Magyar Bancorp(MGYR) - 2023 Q4 - Annual Report

Securities Portfolio - As of September 30, 2023, the fair value of the total securities portfolio was $83.9 million, with an unrealized net loss of $14.1 million on a pre-tax basis[195]. Interest Rates Impact - At September 30, 2023, a 200 basis point increase in interest rates is projected to result in a $391,000 (1.3%) increase in net interest income in the first year and a $1.8 million (5.3%) increase in the second year[196]. - The average life of loans and mortgage-backed securities may be affected by changes in interest rates, leading to reinvestment risk[194]. Loan Loss Allowance - The allowance for loan losses decreased by $103,000 to $8.3 million for the year ended September 30, 2023, with the allowance as a percentage of non-performing loans decreasing to 163.9%[200]. - The allowance for loan losses as a percentage of total loans was 1.19% at September 30, 2023, down from 1.34% a year earlier[200]. - The implementation of the Current Expected Credit Loss (CECL) standard is effective October 1, 2023, which may require an increase in the allowance for loan losses[203]. - Regulatory authorities may require an increase in the allowance for loan losses, which could adversely affect the company's financial condition[202]. Loan Portfolio Composition - The portfolio of commercial real estate and commercial business loans totaled $419.3 million, representing 60.1% of total loans as of September 30, 2023, up from 60.0% a year earlier[198]. - At September 30, 2023, there was one non-performing commercial real estate loan totaling $2.2 million, compared to no non-performing loans in the previous year[198]. - The company intends to continue emphasizing the origination of commercial business and commercial real estate loans, which generally carry more risk than residential mortgage loans[198]. Deposits and Liquidity - As of September 30, 2023, municipal deposits from local government entities amounted to $246.4 million, representing 32.6% of total deposits[221]. - The company faces strong competition for core deposits, which may lead to decreased deposit balances if customers find alternative investments more attractive[218]. - A lack of liquidity could result in increased regulatory scrutiny and potential restrictions on growth, interest rates on deposits, and dividend payments[220]. - If the company relies on more expensive funding sources, operating margins and profitability may be adversely affected[219]. - The company emphasizes low-cost core deposits but may need to resort to higher-cost funding sources if municipal deposits are not retained[222].