UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





ý QUARTERLY REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended March 31, 2006





Commission
      File Number  **000-51726**





MAGYAR
      BANCORP, INC.


(Exact
      name of small business issuer as specified in its charter)





Delaware
            20-4154978(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                Number)400
                Somerset StreetNew
                Brunswick, New Jersey
            08901(Address
                of principal executive offices)
            (Zip
                Code)








Issuer's
      telephone number, including area code (732) 342-7600





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act 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 ý NO o





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


YES o NO ý





State
      the
      number of shares outstanding of each of the issuer's classes of common stock,
      as
      of the latest practicable date.





Class
            Outstanding
                at May 15, 2006Common
                Stock, $0.01 Par Value
            5,923,742








Transitional
      Small Business Disclosure Format YES o  NO  ý





MAGYAR
      BANCORP, INC.





Form
      10-QSB Quarterly Report





Table
      of Contents








PART
      I. FINANCIAL INFORMATION





Page
                NumberItem
                1.
            Financial
                Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial
                Conditionand
                Results of Operations
            11Item
                3.
            Controls
                and Procedures
            21PART
                II. OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            22Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            22Item
                3.
            Defaults
                Upon Senior Securities
            22Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            22Item
                5.
            Other
                Information
            22Item
                6.
            Exhibits
            22Signature
                Page
            23

















**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**CONSOLIDATED
                  BALANCE SHEETS(In
                  Thousands)March
                  31,
              
              September
                  30,2006
              
              2005(Unaudited)ASSETSCash
              
              $
              798
              
              $
              897Interest
                  bearing deposits with banks
              
              
              3,197
              
              
              2,312Total
                  cash and cash equivalents
              
              
              3,995
              
              
              3,209Investment
                  securities - available for sale, at fair value
              
              
              19,549
              
              
              20,602Investment
                  securities - held to maturity, at cost (fair value of $27,982 and
                  $33,853at
                  March 31, 2006 and September 30, 2005, respectively)
              
              
              28,762
              
              
              34,269Federal
                  Home Loan Bank of New York stock, at cost
              
              
              1,829
              
              
              2,444Loans
                  receivable, net of allowance for loan losses of $3,474 and $3,129
                  atMarch
                  31, 2006 and September 30, 2005, respectively
              
              
              303,392
              
              
              267,317Bank
                  owned life insurance
              
              
              9,488
              
              
              5,813Accrued
                  interest receivable
              
              
              1,860
              
              
              1,556Premises
                  and equipment, net
              
              
              21,002
              
              
              19,463Other
                  assets
              
              
              1,024
              
              
              5,032Total
                  assets
              
              $
              390,901
              
              $
              359,705LIABILITIES
                  AND STOCKHOLDERS' EQUITYLiabilitiesDeposits
              
              $
              305,725
              
              $
              278,090Escrowed
                  funds
              
              
              1,287
              
              
              1,195Federal
                  Home Loan Bank of New York advances
              
              
              26,404
              
              
              38,872Securities
                  sold under agreements to repurchase
              
              
              5,000
              
              
              10,000Loans
                  payable
              
              
              -
              
              
              2,497Accrued
                  interest payable
              
              
              1,028
              
              
              496Accounts
                  payable and other liabilities
              
              
              4,405
              
              
              4,167Total
                  liabilities
              
              
              343,849
              
              
              335,317Stockholders'
                  equityPreferred
                  stock: $.01 Par Value, 1,000,000 shares authorized; no shares
                  issued
              
              
              -
              
              
              -Common
                  stock: $.01 Par Value, 8,000,000 shares authorized; 5,923,742
                  issued
              
              
              -
              
              
              -at
                  March 31, 2006, no shares issued at September 30, 2005.
              
              
              59
              
              
              -Additional
                  paid-in capital
              
              
              25,773
              
              
              -Unearned
                  shares held by Employee Stock Ownership Plan
              
              
              (2,248
              )
              
              -Retained
                  earnings - substantially restricted
              
              
              24,489
              
              
              24,996Accumulated
                  other comprehensive loss, net
              
              
              (1,021
              )
              
              (608
              )Total
                  stockholders' equity
              
              
              47,052
              
              
              24,388Total
                  liabilities and stockholders' equity
              
              $
              390,901
              
              $
              359,705See
                  accompanying notes to consolidated financial statements.







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 1




**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**CONSOLIDATED
                  STATEMENTS OF
                  OPERATIONS(In
                  Thousands)For
                  the three months
              
              For
                  the six monthsEnded
                  March 31,
              
              Ended
                  March 31,2006
              
              2005
              
              2006
              
              2005(Unaudited)
              
              
              
              (Unaudited)Interest
                  and dividend incomeLoans,
                  including fees
              
              $
              5,069
              
              $
              2,929
              
              $
              9,643
              
              $
              5,585Investment
                  securities
              
              
              555
              
              
              641
              
              
              1,065
              
              
              1,312Federal
                  Home Loan Bank of New York stock
              
              
              22
              
              
              15
              
              
              55
              
              
              27Total
                  interest and dividend income
              
              
              5,646
              
              
              3,585
              
              
              10,763
              
              
              6,924Interest
                  expenseDeposits
              
              
              1,921
              
              
              941
              
              
              3,628
              
              
              1,817Borrowed
                  money
              
              
              371
              
              
              348
              
              
              935
              
              
              642Total
                  interest expense
              
              
              2,292
              
              
              1,289
              
              
              4,563
              
              
              2,459Net
                  interest and dividend income
              
              
              3,354
              
              
              2,296
              
              
              6,200
              
              
              4,465Provision
                  for loan losses
              
              
              240
              
              
              94
              
              
              360
              
              
              144Net
                  interest and dividend income after provisionfor
                  loan losses
              
              
              3,114
              
              
              2,202
              
              
              5,840
              
              
              4,321Other
                  incomeService
                  charges
              
              
              183
              
              
              114
              
              
              366
              
              
              262Other
                  operating income
              
              
              85
              
              
              34
              
              
              138
              
              
              98Gains
                  on the sale of real property
              
              
              -
              
              
              -
              
              
              -
              
              
              4Total
                  other income
              
              
              268
              
              
              148
              
              
              504
              
              
              364Other
                  expensesCompensation
                  and employee benefits
              
              
              1,625
              
              
              1,184
              
              
              3,002
              
              
              2,491Occupancy
                  expenses
              
              
              443
              
              
              299
              
              
              911
              
              
              582Advertising
              
              
              100
              
              
              52
              
              
              205
              
              
              122Professional
                  fees
              
              
              196
              
              
              114
              
              
              338
              
              
              121Federal
                  insurance premiums and assessments
              
              
              9
              
              
              8
              
              
              18
              
              
              16Service
                  fees
              
              
              116
              
              
              92
              
              
              216
              
              
              183Directors
                  fees
              
              
              180
              
              
              159
              
              
              358
              
              
              727Contribution
                  to charitable foundation
              
              
              1,547
              
              
              -
              
              
              1,547
              
              
              -Other
                  expenses
              
              
              326
              
              
              283
              
              
              661
              
              
              549Total
                  other expenses
              
              
              4,542
              
              
              2,191
              
              
              7,256
              
              
              4,791Income
                  (loss) before income tax (benefit)
              
              
              (1,160
              )
              
              159
              
              
              (912
              )
              
              (106
              )Income
                  tax expense (benefit)
              
              
              (487
              )
              
              53
              
              
              (405
              )
              
              (64
              )Net
                  income (loss)
              
              $
              (673
              )
              $
              106
              
              $
              (507
              )
              $
              (42
              )See
                  accompanying notes to consolidated financial statements.







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 2




**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS'
                  EQUITYFor
                  the Six Months Ended March 31, 2006 and 2005
                  (Unaudited)(In
                  Thousands, Except for Shares Issued)AccumulatedCommon
                  Stock
              
              Additional
              
              
              
              
              
              otherShares
              
              Par
              
              Paid-In
              
              Unearned
              
              Retained
              
              comprehensiveIssued
              
              Value
              
              Capital
              
              ESOP
                  Shares
              
              earnings
              
              loss
              
              TotalBalance,
                  September 30, 2004
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              23,436
              
              $
              (324
              )
              $
              23,112Net
                  loss for the six months ended March 31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (42
              )
              
              -
              
              
              (42
              )Other
                  comprehensive loss, net of reclassificationadjustments
                  and taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (244
              )
              
              (244
              )Total
                  comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (286
              )Balance,
                  March 31, 2005
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              23,394
              
              $
              (568
              )
              $
              22,826Balance,
                  September 30, 2005
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              24,996
              
              $
              (608
              )
              $
              24,388Issuance
                  of common stock, net of offeringexpenses
                  of $1.4 million.
              
              
              5,923,742
              
              
              59
              
              
              25,770
              
              
              -
              
              
              -
              
              
              -
              
              
              25,829Common
                  stock acquired by ESOP
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,306
              )
              
              -
              
              
              -
              
              
              (2,306
              )Allocation
                  of ESOP stock
              
              
              -
              
              
              -
              
              
              3
              
              
              58
              
              
              -
              
              
              -
              
              
              61Net
                  loss for the six months ended March 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (507
              )
              
              -
              
              
              (507
              )Other
                  comprehensive loss, net of reclassification
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -adjustments
                  and taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (413
              )
              
              (413
              )Total
                  comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (920
              )Balance,
                  March 31, 2006
              
              
              5,923,742
              
              $
              59
              
              $
              25,773
              
              $
              (2,248
              )
              $
              24,489
              
              $
              (1,021
              )
              $
              47,052See
                  accompanying notes to consolidated financial statements.






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 3




**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**CONSOLIDATED
                  STATEMENT OF CASH FLOWS(In
                  Thousands)For
                  the six monthsended
                  March 31,2006
              
              2005(Unaudited)Operating
                  activitiesNet
                  loss
              
              $
              (507
              )
              $
              (42
              )Adjustment
                  to reconcile net loss to net cash provided byoperating
                  activitiesContribution
                  of stock to charitable foundation
              
              
              1,047
              
              
              -Depreciation
                  expense
              
              
              488
              
              
              263Premium
                  amortization on investment securities, net
              
              
              56
              
              
              96Gains
                  on sale of premise and equipment
              
              
              -
              
              
              (4
              )Provision
                  for loan losses
              
              
              360
              
              
              144Allocation
                  of ESOP shares
              
              
              61
              
              
              -Deferred
                  income tax (benefit)
              
              
              -
              
              
              772(Increase)
                  decrease in accrued interest receivable
              
              
              (304
              )
              
              171Increase
                  in bank owned life insurance
              
              
              (105
              )
              
              (85
              )Decrease
                  (increase) in other assets
              
              
              4,009
              
              
              (2
              )Increase
                  in accrued interest payable
              
              
              532
              
              
              35Decrease
                  in other liabilities
              
              
              (135
              )
              
              (949
              )Net
                  cash provided by operating activities
              
              
              5,502
              
              
              399Investing
                  activitiesNet
                  increase in loans receivable
              
              
              (36,435
              )
              
              (28,499
              )Purchases
                  of investment securities held to maturity
              
              
              -
              
              
              (2,015
              )Purchases
                  of investment securities available for sale
              
              
              (3,085
              )
              
              -Proceeds
                  from maturities/calls of investment securities held to
                  maturity
              
              
              2,010
              
              
              3,000Proceeds
                  from maturities/calls of investment securities available for
                  sale
              
              
              2,518
              
              
              2,000Principal
                  repayments on investment securities held to maturity
              
              
              3,460
              
              
              3,673Principal
                  repayments on investment securities available for sale
              
              
              1,560
              
              
              2,469Purchases
                  of bank owned life insurance
              
              
              (3,570
              )
              
              -Purchases
                  of premises and equipment
              
              
              (2,027
              )
              
              (200
              )Net
                  proceeds on sale of premises and equipment
              
              
              -
              
              
              96Redemption
                  (purchase) Federal Home Loan Bank of New York stock
              
              
              615
              
              
              (368
              )Net
                  cash used in investing activities
              
              
              (34,954
              )
              
              (19,844
              )Financing
                  activitiesNet
                  increase in deposits
              
              
              27,635
              
              
              14,888Net
                  proceeds from issuance of common stock
              
              
              24,782
              
              
              -Net
                  purchase of common stock for ESOP
              
              
              (2,306
              )
              
              -Net
                  increase in escrowed funds
              
              
              92
              
              
              87Proceeds
                  from long-term Federal Home Loan Bank of New York advances
              
              
              -
              
              
              5,000Repayments
                  of long-term Federal Home Loan Bank of New York advances
              
              
              (968
              )
              
              (670
              )Net
                  repayments of short-term Federal Home Loan Bank of New York
                  advances
              
              
              (11,500
              )
              
              (1,070
              )Net
                  repayments from securities sold under agreements to
                  repurchase
              
              
              (5,000
              )
              
              -Repayment
                  of loans payable
              
              
              (2,497
              )
              
              -Net
                  cash provided by financing activities
              
              
              30,238
              
              
              18,235Net
                  increase (decrease) in cash and cash equivalents
              
              
              786
              
              
              (1,210
              )Cash
                  and cash equivalents, beginning of year
              
              
              3,209
              
              
              4,975Cash
                  and cash equivalents, end of year
              
              $
              3,995
              
              $
              3,765Supplemental
                  disclosures of cash flow informationCash
                  paid forInterest
              
              $
              4,031
              
              $
              2,424Income
                  taxes
              
              $
              20
              
              $
              -See
                  accompanying notes to consolidated financial statements.




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 4


**MAGYAR
      BANCORP, INC. AND SUBSIDIARY**


Notes
      to Consolidated Financial Statements


(Unaudited)








NOTE
      A -
      ORGANIZATION





On
      January 23, 2006, Magyar Bank (the Bank) completed a reorganization involving
      a
      series of transactions by which our corporate structure was changed from a
      mutual savings bank to the mutual holding company form of ownership. Magyar
      Bank
      became a New Jersey-chartered stock savings bank subsidiary of Magyar Bancorp,
      Inc., a Delaware-chartered
      mid-tier stock holding company (the
      Company) . Magyar
      Bancorp, Inc. owns 100% of the outstanding shares of common stock of Magyar
      Bank. Magyar Bancorp, Inc. is a majority-owned subsidiary of Magyar Bancorp,
      MHC, a New
      Jersey-chartered mutual holding company .





As
      a
      result of the reorganization and stock offering, Magyar
      Bancorp, MHC, owns 3,200,450 shares, or 54.03%, of the outstanding shares of
      common stock of Magyar Bancorp, Inc. The remaining 2,723,292 shares, or 45.97%,
      are held by public stockholders, including a charitable foundation organized
      by
      the Bank. The gross offering proceeds from the sale were $27,233,000 and the
      net
      proceeds were $25,829,000 (including $1,047,000 in stock contributed to the
      charitable foundation). So long as Magyar Bancorp, MHC exists, it will be
      required to own a majority of the voting stock of Magyar Bancorp, Inc.





For
      a
      further discussion of the stock offering, see the Company's Prospectus as filed
      on December 12, 2005 with the Securities and Exchange Commission pursuant to
      Rule 424(b)(3) of the Rules and Regulations of the Securities Act of 1933 (File
      Number 333-128392).





Two
      wholly-owned, non-bank subsidiaries exist under Magyar Bank. Magyar Service
      Corporation, a New Jersey corporation, operates under the name Magyar Financial
      Services and receives commissions from annuity and life insurance sales referred
      to a licensed, non-bank financial planner. Hungaria Urban Renewal, LLC, a
      Delaware corporation, is a real-estate holding company whose only holding is
      Magyar Bank’s corporate headquarters in New Brunswick.





Magyar
      Bank is subject to regulations issued by the New Jersey Department of Banking
      and Insurance and the Federal Deposit Insurance Corporation. Magyar Bancorp,
      Inc. is subject to comprehensive regulation and examination by the Board of
      Governors of the Federal Reserve System and the New Jersey Department of Banking
      and Insurance.





NOTE
      B -
      BASIS OF PRESENTATION





The
      consolidated financial statements include the accounts of the Company, its
      wholly-owned subsidiary Magyar Bank, and the Bank’s wholly-owned subsidiaries
      Magyar Service Corporation and Hungaria Urban Renewal, LLC. 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.





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 5





Operating
      results for the three and six months ended March 31, 2006 and 2005 are not
      necessarily indicative of the results that may be expected for the year ending
      September 30, 2006.  The
      September 30, 2005 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 financial
      statements.





The
      preparation of 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 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.





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





Earnings
      per share was not meaningful for the three and six months ended March 31, 2006,
      as the Company did not have publicly-held shares outstanding during each day
      of
      the periods. Earnings per share was not meaningful for the three and six months
      ended March 31, 2005, as the Company had no publicly-held shares during the
      periods.





NOTE
      E -
      STOCK BASED COMPENSATION





The
      Company had no stock-based compensation as of March 31, 2006.





The
      Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of
      employees who meet the eligibility requirements as defined in the plan. The
      ESOP
      trust purchased 217,863 shares of common stock in the open market using proceeds
      of a loan from the Company. The total cost of shares purchased by the ESOP
      trust
      was $2.3 million, reflecting an average cost per share of $10.58. The Bank
      will
      make 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 equal to Prime (currently 8.00%) with principal and
      interest payable annually in equal installments over thirty years. The loan
      is
      secured by the shares of the stock purchased.





As
      the
      debt is repaid, shares are released from the collateral and allocated to
      qualified employees. Accordingly, the shares pledged as collateral are reported
      as unearned ESOP shares in the Consolidated Balance Sheet. The Company accounts
      for its ESOP in accordance with Statement of Position (“SOP”) 93-6, “Employer’s
      Accounting for Employee Stock Ownership Plans”, issued by the Accounting
      Standards Division of the American Institute of Certified Public Accountants
      (“AICPA”). 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. The Company's
      contribution expense for the ESOP was $61,000 for the three and six months
      ended
      March 31, 2006.


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 6





The
      following table presents the components of the ESOP shares:





2006Shares
                released for allocation
            
            
            -Unreleased
                shares
            
            
            217,863Total
                ESOP shares
            
            
            217,863





NOTE
      F -
      COMPREHENSIVE INCOME





SFAS
      No.
      130, “Reporting Comprehensive Income,” established standards for reporting
      comprehensive income, which includes net income as well as certain other items
      which result in a charge to equity during the period.





The
      income tax effects allocated to other comprehensive loss are as follows (in
      thousands):





Three
                Months Ended
            
            Six
                Months EndedMarch
                31,
            
            March
                31,2006
            
            2005
            
            2006
            
            2005(Unaudited)
            
            (Unaudited)Other
                comprehensive loss:Unrealized
                holding gains (losses) onavailable-for-sale
                securities
            
            $
            38
            
            $
            (308
            )
            $
            (41
            )
            $
            (420
            )Unrealized
                holding loss on interestrate
                floors
            
            
            (50
            )
            
            -
            
            
            (50
            )
            
            -Minimum
                pension liability
            
            
            (673
            )
            
            -
            
            
            (673
            )
            
            -Net
                unrealized losses
            
            
            (685
            )
            
            (308
            )
            
            (764
            )
            
            (420
            )Income
                tax benefit
            
            
            318
            
            
            129
            
            
            351
            
            
            176Net
                of tax amount
            
            $
            (367
            )
            $
            (179
            )
            $
            (413
            )
            $
            (244
            )





NOTE
      G -
      INVESTMENT SECURITIES





The
      following table sets forth the composition of our securities portfolio at March
      31, 2006 and September 30, 2005 (in thousands):




March
                31, 2006
            
            September
                30, 2005Amortized
            
            Fair
            
            Amortized
            
            Faircost
            
            value
            
            cost
            
            value(Unaudited)Available
                for saleU.S.
                government and agency obligations
            
            $
            5,593
            
            $
            5,448
            
            $
            4,000
            
            $
            3,894Equity
                securities
            
            
            142
            
            
            142
            
            
            142
            
            
            142Mortgage-backed
                securities
            
            
            14,442
            
            
            13,959
            
            
            17,047
            
            
            16,566Total
            
            $
            20,177
            
            $
            19,549
            
            $
            21,189
            
            $
            20,602Held
                to maturityU.S.
                government and agency obligations
            
            $
            4,299
            
            $
            4,227
            
            $
            4,313
            
            $
            4,266Corporate
                notes
            
            
            -
            
            
            -
            
            
            2,001
            
            
            2,015Mortgage-backed
                securities
            
            
            24,463
            
            
            23,755
            
            
            27,955
            
            
            27,572Total
            
            $
            28,762
            
            $
            27,982
            
            $
            34,269
            
            $
            33,853


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 7








NOTE
      H -
      LOANS RECEIVABLE, NET





Loans
                receivable, net at March 31, 2006 and September 30, 2005 were comprised
                of
                the following (in thousands):


At
                        March 31, 2006
                    
                    At
                        September 30, 2005(Unaudited)One-to-four
                        family residential
                    
                    $
                    134,495
                    
                    $
                    126,269Commercial
                        real estate
                    
                    
                    60,905
                    
                    
                    57,366Construction
                    
                    
                    64,877
                    
                    
                    44,418Home
                        equity lines of credit
                    
                    
                    10,182
                    
                    
                    10,398Commercial
                        business
                    
                    
                    21,942
                    
                    
                    17,413Other
                    
                    
                    14,857
                    
                    
                    14,862Total
                        loans receivable
                    
                    
                    307,258
                    
                    
                    270,726Deferred
                        loan costs (fees)
                    
                    
                    (392
                    )
                    
                    (280
                    )Allowance
                        for loan losses
                    
                    
                    (3,474
                    )
                    
                    (3,129
                    )Total
                        loans receivable, net
                    
                    $
                    303,392
                    
                    $
                    267,317





At
      March
      31, 2006 and September 30, 2005, non-accrual loans had a total principal balance
      of approximately $420,000 and $577,000, respectively.





NOTE
      I -
      DEPOSITS





A
      summary
      of deposits by type of account are summarized as follows (in
      thousands):




At
                  March 31, 2006
              
              At
                  September 30, 2005(Unaudited)Demand
              
              $
              19,042
              
              $
              14,566Passbook
                  savings
              
              
              54,725
              
              
              53,819Regular
                  NOW accounts
              
              
              33,982
              
              
              28,149Money
                  market NOW accounts
              
              
              28,474
              
              
              30,499Certificates
                  of deposit
              
              
              144,397
              
              
              126,165IRA
              
              
              25,105
              
              
              24,892$
              305,725
              
              $
              278,090





NOTE
      J -
      PREMISES AND EQUIPMENT





Premises
      and equipment consisted of the following (in thousands):




Estimated
              
              At
                  March 31,
              
              At
                  September 30,useful
                  lives
              
              2006
              
              2005(Unaudited)Land
              
              Indefinite
              
              $
              2,605
              
              $
              2,605Buildings
                  and improvements
              
              10-40
                  years
              
              
              18,074
              
              
              14,427Construction
                  in progress
              
              10-40
                  years
              
              
              -
              
              
              1,934Furniture,
                  fixtures and equipment
              
              3-10
                  years
              
              
              2,833
              
              
              2,51923,512
              
              
              21,485Less
                  accumulated depreciation
              
              
              
              
              
              (2,510
              )
              
              (2,022
              )$
              21,002
              
              $
              19,463









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 8






For
      the
      six months ended March 31, 2006 and 2005, depreciation expense included in
      occupancy expense amounted to approximately $488,000 and $263,000,
      respectively.





The
      Bank
      completed an IRC “Section 1031 Exchange” of like-kind property on January 24,
      2006. The purpose of the exchange was to defer the capital gains tax otherwise
      attributable to the sale of relinquished commercial real estate. The property
      relinquished by the Bank consisted of its old main office building located
      at
      101 French Street, New Brunswick, New Jersey. The Bank identified 400 Somerset
      Street, New Brunswick, New Jersey as the replacement property, which was
      acquired and developed by a qualified intermediary operating as Hungaria Urban
      Renewal, LLC.





Hungaria
      Urban Renewal, LLC was formed in 2002 and its sole purpose was to purchase
      the
      land and construct the office building for which the Bank would be the primary
      tenant. The Bank had made loans to this entity during 2003 and 2004 to finance
      the purchase of the land and begin construction of the building. During the
      period of construction, the Bank had leased the land and building from the
      entity. The lease payments were structured to equal the debt service on the
      loans plus a nominal fee. The lease agreement contained an irrevocable purchase
      option allowing the Bank to purchase the land and building from this entity
      for
      the aggregated outstanding indebtedness. In conjunction with the completion
      of
      the exchange, the Bank acquired a 100% interest in Hungaria Urban Renewal,
      LLC,
      which will have no other business other than owning the Bank’s main office site.
      At March 31, 2006, Hungaria Urban Renewal, LLC accounted for $2,605,000,
      $13,771,000, and $1,108,000 of land, building, and furniture, fixtures and
      equipment, respectively.





Although
      the exchange was not completed until January 2006, the Bank previously
      identified Hungaria Urban Renewal, LLC as a variable interest entity, as defined
      by Financial Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
      Interest Entities,” and its subsequent amendment, FIN 46-R. As the primary
      beneficiary to this entity, the Bank included the variable interest entity
      in
      the consolidated financial statements beginning October 1, 2004. At September
      30, 2005, Hungaria Urban Renewal, LLC accounted for $2,605,000, $10,446,000,
      $1,934,000, and $987,000 of land, building, construction in progress and
      furniture, fixtures and equipment, respectively.





NOTE
      K -
      FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK





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




March
                  31,
              
              September
                  30,2006
              
              2005Financial
                  instruments whose contract amounts
              
              (Unaudited)represent
                  credit risk (in thousands):Unused
                  lines of credit
              
              $
              29,019
              
              $
              29,687Fixed
                  rate loan commitments
              
              $
              4,313
              
              $
              1,983Variable
                  rate loan commitments
              
              $
              14,675
              
              $
              8,745Letters
                  of credit
              
              $
              332
              
              $
              202










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 9








NOTE
      L -
      PENSION PLAN





Net
      pension cost for the six months ended March 31, 2006 and 2005 included the
      following components (in thousands):


March
                  31,2006
              
              2005(Unaudited)Service
                  cost benefits earned during the period
              
              $
              24
              
              $
              76Effect
                  of plan curtailment
              
              
              161
              
              
              -Interest
                  cost on projected benefit obligation
              
              
              95
              
              
              85Expected
                  return on plan assets
              
              
              (76
              )
              
              (71
              )Amortization
                  of transitional obligation
              
              
              1
              
              
              2Amortization
                  of unrecognized loss
              
              
              40
              
              
              33Amortization
                  of unrecognized past service liability
              
              
              4
              
              
              11Total
              
              $
              249
              
              $
              136




The
      employer contribution for the six months ended March 31, 2006 and 2005 was
      $156,000 and $48,000, respectively.





On
      January 26, 2006, the Board of Directors voted to freeze future benefits payable
      under the Bank’s defined benefit pension plan. Accordingly, the annual benefit
      provided to Bank employees was amended to eliminate future benefit accruals
      on
      February 15, 2006.





In
      accordance with Statement of Financial Accounting Standards No. 88 (SFAS No.88)
      “Employers’ Accounting for Settlements and Curtailments of Defined Benefit
      Pension Plans and for Termination Benefits,” the Bank immediately recognized the
      unrecognized prior service costs associated with years of service no longer
      expected to be rendered as the result of a curtailment. The Bank incurred a
      charge of $161,000 in the three and six month periods ended March 31, 2006
      for
      such prior service costs that were previously being deferred over the plan’s
      amortization period.








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 10





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 Magyar Bancorp, Inc. 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,” or similar expressions
      are intended to identify “forward looking statements.” Such statements are
      subject to risks and uncertainties, including but not limited to changes in
      economic conditions in Magyar Bancorp, Inc.’s market area, changes in policies
      by regulatory agencies, fluctuations in interest rates, demand for loans in
      Magyar Bancorp, Inc.’s market area, changes in the position of banking
      regulators on the adequacy of our allowance for loan losses, and competition,
      all or some of which could cause actual results to differ materially from
      historical earnings and those presently anticipated or projected.




Magyar
      Bancorp, Inc. wishes to caution readers not to place undue reliance on any
      such
      forward-looking statements, which speak only as of the date made, and advise
      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 Magyar Bancorp, Inc.’s financial performance and could
      cause Magyar Bancorp, Inc.’s actual results for future periods to differ
      materially from those anticipated or projected.




Magyar
      Bancorp, Inc. 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.




**Overview**





Magyar
      Bancorp, Inc. is a Delaware-chartered mid-tier stock holding company whose
      most
      significant business activity is operating Magyar Bank. Magyar Bank’s principal
      business is attracting retail deposits from the general public and investing
      those deposits, together with funds generated from operations, principal
      repayments on loans and securities and borrowed funds, into one-to-four family
      residential mortgage loans, multi-family and commercial real estate mortgage
      loans and construction loans. Our results of operations depend primarily on
      our
      net interest income which is the difference between the interest we earn on
      our
      interest-earning assets and the interest we pay on our interest-bearing
      liabilities. Our net interest income is primarily affected by the market
      interest rate environment, the shape of the U.S. Treasury yield curve, the
      timing of the placement of interest-earning assets and interest-bearing
      liabilities, and the prepayment rate on our mortgage-related assets. Other
      factors which may affect our results of operations are general and local
      economic and competitive conditions, government policies and actions of
      regulatory authorities.





In
      connection with the completion of our initial public stock offering on
      January 23, 2006, Magyar Bancorp, Inc. sold 2,618,550 shares of common
      stock, or 44.2% of its outstanding common stock, at a price of $10.00 per share,
      to subscribers in the offering. Magyar Bancorp, MHC, the Company’s New Jersey
      chartered mutual holding company parent, holds 3,200,450 shares, or 54.03%,
      of
      the Company’s outstanding common stock. The Company also contributed $500,000 in
      cash and issued 104,742 shares of common stock, or 1.77% of its outstanding
      shares, to the Magyar Bank Charitable Foundation. Net proceeds
      from the initial offering were $25.8 million (including $1.0 million in stock
      contributed to the charitable foundation) of which the Company contributed
      $12.4
      million to Magyar Bank.


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 11







During
      the six months ended March 31, 2006, we grew net loans $36.1 million, or
      13.5%, over September 30, 2005. We attribute this growth to our continued
      focus on originating commercial, construction, and residential mortgage loans.
      Deposits grew $27.6 million, or 9.9%, from September 30, 2005 to March 31,
      2006. We attribute this growth to the attractiveness of our certificates of
      deposit and the expansion of our commercial relationships, which tend to hold
      larger deposit balances.





We
      reported net losses of $673,000 and $507,000 for the three and six months ended
      March 31, 2006, respectively, compared to net income of $106,000 and net
      loss of $42,000 for the three and six months ended March 31, 2005,
      respectively. Net income was adversely affected by the $1.5 million pre-tax
      charitable contribution we made to the Magyar Bank Charitable Foundation. The
      contribution expense was partially offset by an increase in net interest income,
      resulting from higher yields on assets, which more than offset the increased
      cost of funding.





Our
      net
      interest margin increased to 3.65% and 3.45% for the three and six month periods
      ended March 31, 2006, respectively, compared to 3.28% and 3.23% for the
      three and six month periods ended March 31, 2005, respectively. We
      attribute this increase to both the growth in our loan portfolio, specifically
      in Prime-based loans, and the capital we raised in the stock offering.
      Meanwhile, our net interest spread increased to 3.36% and 3.20% for the three
      and six months ended March 31, 2006, respectively, from 3.12% and 3.06% for
      the
      three and six months ended March 31, 2005, respectively.





Throughout
      2006 we expect to continue with our strategy of diversifying the balance sheet
      with higher concentrations in commercial and construction loans.





**Comparison
      of Financial Condition at March 31, 2006 and September 30,
      2005**





Total
      assets increased $31.2 million, or 8.7%, to $390.9 million at March 31, 2006
      from $359.7 million at September 30, 2005, represented by significant growth
      in
      net loans receivable, partially offset by a decrease in securities
      available-for-sale and securities held-to-maturity.





Net
      loans
      receivable increased $36.1 million, or 13.5%, to $303.4 million at March 31,
      2006 from $267.3 million at September 30, 2005. During the six months ended
      March 31, 2006, construction loans led the increase in net loans receivable
      with
      growth of 46.1% or $20.5 million to $64.9 million from $44.4 million at
      September 30, 2005. Commercial business loans increased $4.5 million, or 26.0%,
      and one-to-four family residential mortgage loans increased $8.2 million,
      or 6.5%, during the period to $21.9 million and $134.5 million, respectively.





At
      March
      31, 2006, the significant loan categories in terms of the percent of total
      loans
      were 43.8% in one-to-four family residential mortgage loans, 21.1% in
      construction loans and 19.8% in commercial real estate loans. The recent
      expansion of our construction lending department led to an increase in the
      percentage of construction loans from 16.4% to 21.1% over the six month period
      ended March 31, 2006.





Total
      non-performing loans, defined as non-accruing loans, decreased by $157,000
      to
      $420,000 at March 31, 2006 from $577,000 at September 30, 2005. The ratio of
      non-performing loans to total loans was 0.14% at March 31, 2006 compared with
      0.21% at September 30, 2005. The allowance for loan losses was $3.5 million
      or 827.1% of non-performing loans at March 31, 2006 compared with
      $3.1 million or 542.3%
      of
      non-performing loans at September 30, 2005. The allowance for loan losses was
      $3.5 million, or 1.1% of gross loans outstanding at March 31, 2006, as compared
      to $2.5 million, or 1.1% of gross loans outstanding at March 31, 2005.


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 12







Securities
      available-for-sale decreased $1.1 million, or 5.1%, to $19.5 million at March
      31, 2006 from $20.6 million at September 30, 2005. The decrease was the result
      of $1.6 million in principal amortization and $2.5 million in maturities of
      mortgage-backed securities, offset by $3.1 million in purchases of
      mortgage-backed and investment securities. In addition, securities
      held-to-maturity decreased $5.5 million, or 16.1%, to $28.8 million at March
      31,
      2006 from $34.3 million at September 30, 2005, resulting from $2.0 million
      in
      maturities and $3.5 million in principal amortization. The decrease in the
      available for sale and held to maturity securities reflected the deployment
      of
      investment proceeds into new higher-yielding loans.





Total
      deposits increased $27.6 million, or 9.9%, to $305.7 million at March 31, 2006.
      The increase was primarily the result of certificates of deposit which increased
      $18.2 million, or 14.5%, to $144.4 million at March 31, 2006 from $126.2 million
      at September 30, 2005. Other significant changes in total deposits over the
      six
      month period included an increase in NOW accounts of $5.8 million, or 20.7%,
      to
      $34.0 million and an increase in demand accounts of $4.5 million, or 30.7%,
      to
      $19.0 million.




Borrowings
      from the Federal Home Loan Bank of New York (FHLBNY) decreased $17.5 million,
      or
      35.7% to $31.4 million at March 31, 2006 from $48.9 million at September 30,
      2005. Proceeds from the growth in deposits described above were used to pay
      down
      $12.5 million in FHLBNY advances and $5.0 million in securities sold under
      agreements to repurchase over the six month period.





Stockholders’
      Equity increased $22.7 million to $47.1 million at March 31, 2006 from $24.4
      million at September 30, 2005. The increase was attributable to a net increase
      in capital (net of stock acquired by the ESOP) of $23.6 million in connection
      with the Company's initial public offering, net losses of $507,000, and an
      increase in accumulated other comprehensive loss of $413,000. The other
      comprehensive losses due to unrealized losses on securities available-for-sale
      related to increases in interest rates since the securities were purchased.
      Management has concluded that none of the securities have impairments that
      are
      other than temporary.





**Average
      Balance Sheets for the Three and Six Months Ended March 31, 2006 and
      2005**





The
      tables on the following pages present certain information regarding Magyar
      Bancorp, Inc.’s financial condition and net interest income for the three months
      and six months ended March 31, 2006 and 2005. The tables present the
      annualized average yield on interest-earning assets and the annualized average
      cost of interest-bearing liabilities. We derived the yields and costs by
      dividing annualized income or expense by the average balance of interest-earning
      assets and interest-bearing liabilities, respectively, for the periods shown.
      We
      derived average balances from daily balances over the periods indicated.
      Interest income includes fees that we consider adjustments to yields.





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 13


**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**Comparative
                  Average Balance Sheets(In
                  Thousands)For
                  the Three Months Ended March 31,2006
              
              2005**Average
                  Balance**
              
              **Interest
                  Income/**
                **Expense**
              
              **Yield/
                  Cost**
              
              **Average
                  Balance**
              
              **Interest
                  Income/**
                **Expense**
              
              **Yield/
                  Cost****Interest-earning
                  assets:**Loans
              
              $
              307,970
              
              $
              5,069
              
              
              6.68
              %
              
              $
              213,511
              
              $
              2,929
              
              
              5.56
              %Securities
              
              
              62,415
              
              
              555
              
              
              3.61
              %
              
              
              68,319
              
              
              641
              
              
              3.81
              %Other
                  interest-earning assets
              
              
              1,829
              
              
              22
              
              
              4.88
              %
              
              
              1,791
              
              
              15
              
              
              3.40
              %Total
                  interest-earning assets
              
              
              372,214
              
              
              5,646
              
              
              6.15
              %
              
              
              283,621
              
              
              3,585
              
              
              5.13
              %Noninterest-earning
                  assets
              
              
              19,372
              
              
              
              
              
              
              
              
              
              13,584Total
                  assets
              
              $
              391,586
              
              
              
              
              
              
              
              
              $
              297,205**Interest-bearing
                  liabilities:**Savings
                  accounts (1)
              
              $
              68,573
              
              
              180
              
              
              1.06
              %
              
              $
              49,918
              
              
              63
              
              
              0.51
              %NOW
                  accounts (2)
              
              
              68,739
              
              
              299
              
              
              1.76
              %
              
              
              61,303
              
              
              152
              
              
              1.01
              %Time
                  deposits (3)
              
              
              163,587
              
              
              1,442
              
              
              3.57
              %
              
              
              113,931
              
              
              726
              
              
              2.58
              %Total
                  interest-bearing deposits
              
              
              300,899
              
              
              1,921
              
              
              2.59
              %
              
              
              225,152
              
              
              941
              
              
              1.69
              %Federal
                  Home Loan Bank borrowings
              
              
              31,396
              
              
              357
              
              
              4.61
              %
              
              
              34,338
              
              
              348
              
              
              4.11
              %Loan
                  payable
              
              
              721
              
              
              14
              
              
              7.87
              %
              
              
              -
              
              
              -
              
              
              -Total
                  interest-bearing liabilities
              
              
              333,016
              
              
              2,292
              
              
              2.79
              %
              
              
              259,490
              
              
              1,289
              
              
              2.01
              %Noninterest-bearing
                  liabilities
              
              
              24,936
              
              
              
              
              
              
              
              
              
              14,608Total
                  liabilities
              
              
              357,952
              
              
              
              
              
              
              
              
              
              274,098Retained
                  earnings
              
              
              33,634
              
              
              
              
              
              
              
              
              
              23,107Total
                  liabilities and retained earnings
              
              $
              391,586
              
              
              
              
              
              
              
              
              $
              297,205Net
                  interest income
              
              
              
              
              $
              3,354
              
              
              
              
              
              
              
              
              $
              2,296Interest
                  rate spread
              
              
              
              
              
              
              
              
              3.36
              %
              
              
              
              
              
              
              
              
              3.12
              %Net
                  interest-earning assets
              
              $
              39,198
              
              
              
              
              
              
              
              
              $
              24,131Net
                  interest margin
              
              
              
              
              
              
              
              
              3.65
              %
              
              
              
              
              
              
              
              
              3.28
              %Average
                  interest-earning assets to
                average
                  interest-bearing liabilities
              
              
              111.77
              %
              
              
              
              
              
              
              
              
              109.30
              %(1)   
                  Includes passbook savings, money market passbook and club
                  accounts.(2)   
                  Includes regular and money market NOW accounts.(3)  
                   Includes certificates of deposits and individual retirement
                  accounts







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 14






**MAGYAR
                    BANCORP, INC. AND SUBSIDIARY**Comparative
                    Average Balance Sheets(In
                    Thousands)For
                    the Six Months Ended March 31,2006
                
                2005**Average
                    Balance**
                
                **Interest
                    Income/**
                  **Expense**
                
                **Yield/
                    Cost**
                
                **Average
                    Balance**
                
                **Interest
                    Income/**
                    **Expense**
                
                **Yield/
                    Cost****Interest-earning
                    assets:**Loans
                
                $
                298,319
                
                $
                9,643
                
                
                6.48
                %
                
                $
                205,782
                
                $
                5,585
                
                
                5.44
                %Securities
                
                
                60,019
                
                
                1,065
                
                
                3.56
                %
                
                
                69,782
                
                
                1,312
                
                
                3.77
                %Other
                    interest-earning assets
                
                
                2,109
                
                
                55
                
                
                5.23
                %
                
                
                1,740
                
                
                27
                
                
                3.11
                %Total
                    interest-earning assets
                
                
                360,447
                
                
                10,763
                
                
                5.99
                %
                
                
                277,304
                
                
                6,924
                
                
                5.01
                %Noninterest-earning
                    assets
                
                
                19,950
                
                
                
                
                
                
                
                
                
                13,963Total
                    assets
                
                $
                380,397
                
                
                
                
                
                
                
                
                $
                291,267**Interest-bearing
                    liabilities:**Savings
                    accounts (1)
                
                $
                63,317
                
                
                333
                
                
                1.05
                %
                
                $
                50,443
                
                
                127
                
                
                0.50
                %NOW
                    accounts (2)
                
                
                64,280
                
                
                541
                
                
                1.69
                %
                
                
                58,382
                
                
                275
                
                
                0.94
                %Time
                    deposits (3)
                
                
                159,635
                
                
                2,754
                
                
                3.46
                %
                
                
                113,309
                
                
                1,415
                
                
                2.50
                %Total
                    interest-bearing deposits
                
                
                287,232
                
                
                3,628
                
                
                2.53
                %
                
                
                222,134
                
                
                1,817
                
                
                1.64
                %Federal
                    Home Loan Bank borrowings
                
                
                38,872
                
                
                871
                
                
                4.49
                %
                
                
                31,253
                
                
                642
                
                
                4.12
                %Loan
                    payable
                
                
                1,619
                
                
                64
                
                
                7.93
                %
                
                
                -
                
                
                -
                
                
                -Total
                    interest-bearing liabilities
                
                
                327,723
                
                
                4,563
                
                
                2.79
                %
                
                
                253,387
                
                
                2,459
                
                
                1.95
                %Noninterest-bearing
                    liabilities
                
                
                23,447
                
                
                
                
                
                
                
                
                
                14,671Total
                    liabilities
                
                
                351,170
                
                
                
                
                
                
                
                
                
                268,058Retained
                    earnings
                
                
                29,227
                
                
                
                
                
                
                
                
                
                23,209Total
                    liabilities and retained earnings
                
                $
                380,397
                
                
                
                
                
                
                
                
                $
                291,267Net
                    interest income
                
                
                
                
                $
                6,200
                
                
                
                
                
                
                
                
                $
                4,465Interest
                    rate spread
                
                
                
                
                
                
                
                
                3.20
                %
                
                
                
                
                
                
                
                
                3.06
                %Net
                    interest-earning assets
                
                $
                32,724
                
                
                
                
                
                
                
                
                $
                23,917Net
                    interest margin
                
                
                
                
                
                
                
                
                3.45
                %
                
                
                
                
                
                
                
                
                3.23
                %Average
                    interest-earning assets to
                  average
                    interest-bearing liabilities
                
                
                109.99
                %
                
                
                
                
                
                
                
                
                109.44
                %(1)   
                    Includes passbook savings, money market passbook and club
                    accounts.(2)   
                    Includes regular and money market NOW accounts.(3)
                    Includes certificates of deposits and individual retirement
                    accounts






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 15




**Comparison
      of Operating Results for the Three Months Ended March 31, 2006 and
      2005**





***Net
      Income*** .
      The
      Company recorded a net loss of $673,000 for the three months ended March 31,
      2006 compared to net income of $106,000 for the prior year period. The loss
      of
      $673,000 for the three months ended March 31, 2006 resulted primarily from
      the
      expense of a $1.5 million contribution to the Magyar Bank Charitable Foundation
      as part of the Company’s initial public offering.





***Net
      Interest and Dividend Income.*** Net
      interest and dividend income increased $1.1 million, or 46.1%, to $3.4
      million for the three months ended March 31, 2006 from $2.3 million for the
      three months ended March 31, 2005. Total interest and dividend income increased
      $2.1 million to $5.6 million for the three month period ended March 31, 2006
      while total interest expense increased $1.0 million to $2.3 million for the
      same
      three month period. In addition, our interest rate spread improved to 3.36%
      from
      3.12%.





***Interest
      Income.*** The
      increase in ** interest
      income of $2.1 million, or 57.5%, to $5.6 million for the three months ended
      March 31, 2006 was primarily due to an increase in the average balance of
      interest-earning assets of $88.6 million to $372.2 million from $283.6 million,
      as well as an improvement in the average yield on such assets to 6.15% from
      5.13%. Interest earned on loans increased to $5.1 million for the three months
      ended March 31, 2006 from $2.9 million for the prior year period, reflecting
      a
      $94.5 million, or 44.2%, increase in the average balance of loans as well as
      a
      112 basis point increase in the average yield on such loans to 6.68% from 5.56%.
      The improved yield on loans reflected the higher balance of higher-yielding
      commercial business, commercial real estate and construction loans, as well
      as
      an overall higher interest rate environment.





Interest
      earned on our investment securities, which included Federal Home Loan Bank
      of
      New York stock, decreased $86,000, or 13.4%, due to a $5.9 million, or 8.6%,
      decrease in the average balance of such securities and a 20 basis point decrease
      in the average yield on such securities from 3.81% to 3.61%. The decreased
      average balance of our investment securities reflected the deployment of
      proceeds from prepayments or repayments into higher-yielding loans.





***Interest
      Expense.*** Interest
      expense increased $1.0 million, or 77.8%, to $2.3 million for the three months
      ended March 31, 2006 from $1.3 million for the three months ended March 31,
      2005. The increase in interest expense was primarily due to a $73.5 million,
      or
      28.3%, increase in the average balance of interest-bearing liabilities to $333.0
      million from $259.5 million. In addition, the average cost of such liabilities
      increased to 2.79% from 2.01% in the higher market interest rate environment.





The
      average balance of interest bearing deposits increased to $300.9 million from
      $225.2 million while the average cost of such deposits increased to 2.59% from
      1.69% in the higher market interest rate environment. This resulted in an
      increase in interest paid on deposits from $941,000 to $1.9 million for the
      three months ended March 31, 2006 compared to the same period last year.
      Interest paid on Federal Home Loan Bank advances increased to $357,000 for
      the
      three months ended March 31, 2006 from $348,000 for the prior year period.
      A
      decrease in the average balance of such advances from $34.3 million to $31.4
      million was more than offset by a 50 basis point increase in the average cost
      of
      Federal Home Loan Bank advances to 4.61% for the three months ended March 31,
      2006 from 4.11% for the prior year period.





***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


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 16


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. After an evaluation
      of
      these factors, management made a provision of $240,000 for the three months
      ended March 31, 2006 compared to a $94,000 provision for the prior year period.
      The increase in the provision in 2006 as compared to 2005 was due primarily
      to
      the overall growth of the loan portfolio and specifically the increase in the
      proportion of construction and commercial real estate loans in our portfolio.





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. Historically, our loan portfolio has consisted primarily
      of
      one-to four-family residential mortgage loans. However, our current business
      plan calls for increases in construction, commercial real estate and commercial
      business loans. 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.




Although
      we believe that we use the best information available to establish the allowance
      for loan losses, future additions to the allowance may be necessary, based
      on
      estimates that are susceptible to change as a result of changes in economic
      conditions and other factors. In addition, the Federal Deposit Insurance
      Corporation, as an integral part of its examination process, will periodically
      review our allowance for loan losses. This agency may require us to recognize
      adjustments to the allowance, based on its judgments about information available
      to it at the time of its examination.





***Non-interest
      Income.*** Non-interest
      income increased to $268,000 for the three months ended March 31, 2006 from
      $148,000 for the three months ended March 31, 2005. The increase reflected
      an
      increase in service charges and a larger increase in the cash surrender value
      of
      Magyar Bank’s bank- owned life insurance for the three months ended March 31,
      2006 compared to the earlier three month period. Higher interest rates accounted
      for the comparatively larger increase in the value of the insurance in the
      current three month period.





***Non-interest
      Expense.*** Non-interest
      expense increased to $4.5 million for the three months ended March 31, 2006
      from
      $2.2 million for the three months ended March 31, 2005. Included with the 2006
      expenses was a $1.5 million contribution to the Magyar Bank Charitable
      Foundation in conjunction with the Company’s initial public offering on January
      23, 2006.





Compensation
      and employee benefits rose to $1.6 million from $1.2 million, reflecting the
      addition of several senior management positions in 2005, including a new
      construction loan officer and a new commercial loan officer, as we increased
      our
      capacity to originate construction and commercial loans. In addition, we
      increased staffing in the administrative area, including a new marketing
      officer, a new human resources officer and a new CRA/community development
      officer. We expect the addition of these positions will enable us to administer
      higher balances of loans and deposits.





The
      higher non-interest expense also was due to higher occupancy expenses, which
      increased to $443,000 for the three months ended March 31, 2006 from $299,000
      for the prior year period. The increase primarily reflected depreciation of
      the
      Bank’s new corporate headquarters, which was completed in September 2005.
      Professional fees increased to $196,000 for the three months ended March 31,
      2006 from
      $114,000 for the same period last year primarily due to additional auditing
      and
      legal services required following the stock offering.


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 17







***Income
      Tax Expense.*** Income
      taxes decreased from a tax expense of $53,000 to a tax benefit of ($487,000),
      due primarily to lower income before taxes for the three months ended March
      31,
      2006 compared to March 31, 2005. The effective tax rate was 42.0% and 33.3%
      for
      the three month periods ended March 31, 2006 and 2005, respectively. The
      difference in the effective tax rate in 2006 as compared to 2005 is primarily
      a
      result of the relative percentage of the permanent differences as compared
      to
      pretax income.





**Comparison
      of Operating Results for the Six Months Ended March 31, 2006 and
      2005**





***Net
      Loss.*** The
      net
      loss for the six months ended March 31, 2006 increased to ($507,000) from a
      loss
      of ($42,000) for the prior year period. The loss of $507,000 for the six months
      ended March 31, 2006 resulted primarily from the expense of a $1.5 million
      contribution to the Magyar Bank Charitable Foundation as part of the Company’s
      initial public offering.





***Net
      Interest and Dividend Income.*** Net
      interest and dividend income increased $1.7 million, or 38.9%, to $6.2
      million for the six months ended March 31, 2006 from $4.5 million for the
      six months ended March 31, 2005. Total interest and dividend income increased
      $3.8 million to $10.8 million for the six month period ended March 31, 2006
      while total interest expense increased $2.1 million to $4.6 million for the
      same
      six month period. In addition, for the comparison period our interest rate
      spread increased 14 basis points to 3.20% from 3.06%.





***Interest
      Income.*** Interest
      income increased $3.8 million, or 55.4%, to $10.8 million for the six months
      ended March 31, 2006 from $6.9 million for the same period last year. The
      increase in interest income was primarily due to an increase in the average
      balance of interest-earning assets of $83.1 million to $360.4 million from
      $277.3 million. In addition, there was an improvement of 98 basis points in
      the
      average yield on such assets to 5.99% from 5.01%. Interest income on loans
      increased 72.7% to $9.6 million for the six months ended March 31, 2006 from
      $5.6 million for the prior year period, reflecting a $92.5 million, or 45.0%,
      increase in the average balance of loans as well as a 104 basis point increase
      in the average yield on such loans to 6.48% from 5.44%. The improved yield
      on
      loans reflected the larger balance of higher-yielding commercial business,
      commercial real estate and construction loans, as well as an overall higher
      interest rate environment.





Interest
      earned on investment securities decreased 18.8% to $1.1 million for the six
      month period ended March 31, 2006 from $1.3 million a year earlier. The decrease
      was primarily due to a $9.8 million, or 14.0%, decrease in the average balance
      of such securities to $60.0 million from $69.8 million for the comparison
      period. The decreased average balance of our investment securities reflected
      the
      deployment of proceeds from investment prepayments or repayments into
      higher-yielding loans.





***Interest
      Expense.*** Interest
      expense increased $2.1 million, or 85.6%, to $4.6 million for the six months
      ended March 31, 2006 from $2.5 million for the six months ended March 31, 2005.
      The increase in interest expense was primarily due to a $74.3 million, or 29.3%,
      increase in the average balance of interest-bearing liabilities to $327.7
      million from $253.4 million. In addition, the average cost of such liabilities
      increased to 2.79% from 1.95% in the higher market interest rate environment.





The
      average balance of interest bearing deposits increased $65.1 million to $287.2
      million for the six months ended March 31, 2006 from $222.1 million for the
      same
      period last year while the average cost of
      such
      deposits increased 89 basis points to 2.53% from 1.64%. This resulted in an
      increase of nearly 100% in interest paid on deposits from $1.8 million to $3.6
      million for the six months


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 18


ended
      March 31, 2006 compared to the same period ended March 31, 2005. Interest paid
      on Federal Home Loan Bank advances increased $229,000 to $871,000 for the six
      months ended March 31, 2006 from $642,000 for the prior year period. The
      increase in advance interest expense was due to an increase in the average
      balance of such advances from $31.2 million to $38.9 million combined with
      a 36
      basis point increase in the average cost of Federal Home Loan Bank advances
      to
      4.49% for the six months ended March 31, 2006 from 4.13% for the prior year
      period. The proceeds from the increase in the balance deposits and advances
      were
      used to partially fund the increase in loans.





***Provision
      for Loan Losses.*** Management made a provision of $360,000 for the six months ended March 31,
      2006
      compared to a $144,000 provision for the prior year period. The increase in
      the
      provision in 2006 as compared to 2005 was due primarily to the overall growth
      of
      the loan portfolio and specifically the increase in the proportion of higher
      risk construction and commercial real estate loans in our portfolio. The
      allowance for loan losses was $3.5 million, or 1.1% of gross loans outstanding
      at March 31, 2006, as compared to $2.5 million, or 1.1% of gross loans
      outstanding at March 31, 2005.





***Non-interest
      Income.*** Non-interest
      income increased $140,000 to $504,000 for the six months ended March 31, 2006
      from $364,000 for the six months ended March 31, 2005. The increase in
      non-interest income was primarily the result of an increase in service charges
      associated with the growth in loans and deposits.





***Non-interest
      Expense.*** Non-interest
      expense increased $2.5 million to $7.3 million for the six months ended March
      31, 2006 from $4.8 million for the six months ended March 31, 2005. Included
      with the 2006 expenses was a $1.5 million contribution to the Magyar Bank
      Charitable Foundation in conjunction with the Company’s initial public offering
      on January 23, 2006.





Compensation
      and employee benefits rose 20.5% or $511,000 to $3.0 million from $2.5 million,
      reflecting the addition of several senior management positions in 2005,
      including a new construction loan officer and a new commercial loan officer,
      as
      we increased our capacity to originate construction and commercial loans. In
      addition, we increased staffing in the administrative area, including a new
      marketing officer, a new human resources officer and a new CRA/community
      development officer. We expect the addition of these positions will enable
      us to
      administer higher balances of loans and deposits.





Occupancy
      expense increased $329,000 or 56.5% to $911,000 for the six months ended March
      31, 2006 from $582,000 for the prior year period. The increase primarily
      reflected depreciation of the Bank’s new corporate headquarters, which was
      completed in January 2006. Professional fees increased $217,000 to $338,000
      for
      the six months ended March 31, 2006 from $121,000 for the same period last
      year
      primarily due to additional auditing and legal expenses associated with the
      reporting requirements of the Company as a publicly-traded entity.





***Income
      Tax Expense.*** The
      income tax benefit increased $341,000 to ($405,000) for the six month period
      ended March 31, 2006 from a tax benefit of ($64,000) for the same period last
      year. The increase reflects the tax benefit associated with the contribution
      of
      $1.5 million to the Magyar Bank Charitable Foundation. The effective tax rate
      was 44.4% and 60.3% for the six month periods ended March 31, 2006 and 2005,
      respectively. The difference in the effective tax rate in 2006 as compared
      to
      2005 is primarily a result of the relative percentage of the permanent
      differences as compared to pretax income.





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 19


**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. We believe that
      the most critical accounting policy upon which our financial condition and
      results of operation depend, and which involves the most complex subjective
      decisions or assessments, is the allowance for loan losses.




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. The methodology for determining the
      allowance for loan losses is considered a critical accounting policy by
      management 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.




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 a problem loan 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. Specific allowances are established
      as required by this analysis. 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. 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 more than the allowances we have established
      which could have a material negative effect on our financial
      results.




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 20





**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,
      brokered deposits, other borrowings, and new advances from the Federal Home
      Loan
      Bank. There has been no material adverse change during the six-month period
      ended March 31, 2006 in the ability of the Company and its subsidiaries to
      fund their operations.




At
      March
      31, 2006, the Company had commitments outstanding under letters of credit of
      $332,000,  commitments
      to originate loans of $19.0 million, and commitments to fund undisbursed
      balances of closed loans and unused lines of credit of $29.0 million. There
      has been no material change during the six months ended March 31, 2006 in any
      of
      the Company’s other contractual obligations or commitments to make future
      payments.




**Capital
      Requirements**




The
      Bank
      was in compliance with all of its regulatory capital requirements as of March
      31, 2006.




**QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




**Asset
      and Liability Management**




The
      Company’s market risk exposure is predominately caused by interest rate risk,
      which is defined as the sensitivity of the Company’s current and future
      earnings, the values of its assets and liabilities, and the value of its capital
      to changes in the level of market interest rates.  Management of the
      Company believes that there has not been a material adverse change in market
      risk during the three or six months ended March 31, 2006.





ITEM
      3 - Controls and Procedures




An
      evaluation was performed under the supervision and with the participation of
      the
      Company’s management, including the Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures (as defined in Rule 13a-15(e) or
      15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended)
      as of the end of the period covered by this report. Based on such evaluation,
      our Chief Executive Officer and Chief Financial Officer, have concluded that
      our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Securities Act of 1934 is recorded, processed, summarized and reported within
      the time periods specified in the SEC’s rules and regulations and are operating
      in an effective manner.




No
      change
      in our internal controls over financial reporting (as defined in
      Rules 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934)
      occurred during the most recent fiscal quarter that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.




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 21


PART
      II - OTHER INFORMATION





Item
      1.  Legal
      proceedings




There
      are
      no material pending legal proceedings to which the Company or its subsidiaries
      is a party other than ordinary routine litigation incidental to their respective
      businesses.




Item
      2.  Unregistered
      Sales of Equity Securities and Use of
      Proceeds




The
      Company sold no shares within the past three years that were not registered
      under the Securities Act. The Company completed its stock offering in a
      registered offering on January 23, 2006, raising $27.2 million in gross
      proceeds. The Company issued a total of 2,618,550 shares of its common stock
      to
      public shareholders, 3,200,450 shares of its common stock to its parent, Magyar
      Bancorp, MHC and 104,742 shares of its common stock to its charitable
      foundation. The net proceeds were $25.8 million, which include a $1.0 million
      stock contribution to the charitable foundation and settlement costs totaling
      $1.4 million. Ryan Beck & Co, Inc. was the selling agent for the offering.
      The Company anticipates deploying the offering proceeds in longer-term
      securities and new loans, although no assurance can be given that the Company
      will be able to effectively deploy the offering proceeds.




The
      Company’s registration statement (File No. 333-128392) was declared effective by
      the SEC on November 14, 2005. The Company registered 2,723,292 shares of its
      common stock for an aggregate price on the offering amount registered of
      $27,232,920.




Item
      3.  Defaults
      Upon Senior Securities




None




Item
      4.  Submission
      of Matters to a Vote of Security Holders




None




Item
      5.  Other
      Information




None




Item
      6.  Exhibits




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.





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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:
                May 15, 2006
            /s/
                Elizabeth E. HanceElizabeth
                E. HancePresident
                and Chief Executive OfficerDate:
                May 15, 2006
            /s/
                Jon R. AnsariJon
              R. AnsariSenior
                Vice President and Chief Financial Officer







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