magyar bancorp
            News




400
Somerset St., New Brunswick, NJ 08901


732.342.7600





MAGYAR
BANCORP, INC. ANNOUNCES FOURTH QUARTER AND YEAR ENDFINANCIAL
RESULTS





New Brunswick, New Jersey,November12, 2008 – Magyar Bancorp
(NASDAQ: MGYR) (“Company”), parent company of Magyar Bank, reported today the
results of its operations for the three months and year ended September 30,
2008.





The
Company reported a net loss of $3.0 million for the three months ended September
30, 2008, compared to net income of $92,000 for the three months ended September
30, 2007.  The Company reported a net loss for the year ended
September 30, 2008 of $2.9 million, compared to net income of $716,000 for
the year ended September 30, 2007.





Basic and
diluted losses per share were $0.53 and $0.51 for the three and twelve months
ended September 30, 2008, respectively. Basic and diluted earnings per share for
the three months and twelve months ended September 30, 2007 were $0.02 and
$0.12, respectively.








Results
from Operations





Net
income decreased $3.1 million during the three-month period ended September 30,
2008 compared with the three-month period ended September 30, 2007 while net
income decreased $3.7 million during the year ended September 30, 2008 compared
with the year ended September 30, 2007. The decreases were due to larger
reserves for loan losses. Reserves were increased to $3.3 million during the
three months ended September 30, 2008 compared with $46,000 for the three months
ended September 30, 2007 and to $4.3 million during the year ended September 30,
2008 compared with $398,000 for the year ended September 30, 2007 due to higher
levels of non-performing loans, adverse economic conditions that resulted
in depreciation of collateral values securing construction and commercial
loans, and higher levels of loan charge-offs during the current
periods.





Net
interest margin decreased by 1 basis point to 3.14% for the quarter ended
September 30, 2008 compared to 3.15% for the quarter ended September 30, 2007.
For the year ended September 30, 2008, the net interest margin decreased by 8
basis points to 3.19% compared to 3.27% for the year ended September 30, 2007
despite reductions in the federal funds interest rate totaling 275 basis points
during the twelve month period.





The
Company was able to increase its net interest income with growth of its loans
receivable and investment securities during both the quarter and year end
periods. Net interest income increased $331,000, or 9.7%, to $3.7 million during
the quarter ended September 30, 2008 from $3.4 million during the quarter ended
September 30, 2007. Net interest income increased $848,000, or 6.2%,
to





$14.5
million during the year ended September 30, 2008 from $13.7 million during the
year ended September 30, 2007.
 
 Interest
and dividend income decreased $554,000, or 7.3%, to $7.0 million for the three
months ended September 30, 2008 from $7.6 million for the three months ended
September 30, 2007. An increase in average interest-bearing assets of $44.0
million, or 10.2%, was offset by a decrease in the yield on such assets of 112
basis points to 5.88% for the three months ended September 30, 2008. However,
interest expense decreased $885,000, or 21.3%, to $3.3 million for the three
months ended September 30, 2008 from $4.2 million for the three months ended
September 30, 2007. While the average balance of interest-costing liabilities
increased $43.7 million between the two periods, the cost on such liabilities
fell 121 basis points to 2.94% for the quarter ended September 30,
2008.
 
 Interest
and dividend income decreased $408,000, or 1.4%, to $28.8 million for the year
ended September 30, 2008 from $29.2 million for the year ended September 30,
2007. An increase in average interest-bearing assets of $36.1 million, or 8.6%,
was more than offset by a decrease in the yield on such assets of 66 basis
points to 6.34% for the year ended September 30, 2008. However, interest expense
decreased $1.3 million, or 8.1%, to $14.3 million for the year ended September
30, 2008 from $15.5 million for the year ended September 30, 2007. While the
average balance of interest-costing liabilities increased $36.7 million between
the two periods, the cost on such liabilities fell 66 basis points to 3.38% for
the year ended September 30, 2008.
 
 The
provision for loan losses was $3.3 million for the three months ended September
30, 2008 compared to $46,000 for the three months ended September 30, 2007. Net
charge-offs were $3.2 million for the three months ended September 30, 2008
compared to $360,000 for the three months ended September 30, 2007. The
provision for loan losses was $4.3 million for the year ended September 30, 2008
compared to $398,000 for the year ended September 30, 2007. There were net
charge-offs of $3.5 million for the year ended September 30, 2008 compared to
net charge-offs of $536,000 for the year ended September 30, 2007.
 
 The
higher level of loan charge-offs resulted from depreciation of real estate
collateral securing commercial and construction loans due to the current adverse
economic environment. During the three months ended September 30, 2008, the Bank
identified 13 relationships totaling $16.0 million that were written down to the
fair value of collateral, if any, securing the loan which resulted in a
reduction of the allowance for loan loss of $3.2 million prior to the additional
provisions. During the year ended September 30, 2008, in addition to the loans
written down during the fourth fiscal quarter, there was one other loan written
down to fair value resulting in a charge of $317,000 to the allowance for loan
losses. The loan was foreclosed upon and is being carried as other real estate
owned at September 30, 2008.
 
 “We
believe that these charge-offs will enable Magyar to clear its books of assets
that represent our losses to date, and those that had the highest potential for
continued valuation decline,” stated Elizabeth E. Hance, President & Chief
Executive Officer.  “Looking ahead, we still face a challenging real
estate market in 2009, and our loan-loss allowance is expected to continue to be
higher than average.”
 
 Non-interest
income increased $81,000, or 24.2%, to $416,000 during the three months ended
September 30, 2008 compared to $335,000 for the three months ended September 30,
2007. The increase was primarily attributable to $117,000 in gains recorded on
sales of investment securities. Non-interest income remained unchanged at $1.5
million for the year ended September 30, 2008 and 2007. Gains on the sales of
investment securities of $99,000 offset losses on the sales of other real estate
owned of $97,000 during the year ended September 30, 2008.








Non-interest
expense of $3.6 million during the three months ended September 30, 2008 was
unchanged from the three month period ended September 30, 2007. A decrease in
employee and benefit expenses to $2.0 million for the three months ended
September 30, 2008 from $2.1 million for the three months ended September 30,
2007 was offset by an increase in FDIC insurance premiums paid between the two
periods of $55,000.
 
 Non-interest
expense increased $835,000, or 6.1%, to $14.6 million for the year ended
September 30, 2008 compared to $13.8 million for the year ended September 30,
2007. Employee and benefit expenses increased $501,000, or 6.3%, to $8.4 million
for the year ended September 30, 2008 primarily due to the Company’s equity
incentive awards that were granted in March 2007 and higher compensation and
benefit expenses related to the opening of the Bank’s fifth branch in February
2007. In addition, the Bank paid $176,000 more in FDIC insurance premiums during
the year ended September 30, 2008 than in the prior year period.
 
 The
Company recorded tax expense of $281,000 and $82,000 and for the three and
twelve months ended September 30, 2008, respectively, compared with tax expense
of $26,000 and $257,000 for the three and twelve months ended September 30,
2007, respectively. At September 30, 2008, the Company recorded a $1.6 million
deferred tax asset. Management placed a full valuation allowance against
this deferred tax asset.
 
 
 Balance
Sheet Comparison
 
 Total
assets increased $5.4 million, or 1.1%, to $514.3 million during the three
months ended September 30, 2008. The quarterly increase was attributable to
$7.2 million of growth in loans receivable, partially offset by decreases
in investment securities and other real estate owned. Total assets increased
$41.1 million, or 8.7%, during the twelve months ended September 30, 2008. The
annual increase was primarily attributable to $25.1 million of growth in
loans receivable and $13.5 million of growth in investment
securities.
 
 Total
loans receivable at September 30, 2008 were comprised of $157.9 million (38.4%)
1-4 family residential mortgage loans, $92.9 million (22.6%) construction loans,
$92.8 million (22.6%) commercial real estate loans, $36.0 million (8.8%)
commercial business loans, and $31.2 million (7.6%) home equity lines of credit
and other loans. Total loans receivable at September 30, 2007 were comprised of
$152.5 million (39.5%) 1-4 family residential mortgage loans, $97.2 million
(25.2%) construction loans, $81.3 million (21.1%) commercial real estate loans,
$26.6 million (6.9%) commercial business loans, and $28.1 million (7.3%) home
equity lines of credit and other loans.
 
 Total
non-performing loans, defined as non-accruing loans, increased by $8.0 million
to $13.3 million at September 30, 2008 from $5.3 million at September 30, 2007.
This increase was the result of commercial and construction loans that have been
downgraded and placed on non-accrual status during the year ended September 30,
2008. The ratio of non-performing loans to total loans was 3.24% at September
30, 2008 compared to 2.08% at September 30, 2007.
 
 Included
in the non-performing loan totals were two loans secured by 1-4 family
residential mortgage properties in the amount of $510,000, which represented
less than 0.04% of the $157.9 million in total loans as of September 30, 2008.
The Company has not and does not intend to originate or purchase sub-prime loans
or option-ARM loans.
 
 The
allowance for loan losses increased by $748,000 to $4.5 million at September 30,
2008 from $3.8 million at September 30, 2007. The increase in the allowance was
primarily attributable to the higher current year loan loss provision which
reflected the overall growth in the loan portfolio, higher
levels








of
non-performing loans, adverse economic conditions that resulted in depreciation
of collateral values securing construction and commercial loans, and higher
levels of loan charge-offs during the current periods.
 
 The
allowance for loan losses as a percentage of non-performing loans was 33.8% at
September 30, 2008 compared with 46.7% at September 30, 2007. At September 30,
2008 our allowance for loan losses as a percentage of total loans was 1.10%
compared with 0.97% at September 30, 2007. Future increases in the allowance for
loan losses may be necessary based on the growth of the loan portfolio, the
change in composition of the loan portfolio, possible future increases in
non-performing loans and charge-offs, and the possible continuation of the
current adverse economic environment.
 
 At
September 30, 2008, investment securities were $58.9 million, reflecting a
decrease of $1.8 million, or 3.0%, from June 30, 2008 and an increase of $13.5
million, or 29.6%, from September 30, 2007,. Investment securities consisted of
$53.5 million of mortgage-backed securities, $3.2 million of municipal bonds,
and $2.2 million of U.S. Government and Agency obligations. The mortgage-backed
securities are collateralized by mortgage loans that meet agency conforming
standards and do not contain sub-prime mortgage loans.
 
 Total
deposits grew $13.0 million, or 3.6%, and $6.8 million, or 1.8%,
respectively, to $375.6 million during the three and twelve months ended
September 30, 2008. The growth in deposits during the three months ended
September 30, 2008 occurred entirely in certificates of deposit (including
individual retirement accounts), which increased $22.4 million to $206.8
million, and was partially offset by decreases in money market, checking and
savings accounts. The growth in deposits during the twelve months ended
September 30, 2008 occurred in checking accounts and certificates of deposit
(including individual retirement accounts), which increased $7.2 million and
$6.3 million to $60.8 million and $206.8 million, respectively. Decreases in
money market and savings accounts of $5.2 million and $1.5 million,
respectively, partially offset the growth in checking and certificates of
deposit. The annual $7.2 million increase in checking represented a 13.4%
increase in the category. Deposits accounted for 72.9% of assets and 92.5% of
net loans at September 30, 2008.
 
 
 At
September 30, 2008, the Company held $12.5 million in Certificate of Deposit
Account Registry Service (CDARS) Reciprocal certificates of deposit and $8.7
million in brokered certificates of deposit.
 
 The
Company’s deposit strategy during the twelve months ended September 30, 2008 was
focused on increasing and expanding customer relationships with the Bank. As a
result of this strategy, many high-cost, single service deposit account holders
were replaced with higher checking account balances. To the extent the Company’s
asset growth exceeded growth in deposits, Federal Home Loan Bank of New York
(FHLBNY) advances were used as alternative funding sources. Use of the FHLBNY
advances enabled the Bank to reduce its cost of funds and manage its interest
rate risk position. FHLBNY borrowings decreased $4.5 million and increased $32.9
million during the three and twelve months ended September 30, 2008,
respectively, to $72.9 million, or 14.2% of assets.
 
 “Fiscal
year 2008 was a successful year for deposit acquisition,” stated Ms.
Hance.  “Our networking efforts in the community, combined with
increased business from existing relationships and a heightened interest by the
consumer in FDIC insurance, produced a strong increase in total deposits,
including core deposits.  In addition, Magyar is one of the few banks
in New Jersey to offer the CDARS product, a CD instrument that provides FDIC
insurance above the current temporary limit of $250,000—CDARS provides full FDIC
insurance up to $50 million.  This further strengthened the Company’s
deposit growth for 2008, and positions the Company for continued deposit growth
in 2009.”








The
Company completed its first stock repurchase of 130,927 shares during the
quarter ended December 31, 2007. On November 16, 2007, the Company’s Board of
Directors approved a second stock repurchase plan that allows for the repurchase
of an additional 5% of its outstanding shares (excluding shares held by Magyar
Bancorp, MHC, the Company’s mutual holding company), or up to 129,924 shares.
The Company repurchased 57,370 shares at an average price of $9.89 pursuant to
the second stock repurchase plan through September 30, 2008, reducing
outstanding shares to 5,756,141.
 
 The
Company’s book value per share decreased to $7.96 at September 30, 2008 from
$8.31 at September 30, 2007. The decrease was the result of the Company’s
results from operations, partially offset by the reduction of shares outstanding
during the twelve month period.
 
 About
Magyar Bancorp
 Magyar
Bancorp is the parent company of Magyar Bank, a community bank headquartered in
New Brunswick, New Jersey. Magyar Bank has been serving families and
businesses in Central New Jersey for over 84 years with a complete line of
financial products and services.  Today, Magyar operates five branch
locations in New Brunswick (2), North Brunswick, South Brunswick and
Branchburg. Please visit us online at www.magbank.com.
 
 Forward
Looking Statements
 This
press release contains statements about future events that constitute
forward-looking statements within the meaning of the Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  Such forward-looking statements may be identified by reference
to a future period or periods, or by the use of forward- looking terminology,
such as “may,” “will,” “believe,” “expect,” or similar terms or variations on
those terms, or the negative of those terms.  Forward-looking
statements are subject to numerous risks and uncertainties, including, but not
limited to, those risks previously disclosed in the Company’s filings with the
SEC, general economic conditions, changes in interest rates, regulatory
considerations, competition, technological developments, retention and
recruitment of qualified personnel, and market acceptance of the Company’s
pricing, products and services, and with respect to the loans extended by the
Bank and real estate owned, the following: risks related to the economic
environment in the market areas in which the Bank operates, particularly with
respect to the real estate market in New Jersey; the risk that the value of the
real estate securing these loans may decline in value; and the risk that
significant expense may be incurred by the Company in connection with the
resolution of these loans. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Company does not undertake and specifically declines any
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
 
 Contact:
John Reissner, 732.214.2083








MAGYAR
      BANCORP, INC. AND SUBSIDIARYSelected
      Financial Data(Dollars
      in Thousands, Except Per Share
Data)
  Three
      Months Ended
                  
                  
                  Twelve
      Months EndedSeptember
      30,
                  
                  
                  September
      30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Income Statement
      Data:Interest
      and dividend income
                  
                  $
                  7,012
                  
                  
                  $
                  7,566
                  
                  
                  $
                  28,820
                  
                  
                  $
                  29,228Interest
      expense
                  
                  
                  3,266
                  
                  
                  
                  4,151
                  
                  
                  
                  14,292
                  
                  
                  
                  15,548Net
      interest and dividend income
                  
                  
                  3,746
                  
                  
                  
                  3,415
                  
                  
                  
                  14,528
                  
                  
                  
                  13,680Provision
      for loan losses
                  
                  
                  3,331
                  
                  
                  
                  46
                  
                  
                  
                  4,255
                  
                  
                  
                  398Net
      interest and dividend income afterprovision
      for loan losses
                  
                  
                  415
                  
                  
                  
                  3,369
                  
                  
                  
                  10,273
                  
                  
                  
                  13,282Non-interest
      income
                  
                  
                  416
                  
                  
                  
                  335
                  
                  
                  
                  1,464
                  
                  
                  
                  1,454Non-interest
      expense
                  
                  
                  3,590
                  
                  
                  
                  3,586
                  
                  
                  
                  14,598
                  
                  
                  
                  13,763Income
      (loss) before income tax expense (benefit)
                  
                  
                  (2,759
                  )
                  
                  
                  118
                  
                  
                  
                  (2,861
                  )
                  
                  
                  973Income
      tax expense
                  
                  
                  281
                  
                  
                  
                  26
                  
                  
                  
                  82
                  
                  
                  
                  257Net
      (loss) income
                  
                  $
                  (3,040
                  )
                  
                  $
                  92
                  
                  
                  $
                  (2,943
                  )
                  
                  $
                  716Per Share
      Data:Basic
      earnings (losses) per share
                  
                  $
                  (0.53
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  (0.51
                  )
                  
                  $
                  0.12Diluted
      earnings (losses) per share
                  
                  $
                  (0.53
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  (0.51
                  )
                  
                  $
                  0.12Book
      value per share
                  
                  $
                  7.96
                  
                  
                  $
                  8.31
                  
                  
                  $
                  7.96
                  
                  
                  $
                  8.31Selected
      Ratios:Return
      on average assets
                  
                  
                  -2.34
                  %
                  
                  
                  0.08
                  %
                  
                  
                  -0.59
                  %
                  
                  
                  0.16
                  %Return
      on average equity
                  
                  
                  -25.86
                  %
                  
                  
                  0.77
                  %
                  
                  
                  -6.21
                  %
                  
                  
                  1.47
                  %Net
      interest margin
                  
                  
                  3.14
                  %
                  
                  
                  3.15
                  %
                  
                  
                  3.19
                  %
                  
                  
                  3.27
                  %












At
      or For the Period EndedSeptember
      30,
                
                
                June
      30,
                
                
                September
      30,2008
                
                
                2008
                
                
                2007Balance Sheet
      Data:Assets
                
                $
                514,272
                
                
                $
                510,056
                
                
                $
                473,177Loans
      receivable
                
                
                410,651
                
                
                
                403,510
                
                
                
                385,368Allowance
      for loan losses
                
                
                4,502
                
                
                
                4,377
                
                
                
                3,754Investment
      securities - available for sale, at fair value
                
                
                49,326
                
                
                
                50,619
                
                
                
                27,373Investment
      securities - held to maturity, at cost
                
                
                9,618
                
                
                
                10,166
                
                
                
                18,116Deposits
                
                
                375,560
                
                
                
                362,586
                
                
                
                368,777Borrowings
                
                
                87,934
                
                
                
                92,394
                
                
                
                49,985Shareholders'
      Equity
                
                
                45,826
                
                
                
                49,130
                
                
                
                48,193Asset Quality
      Data:Non-performing
      loans
                
                $
                13,304
                
                
                $
                5,288
                
                
                $
                8,033REO
      property
                
                
                4,666
                
                
                
                5,568
                
                
                
                2,238Allowance
      for loan losses to non-performing loans
                
                
                33.84
                %
                
                
                82.77
                %
                
                
                46.73
                %Allowance
      for loan losses to total loans receivable
                
                
                1.10
                %
                
                
                1.08
                %
                
                
                0.97
                %Non-performing
      loans to total loans receivable
                
                
                3.24
                %
                
                
                1.31
                %
                
                
                2.08
                %Non-performing
      assets to total assets
                
                
                3.49
                %
                
                
                2.13
                %
                
                
                2.17
                %Non-performing
      assets to total equity
                
                
                39.21
                %
                
                
                22.10
                %
                
                
                21.31
                %