Safe and Sound

Magyar Bank

New Brunswick, NJ
2
Star Rating
Magyar Bank is an FDIC-insured bank started in 1922 and currently based in New Brunswick, NJ. Regulatory filings show the bank having equity of $50.1 million on $596.7 million in assets, as of December 31, 2017.

U.S. bank customers have $511.5 million on deposit at 7 offices in NJ run by 106 full-time employees. With that footprint, the bank holds loans and leases worth $478.2 million, including $429.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Magyar Bank exhibited a below-average condition, earning 2 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of a bank's financial strength. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, Magyar Bank received a score of 8 out of a possible 30 points, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Magyar Bank's Tier 1 capital ratio was 11.79 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial headwinds.

Overall, Magyar Bank held equity amounting to 8.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these kinds of assets suggests a bank may have to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

Magyar Bank scored 28 out of a possible 40 points on Bankrate's asset quality test, below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.27 percent of Magyar Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Magyar Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Losses, on the other hand, lessen a bank's ability to do those things.

Magyar Bank fell short of the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Magyar Bank was 3.14 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.5 million on total equity of $50.1 million. The bank reported an annualized return on average assets, or ROA, of 0.26 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.