REGULATORY CAPITAL

12 Months Ended

Sep. 30, 2021

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

NOTE S - REGULATORY CAPITAL

The Company and Bank are required to maintain minimum amounts of capital to total “risk-weighted” assets, as defined by the banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The capital

Table of Contents

MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2021 and 2020

amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The federal banking agencies substantially amended the regulatory risk-based capital rules applicable to the Bank in 2015. The amendments implemented the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. The rule includes a minimum common equity Tier 1 capital (“CET1”) to risk-weighted assets ratio of 4.5% of risk-weighted assets, a minimum Tier 1 capital to risk-weighted assets of 6.0% and a minimum leverage ratio of 4.0%. The required minimum ratio of total capital to risk-weighted assets is 8.0%.

The amended rules also established a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios, and resulted in the following phased-in minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations established a maximum percentage of eligible retained income that could be utilized for such actions.

As of September 30, 2021, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The following tables set forth the Company’s and the Bank’s actual and required capital levels under those measures:

At September 30, 2021	Company	Bank	Required for capital adequacy purposes			To be well- capitalized under prompt corrective action provisions
Tier 1 leverage ratio	12.43%	10.18%		≥ 4.00	%	≥	5.00	%
CET1	19.19%	15.74%		≥ 7.00	%⁽¹⁾	≥	6.50	%
Tier 1 risk-based capital ratio	19.19%	15.74%		≥ 8.50	%⁽¹⁾	≥	8.00	%
Total risk-based capital ratio	20.44%	16.99%		≥ 10.50	%⁽¹⁾	≥	10.00	%

At September 30, 2020
Tier 1 leverage ratio	7.84%	8.30%		≥ 4.00	%	≥	5.00	%
CET1	11.84%	11.93%		≥ 7.00	%⁽¹⁾	≥	6.50	%
Tier 1 risk-based capital ratio	11.84%	11.93%		≥ 8.50	%⁽¹⁾	≥	8.00	%
Total risk-based capital ratio	13.09%	13.18%		≥ 10.50	%⁽¹⁾	≥	10.00	%

⁽¹⁾	Includes 2.50% capital conservation buffer

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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