The Company had a noncontributory defined benefit pension plan (the “Plan”) covering all eligible employees. On January 26, 2006, the Plan was frozen and amended to eliminate future benefit accruals after February 15, 2006.

MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Plan assets are invested in seven diversified investment funds of the Pentegra Retirement Trust, a no load series open-ended mutual fund. The long-term investment objective is to be invested 65% in equity securities (equity mutual funds) and 35% in debt securities (bond mutual funds). Asset rebalancing is performed at least annually, with interim adjustments made when the investment mix varies more than 5% from the target (i.e., a 10% target range). Risk/volatility is further managed by the distinct investment objectives of each of the funds and the diversification within each fund.

The following table sets forth the Plan’s funded status and amounts recognized in the Company’s Consolidated Balance Sheets at September 30, 2022 and September 30, 2021.

	September 30,
	2022			2021
	(In thousands)

Actuarial present value of benefit obligations	$	3,735		$	4,926

Change in benefit obligations
Projected benefit obligation, beginning	$	4,926		$	5,227
Interest cost		144			140
Actuarial (gain) loss		(1,071	)		(242	)
Annuity payments and lump sum distributions		(264	)		(199	)

Projected benefit obligation, end	$	3,735		$	4,926

Change in plan assets
Fair value of assets, beginning	$	4,871		$	3,579
Actual return on plan assets		(721	)		661
Employer contributions		—			830
Annuity payments and lump sum distributions		(264	)		(199	)

Fair value of assets, end	$	3,886		$	4,871

Funded status included with other assets	$	151		$	—

Funded status included with other liabilities	$	—		$	(55	)

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Net pension cost for the years ended September 30, 2022 and 2021 included the following components:

	September 30,
	2022			2021
	(In thousands)

Service cost benefits earned during the year	$	—		$	—
Interest cost on projected benefit obligation		144			140
Expected return on plan assets		(285	)		(217	)
Amortization of unrecognized net loss		146			206
Net pension cost	$	5		$	129

For the year ended September 30, 2022 and 2021, the weighted average discount rate used in determining the actuarial net periodic pension cost was 3.0% and 2.75%, respectively. For the year ended September 30, 2022 and 2021, the weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 5.25% and 3.00%, respectively.

The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn rates of return in the ranges of 6-8% and 3-5%, respectively, with an assumed long-term inflation rate of 2.5% reflected within these ranges for the year ended September 30, 2022. When these overall return expectations are applied to the plan’s target allocation, the result is an expected rate of return of 5.0% to 7.0%. Accordingly, the expected long-term rate of return on assets were 6.00% for 2023 and 6.00% for 2022.

Current Asset Allocation

The Plan’s weighted-average asset allocations at September 30, 2022 and 2021, by asset category are as follows:

	September 30,
	2022		2021

Equity securities		68%		68%
Debt securities (bond mutual funds)		31%		31%
Other (money market fund)		1%		1%
Total		100%		100%

The target asset allocation set for the assets of the Plan are in equity securities ranging from 50 percent to 75 percent and in debt securities ranging from 25 percent to 50 percent. In general, the Plan assets are investment securities that are well-diversified in terms of industry, capitalization and asset class. The Plan assets are mostly a mix of mutual funds indexed to the performance of Fortune 500 U.S. companies, debt securities held in bond funds, domestic and foreign common equity funds, and a money market fund. The Plan’s exposure to a concentration of credit risk is limited by the diversification of the investments into various investment options with multiple asset managers.

Expected Contributions

For the fiscal year ending September 30, 2023, the Company does not expect to make a contribution to the Plan.

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Estimated Future Benefit Payments

The following benefit payments are expected to be paid as follows (in thousands):

October 1, 2022 through September 30, 2023	$	240
October 1, 2023 through September 30, 2024		253
October 1, 2024 through September 30, 2025		253
October 1, 2025 through September 30, 2030		270
October 1, 2026 through September 30, 2031		271
October 1, 2027 through September 30, 2032		1,304
Total	$	2,591

Included in the funded status of the Plan at September 30, 2022 and 2021, are actuarial losses of $956,000 and $1,167,000, respectively. These amounts are included, net of related income tax effects of $288,000 and $351,000, respectively, in the accumulated other comprehensive loss component of stockholders’ equity.

The following table presents the Plan assets that are measured at fair value on a recurring basis by level within the fair value hierarchy under ASC Topic 820. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note R for further detail regarding fair value hierarchy.

			Fair Value Measurements at Reporting Date Using:
			Quoted Prices		Significant
			in Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Total		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
	(In thousands)
At September 30, 2022
Investment Type
Mutual Funds- Equity
Large-Cap Value	$	638	$	638	$	—	$	—
Large-Cap Core		633		633		—		—
Mid-Cap Core		407		407		—		—
Small-Cap Core		381		381		—		—
Non-U.S. Core		573		573		—		—
Mutual Funds- Fixed Income
Intermediate Duration		433		433		—		—
Short-Duration Corporate		785		785
Cash Equivalents
Money Market		36		36		—		—
Total Investment	$	3,886	$	3,886	$	—	$	—

At September 30, 2021
Investment Type
Mutual Funds- Equity
Large-Cap Value	$	749	$	749	$	—	$	—
Large-Cap Core		749		749		—		—
Mid-Cap Core		506		506		—		—
Small-Cap Core		481		481		—		—
Non-U.S. Core		838		838		—		—
Mutual Funds- Fixed Income
Intermediate Duration		665		665		—		—
Short-Duration Corporate		853		853
Cash Equivalents
Money Market		30		30		—		—
Total Investment	$	4,871	$	4,871	$	—	$	—

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MAGYAR BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 2022 and 2021

Equity and debt securities are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs).