Magyar Bancorp, Inc. (MGYR) stock intrinsic value fair value estimate & owner earnings analysis

Magyar Bancorp is the holding company for Magyar Bank, a community savings bank founded in 1922 and based at 400 Somerset Street in New Brunswick, New Jersey. It gathers deposits through its main office and seven branches in Middlesex and Somerset Counties and lends mainly to small and mid-sized businesses and individuals in central and northern New Jersey. At September 30, 2025 its $858.9 million loan book was 62.1% commercial real estate ($533.2 million), 28.2% one-to-four family homes, 3.7% home equity, 3.4% construction and land and 2.3% commercial business loans. Credit quality is currently very clean: non-accrual loans were 0.05% of loans, the loss allowance was 0.97% of loans, and the bank recovered slightly more than it charged off in both 2024 and 2025. The company became fully publicly owned in July 2021, when it sold 3,910,000 new shares at $10 and swapped existing public shares at 1.2213 new shares for each old share. That added capital and roughly tripled earnings from the pre-2021 level, so we judge the business from fiscal 2022 onward (fiscal years end September 30). Net income was $7.9 million in 2022, $7.7 million in 2023, $7.8 million in 2024 (helped by a $1.3 million pre-tax gain on selling foreclosed property, which will not repeat) and $9.8 million in 2025. In the first nine months of fiscal 2026 it earned $9.3 million against $7.2 million a year earlier, with all three quarters running at roughly the same higher rate. Shareholders' equity was $126.6 million at June 30, 2026, about $19.61 per share. How we measured earnings. For a bank, operating cash flow is swamped by loan and deposit flows, so we start from net income, add back depreciation and subtract the upkeep spending on branches and equipment. Stock compensation, the employee stock ownership plan and loan-loss provisions stay in as real costs. Because a bank must keep capital in step with its balance sheet, each case also deducts the earnings the bank has to retain to grow; only what is left counts as cash to owners. On that basis owner earnings were about $1.24 to $1.30 per share in 2022-2024 and $1.63 in 2025. The 2022-2025 median is $1.28, but equity has grown about 29% since 2022 and nine months of 2026 confirm a higher level, so we value the bank on the return it earns on today's capital. Per-share figures use all 6,457,203 shares outstanding, including shares still held by the employee stock plan. Future cash is discounted at 6% a year. Base case: $32.60 per share. The bank earns 8.5% a year on its equity, its 2025 result. That sits between the 7.2% to 8.1% it earned in 2022-2024 and the roughly 10% annual pace of 2026 so far. The balance sheet grows 5% a year, in line with deposit growth from $492.7 million in 2016 to $814.3 million in 2025. About 5 of those 8.5 points are kept to fund growth, which leaves a modest payout in the early years. After year ten we assume no further growth but a steady return, supported by a deposit franchise that has operated in the same towns for more than a century. About four-fifths of this value comes from those later years, so the result depends heavily on the bank keeping its current profitability. Bear case: $18.54 per share. Returns fall back to what 2023-2024 showed when deposit costs jumped: interest expense rose from $2.5 million in 2022 to $10.3 million in 2023, and 2024's return without the property gain was about 6.4%. On top of that, credit costs rise from today's near-zero level. Commercial real estate loans equal about 4.5 times the bank's equity, so a moderate rise in losses on that book weighs heavily on returns. Together these give a 5.5% return on equity and 3% growth, which is slightly below the 6% we require. So the bank is worth a little less than its book value. Bull case: $43.00 per share. The roughly 10% return of fiscal 2026 holds, and lending keeps growing 7% a year. Loans grew 9.9% in fiscal 2025 alone. The margin-of-safety price is $18.00 per share. That is about 45% below the base case and a little below both book value and the bear case, because this is a small bank heavily tied to commercial property in one region. The estimate would be wrong if losses on commercial real estate rise well above their current near-zero level, if a return to rising deposit costs squeezes margins as in 2023, or if the bank cannot keep growing without cutting its capital. Fiscal 2026 results through June 30 are unaudited quarterly figures. The full-year audited report was not yet available.