UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





[X]
      QUARTERLY REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended December 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 February 8, 2007Common
                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 or Plan of
                Operation
            10Item
                3.
            Controls
                and Procedures
            19PART
                II. OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            20Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            20Item
                3.
            Defaults
                Upon Senior Securities
            20Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            20Item
                5.
            Other
                Information
            20Item
                6.
            Exhibits
            20Signature
                Pages
            21

















*Table
            of Contents*





PART
      I. FINANCIAL INFORMATION





Item
      1. Financial Statements




**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**Consolidated
                  Balance Sheets(In
                  Thousands, Except Share Data)**December
                  31,**
              
              **September
                  30,****2006**
              
              **2006**(Unaudited)**Assets**Cash
              
              $
              4,970
              
              $
              5,912Interest
                  earning deposits with banks
              
              
              175
              
              
              105Total
                  cash and cash equivalents
              
              
              5,145
              
              
              6,017Investment
                  securities - available for sale, at fair value
              
              
              17,336
              
              
              18,169Investment
                  securities - held to maturity, at cost (fair value of $22,333 and
                  $23,358at
                  December 31, 2006 and September 30, 2006, respectively)
              
              
              22,790
              
              
              23,895Federal
                  Home Loan Bank of New York stock, at cost
              
              
              2,785
              
              
              2,870Loans
                  receivable, net of allowance for loan losses of $4,059 and $3,892
                  atDecember
                  31, 2006 and September 30, 2006, respectively
              
              
              365,246
              
              
              347,969Bank
                  owned life insurance
              
              
              9,700
              
              
              9,606Accrued
                  interest receivable
              
              
              2,290
              
              
              2,218Premises
                  and equipment, net
              
              
              22,186
              
              
              21,690Other
                  assets
              
              
              1,631
              
              
              1,770Total
                  assets
              
              $
              449,109
              
              $
              434,204**Liabilities
                  and Stockholders' Equity**LiabilitiesDeposits
              
              $
              342,318
              
              $
              325,602Escrowed
                  funds
              
              
              1,167
              
              
              1,158Federal
                  Home Loan Bank of New York advances
              
              
              46,124
              
              
              47,996Securities
                  sold under agreements to repurchase
              
              
              5,000
              
              
              5,000Accrued
                  interest payable
              
              
              892
              
              
              1,141Accounts
                  payable and other liabilities
              
              
              5,046
              
              
              5,095Total
                  liabilities
              
              
              400,547
              
              
              385,992Stockholders'
                  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
                  issuedat
                  December 31, 2006 and September 30, 2006.
              
              
              59
              
              
              59Additional
                  paid-in capital
              
              
              25,801
              
              
              25,786Unearned
                  shares held by Employee Stock Ownership Plan
              
              
              (2,075
              )
              
              (2,133
              )Retained
                  earnings
              
              
              25,273
              
              
              25,001Accumulated
                  other comprehensive loss, net
              
              
              (496
              )
              
              (501
              )Total
                  stockholders' equity
              
              
              48,562
              
              
              48,212Total
                  liabilities and stockholders' equity
              
              $
              449,109
              
              $
              434,204The
                  accompanying notes are an integral part of these
                  statements.





1
 *Table
            of Contents*





**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**Consolidated
                  Statements of Income(In
                  Thousands, Except Per Share Data)**For
                  the Three Months****Ended
                  December 31,****2006**
              
              **2005**(Unaudited)Interest
                  and dividend incomeLoans,
                  including fees
              
              $
              6,517
              
              $
              4,575Investment
                  securities
              
              
              440
              
              
              510Federal
                  Home Loan Bank of New York stock
              
              
              44
              
              
              33Total
                  interest and dividend income
              
              
              7,001
              
              
              5,118Interest
                  expenseDeposits
              
              
              2,944
              
              
              1,706Borrowed
                  money
              
              
              644
              
              
              564Total
                  interest expense
              
              
              3,588
              
              
              2,270Net
                  interest and dividend income
              
              
              3,413
              
              
              2,848Provision
                  for loan losses
              
              
              167
              
              
              120Net
                  interest and dividend income after provisionfor
                  loan losses
              
              
              3,246
              
              
              2,728Other
                  incomeService
                  charges
              
              
              214
              
              
              182Other
                  operating income
              
              
              117
              
              
              53Gains
                  on sales of loans
              
              
              2
              
              
              -Total
                  other income
              
              
              333
              
              
              235Other
                  expensesCompensation
                  and employee benefits
              
              
              1,840
              
              
              1,555Occupancy
                  expenses
              
              
              592
              
              
              468Advertising
              
              
              73
              
              
              105Professional
                  fees
              
              
              149
              
              
              142Service
                  fees
              
              
              122
              
              
              101Other
                  expenses
              
              
              429
              
              
              344Total
                  other expenses
              
              
              3,205
              
              
              2,715Income
                  before income tax expense
              
              
              374
              
              
              248Income
                  tax expense
              
              
              102
              
              
              82Net
                  income
              
              $
              272
              
              $
              166Basic
                  earnings per share
              
              $
              0.05
              
              
              N/AThe
                  accompanying notes are an integral part of these
                  statements.





2
 *Table
            of Contents*





**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**Consolidated
                  Statement of Changes in Stockholders' EquityThree
                  months ended December 31, 2006(In
                  Thousands, Except for Share Amounts)**Accumulated****Common
                  Stock**
              
              **Additional**
              
              
              
              
              
              **Other****Shares**
              
              **Par**
              
              **Paid-In**
              
              **Unearned**
              
              **Retained**
              
              **Comprehensive****Issued**
              
              **Value**
              
              **Capital**
              
              **ESOP
                  Shares**
              
              **Earnings**
              
              **Income/(Loss)**
              
              **Total**Balance,
                  September 30, 2006
              
              
              5,923,742
              
              $
              59
              
              $
              25,786
              
              $
              (2,133
              )
              $
              25,001
              
              $
              (501
              )
              $
              48,212Allocation
                  of ESOP stock (unaudited)
              
              
              -
              
              
              -
              
              
              15
              
              
              58
              
              
              -
              
              
              -
              
              
              73Net
                  income (unaudited)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              272
              
              
              -
              
              
              272Other
                  comprehensive income, net ofrecalssification
                  adjustments
                and
                  taxes (unaudited)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5
              
              
              5Total
                  comprehensive income (unaudited)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              277Balance,
                  December 31, 2006 (unaudited)
              
              
              5,923,742
              
              $
              59
              
              $
              25,801
              
              $
              (2,075
              )
              $
              25,273
              
              $
              (496
              )
              $
              48,562The
                  accompanying notes are an integral part of this statement.





3
 *Table
            of Contents*




**MAGYAR
                  BANCORP, INC. AND SUBSIDIARY**Consolidated
                  Statements of Cash Flows(In
                  Thousands)**For
                  the Three Months ended****December
                  31,****2006**
              
              **2005**(Unaudited)Operating
                  activitiesNet
                  income
              
              $
              272
              
              $
              166Adjustment
                  to reconcile net income to net cash provided by (used in)operating
                  activitiesDepreciation
                  expense
              
              
              277
              
              
              233Premium
                  amortization on investment securities, net
              
              
              35
              
              
              44Proceeds
                  from mortgage loan sales
              
              
              200
              
              
              -Provision
                  for loan losses
              
              
              167
              
              
              120Gains
                  on sales of loans
              
              
              (2
              )
              
              -Allocation
                  of ESOP shares
              
              
              73
              
              
              -Increase
                  in accrued interest receivable
              
              
              (72
              )
              
              (196
              )Increase
                  in bank owned life insurance
              
              
              (94
              )
              
              (48
              )Decrease
                  (increase) in other assets
              
              
              87
              
              
              (587
              )Increase
                  (decrease) in accrued interest payable
              
              
              (249
              )
              
              340Decrease
                  in accounts payable and other liabilities
              
              
              (49
              )
              
              (308
              )Net
                  cash provided by (used in) operating activities
              
              
              645
              
              
              (236
              )Investing
                  activitiesNet
                  increase in loans receivable
              
              
              (17,642
              )
              
              (17,075
              )Sales
                  of investment securities available for sale
              
              
              142
              
              
              -Principal
                  repayments on investment securities held to maturity
              
              
              1,088
              
              
              2,172Principal
                  repayments on investment securities available for sale
              
              
              730
              
              
              851Purchases
                  of premises and equipment
              
              
              (773
              )
              
              (1,633
              )Redemption
                  of Federal Home Loan Bank of New York stock
              
              
              85
              
              
              651Net
                  cash used in investing activities
              
              
              (16,370
              )
              
              (15,034
              )Financing
                  activitiesNet
                  increase in deposits
              
              
              16,716
              
              
              16,342Increase
                  in stock escrow funds
              
              
              -
              
              
              41,329Net
                  increase (decrease) in escrowed funds
              
              
              9
              
              
              (9
              )Repayments
                  of long-term Federal Home Loan Bank of New York advances
              
              
              (497
              )
              
              (482
              )Repayments
                  of short-term Federal Home Loan Bank of New York advances
              
              
              (1,375
              )
              
              (17,800
              )Net
                  cash provided by financing activities
              
              
              14,853
              
              
              39,380Net
                  increase (decrease) in cash and cash equivalents
              
              
              (872
              )
              
              24,110Cash
                  and cash equivalents, beginning of period
              
              
              6,017
              
              
              3,209Cash
                  and cash equivalents, end of period
              
              $
              5,145
              
              $
              27,319Supplemental
                  disclosures of cash flow informationCash
                  paid forInterest
              
              $
              3,837
              
              $
              1,880Income
                  taxes
              
              $
              123
              
              $
              -The
                  accompanying notes are an integral part of these
                  statements.






4
 *Table
          of Contents*






**MAGYAR
      BANCORP, INC. AND SUBSIDIARY**


Notes
      to
      Consolidated Financial Statements


(Unaudited)








NOTE
      A -
      ORGANIZATION





Magyar
                Bancorp, Inc. (the “Company”) was organized on January 23, 2006 to serve
                as the mid-tier stock holding company of Magyar Bank (the “Bank”). The
                Bank’s 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., aDelaware-charteredholding 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.





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.





Three
                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. MagBank Investment Company, a New Jersey corporation,
                operates as an investment holding company. The MagBank Investment
                Company
                meets the requirements to elect New Jersey Investment Company Status
                and
                therefore is subject to a New Jersey state tax rate of 3.6% compared
                with
                a 9.0% corporate business tax rate for New Jersey
                corporations.





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





Operating
      results for the three months ended December 31, 2006 are not necessarily
      indicative of the results that may be expected for the year ending September
      30,
      2007.  The
      September 30, 2006 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.





5
 *Table
          of Contents*








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





Basic
      earnings per share for the three months ended December 31, 2006 was calculated
      by dividing net income by the weighted-average number of shares outstanding
      for
      the period. Earnings per share was not meaningful for the three month period
      ended December 31, 2005, as the Company had no publicly held shares during
      the
      period.





NOTE
      E -
      STOCK-BASED COMPENSATION





The
      Company had no stock-based compensation as of December 31, 2006, except as
      described below.





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 the Prime rate (currently 8.25%) 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 as collateral and allocated to qualified
      employees. Accordingly, the shares pledged as collateral are reported as
      unearned ESOP shares in the Consolidated Balance Sheets, respectively. 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 $73,000 and $0 for the three
      months ended December 31, 2006 and 2005.























6
 *Table
            of Contents*








The
      following table presents the components of the ESOP shares:




**December
                  31,****2006**Shares
                  released for allocation
              
              
              21,786Unreleased
                  shares
              
              
              196,077Total
                  ESOP shares
              
              
              217,863





NOTE
      F -
      COMPREHENSIVE INCOME





The
      components of comprehensive income and the related income tax effects are as
      follows (in thousands):




**Three
                  Months Ended December 31,****2006**
              
              **2005****Tax**
              
              **Net
                  of**
              
              
              
              **Tax**
              
              **Net
                  of****Before
                  Tax**
              
              **Benefit**
              
              **Tax**
              
              **Before
                  Tax**
              
              **Benefit**
              
              **Tax****Amount**
              
              **(Expense)**
              
              **Amount**
              
              **Amount**
              
              **(Expense)**
              
              **Amount**(Unaudited)Unrealized
                  holding gains (losses)arising
                  during period on:Available-for-sale
                  investments
              
              $
              57
              
              $
              (20
              )
              $
              37
              
              $
              (79
              )
              $
              33
              
              $
              (46
              )Less
                  reclassification adjustment forlosses
                  realized in net income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  rate derivatives
              
              
              (32
              )
              
              -
              
              
              (32
              )
              
              -
              
              
              -
              
              
              -Other
                  comprehensive income (loss), net
              
              $
              25
              
              $
              (20
              )
              $
              5
              
              $
              (79
              )
              $
              33
              
              $
              (46
              )





7
 *Table
            of Contents*








NOTE
      G -
      INVESTMENT SECURITIES





The
      following table sets forth the composition of our investment securities
      portfolio (in thousands):




**December
                    31,**
                
                **September
                    30,****2006**
                
                **2006****Amortized**
                
                **Fair**
                
                **Amortized**
                
                **Fair****Cost**
                
                **Value**
                
                **Cost**
                
                **Value**(Unaudited)Securities
                    available for sale:Municipal
                    bonds
                
                $
                2,049
                
                $
                2,052
                
                $
                2,049
                
                $
                2,066Equity
                    securities
                
                
                -
                
                
                -
                
                
                142
                
                
                142Mortgage-backed
                    securities
                
                
                15,510
                
                
                15,284
                
                
                16,258
                
                
                15,961Total
                    securities available for sale
                
                $
                17,559
                
                $
                17,336
                
                $
                18,449
                
                $
                18,169Securities
                    held to maturity:U.S.
                    government and agency obligations
                
                $
                2,142
                
                $
                2,098
                
                $
                2,157
                
                $
                2,105Municipal
                    bonds
                
                
                137
                
                
                144
                
                
                137
                
                
                145Mortgage-backed
                    securities
                
                
                20,511
                
                
                20,091
                
                
                21,601
                
                
                21,108Total
                    securities held to maturity
                
                $
                22,790
                
                $
                22,333
                
                $
                23,895
                
                $
                23,358





NOTE
      H -
      LOANS RECEIVABLE, NET





Loans
                receivable, net were comprised of the following (in
                thousands):




**December
                  31,**
              
              **September
                  30,****2006**
              
              **2006**(Unaudited)One
                  -to-four family residential
              
              $
              143,093
              
              $
              143,245Commercial
                  real estate
              
              
              68,988
              
              
              68,567Construction
              
              
              95,600
              
              
              90,342Home
                  equity lines of credit
              
              
              14,326
              
              
              10,843Commercial
                  business
              
              
              31,165
              
              
              24,510Other
              
              
              16,489
              
              
              14,846Total
                  loans receivable
              
              
              369,661
              
              
              352,353Deferred
                  loan costs (fees)
              
              
              (356
              )
              
              (492
              )Allowance
                  for loan losses
              
              
              (4,059
              )
              
              (3,892
              )Total
                  loans receivable, net
              
              $
              365,246
              
              $
              347,969





At
                December 31, 2006 and September 30, 2006, non-performing loans had
                a total
                principal balance of $7,306,000 and $7,400,000,
                respectively.  Unrecorded
              interest on the non-performing loans during the three-month period
              ended December 31, 2006 totaled
              $228,000.





8
 *Table
            of Contents*











NOTE
      I -
      DEPOSITS





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




**December
                  31,**
              
              **September
                  30,****2006**
              
              **2006**(Unaudited)Demand
                  accounts
              
              $
              21,299
              
              $
              20,491Savings
                  accounts
              
              
              39,708
              
              
              43,127NOW
                  accounts
              
              
              32,595
              
              
              30,519Money
                  market accounts
              
              
              65,338
              
              
              56,107Certificate
                  of deposit
              
              
              156,448
              
              
              149,811Retirement
                  accounts
              
              
              26,930
              
              
              25,547$
              342,318
              
              $
              325,602





NOTE
      J -
      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.





**December
                  31,**
              
              **September
                  30,****2006**
              
              **2006**(Unaudited)Financial
                  instruments whose contract amountsrepresent
                  credit risk (in thousands)Unused
                  line of credits
              
              $
              35,028
              
              $
              30,977Fixed
                  rate loan commitments
              
              $
              6,722
              
              $
              6,499Variable
                  rate loan commitments
              
              $
              32,258
              
              $
              32,634








9
 *Table
          of Contents*








Item
      2. Management's Discussion and Analysis or Plan of
      Operation





**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 advises
      readers that various factors, including regional and national economic
      conditions, substantial changes in levels of market interest rates, credit
      and
      other risks of lending and investing activities, and competitive and regulatory
      factors, could affect 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.




**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 operations 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





10
 *Table
            of Contents*





property
      securing a loan and the related allowance. 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 and discounted cash flows. 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.





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





Total
      assets increased $14.9 million, or 3.4%, to $449.1 million at December 31,
      2006
      from $434.2 million at September 30, 2006, 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 $17.3 million, or 5.0%, to $365.2 million at December
      31,
      2006 from $348.0 million at September 30, 2006. The increase in loans receivable
      for the three-month period was slightly offset by $200,000 in sales of
      one-to-four family residential mortgage loans and provisions for loan loss
      of
      $167,000. During the three months ended December 31, 2006, commercial business
      loans led the increase in net loans receivable with growth of $6.7 million,
      or
      27.2%, to $31.2 million from $24.5 million at September 30, 2006. Construction
      loans increased $5.3 million, or 5.8%, and home equity lines of credit increased
      $3.5 million, or 32.1%, during the period to $95.6 million and $14.3
      million, respectively.





At
      December 31, 2006, the significant loan categories in terms of the percent
      of
      total loans were 38.7% in one-to-four family residential mortgage loans, 25.9%
      in construction loans and 18.7% in commercial real estate loans. At December
      31,
      2005 these categories in terms of the percent of total loans were 43.3% in
      one-to-four family residential mortgage loans, 22.8% in construction loans
      and
      19.6% in commercial real estate loans. Throughout 2007 we expect to continue
      with our strategy of diversifying the Company’s balance sheet with higher
      concentrations in commercial and construction loans.





Total
      non-performing loans decreased by $94,000 to $7.3 million at December 31, 2006
      from $7.4 million at September 30, 2006. The ratio of non-performing loans
      to
      total loans receivable was





11
 *Table
            of Contents*





1.98%
      at
      December 31, 2006 compared with 2.10% at September 30, 2006. The allowance
      for
      loan losses was increased $167,000 to $4.1 million or 55.6% of
      non-performing loans at December 31, 2006 compared with $3.9 million or
      52.6% of non-performing loans at September 30, 2006. The allowance for loan
      losses was 1.1% of gross loans outstanding at both December 31, 2006 and
      September 30, 2006.





The
      Bank’s interest in loans on the Dwek Properties and Sugar Maple Estates
      (reported in the Company’s Current Report on Form 8-K dated June 27, 2006) was
      $745,000 and $4.2 million, respectively, at December 31, 2006. Payments on
      both
      loans were current at December 31, 2006. An “as-is condition” contract of sale
      in the amount of $1.46 million was approved by the superior court for the sale
      of property securing the Dwek Properties loan. The sale and closing are
      currently scheduled to occur in February 2007. The Sugar Maple Estates property
      is currently listed for sale through the court appointed sale
      agent.





In
      October 2006, Kara Homes, Inc. (“Kara Homes”), one of our largest construction
      loan borrowers, filed for Chapter 11 bankruptcy (reported in our Current Report
      on Form 8-K dated October 10, 2006). Kara Homes' lending relationship with
      us
      consists of four construction loans with a total outstanding balance of $7.6
      million. Two of the four loans were participated with other banks, limiting
      our
      total lending relationship with Kara Homes to $5.1 million. The loans were
      designated non-accrual at September 30, 2006 and remained on that status at
      December 31, 2006. On January 8, 2007 the Bankruptcy Court approved a motion
      to
      begin a bidding process through the Bankruptcy Court for all four Kara Homes
      properties. An auction is expected to be held in the Bankruptcy Court during
      the
      Company’s second quarter to sell the four projects. The Bank has made an initial
      offer on each of the four projects to proceed with a Bankruptcy Code Section
      363
      sale of the property to the Bank (free and clear of all liens, claims and
      encumbrances with the exception of real estate taxes.)




Although
      management believes that the Bank’s position in the Dwek Properties, Sugar Maple
      Estates, and Kara Homes, Inc. loans are well collateralized, there can be no
      assurance that losses will not occur or that significant additional expenses
      will not be incurred in the process of the resolution of the loans.





Securities
      available-for-sale decreased $0.9 million, or 4.6%, to $17.3 million at December
      31, 2006 from $18.2 million at September 30, 2006. The decrease was the result
      of $142,000 in sales of a money market mutual fund and $730,000 in principal
      amortization. In addition, securities held-to-maturity decreased $1.1 million,
      or 4.6%, to $22.8 million at December 31, 2006 from $23.9 million at September
      30, 2006, resulting from principal amortization. The decrease in the
      available-for-sale and held-to-maturity securities reflected the deployment
      of
      investment proceeds into new higher-yielding construction and commercial
      loans.





Total
      deposits increased $16.7 million, or 5.1%, to $342.3 million at December 31,
      2006. The increase was primarily the result of money market accounts, which
      increased $9.2 million, or 16.5%, to $65.3 million at December 31, 2006 from
      $56.1 million at September 30, 2006, and certificate of deposit accounts, which
      increased $6.6 million, or 4.4%, to $156.4 million at December 31, 2006 from
      $149.8 million at September 30, 2006. Other significant changes in total
      deposits over the three-month period included an increase in NOW accounts of
      $2.1 million, or 6.8%, to $32.6 million and a decrease in savings accounts
      of
      $3.4 million, or 7.9%, to $39.7 million.




Borrowings
      from the Federal Home Loan Bank of New York decreased $1.9 million, or 3.9%
      to
      $51.1 million at December 31, 2006 from $53.0 million at September 30, 2006.
      Proceeds from the growth in deposits described above were used to pay down
      short-term advances over the three-month period.





12
 *Table
            of Contents*







Stockholders’
      equity increased $350,000, or 0.7%, to $48.6 million at December 31, 2006 from
      $48.2 million at September 30, 2006. The increase was attributable to net income
      during the period of $272,000, the release of shares from the ESOP totaling
      $73,000 and a decrease in accumulated other comprehensive loss of $5,000. The
      other comprehensive losses due to unrealized losses on investment securities
      available-for-sale related to increases in interest rates since the investment
      securities were purchased. Management has concluded that none of the securities
      have impairments that are considered other than temporary.








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





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













13
 *Table
            of Contents*





**Three
                  Months Ended December 31,****2006**
              
              **2005****Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Yield/**
                **Cost**
              
              **Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Yield/**
                **Cost**(Dollars
                  in thousands)Interest-earning
                  assets:Interest-earning
                  deposits
              
              $
              233
              
              $
              3
              
              
              5.11
              %
              $
              1,190
              
              $
              8
              
              
              2.67
              %Loans
                  receivable, net
              
              
              365,246
              
              
              6,517
              
              
              7.08
              %
              
              277,681
              
              
              4,575
              
              
              6.54
              %SecuritiesTaxable
              
              
              37,951
              
              
              416
              
              
              4.35
              %
              
              50,269
              
              
              500
              
              
              3.95
              %Tax-exempt
              
              
              2,175
              
              
              30
              
              
              5.47
              %
              
              147
              
              
              2
              
              
              5.40
              %FHLB
                  of NY stock
              
              
              2,785
              
              
              44
              
              
              6.27
              %
              
              2,389
              
              
              33
              
              
              5.48
              %Total
                  interest-earning assets
              
              
              408,390
              
              
              7,010
              
              
              6.81
              %
              
              331,676
              
              
              5,118
              
              
              6.12
              %Noninterest-earning
                  assets
              
              
              40,719
              
              
              
              
              
              
              
              
              37,934Total
                  assets
              
              $
              449,109
              
              
              
              
              
              
              
              $
              369,610Interest-bearing
                  liabilities:Savings
                  accounts(1)
              
              $
              39,708
              
              
              113
              
              
              1.13
              %
              $
              58,061
              
              
              153
              
              
              1.05
              %NOW
                  accounts(2)
              
              
              97,851
              
              
              824
              
              
              3.34
              %
              
              59,821
              
              
              241
              
              
              1.60
              %Time
                  deposits(3)
              
              
              183,378
              
              
              2,007
              
              
              4.34
              %
              
              155,682
              
              
              1,312
              
              
              3.34
              %Total
                  interest-bearing deposits
              
              
              320,937
              
              
              2,944
              
              
              3.64
              %
              
              273,564
              
              
              1,706
              
              
              2.47
              %Federal
                  Home Loan Bank borrowings
              
              
              51,124
              
              
              644
              
              
              5.00
              %
              
              46,322
              
              
              514
              
              
              4.40
              %Loan
                  payable
              
              
              -
              
              
              -
              
              
              
              
              
              2,497
              
              
              50
              
              
              7.94
              %Total
                  interest-bearing liabilities
              
              
              372,061
              
              
              3,588
              
              
              3.83
              %
              
              322,383
              
              
              2,270
              
              
              2.79
              %Noninterest-bearing
                  liabilities
              
              
              28,485
              
              
              
              
              
              
              
              
              22,380Total
                  liabilities
              
              
              400,546
              
              
              
              
              
              
              
              
              344,763Retained
                  earnings
              
              
              48,563
              
              
              
              
              
              
              
              
              24,847Total
                  liabilities and retained earnings
              
              $
              449,109
              
              
              
              
              
              
              
              $
              369,610Tax-equivalent
                  basis adjustment
              
              
              
              
              
              (9
              )Net
                  interest income
              
              
              
              
              $
              3,413
              
              
              
              
              
              
              
              $
              2,848Interest
                  rate spread
              
              
              
              
              
              
              
              
              2.98
              %
              
              
              
              
              
              
              
              3.33
              %Net
                  interest-earning assets
              
              $
              36,329
              
              
              
              
              
              
              
              $
              9,293Net
                  interest margin(4)
              
              
              
              
              
              
              
              
              3.32
              %
              
              
              
              
              
              
              
              3.41
              %Average
                  interest-earning assets to average
                interest-bearing
                  liabilities
              
              
              109.76
              %
              
              
              
              
              
              
              
              102.88
              %







(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.


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





14
 *Table
            of Contents*








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





***Net
      Income*** .
      The
      Company recorded net income of $272,000 for the three months ended December
      31,
      2006. Net income increased $106,000, or 63.9%, compared to $166,000 for the
      three months ended December 31, 2005.





***Net
      Interest and Dividend Income.*** Net
      interest and dividend income increased $565,000, or 19.8%, to $3.4 million
      for the three months ended December 31, 2006 from $2.8 million for the
      three months ended December 31, 2005. Total interest and dividend income
      increased $1.9 million to $7.0 million for the three month period ended December
      31, 2006 while total interest expense increased $1.3 million to $3.6 million
      from the same three month period one year earlier.





***Interest
      Income.*** The
      increase in ** interest
      income of $1.9 million, or 36.8%, to $7.0 million for the three months ended
      December 31, 2006 was primarily due to an increase in the average balance of
      interest-earning assets of $76.7 million to $408.4 million from $331.7 million,
      as well as an improvement in the average yield on such assets to 6.81% from
      6.12%. Interest earned on loans increased to $6.5 million for the three months
      ended December 31, 2006 from $4.6 million for the prior year period, reflecting
      an $87.6 million, or 31.5%, increase in the average balance of loans as well
      as
      a 54 basis point increase in the average yield on such loans to 7.08% from
      6.54%. The improved yield on loans reflected the higher balance of
      higher-yielding commercial business, commercial real estate and construction
      loans. The yield on loans would have been 25 basis points greater at 7.33%
      if
      not for $7.1 million in loans that did not accrue interest during the three
      months ended December 31, 2006.





Interest
      earned on our investment securities decreased $56,000, or 11.2%, due to a $10.3
      million, or 20.4%, decrease in the average balance of such securities. The
      average yield on such securities increased 46 basis points from 3.95% for the
      three months ended December 31, 2005 to 4.41% for the three months ended
      December 31, 2006. 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 $1.3 million, or 58.1%, to $3.6 million for the three months
      ended December 31, 2006 from $2.3 million for the three months ended December
      31, 2005. The increase in interest expense was primarily due to a $49.7 million,
      or 15.4%, increase in the average balance of interest-bearing liabilities to
      $372.1 million from $322.4 million. In addition, the average cost of such
      liabilities increased to 3.83% from 2.79% in the higher market interest rate
      environment.





The
      average balance of interest bearing deposits increased to $320.9 million from
      $273.6 million while the average cost of such deposits increased to 3.64% from
      2.47% in the higher market interest rate environment. This resulted in an
      increase in interest paid on deposits from $1.7 million to $2.9 million for
      the
      three months ended December 31, 2006 compared to the same period last year.
      Interest paid on Federal Home Loan Bank advances increased to $644,000 for
      the
      three months ended December 31, 2006 from $514,000 for the prior year period.
      In
      addition to an increase in the average balance of such advances from $46.3
      million to $51.1 million, there was a 60 basis point increase in the average
      cost of Federal Home Loan Bank advances to 5.00% for the three months ended
      December 31, 2006 from 4.40% 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





15
 *Table
            of Contents*





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 recorded a provision of $167,000 for the three months
      ended December 31, 2006 compared to a $120,000 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 the inherent risks
      within that growth, 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.





***Other
      Income.*** Non-interest
      income increased $98,000, or 41.7%, to $333,000 for the three months ended
      December 31, 2006 from $235,000 for the three months ended December 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 December 31, 2006 compared to the earlier three-month period.
      In addition, the Bank recorded $19,000 in rental income from a lease of office
      space at its headquarters that commenced in April 2006.





***Other
      Expenses.*** Non-interest
      expense increased to $3.2 million for the three months ended December 31, 2006
      from $2.7 million for the three months ended December 31, 2005.





Compensation
      and employee benefits increased $285,000, or 18.3% to $1.8 million for the
      three
      months ended December 31, 2006 from $1.6 million for the three months ended
      December 31, 2005. This increase included $73,000 in ESOP expenses recorded
      during the current period. In addition, the increase also reflected staff
      additions in our commercial real estate and retail banking areas, as well as
      normal merit increases and increases in employee benefit costs.





The
      higher non-interest expense also was due to higher occupancy expenses, which
      increased to $592,000 for the three months ended December 31, 2006 from $468,000
      for the prior year period. The increase primarily reflected the addition of
      the
      Bank’s fourth branch office in Branchburg, New Jersey, which was completed in
      September 2006. In addition, other expenses increased $85,000, or 24.7%, to
      $429,000 for the three months ended December 31, 2006 from $344,000 for the
      same
      period last year primarily due to expenses associated with the non-performing
      loans described above.





16
 *Table
            of Contents*





***Income
      Tax Expense.***  Income
      tax expense was $102,000 for the three months ended December 31, 2006, as
      compared to $82,000 for the three months ended December 31, 2005. The
      effective tax rate was 27.3% and 33.1% for the three month periods ended
      December 31, 2006 and 2005, respectively. The decrease in the effective tax
      rate
      between periods was due to the creation of the Magbank Investment Company in
      August 2006. The
      MagBank Investment Company meets the requirements to elect New Jersey Investment
      Company status and therefore is subject to a New Jersey state tax rate of 3.6%
      compared with a 9.0% corporate business tax rate for New Jersey corporations. 
 The
        benefit from the MagBank investment Company was partially offset by an added
        New
        Jersey state tax assessment for privilege periods ending on or after July
        1,
        2006, which affects the Company’s year ending September 30, 2007. New Jersey
        taxpayers shall be assessed and must pay a surtax equal to 4% of the amount
        of
        tax liability remaining after applying credits against liability, other than
        credits for installment payments, estimated payments made with a request
        for
        extension to file a return, or overpayments from a prior privilege period.
        Payments of the surtax are to be made annually as required under N.J.S.A.
        54:10A-15. No credits shall be allowed against the surtax liability except
        for
        credits for installment payments, estimated payments made with a request
        for an
        extension of time for filing a return, or overpayments from prior privilege
        periods.





**New
      Accounting Pronouncements**




In
      July
      2006, FASB issued FASB Interpretation (FIN) 48, “Accounting for Uncertainty in
      Income Taxes: an interpretation of FASB Statement No. 109, “Accounting for
      Income Taxes.”  FIN 48 clarifies FASB 109, to indicate a criterion that an
      individual tax position would have to meet for some or all of the benefit of
      that position to be recognized in an entity’s financial statements.  In
      applying FIN 48, an entity is required to evaluate a tax position using a
      two-step process.  First, the entity should evaluate the position for
      recognition. An entity should recognize the financial statement benefit of
      a tax position if it determines that it is more likely than not that the
      position will be sustained on examination. The term “more likely than not” means
“a likelihood of more than 50 percent.” In assessing whether the
      more-likely-than-not criterion is met, the entity should assume that the tax
      position will be reviewed by the applicable taxing authority. Additionally,
      if past administrative practices and precedents of the taxing authority are
      widely understood, those practices and precedents should be considered in an
      entity’s assessment of the more-likely-than-not criterion. The second step
      is measurement: a tax position that meets the more-likely-than-not recognition
      threshold is measured to determine the amount of benefit to recognize in the
      financial statements. The tax position is measured at the largest amount of
      benefit that is greater than 50 percent likely of being realized upon ultimate
      settlement.  FIN 48 is effective for fiscal years beginning after December
      15, 2006 (as of October 1, 2007 for the Company) and is currently under
      evaluation by the Company to determine the impact on the Company’s consolidated
      financial statements.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements.” This Statement defines fair value, establishes a framework
      for measuring fair value in accordance with generally accepted accounting
      principles, and expands disclosures about fair value measurements.  This
      Statement applies to other accounting pronouncements that require or permit
      fair
      value measurements, but does not require any new fair value
      measurements. The Statement is effective for fiscal years beginning after
      November 15, 2007 and interim periods within those fiscal years (as of
      September 30, 2008 for the Company). The Company does not expect the
      adoption of SFAS No. 157 to have a material impact on its financial
      statements.




In
      September 2006, FASB issued SFAS No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans,” which requires
      employers to recognize on their balance sheets the funded status of pension
      and
      other postretirement benefit plans.  This requirement is effective as of
      the end of the first fiscal year ending after December 31, 2006 (as of
      September 30, 2007 for the Company). Statement 158 will also require
      fiscal-year-end measurements of plan assets and benefit obligations, eliminating
      the use of earlier measurement dates currently permissible. The new
      measurement-date requirement will not be effective until fiscal years ending
      after December 15, 2008 (as of September 30, 2009). The Statement
      amends Statements 87, 88, 106 and 132R, but retains most of their measurement
      and disclosure guidance and will not change the amounts recognized in the income
      statement as net periodic benefit cost.  The Company is evaluating the
      effect of SFAS No. 158 on its financial statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements”





17
 *Table
            of Contents*







(SAB
      108), to address diversity in practice in quantifying financial statement
      misstatements. SAB 108 requires that registrants use a dual approach in
      quantifying misstatements based on their impact on the financial statements
      and
      related disclosures. SAB 108 is effective as of September 30, 2007, allowing
      a
      one-time transitional cumulative effect adjustment to retained earnings for
      errors (if any) that were not previously deemed material, but are material
      under
      the guidance in SAB 108.  The Company is currently evaluating the impact of
      adopting SAB 108 on its financial statements.








**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 three month period
      ended December 31, 2006 in the ability of the Company and its subsidiaries
      to
      fund their operations.




At
      December 31, 2006, the Company had commitments outstanding under letters of
      credit of $450,000,  commitments
      to originate loans of $39.0 million, and commitments to fund undisbursed
      balances of closed loans and unused lines of credit of $35.0 million. There
      has been no material change during the three months ended December 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 December
      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. The Company’s balance
      sheet at September 30, 2006 reflected sensitivity to decreases in market
      interest rate movements. In an effort to reduce the anticipated negative affect
      on earnings from decreases in market interest rates, interest rate floors with
      notional amounts of $15 million were held by the Bank at December 31,
      2006.





Management
      of the Company believes that there has not been a material adverse change in
      market risk during the three months ended December 31, 2006.








18
 *Table
            of Contents*











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.





19
 *Table
            of Contents*





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 included 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.







20
 *Table
            of Contents*








Signatures





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











MAGYAR
                BANCORP, INC.(Registrant)Date:
                February 8, 2007
            /s/
                Elizabeth E. HanceElizabeth
                E. HancePresident
                     and Chief Executive OfficerDate:
                February 8, 2007
            /s/
                Jon R. AnsariJon
                R. AnsariSenior
                Vice President and Chief Financial Officer








21