Magyar Bancorp, Inc. Income Taxes Disclosure

NOTE K - INCOME TAXES

 

The Company’s income tax expense is comprised of the following components for the years ended September 30, 2025 and 2024:

 

		Years Ended September 30,
		2025				2024
		(In thousands)
Current		$	4,397			$	3,423
Deferred			(348	)			(106	)
Total income tax expense		$	4,049			$	3,317

A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2025 and 2024 is as follows:

 

		Years Ended September 30,
		2025				2024
		(In thousands)
Income tax expense at statutory rate		$	2,900			$	2,331
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit			1,183				1,005
Tax-exempt income, net			(153	)			(103	)
BOLI policy surrender tax			-				277
Nondeductible expenses			54				56
Share based compensation			39				40
Employee stock ownership plan			18				6
Other, net			8				(295	)
Total income tax expense		$	4,049			$	3,317

 

The major sources of temporary differences and their deferred tax effect at September 30, 2025 and 2024 are as follows:

 

		Years Ended September 30,
		2025				2024
		(In thousands)
Allowance for credit losses		$	2,403			$	2,248
Net unrealized loss, investment securities available-for-sale			180				278
Deferred loan fees			434				296
Unrealized loss, minimum pension liability			-				132
Employee benefits			503				340
Allowance for transaction expense			13				6
Straight line rent			45				54
Gross deferred tax asset			3,578				3,354
Depreciation			(565	)			(551	)
Unrealized gain, minimum pension liability			(13	)			-
OREO			(16	)			-
Mortgage servicing rights			(121	)			(45	)
Gross deferred tax liability			(715	)			(596	)
Net deferred tax asset, included in other assets		$	2,863			$	2,758

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and carry forwards are available.

 

There were no valuation allowances for the year ended September 30, 2025 and 2024. The Company has considered future market growth, forecasted earnings, future taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets. If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made.

The Bank’s statutory income tax rate in the State of New Jersey was 9.0% for the years ending September 30, 2025 and 2024. The State of New Jersey has imposed a surtax on corporations earning New Jersey allocated income in excess of $10 million for the Company’s tax years ended September 30, 2025 and 2024. The surtax is set at a rate of 2.5% and is currently effective through 2029. Accordingly, the Company used an 11.5% State tax rate for the calculation of its State income tax expense for the years ended September 30, 2025 and 2024.