with $201,000 for the three months ended September 30, 2020 accounted
for the increase in yield between periods.
Interest expense decreased $482,000, or 44.5%, to
$601,000 for the three months ended September 30, 2021 from $1.1 million for the three months ended September 30, 2020. The average balance
of interest-bearing liabilities decreased $17.0 million, or 3.3%, between the two periods while the cost on such liabilities decreased
35 basis points to 0.48% for the three months ended September 30, 2021 compared with the prior year period. Lower market interest rates
were primarily responsible for the drop in the cost of the Company’s interest-bearing liabilities.
During the year ended September 30, 2021, net interest
and dividend income increased $4.2 million, or 19.5%, to $25.6 million compared to the year ended September 30, 2020. The Company’s
net interest margin increased 22 basis points to 3.53% for the year ended September 30, 2021 compared to 3.31% for the year ended September
30, 2020.
The average balance of interest-earning assets increased
$79.5 million, or 12.3%, while the yield on such assets decreased 22 basis points to 3.94% for the year ended September 30, 2021 compared
with the prior year period. Interest and dividend income increased $1.6 million, or 5.9%, to $28.5 million for the year ended September
30, 2021 from $26.9 million to the year ended September 30, 2020. The recognition of PPP loans fees totaling $2.0 million during the year
ended September 30, 2021 compared with $335,000 for the year ended September 30, 2020 accounted for the increase in yield between periods.
Interest expense decreased $2.6 million, or 46.7%,
to $2.9 million for the year ended September 30, 2021 from $5.5 million for the year ended September 30, 2020. The average balance of
interest-bearing liabilities increased $23.7 million, or 4.9%, between the two periods while the cost of such liabilities decreased 55
basis points to 0.58% for the year ended September 30, 2021 compared with the prior year period. Lower market interest rates were primarily
responsible for the drop in the cost of the Company’s interest-bearing liabilities for the year ended September 30, 2021.
The provision for loan loss was $276,000 for the three
months ended September 30, 2021 compared to $597,000 for the three months ended September 30, 2020. Net charge-offs totaled $1,000 for
the three months ended September 30, 2021 compared with net charge-offs of $197,000 for the prior year period. The provision for loan
losses decreased $37,000 to $1.6 million for the year ended September 30, 2021 compared to $1.7 million for the year ended September 30,
2020. There were net recoveries of $46,000 during the year ended September 30, 2021 compared with net charge-offs of $154,000 for the
year ended September 30, 2020.
Non-interest income decreased $41,000, or 7.2%, to
$525,000 during the three months ended September 30, 2021 primarily from lower gains on the sales of loans, partially offset by higher
interest rate swap fees. The Company recorded $105,000 in interest rate swap fees from the commercial loan swap product it began offering
during the year ended September 30, 2021.
Non-interest income increased $1.7 million, or 98.7%,
to $3.4 million during the twelve months ended September 30, 2021 compared to $1.7 million for the twelve months ended September 30, 2020.
Fees for other customer services increased $777,000 from fees earned from the Small Business Relief Grant program. The Company received
a fee of three percent of the grants it assisted with processing. In addition, the Company recorded higher gains from the sales of loans,
which were $749,000 for the twelve months ended September 30, 2021 compared with $317,000 for the twelve months ended September 30, 2020.
The Company also received $313,000 in interest rate swap fees during the twelve months ended September 30, 2021.
Non-interest expense increased $157,000 during the
three months ended September 30, 2021 from the prior year period due to higher compensation expense, partially offset by lower loan servicing
expenses and lower FDIC insurance assessments. Compensation and benefit expense increased $255,000, or 9.9%, from higher incentive accruals
and the new Employee Stock Ownership Plan established in connection with the Company’s recently completed second step conversion
and stock offering. Loan servicing expenses decreased $74,000, or 76.3%, from reimbursed expenses related to non-performing loan payoffs.
FDIC insurance assessment accruals decreased $69,000, or 57.0%, due to higher capital levels at the Bank resulting from the Company’s
stock offering.
For the year ended September 30, 2021, non-interest
expense increased $289,000, or 1.6%, to $18.6 million compared to $18.4 million for the year ended September 30, 2020. Higher compensation
and benefit expenses, higher professional fees and higher other expenses were partially offset by lower other-real-estate-owned expenses,
lower data processing expenses, and lower FDIC insurance assessments.
Balance Sheet Comparison
Total assets decreased $68.3 million, or 8.1%, to
$774.0 million during the three months ended September 30, 2021. The decrease in assets was primarily attributable to a decrease of $54.0
million in cash and cash equivalents as a result of oversubscription of the Company’s stock offering, which closed on July 14, 2021,
and resulted in the return of $72.2 million held as deposits at June 30, 2021.
During the twelve months ended September 30, 2021,
total assets increased $20.0 million, or 2.7%. The increase was attributable to a $25.6 million, or 56.8%, increase in investment securities
and a $13.5 million, or 21.8%, increase in cash and cash equivalents, offset by a $17.8 million, or 3.0%, decrease in loans receivable,
net of allowance of loss. The increase in cash and investments resulted from a $21.5 million increase in deposits during the year ended
September 30, 2021 as well as a $30.9 million net reduction in PPP loan balances to $25.1 million at September 30, 2021 from $56.0 million
at September 30, 2020.
Total loans receivable decreased $16.7 million, or
2.7%, to $594.6 million at September 30, 2021 from $611.3 million at September 30, 2020. Total loans receivable at September 30, 2021
were comprised of $280.8 million (47.2%) in commercial real estate loans, $203.0 million (34.2%) in 1-4 family residential mortgage loans,
$68.7 million (11.6%) in commercial business loans (including $25.1 million in PPP loans), $20.4 million (3.4%) in construction loans,
and $21.7 million (3.6%) in home equity lines of credit and other loans. Total loans receivable at September 30, 2020 were comprised of
$248.1 million (40.6%) in commercial real estate loans, $210.4 million (34.4%) in 1-4 family residential mortgage loans, $101.0 million
(16.5%) in commercial business loans (including $56.0 million in PPP loans), $28.2 million (4.6%) in construction loans, and $23.5 million
(3.9%) in home equity lines of credit and other loans.
During the quarter our total non-performing loans
decreased $1.3 million, or 13.4%, to $8.2 million at September 30, 2021 from $9.4 million at June 30, 2021. The decrease was the result
of loan repayments totaling $1.5 million, partially offset by two new residential mortgage loans totaling $242,000. At September 30, 2021,
non-performing loans consisted of two construction loans totaling $4.6 million, one commercial business loan totaling $1.3 million, four
loans secured by 1-4 family residential mortgage totaling $1.2 million, and three commercial real estate loans totaling $1.1 million.
Total non-performing loans decreased $1.5 million
during the year ended September 30, 2021 from $9.7 million at September 30, 2020. The ratio of non-performing loans to total loans was
1.4% at September 30, 2021 compared to 1.6% at September 30, 2020.
The allowance for loan losses increased by $275,000
during the three months ended September 30, 2021 and by $1.7 million during the twelve months ended September 30, 2021 to $8.1 million.
The increases were attributable to growth in non-PPP loans and adjustments to the historical loss factors for economic conditions relating
to the COVID-19 pandemic.
The allowance for loan losses as a percentage of non-performing
loans increased to 99.0% at September 30, 2021 compared with 65.8% at September 30, 2020. At September 30, 2021 our allowance for loan
losses as a percentage of total loans was 1.36%, compared with 1.05% at September 30, 2020. Future increases in the allowance for loan
losses may be necessary based on possible future increases in total loans receivable, increases in non-performing loans and charge-offs,
deterioration of collateral values securing impaired real estate loans, and deterioration of the current economic environment.
At September 30, 2021, investment securities were
$70.6 million, reflecting an $8.6 million, or 13.8%, increase from June 30, 2021 and a $25.6 million, or 56.8%, increase from September
30, 2020. Investment securities at September 30, 2021 consisted of $52.8 million in mortgage-backed securities issued by U.S. government
agencies and U.S. government-sponsored enterprises, $12.5 million in U.S. government-sponsored enterprise debt securities, $3.0 million
in corporate notes, $2.0 million in municipal bonds and $242,000 in “private-label” mortgage-backed securities. There were
no other-than-temporary-impairment charges for the Company’s investment securities for the year ended September 30, 2021.
OREO decreased $669,000, or 51.3%, to $636,000 during
the quarter ended September 30, 2021 from sales of two properties. Year-to-date, OREO decreased $2.0 million resulting from the sales
of four properties totaling $2.3 million, in addition to valuation allowances and other net reductions totaling $205,000. There were two
additions totaling $547,000 during the year, both of which were sold.
At September 30, 2021 our OREO consisted of one commercial
real estate property totaling $268,000 and one assemblage of approved real estate lots/land totaling $368,000. Both properties are listed
for sale.
Total deposits increased $21.5 million, or 3.5%, to
$639.8 million during the twelve months ended September 30, 2021. The growth in deposits during the twelve months ended September 30,
2021 occurred in non-interest checking account balances, which increased $18.4 million, or 11.3%, to $182.0 million, in savings account
balances, which increased $6.8 million, or 9.1%, to $81.7 million, and in interest-bearing checking account balances, which increased
$5.9 million, or 9.0% to $71.3 million. Offsetting these increases was a $9.5 million, or 7.5%, decrease in certificates of deposit (including
individual retirement accounts), to $116.9 million, and a $125,000, or 0.1%, decrease in money market account balances to $187.9 million.
Commercial and consumer deposit inflows were higher
during this period from PPP loan disbursements, government stimulus programs, lower spending and customers’ preferences for liquidity
during the ongoing COVID-19 pandemic. Deposits accounted for 82.6% of assets and 109.3% of net loans receivable at September 30, 2021.
At September 30, 2021, the Company held $6.0 million
in brokered certificates of deposit, compared with $9.4 million at September 30, 2020.
Borrowings decreased $44.0 million, or 65.4%, to $23.4
million at September 30, 2021 from $67.4 million at September 30, 2020. The Bank repaid all $36.9 million in Paycheck Protection Program
Liquidity Facility (“PPPLF”) advances to the Federal Reserve Bank during the year ended September 30, 2021 that were used
to fund Round 1 PPP loans. The Bank did not utilize the PPPLF to fund its Round 2 PPP loans. Federal Home Loan Bank of New York advances
decreased $7.1 million to $23.4 million at September 30, 2021 from $30.5 million at September 30, 2020 as deposit inflows were used to
repay maturing long-term advances.
The Company’s book value per share increased
to $13.76 at September 30, 2021 from $9.78 at September 30, 2020. The increase was due to the Company’s results of operations for
the year ended September 30, 2021 and its second step/stock offering that raised $37.4 million, net of offering expenses.
About Magyar Bancorp
Magyar Bancorp is the parent company of Magyar Bank,
a community bank headquartered in New Brunswick, New Jersey. Magyar Bank has been serving families and businesses in Central New Jersey
since 1922 with a complete line of financial products and services. Today, Magyar operates seven branch locations in New Brunswick, North
Brunswick, South Brunswick, Branchburg, Bridgewater and Edison (2). Please visit us online at www.magbank.com.
Forward Looking Statements
This
press release contains statements about future events that constitute forward-looking statements within the meaning of the Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified
by reference to a future period or periods, or by the use of forward- looking terminology, such as “may,” “will,”
“believe,” “expect,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking
statements are subject to numerous risks and uncertainties, including, but not limited to, those risks previously disclosed in the Company’s
filings 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 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 continues to have an adverse impact on the Company, its customers and
the communities it serves.
iven its ongoing and dynamic nature, it is
difficult to predict the full impact of the pandemic on the Company’s business. The extent of such impact will depend on future
developments, which are highly uncertain, including when the coronavirus can be controlled and abated and the extent to which the economy
can open and remain open. 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. The Company does not undertake and specifically declines any obligation to publicly release the result
of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
Contact: John Reissner, 732.214.2083
MAGYAR BANCORP, INC. AND SUBSIDIARY
Selected Financial Data
(Dollars in Thousands,
Except Per Share Data)
Three Months Ended
Year Ended
Income Statement Data:
28,528
26,927
25,587
21,414
Provision for loan losses
Net interest and dividend income after
provision for loan losses
23,958
19,748
18,642
18,353
Income before income tax expense
Income tax expense
Per Share Data:
Basic and diluted earnings per share*
Book value per share, at period end
Selected Ratios (annualized):
Return on average assets
Return on average equity
Net interest margin
As a result of the second-step conversion, the number of shares for the year ended September 30, 2020 were adjusted to reflect the 1.2213
exchange ratio.
Balance Sheet Data:
Assets
773,990
842,330
753,997
594,617
615,124
611,259
Allowance for loan losses
Investment securities - available for sale, at fair value
12,927
13,731
14,561
Investment securities - held to maturity, at cost
57,660
48,298
30,443
639,814
735,952
618,330
23,356
31,304
67,410
Shareholders' Equity
97,641
61,263
56,850
Asset Quality Data:
Non-performing loans
Other real estate owned
Total non-performing assets
10,736
12,326
Allowance for loan losses to non-performing loans
98.96%
82.71%
65.76%
Allowance for loan losses to total loans receivable
Non-performing loans to total loans receivable
Non-performing assets to total assets
Non-performing assets to total equity
17.52%
21.68%
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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