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 Company and real estate owned, the following: risks
related to the economic environment in the market areas in which the Bank
operates, particularly with respect to the real estate market in New Jersey; the
risk that the value of the real estate securing these loans may decline in
value; and the risk that significant expense may be incurred by the Company in
connection with the resolution of these loans.



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

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

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 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.

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.

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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 analyze historical loss experience,
delinquency trends, general economic conditions and geographic and industry
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.





We intend to adopt the Current Expected Credit Losses (CECL) Methodology
effective October 1, 2023. The adoption of the CECL standard for determining the
amount of our allowance for credit losses may increase our allowance for loan
and lease losses upon adoption and cause our historic allowance for loan and
lease losses not to be indicative of how we will maintain our allowance for
credit losses beginning October 1, 2023.



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 consolidated financial statements or tax returns; (ii) are
attributable to differences between the consolidated 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.

Deferred tax assets are likely to be realized and therefore do not have a valuation allowance.

Comparison of Financial Condition at December 31, 2022 and September 30, 2022





Total Assets. Total assets increased $23.1 million, or 2.9%, to $821.6 million
at December 31, 2022 compared with $798.5 million at September 30, 2022. The
increase was attributable to higher balances of loans receivable, net of
allowance for loan loss, partially offset by lower interest-earning deposits
with banks.



Cash and interest-earning deposits with banks decreased $23.1 million, or 74.5%
to $7.9 million at December 31, 2022 from $30.9 million at September 30, 2022
resulting primarily from deployment of these funds into loans receivable during
the three months ended December 31, 2022.



Loans Receivable. Total loans receivable increased $46.8 million, or 7.4%, to
$675.7 million at December 31, 2022 from $628.9 million for the year ended
September 30, 2022. Growth occurred in commercial real estate loans, which
increased $46.5 million, or 13.6%, to $389.2 million, in construction loans,
which increased $2.6 million, or 17.4%, to $17.9 million, in one-to four-family
residential mortgage loans (including home equity lines of credit), which
increased $653,000, or 0.3%, to $233.7 million and in other consumer loans,
which increased $130,000, or 4.2%, to $3.3 million. Offsetting these increases
was a $3.0 million, or 8.8%, decrease in commercial business loans to $31.6
million.



Total loans receivable at December 31, 2022 were comprised of $389.2 million
(57.6%) in commercial real estate loans, $215.3 million (31.9%) in one-to
four-family residential mortgage loans, $31.6 million (4.7%) in commercial
business loans, $17.9 million (2.6%) in construction loans, $18.5 million (2.7%)
in home equity lines of credit, and $3.2 million (0.5%) in other loans. For
comparison, total loans receivable at September 30, 2022 were comprised of
$342.8 million (54.5%) in commercial real estate loans, $214.4 million (34.1%)
in one- to four- family residential mortgage loans, $34.7 million (5.5%) in
commercial business loans, $15.2 million (2.4%) in construction loans, and $21.8
million (3.5%) in home equity lines of credit and other loans.



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Total non-performing loans increased $1.1 million, or 37.5%, to $3.9 million at
December 31, 2022 from $2.8 million at September 30, 2022. The addition of one
consumer loan secured by shares of Johnson & Johnson stock totaling $676,000 and
one commercial real estate loan totaling $387,000 accounted for the increase in
non-performing loans during the quarter. The ratio of non-performing loans to
total loans increased to 0.58% at December 31, 2022 from 0.45% at September

30,
2022.



The allowance for loan losses increased $317,000 during the three months ended
December 31, 2022 to $8.8 million. The $46.8 million increase in loans
receivable as well as the increase in non-performing loans accounted for the
increase in the Company's allowance for loan loss.



The allowance for loan losses as a percentage of non-performing loans decreased
to 224.4% at December 31, 2022 from 297.5% at September 30, 2022. Our allowance
for loan losses as a percentage of total loans was 1.29% at December 31, 2022
compared with 1.34% at September 30, 2022. 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, 2022, investment securities totaled $99.8
million, reflecting a decrease of $1.0 million, or 1.0% from $100.9 million

at
September 30, 2022.



The Company did not purchase or sell any new investment securities during the
three months ended December 31, 2022. The Company received payments from
mortgage-backed securities totaling $1.2 million during the quarter that were
used to fund new loan originations. Investment securities at December 31, 2022
consisted of $63.3 million in mortgage-backed securities issued by U.S.
government agencies and U.S. government-sponsored enterprises, $24.8 million in
U.S. government-sponsored enterprise debt securities, $8.0 million in corporate
notes, $3.5 million in municipal bonds, and $220,000 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, 2022.



Bank-Owned Life Insurance.The Company's carrying value of its life insurance
policies held for directors and officers of Magyar Bank increased $95,000, or
0.5%, to $17.8 million at December 31, 2022 from $17.7 million at September 30,
2022. The increase was attributable to an increase in the cash surrender value
of the policies during the three months ended December 31, 2022.

Other Real Estate Owned. OREO increased $11,000, or 3.9%, to $292,000 at December 31, 2022 from capital improvements to one property in order to market it for sale. The property was under contract for sale at December 31, 2022.

Deposits. Total deposits increased $8.4 million, or 1.3%, to $676.1 million at December 31, 2022 from $667.7 million at September 30, 2022.





The increase in deposits during the three months ended December 31, 2022
occurred in money market accounts, which increased $11.5 million, or 5.2%, to
$233.7 million, in non-interest bearing checking accounts, which increased $6.0
million, or 3.3%, to $188.4 million, and in certificates of deposit (including
individual retirement accounts), which increased $1.8 million, or 2.2%, to $84.4
million. Partially offsetting these increases were decreases in savings
accounts, which decreased $5.7 million, or 7.0%, to $76.1 million and in
interest-bearing checking accounts (NOW), which decreased $5.2 million, or 5.3%,
to $93.5 million. Included in the certificates of deposit were $11.4 million in
brokered certificates of deposit.

Borrowed Funds. Borrowings increased $14.1 million, or 90.2%, to $29.7 million at December 31, 2022 from $15.6 million at September 30, 2022.





The Company borrowed $11.1 million in overnight advances and $3.0 million in
term advances from the Federal Home Loan Bank of New York during the quarter to
fund its loan originations.




Stockholders' Equity. Stockholders' equity increased $1.4 million, or 1.4%, to
$99.9 million at December 31, 2022 from $98.5 million at September 30, 2022. The
increase was due to net income of $1.8 million during the quarter, partially
offset by $744,000 in dividends paid and 2,194 shares repurchased during the
quarter at an average share price of $12.54. The Company's book value per share
increased to $14.82 at December 31, 2022 from $14.60 at September 30, 2022, and
6,742,934 shares were outstanding at December 31, 2022.

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Average Balance Sheet for the Three Months Ended December 31, 2022 and 2021





The following table presents certain information regarding the Company's
financial condition and net interest income for the three months ended December
31, 2022 and 2021. 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.



                                                          For the Three Months Ended December 31,
                                                    2022                                           2021
                                                Interest                                       Interest
                                  Average       Income/         Yield/Cost       Average       Income/         Yield/Cost
                                  Balance       Expense       (Annualized)       Balance       Expense       (Annualized)
                                                                  (Dollars in thousands)
Interest-earning assets:
Interest-earning deposits        $  14,984     $      109             2.88%     $  84,088     $       35             0.17%
Loans receivable, net              643,206          7,959             4.91%

      579,131          6,721             4.60%
Securities
Taxable                             97,121            395             1.61%        71,946            226             1.25%
Tax-exempt (1)                       3,370             18             2.15%         2,198              9             1.63%
FHLBNY stock                         1,613             24             6.00%         1,676             20             4.81%

Total interest-earning assets      760,294          8,505             4.44%       739,039          7,011             3.76%
Noninterest-earning assets          48,415                                         44,299
Total assets                     $ 808,709                                      $ 783,338

Interest-bearing liabilities:
Savings accounts (2)             $  78,263             82             0.41%     $  84,542             36             0.17%
NOW accounts (3)                   325,295          1,177             1.44%       263,626            140             0.21%
Time deposits (4)                   79,535            215             1.07%       111,911            275             0.98%
Total interest-bearing
deposits                           483,093          1,474             1.21%       460,079            451             0.39%
Borrowings                          19,067            136             2.83%        21,877            119             2.16%
Total interest-bearing
liabilities                        502,160          1,610             1.27%       481,956            570             0.47%
Noninterest-bearing
liabilities                        206,197                                        202,334
Total liabilities                  708,357                                        684,290
Retained earnings                  100,352                                         99,048
Total liabilities and retained
earnings                         $ 808,709                                      $ 783,338

Tax-equivalent basis
adjustment                                             (4 )                                           (2 )
Net interest and dividend
income                                         $    6,891                                     $    6,439
Interest rate spread                                                  3.17%                                          3.29%
Net interest-earning assets      $ 258,134                                      $ 257,083
Net interest margin (5)                                               3.60%                                          3.46%
Average interest-earning
assets to
 average interest-bearing
liabilities                        151.40%                                        153.34%

(1) Calculated using the Company's 21% federal tax rate. (2) Includes passbook savings, money market passbook and club accounts. (3) Includes interest-bearing checking and money market accounts. (4) Includes certificates of deposits and individual retirement accounts. (5) Calculated as annualized net interest income divided by average total interest-earning assets.



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Comparison of Operating Results for the Three Months Ended December 31, 2022 and 2021

Net Income. Net income increased $117,000, or 6.9% to $1.8 million for the three-month period ended December 31, 2022 compared with net income of $1.7 million for the three-month period ended December 31, 2021. The increase was due to higher net interest and lower other expenses, partially offset by higher provision for loan loss and lower other income.





Net Interest and Dividend Income. Net interest and dividend income increased
$453,000, or 7.0%, to $6.9 million for the three months ended December 31, 2022
from $6.4 million for the three months ended December 31, 2021. The increase was
attributable to a 14 basis point increase in the Company's net interest margin
to 3.60% for the three months ended December 31, 2022 from 3.46% for the three
months ended December 31, 2021.



Interest and Dividend Income. Interest and dividend income increased $1.5
million, or 21.3%, to $8.5 million for the three months ended December 31, 2022
compared with $7.0 million for the three months ended December 31, 2021. The
increase was attributable to a 68 basis point increase in the yield on
interest-earning assets to 4.44% for the three months ended December 31, 2022
from 3.76% for the three months ended December 31, 2021 as well as a $21.3
million, or 2.9%, increase in the average balance of interest-earning assets.
There were no Paycheck Protection Program loan fees included in interest income
on loans receivable for the three months ended December 31, 2022, compared with
$407,000 for the three months ended December 31, 2021.



The average balance of loans receivable, net of allowance for loan loss,
increased $64.1 million to $643.2 million during the three months ended December
31, 2022 from $579.1 million during the three months ended December 31, 2021
while the yield on loans receivable increased 31 basis points to 4.91% for the
three months ended December 31, 2022 from 4.60% for the three months ended
December 31, 2021 due to higher market interest rates. The higher average
balance and yield accounted for a $1.2 million, or 18.4%, increase in loan
interest income between periods.



Interest earned on investment securities, including interest-earning deposits
and excluding FHLB stock, increased $250,000, or 93.3%, to $518,000 for the
quarter ended December 31, 2022 from $268,000 for the prior year quarter. A 111
basis point increase in the yield on such assets to 1.79% for the three months
ended December 31, 2022 from 0.69% for the three months ended December 31, 2021,
partially offset by a $42.7 million, or 27.0%, decrease in the average balance
of investment securities and interest-earning deposits to $115.5 million for the
quarter ended December 31, 2022, accounted for the increase.



Interest Expense.Interest expense increased $1.0 million, or 182.5%, to $1.6
million for the three months ended December 31, 2022 from $570,000 for the three
months ended December 31, 2021. The cost of interest-bearing liabilities
increased 80 basis points to 1.27% for the three months ended December 31, 2022
compared with 0.47% for the three months ended December 31, 2021 resulting
primarily from higher market interest rates. Between periods, the average
balance of interest-bearing liabilities increased $20.2 million, or 4.2%, to
$502.2 million.



The average balance of interest-bearing deposits increased $23.0 million, or
5.0%, to $483.0 million for the quarter ended December 31, 2022 from $460.0
million for the quarter ended December 31, 2021, while the average cost of such
deposits increased 82 basis points to 1.21% from 0.39%. As a result, interest
paid on interest-bearing deposits increased $1.0 million to $1.5 million for the
three months ended December 31, 2022 compared with $451,000 for the three months
ended December 31, 2021 due to higher market interest rate environment.



Interest paid on borrowings increased $17,000, or 14.3%, to $136,000 for the
three months ended December 31, 2022 from $119,000 for the prior year period.
The increase was the result of a 67 basis point increase in the cost of
borrowings to 2.83% for the three months ended December 31, 2022 from 2.16% for
the three months ended December 31, 2021, partially offset by a $2.8 million
decrease in the average balance of such borrowings to $19.1 million for the
quarter ended December 31, 2022 from $21.9 million for the quarter ended
December 31, 2021.



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 consolidated
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
$317,000 for the three months ended December 31, 2022 compared to $101,000 for
the three months ended December 31, 2021. The higher provision for loan losses
resulted from growth in the Company's loan portfolio and an increase in
non-performing loans during the three months ended December 31, 2022. The
Company did not record any loan charge-offs or recoveries for the three months
ended December 31, 2022 compared with $52,000 in net recoveries during the three
months ended December 31, 2021.



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.



Other Income. Other income decreased $52,000, or 8.0%, to $598,000 during the
three months ended December 31, 2022 compared to $650,000 for the three months
ended December 31, 2021.



Gains from the sale of Small Business Administration 7(a) loans decreased
$101,000 to $180,000 for the three months ended December 31, 2022 from $281,000
for the three months ended December 31, 2021. Partially offsetting this decrease
were $57,000 in interest rate swap fees received during the three months ended
December 31, 2022, compared with no fees during the three months ended December
31, 2021.

Other Expenses. Other expenses decreased $38,000, or 0.8%, to $4.6 million during the three months ended December 31, 2022.


The decrease was primarily attributable to decreases in professional fees, which
decreased $208,000, or 53.7%, to $179,000, due to lower legal and consulting
fees related to the collection and foreclosure of non-performing loans, and OREO
expenses, which decreased $18,000 to $16,000, from fewer OREO properties between
periods. Offsetting the decrease was higher compensation and benefit expense,
which increased $121,000, or 4.5%, to $2.8 million, due to stock award and stock
option expenses related to the Company's 2022 Equity Incentive Plan.



Income Tax Expense.The Company recorded tax expense of $780,000 on pre-tax
income of $2.6 million for the three months ended December 31, 2022, compared to
$674,000 on pre-tax income of $2.4 million for the three months ended December
31, 2021. The Company's effective tax rate for the three months ended December
31, 2022 was 30.1% compared with 28.5% for the three months ended December

31,
2021.

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, 2022
in the ability of the Company and its subsidiaries to fund their operations.



At December 31, 2022, the Company had commitments outstanding under letters of
credit of $740,000, commitments to originate loans of $15.5 million, and
commitments to fund undisbursed balances of closed loans and unused lines of
credit of $85.7 million. There has been no material change during the three
months ended December 31, 2022 in any of the Company's other contractual
obligations or commitments to make future payments.





Capital Requirements

At December 31, 2022, the Bank's Tier 1 capital as a percentage of the Bank's total assets was 11.23%, and total qualifying capital as a percentage of risk-weighted assets was 15.83%.



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