These terms and conditions govern your use of the website alphaminr.com and its related
services.
These Terms and Conditions (“Terms”) are a binding contract between you and Alphaminr,
(“Alphaminr”, “we”, “us” and “service”). You must agree to and accept the Terms. These Terms
include the provisions in this document as well as those in the Privacy Policy. These terms may
be modified at any time.
Subscription
Your subscription will be on a month to month basis and automatically renew every month. You may
terminate your subscription at any time through your account.
Fees
We will provide you with advance notice of any change in fees.
Usage
You represent that you are of legal age to form a binding contract. You are responsible for any
activity associated with your account. The account can be logged in at only one computer at a
time.
The Services are intended for your own individual use. You shall only use the Services in a
manner that complies with all laws. You may not use any automated software, spider or system to
scrape data from Alphaminr.
Limitation of Liability
Alphaminr is not a financial advisor and does not provide financial advice of any kind. The
service is provided “As is”. The materials and information accessible through the Service are
solely for informational purposes. While we strive to provide good information and data, we make
no guarantee or warranty as to its accuracy.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, UNDER NO CIRCUMSTANCES SHALL ALPHAMINR BE LIABLE TO
YOU FOR DAMAGES OF ANY KIND, INCLUDING DAMAGES FOR INVESTMENT LOSSES, LOSS OF DATA, OR ACCURACY
OF DATA, OR FOR ANY AMOUNT, IN THE AGGREGATE, IN EXCESS OF THE GREATER OF (1) FIFTY DOLLARS OR
(2) THE AMOUNTS PAID BY YOU TO ALPHAMINR IN THE SIX MONTH PERIOD PRECEDING THIS APPLICABLE
CLAIM. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL OR
CERTAIN OTHER DAMAGES, SO THE ABOVE LIMITATION AND EXCLUSIONS MAY NOT APPLY TO YOU.
If any provision of these Terms is found to be invalid under any applicable law, such provision
shall not affect the validity or enforceability of the remaining provisions herein.
Privacy Policy
This privacy policy describes how we (“Alphaminr”) collect, use, share and protect your personal
information when we provide our service (“Service”). This Privacy Policy explains how
information is collected about you either directly or indirectly. By using our service, you
acknowledge the terms of this Privacy Notice. If you do not agree to the terms of this Privacy
Policy, please do not use our Service. You should contact us if you have questions about it. We
may modify this Privacy Policy periodically.
Personal Information
When you register for our Service, we collect information from you such as your name, email
address and credit card information.
Usage
Like many other websites we use “cookies”, which are small text files that are stored on your
computer or other device that record your preferences and actions, including how you use the
website. You can set your browser or device to refuse all cookies or to alert you when a cookie
is being sent. If you delete your cookies, if you opt-out from cookies, some Services may not
function properly. We collect information when you use our Service. This includes which pages
you visit.
Sharing of Personal Information
We use Google Analytics and we use Stripe for payment processing. We will not share the
information we collect with third parties for promotional purposes.
We may share personal information with law enforcement as required or permitted by law.
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31,
2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number:
001-41808
SR Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland
92-2601722
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
220 West Union Avenue
Bound Brook
,
New Jersey
08805
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (
732
)
560-1700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
SRBK
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
As of May 12, 2025, the registrant had
8,996,835
shares of common stock, $0.01 par value per share, outstanding.
Common stock, $
0.01
par value,
50,000,000
authorized;
9,184,700
and
9,507,930
shares issued and outstanding
as of March 31, 2025, and June 30, 2024, respectively
92
95
Additional paid-in capital
84,466
91,436
Retained earnings
118,705
116,205
Unearned compensation ESOP
(
6,751
)
(
7,036
)
Accumulated other comprehensive loss
(
1,444
)
(
1,217
)
Total stockholders' equity
195,068
199,483
Total liabilities and stockholders' equity
$
1,073,907
$
1,020,844
The accompanying notes are an integral part of the consolidated financial statements
1
SR Bancorp, Inc. and Subsidiaries
Consolidate
d Statements of Income (Loss)
For the Three and Nine Months Ended March 31, 2025 and 2024
(In thousands, except for share data, unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2025
2024
2025
2024
Interest Income
Loans, including fees
$
10,346
$
9,819
$
31,069
$
23,760
Securities:
Taxable
600
779
1,848
2,489
Federal funds sold
—
76
—
157
Interest bearing deposits at other banks
537
974
1,578
3,071
Total interest income
11,483
11,648
34,495
29,477
Interest Expense
Deposits:
Demand
1,332
122
3,500
504
Savings and time
2,584
3,031
8,136
6,834
Borrowings
383
227
842
707
Total interest expense
4,299
3,380
12,478
8,045
Net Interest Income
7,184
8,268
22,017
21,432
Provision (Credit) for Credit Losses
37
(
142
)
(
105
)
3,913
Net Interest Income After Provision (Credit)
for Credit Losses
7,147
8,410
22,122
17,519
Noninterest Income
Service charges and fees
230
193
782
576
Increase in cash surrender value of bank owned life insurance
259
247
783
655
Fees and service charges on loans
35
36
128
47
Unrealized gain on equity securities
3
1
7
3
Realized gain on sale of investments
—
19
—
33
Realized gain on sale of loans
—
—
51
—
Other
14
20
214
80
Total noninterest income
541
516
1,965
1,394
Noninterest Expense
Salaries and employee benefits
3,681
3,631
10,288
12,050
Occupancy
557
772
1,681
1,674
Furniture and equipment
346
285
924
674
Data Processing
552
951
1,642
2,392
Advertising
97
75
264
204
FDIC premiums
120
120
360
348
Directors fees
93
103
287
288
Professional fees
467
357
1,423
1,775
Insurance
133
165
451
389
Telephone, postage and supplies
197
210
569
391
Other
819
902
2,497
7,799
Total noninterest expense
7,062
7,571
20,386
27,984
Income (Loss) Before Income Tax Expense (Benefit)
626
1,355
3,701
(
9,071
)
Income Tax Expense (Benefit)
89
292
776
(
1,243
)
Net Income (Loss)
$
537
$
1,063
$
2,925
$
(
7,828
)
Basic earnings (loss) per share
$
0.06
$
0.12
$
0.34
$
(
1.27
)
Diluted earnings (loss) per share
$
0.06
$
0.12
$
0.34
$
(
1.27
)
Weighted average number of common
shares outstanding - basic
8,303,795
8,790,082
8,567,520
6,187,588
Weighted average number of common
shares outstanding - diluted
8,315,030
8,790,082
8,572,283
6,187,588
The accompanying notes are an integral part of these condensed financial statements
2
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
For the Three and Nine Months Ended March 31, 2025 and 2024
(In thousands, unaudited)
Three Months Ended March 31,
Nine Months Ended March 31,
2025
2024
2025
2024
Net Income (Loss)
$
537
$
1,063
$
2,925
$
(
7,828
)
Other Comprehensive Income (Loss)
Unrealized holding gains on securities available-for-
sale arising during the year 2024, net of income tax
benefit (expense) of $
59
and $(
238
), respectively
—
(
167
)
—
660
Change in defined pension plan for unrealized
actuarial gains (losses) net of income tax (expense)
benefit of $
71
, $(
120
), $
90
and $
6
, respectively
(
182
)
306
(
227
)
(
17
)
Total other comprehensive (loss) income
(
182
)
139
(
227
)
643
Total comprehensive income (loss)
$
355
$
1,202
$
2,698
$
(
7,185
)
The accompanying notes are an integral part of these consolidated financial statements
3
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements
of Changes in Stockholders' Equity
For the Three and Nine Months Ended March 31, 2025 and 2024
(In thousands, except for share data, unaudited)
Common
Stock
Shares
Common
Stock
Amount
Additional
Paid in
Capital
Retained
Earnings
Unearned
ESOP
Compensation
Accumulated
Other
Comprehensive
Loss
Total
Balance, December 31, 2024
9,255,948
$
93
$
87,567
$
118,593
$
(
6,846
)
$
(
1,262
)
$
198,145
Net income
—
—
—
537
—
—
537
Other comprehensive loss,
net of tax
—
—
—
—
—
(
182
)
(
182
)
ESOP shares earned,
9,508
shares
—
—
19
—
95
—
114
Repurchase of common shares
(
280,404
)
(
3
)
(
3,392
)
—
—
—
(
3,395
)
Cash dividends declared on common stock, $
0.05
per share
—
—
—
(
425
)
—
—
(
425
)
Restricted stock awards issued
209,156
2
(
2
)
—
—
—
—
Stock-based compensation
—
274
—
—
—
274
Balance, March 31, 2025
9,184,700
$
92
$
84,466
$
118,705
$
(
6,751
)
$
(
1,444
)
$
195,068
Balance, June 30, 2024
9,507,930
$
95
$
91,436
$
116,205
$
(
7,036
)
$
(
1,217
)
$
199,483
Net income
—
—
—
2,925
—
—
2,925
Other comprehensive loss,
net of tax
—
—
—
—
—
(
227
)
(
227
)
ESOP shares earned,
28,524
shares
—
—
31
—
285
—
316
Repurchase of common shares
(
627,461
)
(
6
)
(
7,306
)
—
—
—
(
7,312
)
Cash dividends declared on common stock, $
0.05
per share
—
—
—
(
425
)
—
—
(
425
)
Restricted stock awards issued
304,231
3
(
3
)
—
—
—
—
Stock-based compensation
—
—
308
—
—
—
308
Balance, March 31, 2025
9,184,700
$
92
$
84,466
$
118,705
$
(
6,751
)
$
(
1,444
)
$
195,068
Balance, December 31, 2023
9,507,930
$
95
$
91,449
$
118,174
$
(
7,226
)
$
(
4,511
)
$
197,981
Net income
—
—
—
1,063
—
—
1,063
Other comprehensive income,
net of tax
—
—
—
—
—
139
139
ESOP shares commited for allocation
to participants,
9,508
shares
—
—
(
5
)
—
95
—
90
Balance, March 31, 2024
9,507,930
$
95
$
91,444
$
119,237
$
(
7,131
)
$
(
4,372
)
$
199,273
Balance, June 30, 2023
—
$
—
$
—
$
127,099
$
—
$
(
5,015
)
$
122,084
Net loss
—
—
—
(
7,828
)
—
—
(
7,828
)
Other comprehensive income,
net of tax
—
—
—
—
—
643
643
Cumulative adjustment for
change in accounting principle
(ASU No. 2016-13)
—
—
—
(
34
)
—
—
(
34
)
Common stock issued,
9,507,930
shares
9,507,930
95
91,491
—
—
—
91,586
Unearned ESOP shares,
760,364
shares
—
—
—
—
(
7,606
)
—
(
7,606
)
Repurchase of common shares
—
—
—
—
—
—
—
Restricted stock awards issued
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
—
—
—
ESOP shares committed for
allocation to participants,
47,540
shares
—
—
(
47
)
—
475
—
428
Balance, March 31, 2024
9,507,930
$
95
$
91,444
$
119,237
$
(
7,131
)
$
(
4,372
)
$
199,273
The accompanying notes are an integral part of these consolidated financial statements
4
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2025 and 2024
(In thousands, except for share data, unaudited)
Nine Months Ended March 31,
2025
2024
Cash Flows from Operating Activities
Net income (loss)
$
2,925
$
(
7,828
)
Adjustments to reconcile net income to net cash provided by operating activities:
by operating activities:
(Credit) provision for credit losses
(
105
)
3,913
Depreciation
703
520
Deferred income tax benefit
(
107
)
(
1,454
)
Accretion of acquisition fair value adjustments, net
(
3,498
)
(
3,878
)
Amortization of core deposit intangible asset
1,102
933
Net amortization of premiums and discounts on securities
776
220
Net amortization of deferred loan fees, costs and discounts
217
279
Income from cash surrender value of bank owned life insurance
(
783
)
(
655
)
Stock-based compensation expense
624
428
Unrealized gain on equity securities
(
7
)
(
3
)
Gain on sale of investments, net
—
(
33
)
Gain on sale of loans held for sale
(
51
)
—
Proceeds from sales of loans held for sale
575
—
Originations of loans held for sale
(
524
)
—
Noncash expense of common shares contributed to Somerset Regal Bank Charitable Foundation
—
—
(Increase) decrease in:
Accrued interest receivable
(
447
)
(
84
)
Other assets
2,476
1,133
(Decrease) increase in other liabilities
(
948
)
99
Net cash provided by (used in) operating activities
2,928
(
6,410
)
Cash Flows from Investing Activities
Proceeds from sales, maturities, and principal repayments of securities available-for-sale
—
16,808
Proceeds from maturities, calls and principal repayments of securities held-to-maturity
10,477
11,747
Proceeds from sale of time deposits in other financial institutions
—
8,810
Net increase in loans receivable
(
45,439
)
(
14,454
)
Purchase of premises and equipment
(
257
)
(
358
)
Purchase of restricted equity securities
(
2,700
)
—
Cash paid for acquisition
—
(
69,538
)
Cash received from acquisition
—
55,294
Net cash used in investing activities
(
37,919
)
8,309
Cash Flows from Financing Activities
Net increase (decrease) in interest bearing deposits
30,379
(
35,330
)
Net decrease in non-interest bearing deposits
(
2,006
)
(
3,315
)
Net increase in advance payments by borrowers for taxes and insurance
245
2,810
Net increase (decrease) in short-term borrowings
30,000
(
20,000
)
Cash proceeds from issuance of common stock
—
83,980
Repurchase of common stock
(
7,312
)
—
Net cash provided by financing activities
51,306
28,145
Net increase in cash and cash equivalents
16,315
30,044
Cash and Cash Equivalents, Beginning of Period
45,909
42,449
Cash and Cash Equivalents, End of Period
$
62,224
$
72,493
Supplementary Cash Flow Information
Cash paid during the period for:
Interest paid
$
12,436
$
6,361
Income taxes paid
—
475
Acquisition:
Fair value of assets acquired, net of cash and cash equivalents acquired
—
372,739
Goodwill recorded at merger
—
20,417
Fair value of liabilities assumed
—
378,972
Fair value of
452,758
common shares contributed to Somerset Regal Bank Charitable Foundation
—
—
The accompanying notes are an integral part of these consolidated financial statements
5
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1.
Summary
of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited consolidated financial statements of SR Bancorp, Inc. (the “Company”) have been prepared in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. The consolidated financial statements are prepared on an accrual basis and include the accounts of the Company’s wholly-owned subsidiary, Somerset Regal Bank (the “Bank”) and its wholly-owned subsidiaries Somerset Investment Co. (the “Investment Co.”), RB Properties, LLC and Somerset Consumer Service Corp. (“SCS”). All significant intercompany accounts and transactions have been eliminated in consolidation.
The Investment Co. is a special purpose entity subject to the investment company provisions of the New Jersey Corporation Business Tax Act whose activities are limited to holding investment securities and recognizing income and other gains/losses thereon. RB Properties, LLC was formed to own and manage real estate property acquired through foreclosure or in lieu of foreclosure in connection with loans. RB Properties, LLC is currently inactive. SCS has had limited activity.
The interim consolidated financial statements reflect all adjustments, including normal and recurring accruals, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and nine months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for the full fiscal year or any other period. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and the results of operations for the periods presented. Actual results could differ from these estimates.
Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.
Conversion, Stock Offering and Merger
The conversion of Somerset Savings Bank, SLA from the mutual to stock form of organization and related stock offering by the Company, the holding company for Somerset Savings Bank, SLA, was completed on September 19, 2023. The Company’s common stock began trading on the Nasdaq Capital Market under the trading symbol “SRBK” on September 20, 2023.
The Company sold
9,055,172
shares of its common stock at a price of
$
10.00
per share, which included
760,634
shares sold to Somerset Regal Bank’s Employee Stock Ownership Plan. Additionally, the Company contributed
452,758
shares and
$
905,517
in cash to the Somerset Regal Charitable Foundation, Inc., a charitable foundation formed in connection with the conversion. Upon the completion of the conversion and offering,
9,507,930
shares of Company common stock were outstanding.
Promptly following the completion of the conversion and related stock offering, Regal Bancorp, Inc., a New Jersey corporation (“Regal Bancorp”), merged with and into the Company, with the Company as the surviving entity (the “Merger”). Immediately following the Merger, Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey and the wholly-owned subsidiary of Regal Bancorp, merged with and into Somerset Bank, which had converted into a commercial bank charter, and was renamed Somerset Regal Bank (the “Bank”). In connection with the Merger, each outstanding share of Regal Bancorp common stock converted into the right to receive
$
23.00
in cash. The Merger was completed on September 19, 2023. The accounts and operations of Regal Bancorp and Regal Bank are included in these consolidated financial statements since the Merger on September 19, 2023
.
6
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Business
SR Bancorp, Inc., a Maryland corporation, is the holding company for Somerset Regal Bank. The Bank, which was formed in 1887, serves Essex, Hunterdon, Middlesex, Morris, Somerset and Union counties in New Jersey. The Bank is a New Jersey chartered commercial bank subject to the laws and regulations of federal and state agencies. As a locally managed commercial bank, the Bank provides retail and commercial banking services to individuals, businesses and local municipalities through its
14
full-service branch locations.
Concentrations of Credit Risk
The Company's lending activity is concentrated in loans secured by real estate located primarily in New Jersey. Credit risk exposure in this area of lending is mitigated by adhering to conservative underwriting practices and policies, and close monitoring of the loan portfolio. The Company does not have any significant concentrations to any one industry or customer.
Notes 4 discusses the types of investment securities in which the Company invests. Credit risk as it relates to investment activities is mitigated through the monitoring of ratings. The Company's portfolio consists principally of highly-rated government-sponsored agency securities.
Recent Accounting Standards Not Yet Adopted
In November 2023, FASB issued ASU 2023-07, "
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
". The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on our consolidated financial statements, which is not expected to have a material impact on our financial statements.
In December 2023, FASB issued ASU 2023-09, "
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
". The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on our consolidated financial statements, which is not expected to have a material impact on our financial statements.
Accounting Standards Update 2024-01, "
Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards
" ("ASU 2024-01"), clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the "Scope" and "Scope Exceptions" sections of Topic 718 to improve its clarity and operability without changing the guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle. ASU 2024-01 is effective July 1, 2025, including interim periods, and is not expected to have a material impact on our financial statements.
Accounting Standards Update 2024-02, "
Codification Improvements
" ("ASU 2024-02"), amends the Codification to remove references to various concept statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective for the Company on July 1, 2025, and is not expected to have a material impact on our financial statements.
7
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Accounting Standards Update 2024-03, "
Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures
" ("ASU 2024-03"), requires additional expense disclosures by public entities in the notes to the financial statements. ASU 2024-03 outlines the specific costs that are required to be disclosed, which include costs such as: employee compensation, depreciation, intangible asset amortization, selling costs and depreciation. It also requires qualitative descriptions of the amounts remaining in the relevant income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses. The disclosures are required for each interim and annual reporting period. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026. In January 2025, the FASB issued Accounting Standards Update 2025-01, "
Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Clarifying the Effective
Date
" ("ASU 2025-01")
,
clarifying the interim reporting date when an entity must adopt ASU 2024-03. According to ASU 2025-01, ASU 2024-03 is effective for interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on our consolidated financial statements, which is not expected to have a material impact on our financial statements.
Subsequent Events
The Company has evaluated subsequent events for recognition or disclosure through May 15, 2025
, the date the consolidated financial statements were available to be issued.
2.
Business Combination
On
September 19, 2023
, the Company completed its acquisition of Regal Bancorp and Regal Bank, under which Regal Bancorp merged with and into the Company, with the Company as the resulting entity. Immediately following the Merger, Regal Bank merged with and into Somerset Bank, which had converted to a commercial bank charter, with Somerset Bank as the surviving entity, and was renamed Somerset Regal Bank. In connection with the Merger, each outstanding share of Regal Bancorp common stock converted into the right to receive
$
23.00
in cash.
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of September 19, 2023 based on management’s best estimate using the information available as of the merger date. The application of the acquisition method of accounting resulted in the recognition of goodwill of
$
20.4
million
and a core deposit intangible of
$
9.1
million
. Accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which ran through September 19, 2024. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.
8
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table sets forth assets acquired and liabilities assumed in the acquisition of Regal Bancorp, at their estimated fair values as of the closing date of the transaction:
As recorded
by Regal
Bancorp
Fair value
adjustments
As recorded
at acquisition
(In thousands)
Consideration paid (
3,023,369
Regal
Bancorp shares at $
23.00
per share)
69,538
Assets Acquired
Cash and cash equivalents
$
55,294
$
—
$
55,294
Time deposits in other financial institutions
8,810
8,810
Securities available-for-sale, at fair value
12,487
12,487
Securities held-to-maturity, at amortized cost
2,587
2,587
Federal Home Loan Bank stock and
other restricted stock
548
548
Loans receivable, net
335,971
(
14,371
)
(a)
321,600
Allowance for credit losses
(
4,076
)
4,076
(b)
—
Accrued interest receivable
1,214
1,214
Premises and equipment, net
1,570
1,570
Right-of-use asset
3,416
3,416
Goodwill
1,047
(
1,047
)
(c)
—
Core deposit intangible
26
9,038
(d)(e)
9,064
Deferred costs
224
(
224
)
(f)
—
Bank owned life insurance
7,470
7,470
Net deferred tax asset
1,634
(
78
)
(g)(i)
1,556
Other assets
2,430
(
201
)
(i)
2,229
Total assets acquired
$
430,652
$
(
2,807
)
$
427,845
Liabilities assumed
Deposits
$
373,174
$
(
1,299
)
(h)
$
371,875
Lease liability
3,444
3,444
Deferred compensation
1,521
1,521
Accrued expenses and other liabilities
2,132
(
248
)
(i)
1,884
Total liabilities assumed
$
380,271
$
(
1,547
)
$
378,724
Net assets acquired
$
49,121
Goodwill recorded at merger
20,417
(a)
Adjustment for interest rate and credit risk to reduce loans to fair value, to be amortized as an increase to interest income over their remaining term.
(b)
Elimination of Regal Bank allowance for loan losses.
(c)
Elimination of pre-existing goodwill.
(d)
Recording of new intangible asset for the fair value of core deposits, to be amortized on an accelerated basis over the estimated average life of the deposit base.
(e)
Elimination of pre-existing intangible asset for the fair value of core deposits.
(f)
Elimination of deferred costs.
(g)
Recording of the deferred income tax effects of fair value adjustments.
(h)
Adjustment to reduce time deposits to fair value, to be amortized as an increase to interest expense over their remaining term.
(i)
Final adjustments of income taxes, other assets and other liabilities.
During the nine months ended March 31, 2024, the Company recorded one-time merger-related expenses of $
4.1
million in the consolidated statements of income (loss), consisting of
$
2.6
million for change in control payments,
$
612,000
for investment banking services,
$
414,000
related to the termination of a data processing contract,
$
99,000
for legal expenses,
$
42,000
for severance payments,
$
17,000
in other professional services and
$
30,000
in other miscellaneous expenses. In addition, the Company recorded a
$
4.2
million
provision for estimated credit losses in connection with the acquired loan portfolio.
9
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The fair value of loans acquired from Regal Bank was estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of Regal Bank’s allowance for loan losses associated with the loans that were acquired. The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately
10
years utilizing the s
um-of-the-years digits method. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the Company recognizes amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair value. At June 30, 2024, the Company finalized its review of the acquired assets and assumed liabilities and did not record any further adjustments to the carrying value.
The fair value of retail demand and interest-bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.
3.
Earnings (Loss) Per Share
Basic earnings (loss) per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding. Diluted earnings per share have been calculated in a manner similar to that of basic earnings per share except that weighted-average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potential dilutive common shares (such as those resulting from the exercise of stock options and vested restricted stock awards) were issued during the period, computed using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.
The following table presents the composition of the weighted average common shares used in the earnings per share calculation:
Three Months Ended March 31,
Nine Months Ended March 31,
2025
2024
2025
2024
Net income (loss)
$
537
$
1,063
$
2,925
$
(
7,828
)
Weighted average common
shares outstanding used to
calculate basic earnings per
common share
8,303,795
8,790,082
8,567,520
6,187,588
Add: Dilutive effect of common
stock equivalents
11,235
—
4,763
—
Weighted average common
shares outstanding used to
calculate diluted earnings per
common share
8,315,030
8,790,082
8,572,283
6,187,588
Basic income (loss) per
common share
$
0.06
$
0.12
$
0.34
$
(
1.27
)
Diluted income (loss) per
common share
$
0.06
$
0.12
$
0.34
$
(
1.27
)
Number of common stock
equivalents excluded from the
calculation of diluted earnings
as they are anti-dilutive
include:
Stock options
760,593
—
760,593
—
Restricted stock awards
209,156
—
209,156
—
10
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
4.
Investment Securities
The Company owned
no
investment securities available-for-sale at
March 31, 2025 or June 30, 2024. The amortized cost and approximate fair value of securities held-to-maturity are as follows at the dates indicated:
March 31, 2025
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In thousands)
Federal National Mortgage Association
$
88,894
$
9
$
(
15,583
)
$
73,320
Federal Home Loan Mortgage Corporation
46,227
1
(
7,698
)
38,530
Government National Mortgage Association
235
2
—
237
Subordinated Debt
7,750
—
(
504
)
7,246
CMO
2,107
—
(
141
)
1,966
Foreign Government Bonds
200
—
—
200
Total
$
145,413
$
12
$
(
23,926
)
$
121,499
June 30, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In thousands)
Federal National Mortgage Association
$
95,338
$
1
$
(
16,822
)
$
78,517
Federal Home Loan Mortgage Corporation
50,060
78
(
8,252
)
41,886
Government National Mortgage Association
273
—
(
3
)
270
Subordinated Debt
7,750
—
(
1,488
)
6,262
CMO
2,423
—
(
222
)
2,201
Foreign Government Bonds
300
—
—
300
Total
$
156,144
$
79
$
(
26,787
)
$
129,436
There were
no
purchases or sales of available-for sale securities in the
three and nine months ended March 31, 2025
. During the nine months ended March 31, 2024, the Company acquired $
20.9
million of available-for-sale securities from the Regal Bancorp acquisition. Following the completion of the Merger, the Company sold $
19.2
million of its available-for-sale portfolio, which resulted in a realized gain of $
17,000
in the nine months ended March 31, 2024. The Company did
no
t purchase or sell any other available-for-sale securities during the
three and nine months ended March 31, 2024.
The amortized cost and fair value of securities held-to-maturity by contractual maturity at March 31, 2025
are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations. Securities are assigned to categories based on contractual maturity except for mortgage-backed securities and CMOs, which are based on the estimated average life of the securities.
March 31, 2025
Amortized
Cost
Fair
Value
(In thousands)
Due within 1 year
$
—
$
—
Due after 1 but within 5 years
200
200
Due after 5 but within 10 years
7,750
7,246
Due after 10 years
—
—
Mortgage-backed securities
137,463
114,053
Total
$
145,413
$
121,499
11
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The unrealized losses as of
March 31, 2025 and June 30, 2024, categorized by the length of time of continuous loss position, and the fair value of the related securities held-to-maturity are as follows:
March 31, 2025
Less than 12 Months
More than 12 Months
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
Federal National Mortgage
Association
$
—
$
—
$
72,967
$
(
15,583
)
$
72,967
$
(
15,583
)
Federal Home Loan Mortgage
Corporation
—
—
38,500
(
7,698
)
38,500
(
7,698
)
Subordinated Debt
—
—
7,246
(
504
)
7,246
(
504
)
CMO
—
—
1,966
(
141
)
1,966
(
141
)
Total
$
—
$
—
$
120,679
$
(
23,926
)
$
120,679
$
(
23,926
)
June 30, 2024
Less than 12 Months
More than 12 Months
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
Federal National Mortgage
Association
$
—
$
—
$
78,160
$
(
16,822
)
$
78,160
$
(
16,822
)
Federal Home Loan Mortgage
Corporation
—
—
41,838
(
8,252
)
41,838
(
8,252
)
Government National
Mortgage Association
—
—
270
(
3
)
270
(
3
)
Subordinated Debt
—
—
6,262
(
1,488
)
6,262
(
1,488
)
CMO
—
—
2,201
(
222
)
2,201
(
222
)
Total
$
—
$
—
$
128,731
$
(
26,787
)
$
128,731
$
(
26,787
)
On a quarterly basis, management evaluates whether there is a credit loss associated with any declines in fair value. Management considers the nature of the collateral, default rates, delinquency rates, credit ratings and interest rate changes, among other factors. However, the Company has determined that highly rated issues and mortgage-backed securities of U.S. government and government-sponsored agencies have a
zero
expected credit loss.
Three Months Ended
March 31,
Nine Months Ended
March 31,
2025
2024
2025
2024
(In thousands)
(In thousands)
Net gains recognized on equity securities
$
3
$
1
$
7
$
3
Less: Net gains recognized on equity
securities sold/acquired
—
—
—
—
Net unrealized gains recognized on
equity securities
$
3
$
1
$
7
$
3
At March 31, 2025 and June 30, 2024
, mortgage-backed securities with a carrying value of approximately $
1.8
million and $
1.8
million, respectively, were pledged as collateral to secure public funds on deposit. During the
three and nine months ended March 31, 2025
and 2024, there were
no
sales of securities held-to-maturity.
12
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
5.
Loans Receivable
Loans at
March 31, 2025 and June 30, 2024 are summarized as follows:
March 31, 2025
June 30, 2024
(In thousands)
Owner occupied commercial real estate loans
$
56,002
$
59,968
Other commercial real estate loans
73,618
75,782
Multi-family loans
216,058
180,364
Commercial and industrial loans
11,296
12,522
Total commercial loans
356,974
328,636
Residential mortgage loans
413,918
394,723
Consumer and other loans
12,832
11,658
Total loans
783,724
735,017
Allowance for credit losses
(
5,124
)
(
5,229
)
Deferred loan costs, net
2,195
2,071
Loans receivable, net
$
780,795
$
731,859
The Company engages primarily in the lending of fixed-rate and adjustable-rate commercial real estate and residential mortgage loans. Lending activities are targeted to individuals within the Company's geographic footprint. Risks associated with lending activities include changes in economic conditions and interest rates, which can adversely impact both the ability of borrowers to repay their loans and the value of the associated collateral. Credit risk exposure is minimized by the evaluation of the creditworthiness of the borrower, including debt-to-income ratios, credit scores and conservative underwriting standards with loan-to-value ratios of generally no more than
75
%
for commercial loans,
80
% for multifamily loans and
80
%
for residential loans. Residential mortgage loans granted in excess of the
80
%
loan-to-value ratio criterion generally require private mortgage insurance. The real estate home equity portfolio consists of fixed-rate home equity loans and variable-rate home equity lines of credit. Risks associated with second lien loans secured by residential properties are generally lower than commercial loans and include general economic risks, such as the strength of the job market, employment stability and the strength of the housing market.
At March 31, 2025
, commercial loans represented
45.5
%
of net loans, while residential mortgage, consumer and other loans represented
54.5
%
, nearly all of which is concentrated within our primary market area in New Jersey. The Company holds
96.8
%
of its commercial loan portfolio in commercial real estate, consisting of multi-family, mixed use and owner occupied loans, with less than
1
%
secured by office buildings. At March 31, 2025
, the Company had
no
non-accrual commercial loans.
13
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following tables summarize the activity in the allowance for credit losses by loan class for the
three and nine months ended March 31, 2025 and 2024.
Three Months Ended March 31, 2025
Owner
Occupied
Commercial
Real Estate
Other
Commercial
Real Estate
Multi-
Family
Commercial
and
Industrial
Residential
Mortgage
Consumer
and Other
Total
(In thousands)
Allowance for Credit
Losses:
Beginning balance
$
750
$
196
$
1,903
$
132
$
1,876
$
230
$
5,087
Charge-offs
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Provisions (credits)
(
9
)
(
3
)
39
—
(
2
)
12
37
Ending balance
$
741
$
193
$
1,942
$
132
$
1,874
$
242
$
5,124
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
741
$
193
$
1,942
$
132
$
1,874
$
242
$
5,124
Loans Receivable:
Ending balance
$
56,002
$
73,618
$
216,058
$
11,296
$
413,918
$
12,832
$
783,724
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
56,002
$
73,618
$
216,058
$
11,296
$
413,918
$
12,832
$
783,724
Three Months Ended March 31, 2024
Owner
Occupied
Commercial
Real Estate
Other
Commercial
Real Estate
Multi-
Family
Commercial
and
Industrial
Residential
Mortgage
Consumer
and Other
Total
(In thousands)
Allowance for Credit
Losses:
Beginning balance
$
1,364
$
533
$
1,869
$
146
$
1,285
$
21
$
5,218
Charge-offs
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Provisions (credits)
(
27
)
(
11
)
40
(
3
)
(
152
)
11
(
142
)
Ending balance
$
1,337
$
522
$
1,909
$
143
$
1,133
$
32
$
5,076
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
1,337
$
522
$
1,909
$
143
$
1,133
$
32
$
5,076
Loans Receivable:
Ending balance
$
60,413
$
75,973
$
166,907
$
12,358
$
375,065
$
11,296
$
702,012
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
72
$
148
$
—
$
220
Ending balance,
Collectively evaluated
for impairment
$
60,413
$
75,973
$
166,907
$
12,286
$
374,917
$
11,296
$
701,792
14
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended March 31, 2025
Owner
Occupied
Commercial
Real Estate
Other
Commercial
Real Estate
Multi-
Family
Commercial
and
Industrial
Residential
Mortgage
Consumer
and Other
Total
(In thousands)
Allowance for Credit
Losses:
Beginning balance
$
1,331
$
502
$
1,998
$
146
$
1,175
$
77
$
5,229
Charge-offs
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Provisions (credits)
(
590
)
(
309
)
(
56
)
(
14
)
699
165
(
105
)
Ending balance
$
741
$
193
$
1,942
$
132
$
1,874
$
242
$
5,124
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
741
$
193
$
1,942
$
132
$
1,874
$
242
$
5,124
Loans Receivable:
Ending balance
$
56,002
$
73,618
$
216,058
$
11,296
$
413,918
$
12,832
$
783,724
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
56,002
$
73,618
$
216,058
$
11,296
$
413,918
$
12,832
$
783,724
Nine Months Ended March 31, 2024
Owner
Occupied
Commercial
Real Estate
Other
Commercial
Real Estate
Multi-
Family
Commercial
and
Industrial
Residential
Mortgage
Consumer
and Other
Total
(In thousands)
Allowance for Credit
Losses:
Beginning balance
$
—
$
4
$
—
$
—
$
1,039
$
73
$
1,116
Impact of ASU 2016-13
—
—
—
—
27
20
47
Charge-offs
—
—
—
—
—
—
—
Recoveries
—
—
—
—
—
—
—
Provisions (credits)
1,337
518
1,909
143
67
(
61
)
3,913
Ending balance
$
1,337
$
522
$
1,909
$
143
$
1,133
$
32
$
5,076
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Ending balance,
Collectively evaluated
for impairment
$
1,337
$
522
$
1,909
$
143
$
1,133
$
32
$
5,076
Loans Receivable:
Ending balance
$
60,413
$
75,973
$
166,907
$
12,358
$
375,065
$
11,296
$
702,012
Ending balance,
Individually evaluated
for impairment
$
—
$
—
$
—
$
72
$
148
$
—
$
220
Ending balance,
Collectively evaluated
for impairment
$
60,413
$
75,973
$
166,907
$
12,286
$
374,917
$
11,296
$
701,792
15
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table presents the credit risk profile of loans by class and fiscal year of origination as of
March 31, 2025 and June 30, 2024:
March 31, 2025
2025
2024
2023
2022
2021
Prior
Revolving
Total
(In thousands)
Owner Occupied Commercial
Real Estate
Risk Rating
Pass
$
—
$
7,043
$
7,101
$
7,976
$
5,377
$
28,505
$
—
$
56,002
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Owner Occupied Commercial
Real Estate
$
—
$
7,043
$
7,101
$
7,976
$
5,377
$
28,505
$
—
$
56,002
Other Commercial Real Estate
Risk Rating
Pass
$
5,467
$
1,364
$
3,540
$
925
$
1,708
$
60,614
$
—
$
73,618
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Other Commercial Real Estate
$
5,467
$
1,364
$
3,540
$
925
$
1,708
$
60,614
$
—
$
73,618
Multi-Family
Risk Rating
Pass
$
40,123
$
28,668
$
28,497
$
25,277
$
13,355
$
80,138
$
—
$
216,058
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Multi-Family
$
40,123
$
28,668
$
28,497
$
25,277
$
13,355
$
80,138
$
—
$
216,058
Commercial and Industrial
Risk Rating
Pass
$
89
$
988
$
4,242
$
2,471
$
61
$
3,445
$
—
$
11,296
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Commercial and Industrial
$
89
$
988
$
4,242
$
2,471
$
61
$
3,445
$
—
$
11,296
Residential Mortgage
Risk Rating
Pass
$
51,205
$
63,573
$
51,600
$
73,237
$
68,138
$
106,165
$
—
$
413,918
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Residential Mortgage
$
51,205
$
63,573
$
51,600
$
73,237
$
68,138
$
106,165
$
—
$
413,918
Consumer and Other
Risk Rating
Pass
$
674
$
1,250
$
365
$
742
$
1,123
$
1,650
$
7,028
$
12,832
Special mention
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Consumer and Other
$
674
$
1,250
$
365
$
742
$
1,123
$
1,650
$
7,028
$
12,832
Total Loans
Pass
$
97,558
$
102,886
$
95,345
$
110,628
$
89,762
$
280,517
$
7,028
$
783,724
Special mention
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
Total Loans
$
97,558
$
102,886
$
95,345
$
110,628
$
89,762
$
280,517
$
7,028
$
783,724
Gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
16
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Total
(In thousands)
Owner Occupied Commercial
Real Estate
Risk Rating
Pass
$
7,133
$
7,403
$
8,210
$
5,507
$
1,977
$
29,738
$
—
$
59,968
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Owner Occupied Commercial
Real Estate
$
7,133
$
7,403
$
8,210
$
5,507
$
1,977
$
29,738
$
—
$
59,968
Other Commercial Real Estate
Risk Rating
Pass
$
1,379
$
3,978
$
3,168
$
1,745
$
10,938
$
54,574
$
—
$
75,782
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Other Commercial Real Estate
$
1,379
$
3,978
$
3,168
$
1,745
$
10,938
$
54,574
$
—
$
75,782
Multi-Family
Risk Rating
Pass
$
21,100
$
29,070
$
25,713
$
14,135
$
8,989
$
81,357
$
—
$
180,364
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Multi-Family
$
21,100
$
29,070
$
25,713
$
14,135
$
8,989
$
81,357
$
—
$
180,364
Commercial and Industrial
Risk Rating
Pass
$
1,225
$
4,158
$
2,722
$
90
$
1,470
$
2,807
$
—
$
12,472
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
50
—
50
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Commercial and Industrial
$
1,225
$
4,158
$
2,722
$
90
$
1,470
$
2,857
$
—
$
12,522
Residential Mortgage
Risk Rating
Pass
$
69,868
$
54,675
$
76,714
$
74,771
$
30,347
$
88,348
$
—
$
394,723
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Residential Mortgage
$
69,868
$
54,675
$
76,714
$
74,771
$
30,347
$
88,348
$
—
$
394,723
Consumer and Other
Risk Rating
Pass
$
1,327
$
940
$
810
$
869
$
310
$
1,989
$
5,413
$
11,658
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Consumer and Other
$
1,327
$
940
$
810
$
869
$
310
$
1,989
$
5,413
$
11,658
Total Loans
Pass
$
102,032
$
100,224
$
117,337
$
97,117
$
54,031
$
258,813
$
5,413
$
734,967
Special mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
50
—
50
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total Loans
$
102,032
$
100,224
$
117,337
$
97,117
$
54,031
$
258,863
$
5,413
$
735,017
Gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
17
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table presents the amortized cost of collateral-dependent non-accrual loans by portfolio segment and type of collateral as of
March 31, 2025 and June 30, 2024.
March 31, 2025
Type of Collateral
Residential
Property
Commercial
Property
Business
Assets
Total
(In thousands)
Loans:
Owner occupied commercial real estate
$
—
$
—
$
—
$
—
Other commercial real estate
—
—
—
—
Multi-family
—
—
—
—
Commercial and industrial
—
—
—
—
Residential Mortgage
—
—
—
—
Consumer and Other
—
—
—
—
Total collateral dependent loans
$
—
$
—
$
—
$
—
June 30, 2024
Type of Collateral
Residential
Property
Commercial
Property
Business
Assets
Total
(In thousands)
Loans:
Owner occupied commercial real estate
$
—
$
—
$
—
$
—
Other commercial real estate
—
—
—
—
Multi-family
—
—
—
—
Commercial and industrial
—
50
—
—
Residential Mortgage
—
—
—
—
Consumer and Other
—
—
—
—
Total collateral dependent loans
$
—
$
50
$
—
$
—
The following tables present the classes of loans summarized by past due status as of
March 31, 2025 and June 30, 2024:
March 31, 2025
Delinquency Status
30-59 Days
Past Due
60-89 Days
Past Due
90 Days or
More Past
Due and
Still
Accruing
Past Due
Non-
Accrual
Total
Past
Due
Total
Current
Total
(In thousands)
Owner occupied commercial
real estate
$
—
$
—
$
—
$
—
$
—
$
56,002
$
56,002
Other commercial real estate
—
—
—
—
—
73,618
73,618
Multi-family
—
—
—
—
—
216,058
216,058
Commercial and industrial
—
—
—
—
—
11,296
11,296
Residential mortgage
584
—
—
—
584
413,334
413,918
Consumer and Other
2
—
—
—
2
12,830
12,832
Total
$
586
$
—
$
—
$
—
$
586
$
783,138
$
783,724
18
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2024
Delinquency Status
30-59 Days
Past Due
60-89 Days
Past Due
90 Days or
More Past
Due and
Still
Accruing
Past Due
Non-
Accrual
Total
Past
Due
Total
Current
Total
(In thousands)
Owner occupied commercial
real estate
$
—
$
—
$
—
$
—
$
—
$
59,968
$
59,968
Other commercial real estate
—
—
—
—
—
75,782
75,782
Multi-family
—
—
—
—
—
180,364
180,364
Commercial and industrial
—
—
—
50
50
12,472
12,522
Residential mortgage
572
—
—
—
572
394,151
394,723
Consumer and Other
40
—
—
—
40
11,618
11,658
Total
$
612
$
—
$
—
$
50
$
662
$
734,355
$
735,017
At March 31, 2025 and June 30, 2024
, the Company had
no
foreclosed real estate owned and there were
no
loan modifications to borrowers experiencing financial difficulty.
6.
Premises and Equipment
Premises and equipment at
March 31, 2025 and June 30, 2024 are summarized as follows:
March 31, 2025
June 30, 2024
(In thousands)
Land
$
926
$
926
Buildings and leasehold improvements
8,988
9,181
Furniture, fixtures and equipment
5,983
5,882
Total
15,897
15,989
Accumulated depreciation
(
10,925
)
(
10,570
)
Net
$
4,972
$
5,419
Depreciation expense amounted to $
703,000
and
$
520,000
for the
nine months ended March 31, 2025 and 2024
, respectively.
7.
Leases
The Company accounts for its leases in accordance with ASC Topic 842. The Company's right-of-use asset and operating lease liability are recognized at lease commencement based on the present value of the remaining lease payment obligations using discount rates that represent the Company’s incremental borrowing rate as of the lease commencement dates. The Company leases only office space and equipment under operating leases, with original lease terms ranging from
five
to
ten years
. The Company elected not to include short-term leases with initial terms of twelve months or less on the Consolidated Statements of Financial Condition. As of
March 31, 2025
, the Company had not entered into any material leases that have not yet commenced.
The operating lease agreements recognized on the Consolidated Statements of Financial Condition as a right-of-use asset and a corresponding lease liability, as well as other information related to the Company's operating leases, are summarized in the table below.
Three Months Ended March 31,
2025
2024
(In thousands)
Operating lease cost
$
206
$
276
Cash paid for amounts included in the
measurement of lease liabilities
$
226
$
270
19
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended March 31,
2025
2024
(In thousands)
Operating lease cost
$
661
$
556
Cash paid for amounts included in the
measurement of lease liabilities
$
677
$
543
March 31, 2025
June 30, 2024
(In thousands)
Right-of-use asset
$
1,926
$
2,311
Lease liability
$
2,012
$
2,403
Weighted-average remaining lease term, in years
3.73
3.57
Weighted-average discount rate
1.86
%
1.70
%
Future undiscounted minimum lease payments for operating leases with initial terms of one year or more as of
March 31, 2025 are as follows:
March 31,
(Dollars in
thousands)
2026
$
828
2027
499
2028
368
2029
205
2030
172
Thereafter
—
Total future minimum lease payments
2,072
Less: imputed interest
(
60
)
Total
$
2,012
8.
Goodwill and Intangible Assets
Goodwill and core deposit intangibles resulted from the Company's acquisition of Regal Bancorp, which was accounted for under FASB ASC 805, Business Combinations. In accordance with FASB ASC 805, the Company recorded $
20.4
million of goodwill and $
9.1
million of core deposit intangibles. The intangible assets are related to core deposits and are being amortized over
10
years, using an accelerated method.
The changes in the carrying amount of goodwill and core deposit intangibles for the
nine months ended March 31, 2025 and 2024 are summarized as follows:
Nine Months Ended March 31,
2025
2024
(In thousands)
Balance at beginning of period
$
28,141
$
—
Acquisition of Regal Bancorp
—
29,541
Amortization expense
(
1,102
)
(
933
)
Balance at end of period
$
27,039
$
28,608
20
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Goodwill and Intangible assets at March 31, 2025 and June 30, 2024:
March 31, 2025
June 30, 2024
(In thousands)
Goodwill
$
20,417
$
20,417
Core Deposit Intangible, net of amortization
6,622
7,724
Goodwill and Intangible Assets
$
27,039
$
28,141
As of
March 31, 2025, the amortization of the core deposit intangibles in future fiscal years is as follows:
Amount
(In thousands)
2025
$
331
2026
1,167
2027
951
2028
774
2029
657
Thereafter
2,742
Total
$
6,622
9.
Deposits
Deposits at
March 31, 2025 and June 30, 2024 consisted of the following:
March 31, 2025
June 30, 2024
(In thousands)
Demand accounts:
Interest-bearing
$
306,935
$
252,880
Noninterest-bearing
106,020
108,026
Total demand accounts
412,955
360,906
Savings and club
151,196
173,375
Certificates of deposit
271,433
272,819
Total
$
835,584
$
807,100
Certificates of deposit with balances in excess of the Federal Deposit Insurance Corporation (the "FDIC") insurance limit of $250,000 at March 31, 2025 and June 30, 2024 amounted to approximately
$
25.2
million and
$
21.9
million, respectively. Uninsured deposits of municipalities and local government agencies are protected under a New Jersey supplemental insurance program with collateralized assets.
At
March 31, 2025, the scheduled maturities of certificates of deposit are as follows:
(In thousands)
Year ending March 31, 2026
$
246,834
Year ending March 31, 2027
18,433
Year ending March 31, 2028
3,862
Year ending March 31, 2029
1,371
Year ending March 31, 2030
933
Total
$
271,433
21
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
10.
Borrowings
The Company can borrow overnight funds from the Federal Home Loan Bank ("FHLB") under a redesigned overnight advance program up to the Company’s maximum borrowing capacity based on the Company’s ability to collateralize such borrowings. At March 31, 2025 and June 30, 2024, the Company's maximum borrowing capacity was
$
100.0
million.
At March 31, 2025
, the Company had a $
30.0
million advance with the Federal Home Loan Bank of New York at a fixed rate of
4.48
%, which matures on
May 5, 2025
. At June 30, 2024, the Company had
no
outstanding borrowings.
At March 31, 2025 and June 30, 2024, the Company's Board of Directors authorized borrowings of up to
$
25.0
million from the Federal Reserve Bank of New York (“FRB-NY”), secured by pledges of the Company’s qualifying loan portfolio and generally on overnight terms with an interest rate quoted at the time of the borrowing. The Company had
no
outstanding borrowings from the FRB-NY at March 31, 2025 or June 30, 2024, respectively.
11.
Commitments and Contingencies
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
At March 31, 2025, total unfunded loan-related commitments, including lines of credit, amounted to
$
58.7
million
, comprised of
$
37.1
million
for unused equity lines of credit and
$
21.6
million
to originate and purchase loans, expiring within
three months
.
At June 30, 2024, total unfunded loan-related commitments, including lines of credit, amounted to
$
72.1
million
, comprised of
$
36.1
million
for unused equity lines of credit and
$
36.0
million
to originate and purchase loans, expiring within
three months
.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the counterparty.
A reserve for unfunded commitments is recognized and included in other liabilities on the consolidated statements of financial condition. Periodic adjustm
ents to either increase or decrease the reserve are recognized in non-interest expense in the consolidated statements of income. The Company recorded $
40,000
and $
0
expense for the
nine months ended March 31, 2025 and 2024
, respectively. The balance for unfunded commitments was $
40,000
at
March 31, 2025
and $
0
at
June 30, 2024
.
12.
Stock-Based Compensation
On November 20, 2024, the Company adopted the SR Bancorp, Inc. 2024 Equity Incentive Plan ("2024 Equity Plan”). The 2024 Equity Plan authorizes
1,331,110
shares of common stock for equity-based compensation awards including restricted stock awards, restricted stock units, non-qualified stock options, and incentive stock options. As of
March 31, 2025
, there were
266,286
shares available for future grants.
22
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Stock Options
On January 29, 2025 and February 5, 2025, the Company granted
465,889
and
57,009
, respectively, of stock options to certain officers and employees of the company with a contractual term of
10
years. The stock options vest in equal annual installments over a
five-year
period beginning on the first anniversary of the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model.
The following table sets forth information regarding the grants:
Date of grant
January 29, 2025
February 5, 2025
Options granted
465,889
57,009
Exercise price
$
12.50
$
12.36
Vesting period (years)
5.00
5.00
Expiration date
January 29, 2035
February 5, 2035
Expected Volatility
(1)
27.87
%
27.87
%
Expected term (years)
(2)
6.50
6.50
Expected dividend yield
(3)
0.00
%
0.00
%
Forfeiture rate
0.00
%
0.00
%
Risk free rate of return
(4)
4.44
%
4.33
%
Fair value per option
$
4.82
$
4.73
(1)
Expected volatility is based on the standard deviation of the historical volatility of the daily adjusted closing price of a group of peers' shares
(2)
Expected term represents the period of time that the option is expected to be outstanding, determined using the "Simplified Method"
(3)
Expected dividend yield is determined based on management's expectations regarding issuing dividends in the foreseeable future.
(4)
The risk-free rate of return is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected term of the option
The following table represents stock option activities for the period indicated:
Three Months Ended March 31, 2025
Nine Months Ended March 31, 2025
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
(In thousands)
(In thousands)
Balance at beginning of period
237,695
$
11.04
9.89
$
—
—
$
—
—
—
Granted
522,898
12.48
9.83
—
760,593
12.03
9.89
—
Exercised
—
—
—
—
—
—
—
—
Vested
—
—
—
—
—
—
—
—
Forfeited or expired
—
—
—
—
—
—
—
—
Balance at end of period
760,593
$
12.03
9.77
$
212
760,593
$
12.03
9.77
$
212
Exercisable at end of period
—
$
—
—
$
—
—
$
—
—
$
—
The aggregate intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date.
Restricted Stock Awards
On January 29, 2025 and February 5, 2025, the Company granted
186,356
and
22,800
, respectively, of restricted stock awards to certain officers and employees. The restricted stock awards vest in equal annual installments over a
five-year
period. The restricted stock awards are measured based on grant-date fair value, which reflects the closing price of the Company’s stock on the date of grant.
23
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table represents information regarding restricted stock award activities for the periods indicated:
Three Months Ended
March 31, 2025
Nine Months Ended
March 31, 2025
Number
of Shares
Weighted-
Average Grant
Date Fair Value
Per Share
Number
of Shares
Weighted-
Average Grant
Date Fair Value
Per Share
Balance at beginning of period
95,075
$
11.04
—
$
—
Granted
209,156
12.48
304,231
12.03
Vested
—
—
—
—
Forfeited
—
—
—
—
Balance at end of period
304,231
$
12.03
304,231
$
12.03
The following table represents the compensation expense and income tax benefit recognized for stock options and restricted stock awards for the period indicated:
Three Months Ended
March 31, 2025
Nine Months Ended
March 31, 2025
(In thousands)
(In thousands)
Stock-based compensation expense
Stock options
$
134
$
151
Restricted stock awards
140
157
Total stock-based compensation expense
$
274
$
308
Related tax benefits recognized in earnings
$
77
$
87
The following table sets forth the total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized as of
March 31, 2025:
Amount
Weighted
Average
Period (years)
(In thousands)
Stock options
$
3,372
4.78
Restricted stock awards
3,504
4.78
Total
$
6,876
13.
Regulatory Capital
The Bank is subject to regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the following table) of total capital, Tier 1 capital (as defined in the regulations) and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. A capital conservation buffer of
2.50
%
, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements and must be maintained to avoid limitations on capital distributions.
24
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In 2021, the Bank adopted the new community bank leverage ratio framework. This framework simplifies the regulatory capital requirements by requiring the Bank to meet only the Tier 1 capital to average assets (leverage) ratio. The Bank must only maintain a leverage ratio greater than the
9.0
%
required minimum to be considered well capitalized under this framework. The Bank can opt out of the new framework and return to the risk-weighting framework at any time.
Market risk, credit risk, operational risk and deposit outflows are some of the factors that can impact the capital adequacy ratio and in turn, adversely affect the performance of the Bank. As of March 31, 2025, the Bank met all capital adequacy requirements to which it is subject. As of March 31, 2025
, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are as follows:
Actual
To be Well Capitalized
under Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
(In thousands)
March 31, 2025
Tier 1 capital (to average total assets)
$
164,734
15.86
%
$
93,492
9.00
%
June 30, 2024:
Tier 1 capital (to average total assets)
$
170,364
16.83
%
$
91,122
9.00
%
14.
Fair Value Measurements and Disclosures
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company’s securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.
FASB ASC 820,
Fair Value Measurements and Disclosures
, defines fair value as an exit price representing the amount that would be received to sell an asset or settle a liability in an orderly transaction between market participants. A three-level hierarchy has been established for fair value measurements based upon the inputs to the valuation of an asset or liability.
Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities;
Level 2 - Valuation is determined from quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument;
Level 3 - Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that a market participant would use to value the asset or liability.
The Company's available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss. The securities available-for-sale portfolio consists of U.S. government-sponsored enterprise and mortgage-backed securities. The fair values of these securities were obtained from an independent nationally recognized pricing service. The independent pricing service provided prices categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.
25
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For financial assets measured at fair value on a recurring basis as of
March 31, 2025 and June 30, 2024, the fair value measurements by level within the fair value hierarchy used are as follows:
March 31, 2025
Description
(Level 1)
(Level 2)
(Level 3)
Total
(In thousands)
Equity securities
32
—
—
32
Total
$
32
$
—
$
—
$
32
June 30, 2024
Description
(Level 1)
(Level 2)
(Level 3)
Total
(In thousands)
Equity securities
25
—
—
25
Total
$
25
$
—
$
—
$
25
The classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Other securities are measured at fair value using quoted market prices in an active market for identical assets and are classified as Level 1 in the hierarchy. The estimated fair values of equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs).
All debt securities are measured at fair value using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices and are classified as Level 2 in the hierarchy.
There were
no
transfers between levels within the fair value hierarchy during the
nine months ended March 31, 2025 and 2024.
Financial Assets Measured at Fair Value on a Nonrecurring Basis
The following tables present those assets and liabilities measured at fair value on a non-recurring basis at
March 31, 2025 and June 30, 2024, and additional quantitative information about the valuation techniques and inputs utilized to determine fair value. All such assets and liabilities were measured using Level 3 inputs:
March 31, 2025
Fair Value Measurement
Quantitative Information
Recorded
Investment
Valuation
Allowance
Fair
Value
Valuation
Technique
Unobservable
Inputs
Value/Range
(In thousands)
Individually
evaluated loans
$
—
$
—
$
—
Appraisal of collateral
Selling costs
15
%
June 30, 2024
Fair Value Measurement
Quantitative Information
Recorded
Investment
Valuation
Allowance
Fair
Value
Valuation
Technique
Unobservable
Inputs
Value/Range
(In thousands)
Individually
evaluated loans
$
50
$
—
$
50
Appraisal of collateral
Selling costs
15
%
26
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Fair Value of Financial Instruments not Carried at Fair Value
The Company discloses fair value information about financial assets, whether or not recognized in the statements of financial condition, for which it is practicable to estimate that value. The fair value of financial assets that are not measured at fair value in the financial statements were based on the exit price notion. The following estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, the estimates below are not necessarily indicative of amounts that could be realized in the marketplace. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at
March 31, 2025 and June 30, 2024 were as follows:
March 31, 2025
Description
Carrying Value
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Financial Assets:
Cash and cash equivalents
$
62,224
$
62,224
$
62,224
$
—
$
—
Securities held-to-maturity, at amortized cost
145,413
121,499
—
121,499
—
Restricted equity securities, at cost
2,581
2,581
—
2,581
—
Loans receivable, net
780,795
748,761
—
—
748,761
Accrued interest receivable
2,964
2,964
—
2,964
—
Financial Liabilities:
Deposits
835,584
750,888
—
750,888
—
Borrowings
30,000
30,000
—
30,000
—
June 30, 2024
Description
Carrying Value
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In thousands)
Financial Assets:
Cash and cash equivalents
$
45,909
$
45,909
$
45,909
$
—
$
—
Securities held-to-maturity, at amortized cost
156,144
129,436
—
129,436
—
Restricted equity securities, at cost
1,231
1,231
—
1,231
—
Loans receivable, net
731,859
696,757
—
—
696,757
Accrued interest receivable
2,695
2,695
—
2,695
—
Financial Liabilities:
—
Deposits
807,100
704,566
—
704,566
—
Borrowings
—
—
—
—
—
Loans
The fair values of performing loans was estimated by segregating the portfolio into its primary loan categories—owner occupied commercial real estate, other commercial real estate, multi-family, commercial and industrial, residential and consumer. These categories were further disaggregated based upon significant financial characteristics such as type of interest rate (fixed/variable). The Company discounts the contractual cash flows for each loan category using interest rates currently being offered for loans with similar terms to borrowers of similar quality and incorporates estimates of future loan prepayments.
27
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Deposits
The fair value of deposits with no defined maturities (e.g. demand deposits, interest-bearing demand accounts, money market accounts and savings accounts) is the amount payable on demand of the liabilities at the reporting date (i.e. their carrying amounts). This approach to estimating fair value excludes the significant benefit that results from the low -cost funding provided by such deposit liabilities, as compared to alternative sources of funding. Deposits with stated maturities (time deposits) have been valued using the present value of cash flows discounted at rates approximating the current market for similar deposits.
Borrowed Funds
The fair value of federal funds purchased is equal to the amount borrowed. The fair value of FRB-NY or FHLB advances represents contractual repayments discounted using interest rates currently available for borrowings with similar characteristics and remaining maturities. The discount rates used are representative of approximate rates currently offered on borrowings with similar characteristics and maturities.
28
Ite
m 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management discussion and analysis of the Company’s consolidated financial condition as of March 31, 2025 and the results of operations for the three and nine months ended March 31, 2025 and 2024 (“MD&A”) should be read in conjunction with the consolidated audited financial statements, including notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the Securities and Exchange Commission, and the other information therein and in conjunction with the Consolidated Statements of Financial Condition as of March 31, 2025, the Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss), the Consolidated Statements of Changes in Stockholders’ Equity and the Consolidated Statements of Cash Flows for the three and nine months ended March 31, 2025 and 2024, which are unaudited. The Consolidated Statement of Financial Condition as of June 30, 2024 was derived from the audited Consolidated Statements of Financial Condition that was included in the Company's Annual Report on Form 10-K for the year ended June 30, 2024. The consolidated financial statements include, in the opinion of management, all adjustments considered necessary for a fair presentation of such data. As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “the Bank” and “the Company” refer to SR Bancorp, Inc., and its consolidated subsidiaries, unless otherwise noted.
Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
•
statements of our goals, intentions and expectations;
•
statements regarding our business plans, prospects, financial performance, growth and operating strategies;
•
statements regarding the quality of our loan and investment portfolios; and
•
estimates of our risks and future costs and benefits.
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
•
general economic conditions, either nationally or in our market areas, that are worse than expected, including potential recessionary conditions;
•
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
•
our inability to successfully integrate acquired employees or operations or achieve the expected level of synergies or cost savings;
•
changes in the level and direction of loan delinquencies and write-offs and changes in estimates of and the methodology calculating the adequacy of the allowance for credit losses;
•
our ability to access cost-effective funding;
•
changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;
29
•
fluctuations in real estate values and both residential and commercial real estate market conditions;
•
demand for loans and deposits in our market area;
•
our ability to implement and change our business strategy;
•
competition among depository and other financial institutions;
•
adverse changes in the securities or secondary mortgage markets;
•
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums or changes in the fiscal or monetary policies of the U.S. Treasury or Board of Governors of the Federal Reserve System;
•
the imposition of tariffs or other domestic or international governmental policies;
•
changes in the quality or composition of our loan or investment portfolios;
•
technological changes that may be more difficult or expensive than expected;
•
the failure to maintain current technologies and/or to successfully implement future information technology enhancements;
•
the inability of third-party providers to perform as expected;
•
a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
•
our ability to manage market risk, credit risk and operational risk;
•
changes in consumer spending, borrowing and savings habits;
•
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
•
the current or anticipated impact of military conflict, terrorism or other geopolitical event;
•
our ability to retain key employees;
•
our compensation expense associated with equity allocated or awarded to our employees; and
•
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Critical Accounting Policies
Certain of our accounting policies are important to the presentation of our financial condition and results of operation, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could affect these judgments include, but are not limited to, changes noted above in "Forward-Looking Statements." Our significant accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included elsewhere in this document.
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we plan to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
30
Management believes our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: the determination of the allowance for credit losses, the assessment of the impairment of goodwill and intangible assets and the valuation of our deferred tax assets.
Allowance for Credit Losses
: The allowance for credit losses (“ACL”), calculated in accordance with ASC 326, is deducted from the amortized cost basis of loans. The ACL represents an amount that, in management’s judgment, is adequate to absorb the lifetime expected credit losses that may be experienced on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of economic conditions and prepayment experience. The allowance for credit losses is measured and recorded upon the initial recognition of a financial asset. Determination of the adequacy of the allowance is inherently complex and requires the use of significant and highly subjective estimates. Loans are charged-off against the allowance when deemed uncollectible by management. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses.
In calculating the allowance for credit losses, loans are segmented into pools based upon similar characteristics and risk profiles. Common characteristics and risk profiles include the type of loan, underlying collateral, geographical similarity and historical or expected credit loss patterns. The Company applies two methodologies to estimate the allowance on its pooled portfolio segments: a cohort method based on common characteristics and the weighted average remaining life method. The models related to these methodologies utilize the Company’s historical default and loss experience adjusted for future economic forecasts. The reasonable and supportable forecast period represents a one-year economic outlook for the applicable economic variables.
In some cases, management may determine that an individual loan exhibits unique risk characteristics that differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing, among other things, the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk rating of the loan and economic conditions affecting the borrower.
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making qualitative factor adjustments include, among other things: the impact of changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries; actual and expected changes in national, regional, and local economic and business conditions and developments that affect the collectability of the loan pools; changes in the composition and size of the loan portfolio and in the terms of the underlying loans; changes in the experience, ability, and depth of our lending management and staff; changes in volume and severity of past due and nonaccrual assets; changes to the quality of our internal loan review system; the existence, growth, and effect of any concentrations of credit; and regulatory, legal and environmental events. Management believes it uses relevant information available to make determinations about the allowance and that it has established the existing allowance in accordance with GAAP. However, the determination of the allowance requires significant judgment, and estimates of expected lifetime losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment and changes in the financial condition of borrowers.
Goodwill and Other Intangible Assets
: Our intangible assets consist of goodwill and core deposit intangibles. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is not amortized but is subject to annual tests for impairment, or more often if events or circumstances indicate it may be impaired. We may elect to perform a qualitative assessment as a part of the annual impairment test. If the qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we elect not to perform a qualitative assessment, then we would be required to perform a quantitative test for goodwill impairment. If the estimated fair value of the reporting unit less than the carrying value, goodwill is impaired and is written down to its estimated fair value.
31
During the year ended June 30, 2024, we performed a qualitative assessment of goodwill. Based on that assessment, we determined that it was more likely than not that the reporting unit's fair value was not less than its carrying amount. We concluded that our goodwill was not impaired as of June 30, 2024. As of March 31, 2025, no triggering events were identified and therefore, we did not perform an interim impairment evaluation.
Core deposit intangibles are amortized on an accelerated basis using an estimated life of ten years. The core deposit intangibles are evaluated annually for impairment in accordance with GAAP. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.
Deferred Tax Assets
: Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced by a valuation allowance for the amount of the deferred tax asset that is more likely than not to be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
We recognize interest and/or penalties related to income tax matters in other operating expenses.
Comparison of Financial Condition at March 31, 2025 and June 30, 2024
Total Assets
. Total assets increased $53.1 million, or 5.2%, to $1.07 billion at March 31, 2025 from $1.02 billion at June 30, 2024. The increase was primarily driven by new loan originations, resulting in a net increase of $48.9 million in loans receivable and a $16.3 million increase in cash, partially offset by a $10.7 million decrease in securities.
Cash and Cash Equivalents
. Cash and cash equivalents increased $16.3 million, or 35.5%, to $62.2 million at March 31, 2025 from $45.9 million at June 30, 2024, primarily due to borrowings of $30.0 million from the Federal Home Loan Bank of New York during the nine months ended March 31, 2025, a $28.5 million increase in deposits and the maturity of securities, offset by increased loan originations.
Securities
. Securities held-to-maturity decreased $10.7 million, or 6.9%, to $145.4 million at March 31, 2025 from $156.1 million at June 30, 2024. The decrease was primarily due to principal repayments and maturities.
Loans
. Loans receivable, net, increased $48.9 million, or 6.7%, to $780.8 million at March 31, 2025 from $731.9 million at June 30, 2024, driven by an increase in residential mortgage loans of $19.2 million and an increase in multi-family commercial loans of $28.3 million through an increased emphasis on this type of lending. Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 45.5% of loans at March 31, 2025. For further information about our loans, see "Lending Activities" below.
Bank Owned Life Insurance
. Bank owned life insurance increased $783,000, or 2.1%, to $37.9 million at March 31, 2025 from $37.1 million at June 30, 2024 due to an increase in the cash surrender value of the underlying assets.
Goodwill and Intangible Assets
. Goodwill and the core deposit intangible asset recognized from the Merger totaled $27.0 million at March 31, 2025 compared to $28.1 million at June 30, 2024. The decrease was due to the amortization of the core deposit intangible.
32
Total Liabilities
. Total liabilities increased $57.5 million, or 7.0%, to $878.8 million at March 31, 2025 from $821.4 million at June 30, 2024. The increase was primarily due to a $30.0 million advance from the Federal Home Loan Bank of New York and a $28.5 million increase in deposits.
Deposits
. Deposits increased $28.5 million, or 3.5%, to $835.6 million at March 31, 2025 from $807.1 million at June 30, 2024. Increases in interest-bearing deposit accounts resulted from the Bank raising rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. At March 31, 2025, $106.0 million, or 12.7%, of total deposits consisted of noninterest-bearing deposits. At March 31, 2025, $133.9 million, or 16.0%, of total deposits were uninsured.
Borrowings
. During the nine months ended March 31, 2025, the Bank borrowed $30.0 million from the Federal Home Loan Bank of New York to provide additional liquidity to fund new loans. Such borrowings remained outstanding at March 31, 2025. At June 30, 2024, there were no outstanding borrowings.
Total Equity
. Total equity decreased $4.4 million, or 2.2%, to $195.1 million at March 31, 2025 from $199.5 million at June 30, 2024. The decrease was primarily due to the repurchase of 627,461 shares of common stock at a cost of $7.3 million, partially offset by net earnings of $2.9 million.
Lending Activities
We offer a variety of loans, including residential, commercial real estate, multi-family, commercial and industrial and consumer loans. Historically, a significant portion of our loan portfolio was concentrated in residential loans. The Merger greatly expanded our commercial loan portfolio and commercial lending capabilities. At March 31, 2025, residential mortgage loans comprised 52.8% of our total loan portfolio and commercial loans comprised 45.5%, which largely consisted of multi-family loans.
In the future, we intend to continue to concentrate on ways to compete for a greater share of commercial loan originations in our primary market area.
Loan Portfolio Composition.
The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.
March 31, 2025
June 30, 2024
Amount
Percent
Amount
Percent
(In thousands)
Owner occupied commercial real estate loans
$
56,002
7.15
%
$
59,968
8.16
%
Other commercial real estate loans
73,618
9.39
%
75,782
10.31
%
Multi-family loans
216,058
27.57
%
180,364
24.54
%
Commercial and industrial loans
11,296
1.44
%
12,522
1.70
%
Total commercial loans
356,974
45.55
%
328,636
44.71
%
Residential mortgage loans
413,918
52.81
%
394,723
53.70
%
Consumer and other loans
12,832
1.64
%
11,658
1.59
%
Total loans
783,724
100.00
%
735,017
100.00
%
Allowance for credit losses
(5,124
)
(5,229
)
Net deferred loan origination fees
2,195
2,071
Loans, net
$
780,795
$
731,859
33
Contractual Maturities.
The following tables set forth the contractual maturities of our total loan portfolio at March 31, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.
Owner
Occupied
Commercial
Real Estate
Other
Commercial
Real Estate
Multi-
Family
Commercial
and
Industrial
Residential
Mortgage
Consumer
and Other
Total
(In thousands)
Amounts due in:
One year or less
$
72
$
895
$
120
$
3,339
$
157
$
7,282
$
11,865
After one through five years
831
6,207
23,752
3,317
6,070
807
40,984
After five through 15 years
17,517
26,843
81,633
2,388
78,422
4,088
210,891
More than 15 years
37,582
39,673
110,553
2,252
329,269
655
519,984
Total
$
56,002
$
73,618
$
216,058
$
11,296
$
413,918
$
12,832
$
783,724
Fixed Versus Adjustable-Rate Loans.
The following tables sets forth our fixed and adjustable-rate loans at March 31, 2025 that are contractually due after March 31, 2026.
Due After March 31, 2026
Fixed
Adjustable
Total
(In thousands)
Owner occupied commercial real estate loans
$
—
$
55,930
$
55,930
Other commercial real estate loans
—
72,723
72,723
Multi-family loans
—
215,938
215,938
Commercial and industrial loans
—
7,957
7,957
Total commercial loans
$
—
$
352,548
$
352,548
Residential mortgage loans
323,666
90,095
413,761
Consumer and other loans
2,925
2,625
5,550
Total loans
$
326,591
$
445,268
$
771,859
Non-Performing and Problem Assets
When a loan is 15 days past due, we send the borrower a late charge notice. If the loan delinquency is not corrected, other forms of collections are implemented, including telephone calls and collection letters. We attempt personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower understands the terms of the loan and to emphasize the importance of making timely payments. If necessary, subsequent late charges and delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90
th
day of delinquency, we will send the borrower a final demand for payment, after which we may refer the loan to legal counsel to commence foreclosure proceedings. Any of our loan officers can shorten these time frames in consultation with the senior lending officer.
Generally, loans are placed on non-accrual status when payment of principal or interest is 90 days or more delinquent unless the loan is considered well-secured and in the process of collection. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current and factors indicating doubtful collection no longer exist, including performance by the borrower under the loan terms for a six-month period. Our Senior Mortgage Lending Officer reports monitored loans, including all loans rated special mention, substandard, doubtful or loss, to the Board of Directors on a quarterly basis. In addition, management presents a quarterly credit loss allowance analysis to our Board of Directors.
34
The following table sets forth our loan delinquencies by type and amount at the dates indicated.
March 31, 2025
Delinquency Status
30-59 Days
Past Due
60-89 Days
Past Due
90 Days or
More Past
Due and
Still
Accruing
Past Due
Non-
Accrual
Total
Past
Due
Total
Current
Total
(In thousands)
Owner occupied commercial
real estate
$
—
$
—
$
—
$
—
$
—
$
56,002
$
56,002
Other commercial real estate
—
—
—
—
—
73,618
73,618
Multi-family
—
—
—
—
—
216,058
216,058
Commercial and industrial
—
—
—
—
—
11,296
11,296
Residential mortgage
584
—
—
—
584
413,334
413,918
Consumer and Other
2
—
—
—
2
12,830
12,832
Total
$
586
$
—
$
—
$
—
$
586
$
783,138
$
783,724
June 30, 2024
Delinquency Status
30-59 Days
Past Due
60-89 Days
Past Due
90 Days or
More Past
Due and
Still
Accruing
Past Due
Non-
Accrual
Total
Past
Due
Total
Current
Total
(In thousands)
Owner occupied commercial
real estate
$
—
$
—
$
—
$
—
$
—
$
59,968
$
59,968
Other commercial real estate
—
—
—
—
—
75,782
75,782
Multi-family
—
—
—
—
—
180,364
180,364
Commercial and industrial
—
—
—
50
50
12,472
12,522
Residential mortgage
572
—
—
—
572
394,151
394,723
Consumer and Other
40
—
—
—
40
11,618
11,658
Total
$
612
$
—
$
—
$
50
$
662
$
734,355
$
735,017
Non-Performing Assets.
The following table sets forth information regarding our non-performing assets. The Bank had no loan modifications to borrowers experiencing financial difficulty as of March 31, 2025 or June 30, 2024.
March 31, 2025
June 30, 2024
(In thousands)
Non-accrual loans:
Residential mortgage loans
$
—
$
—
Commercial loans
—
50
Total non-accrual loans
—
50
Accruing loans past due 90 days or more:
Residential mortgage loans
—
—
Total non-performing loans
—
50
Real estate owned
—
—
Total non-performing assets
$
—
$
50
Total non-performing loans to total loans
—
%
0.01
%
Total non-accrual loans to total loans
—
%
0.01
%
Total non-performing assets to total assets
—
%
—
%
35
Allowance for Credit Losses
Our allowance for credit losses ("ACL") is maintained at a level necessary to absorb the lifetime expected credit losses. Management, in determining the allowance for credit losses, considers the losses in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. A description of our methodology in establishing our allowance for credit losses is set forth in the section “
Management’s Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Critical Accounting Policies-Allowance for Credit Losses
” in our Form 10-K as of and for the year ended June 30, 2024 and in this Form 10-Q. The allowance for credit losses as of March 31, 2025 and June 30, 2024 were maintained at levels that represent management’s best estimate of current expected losses in the loan portfolio. However, this analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance at levels to absorb current expected losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.
In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance have authority to periodically review our allowance for credit losses. Such agencies may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.
Allocation of Allowance for Credit Losses.
The following tables set forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
March 31, 2025
ACL
Percent of
ACL
in Each
Category
to Total
Allocated
Allowance
Percent
of Loans
in Each
Category
to Total
Loans
ACL to
Total Loans
(In thousands)
Owner occupied commercial real estate loans
$
741
14.46
%
7.15
%
0.09
%
Other commercial real estate loans
193
3.77
%
9.39
%
0.02
%
Multi-family loans
1,942
37.90
%
27.57
%
0.25
%
Commercial and industrial loans
132
2.58
%
1.44
%
0.02
%
Residential mortgage loans
1,874
36.57
%
52.81
%
0.24
%
Consumer and other loans
242
4.72
%
1.64
%
0.03
%
Total allocated allowance
5,124
100.00
%
100.00
%
0.65
%
Unallocated
—
Total
$
5,124
Allowance to non-performing loans
—
Allowance to total loans outstanding at
the end of the year
0.65
%
Net (charge-offs) recoveries to average
loans outstanding during the year
—
36
June 30, 2024
ACL
Percent of
ACL
in Each
Category
to Total
Allocated
Allowance
Percent
of Loans
in Each
Category
to Total
Loans
ACL to
Total Loans
(In thousands)
Owner occupied commercial real estate loans
$
1,331
25.46
%
8.16
%
0.18
%
Other commercial real estate loans
502
9.60
10.31
0.07
Multi-family loans
1,998
38.21
24.54
0.27
Commercial and industrial loans
146
2.79
1.70
0.02
Residential mortgage loans
1,175
22.47
53.70
0.16
Consumer and other loans
77
1.47
1.59
0.01
Total allocated allowance
5,229
100.00
%
100.00
%
0.71
%
Unallocated
—
Total
$
5,229
Allowance to non-performing loans
10458.00
%
Allowance to total loans outstanding at
the end of the year
0.71
%
Net (charge-offs) recoveries to average
loans outstanding during the year
—
Investment Activities
General
.
The goals of our investment policy are to maximize portfolio yield over the long term in a manner that is consistent with minimizing risk, and to meet liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. We monitor the balance of our investment securities portfolio based on loan demand, our asset/liability management and interest rate risk analysis and our liquidity needs.
At March 31, 2025 and June 30, 2024, our investment portfolio consisted of securities held-to-maturity, primarily of securities and obligations issued by U.S. government-sponsored enterprises, subordinated debentures issued by financial institutions in the Mid-Atlantic region, collateralized mortgage obligations and foreign government bonds.
The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis and our residential mortgage-backed securities at March 31, 2025:
March 31, 2025
Held to Maturity
Amortized
Cost
Fair Value
Weighted
Average
Yield
(In thousands)
Due within one year
$
—
$
—
Due after one year through five years
200
200
4.40
%
Due after five years through ten years
7,750
7,246
3.10
%
Due after ten years
Residential mortgage-backed securities:
Issued by FNMA and FHLMC
135,121
111,850
1.66
%
Issued by GNMA
235
237
4.87
%
CMO
2,107
1,966
2.50
%
Total
$
145,413
$
121,499
37
For additional information regarding our investment securities portfolio, see Note 4 to the Notes to Financial Statements.
Deposit Accounts
.
Deposits are primarily attracted from within our market area through the offering of a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW accounts), savings accounts, money market accounts and certificates of deposit. At March 31, 2025 and June 30, 2024, we held $33.0 million and $22.2 million, respectively, of accounts from a variety of local municipal relationships, which are protected under a New Jersey supplemental insurance program with collateralized assets. At March 31, 2025 and June 30, 2024, we had no brokered deposits.
We also offer a variety of deposit accounts designed for the businesses operating in our market area. Our business banking deposit products include a business checking account designed for small businesses, and savings and money market accounts. We offer bill payment services through our online banking system.
Deposit account terms vary according to the minimum balance required, the time period the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, the rates on borrowings, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has generally been to offer competitive rates on all types of deposit products, and to periodically offer special rates to attract deposits of a specific type or term.
The following table sets forth the distribution of total deposits by account type at the dates indicated.
March 31, 2025
June 30, 2024
Amount
Percent
Average
Rate
Amount
Percent
Average
Rate
(In thousands)
Non-interest-bearing demand
deposits
$
106,020
12.69
%
—
%
$
108,026
13.39
%
—
%
Interest-bearing demand deposits
306,935
36.73
1.81
252,880
31.33
1.13
Savings and club accounts
151,196
18.10
0.06
173,375
21.48
0.07
Time deposits
271,433
32.48
3.65
272,819
33.80
3.81
Total
$
835,584
100.00
%
$
807,100
100.00
%
As of March 31, 2025 and June 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $133.9 million and $109.7 million, respectively. In addition, as of March 31, 2025 and June 30, 2024, the aggregate amount of all our uninsured certificates of deposit was $25.2 million and $21.9 million, respectively. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. Uninsured deposits of municipalities and local government agencies are protected under a New Jersey supplemental insurance program with collateralized assets.
The following table sets forth the maturity of the uninsured certificates of deposit as of the dates indicated.
March 31, 2025
June 30, 2024
(In thousands)
Maturity Period:
Three months or less
$
7,216
$
4,050
Over three through six months
6,027
5,733
Over six through twelve months
11,231
8,813
Over twelve months
749
3,351
Total
$
25,223
$
21,947
38
Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024
General.
Net income decreased $526,000, or 49.5%, to $537,000 for the three months ended March 31, 2025 from $1.1 million for the three months ended March 31, 2024. Net income for the three months ended March 31, 2025 included $575,000 of net accretion income related to fair value adjustments resulting from the Merger. Net income for the three months ended March 31, 2024 included $242,000 of merger-related costs, offset by $1.4 million of net accretion income related to fair value adjustments.
Interest Income.
Interest income decreased $165,000, or 1.4%, to $11.5 million for the three months ended March 31, 2025 from $11.6 million for the three months ended March 31, 2024. The decrease resulted from a $513,000, or 51.1%, decrease in interest income on interest bearing deposits at other banks and a $179,000, or 23.0%, decrease in interest income on securities, partially offset by a $527,000, or 5.4%, increase in interest income on loans. The increase in the interest income on loans was due to a $71.5 million increase in the average balance of loans from $707.1 million for the three months ended March 31, 2024 to $778.6 million for the three months ended March 31, 2025, offset in part by a 23 basis point decrease in the yield on loans in a lower interest rate environment. The decrease in interest income on securities was due to a $48.2 million decrease in the average balance of securities resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning, which resulted in a two basis point increase in the yield notwithstanding the lower interest rate environment.
Interest Expense.
Interest expense increased $919,000, or 27.2%, to $4.3 million for the three months ended March 31, 2025 from $3.4 million for the three months ended March 31, 2024, due to a $981,000 increase in interest expense on interest-bearing demand deposits and a $156,000 increase in interest expense on borrowings, offset in part by a decrease in interest expense on certificates of deposit of $203,000 primarily resulting from a 28 basis point decrease in the average rate. The increase in interest expense on interest-bearing demand deposits was due to an increase of $101.5 million, or 49.9%, in the average balance and an increase of 106 basis points in the cost of interest-bearing deposits to 1.75% for the three months ended March 31, 2025 from 0.69% for the three months ended March 31, 2024 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. Interest expense on borrowings also increased by $156,000 due to a higher average outstanding balance and higher average rates paid.
Net Interest Income.
Net interest income decreased $1.1 million, or 13.1%, to $7.2 million for the three months ended March 31, 2025 from $8.3 million for the three months ended March 31, 2024. Net interest rate spread decreased 58 basis points to 2.25% for the three months ended March 31, 2025 from 2.83% for the three months ended March 31, 2024. Net interest margin decreased 49 basis points to 2.82% for the three months ended March 31, 2025 from 3.31% for the three months ended March 31, 2024. Net interest-earning assets decreased $2.9 million, or 1.1%, to $258.8 million for the three months ended March 31, 2025 from $261.8 million for the three months ended March 31, 2024. The decrease in the Bank’s net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing while the yield on interest-earning assets decreased.
39
Average Balances and Yields
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $101,000 and $134,000 for the three months ended March 31, 2025 and 2024, respectively.
Three Months Ended March 31,
2025
2024
Average
Outstanding
Balance
Interest
Average
Yield/Rate
(1)
Average
Outstanding
Balance
Interest
Average
Yield/Rate
(1)
(In thousands)
Interest-earning assets:
Loans
$
778,572
$
10,346
5.32
%
$
707,072
$
9,819
5.55
%
Securities
149,628
600
1.60
%
197,810
779
1.58
%
Other
90,478
537
2.37
%
93,741
1,050
4.48
%
Total interest-earning
assets
1,018,678
11,483
4.51
%
998,623
11,648
4.67
%
Noninterest-earning assets
47,157
78,881
Total assets
$
1,065,835
$
1,077,504
Interest-bearing liabilities:
Savings and club accounts
$
151,684
23
0.06
%
$
239,847
38
0.06
%
Interest-bearing demand
accounts
304,808
1,332
1.75
%
203,285
351
0.69
%
Certificates of deposit
273,339
2,561
3.75
%
274,354
2,764
4.03
%
Total interest-bearing
deposits
729,831
3,916
2.15
%
717,486
3,153
1.76
%
Federal Home Loan Bank
advances
30,000
383
5.11
%
—
—
—
Other borrowings
—
—
—
19,355
227
4.69
%
Total interest-bearing
liabilities
759,831
4,299
2.26
%
736,841
3,380
1.83
%
Noninterest-bearing deposits
104,850
118,535
Other noninterest-bearing
liabilities
11,715
21,537
Total liabilities
876,396
876,913
Equity
189,439
200,591
Total liabilities and
equity
$
1,065,835
$
1,077,504
Net interest income
$
7,184
$
8,268
Net interest rate spread
2.25
%
2.83
%
Net interest-earning
assets (2)
$
258,847
$
261,782
Net interest margin (3)
2.82
%
3.31
%
Average interest-earning
assets to interest-
bearing liabilities
134.07
%
135.53
%
(1)
Annualized.
(2)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)
Net interest margin represents net interest income divided by average total interest-earning assets.
40
Rate/Volume Analysis
The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the tables below.
Three Months Ended March 31,
2025 vs. 2024
Increase (Decrease)
Volume
Rate
Total Change
(In thousands)
Interest-earning assets:
Loans
$
993
$
(466
)
$
527
Securities
(190
)
11
(179
)
Other
(37
)
(476
)
(513
)
Total interest-earning assets
766
(931
)
(165
)
Interest-bearing liabilities:
Savings and club accounts
(14
)
(1
)
(15
)
Interest-bearing accounts
175
806
981
Certificates of deposit
(10
)
(193
)
(203
)
Federal Home Loan Bank advances
383
—
383
Other borrowings
(227
)
—
(227
)
Total interest-bearing liabilities
(76
)
995
919
Change in net interest income
$
842
$
(1,926
)
$
(1,084
)
Provision for Credit Losses.
The Bank establishes provisions for credit losses, which are charged to operations to maintain the allowance for credit losses at a level it considers necessary to absorb probable credit losses attributable to loans that are reasonably estimable at the balance sheet date. In determining the level of the allowance for credit losses, the Bank considers, among other things, past and current loss experience, evaluations of real estate collateral, economic conditions, the amount and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of delinquent, classified and criticized loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. The Bank assesses the allowance for credit losses and records provisions for credit losses on a quarterly basis.
The Bank recorded a provision for credit losses of $37,000 during the three months ended March 31, 2025 reflecting the loan growth during the period, compared to a recovery for credit losses of $142,000 for the three months ended March 31, 2024. The Bank had no charge-offs for the three months ended March 31, 2025 and no non-performing loans at March 31, 2025 compared to no charge-offs for the three months ended March 31, 2024 and $220,000 of non-performing loans at March 31, 2024. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at March 31, 2025 compared to 0.72% at March 31, 2024.
41
Noninterest Income.
Noninterest income was as follows:
Three Months Ended March 31,
Change
2025
2024
Amount
Percent
(In thousands)
Service charges and fees on deposit
$
230
$
193
$
37
19.2
%
Increase in cash surrender value of bank-
owned life insurance
259
247
12
4.9
%
Fees and service charges on loans
35
36
(1
)
(2.8
)%
Unrealized gain on equity securities
3
1
2
200.0
%
Realized gain on sale of securities
—
19
(19
)
(100.0
)%
Other
14
20
(6
)
(30.0
)%
Total noninterest income
$
541
$
516
$
25
4.8
%
Noninterest income increased $25,000, or 4.8%, to $541,000 for the three months ended March 31, 2025 from $516,000 for the three months ended March 31, 2024, primarily as a result of an increase of $37,000 in service charges and fees, offset by a decrease of $19,000 in realized gain on sale of investments.
Noninterest Expense
.
Noninterest expense was as follows:
Three Months Ended March 31,
Change
2025
2024
Amount
Percent
(In thousands)
Salaries and employee benefits
$
3,681
$
3,631
$
50
1.4
%
Occupancy
557
772
(215
)
(27.8
)%
Furniture and equipment
346
285
61
21.4
%
Data processing
552
951
(399
)
(42.0
)%
Advertising
97
75
22
29.3
%
Federal deposit insurance premiums
120
120
—
—
Directors fees
93
103
(10
)
(9.7
)%
Professional fees
467
357
110
30.8
%
Insurance
133
165
(32
)
(19.4
)%
Telephone, postage and supplies
197
210
(13
)
(6.2
)%
Other expenses
819
902
(83
)
(9.2
)%
Total noninterest expense
$
7,062
$
7,571
$
(509
)
(6.7
)%
Noninterest expense decreased $509,000, or 6.7%, to $7.1 million for the three months ended March 31, 2025 from $7.6 million for the three months ended March 31, 2024, due to a $399,000, or 42.0%, decrease in data processing expenses, as the 2024 period included $242,000 of one-time deconversion fees related to the Merger, and a $215,000, or 27.8%, decrease in occupancy expenses driven by the consolidation of branch offices, offset by an increase in professional fees of $110,000 primarily due to the costs of becoming compliant with the additional audit and reporting requirements under FDICIA, attendant with exceeding the $1 billion asset threshold.
Income Tax Expense.
The provision for income taxes was $89,000 for the three months ended March 31, 2025, compared to $292,000 for the three months ended March 31, 2024. The Bank’s effective tax rate was 14.2% for the three months ended March 31, 2025 compared to 21.5% for the three months ended March 31, 2024.
42
Comparison of Operating Results for the Nine Months Ended March 31, 2025 and 2024
General.
Net income increased $10.7 million, or 137.4%, to $2.9 million for the nine months ended March 31, 2025 from a net loss of $7.8 million for the nine months ended March 31, 2024. Net income for the nine months ended March 31, 2025 included $2.4 million of net accretion income related to fair value adjustments resulting from the Merger. Net income for the nine months ended March 31, 2024 included a $5.4 million charitable contribution and $4.1 million of merger-related costs, offset by $2.9 million of net accretion income related to fair value adjustments.
Interest Income.
Interest income increased $5.0 million, or 17.0%, to $34.5 million for the nine months ended March 31, 2025 from $29.5 million for the nine months ended March 31, 2024 due to a 22 basis point increase in the yield on interest-earning assets and a $103.2 million increase in the average balance of interest-earning assets. The increase resulted from a $7.3 million, or 30.8%, increase in interest income on loans due to the increased size of the loan portfolio, largely as a result of the Merger as well as subsequent loan growth, and a higher average yield on the loan portfolio due to higher market rates and an increased proportion of higher-yielding commercial real estate loans, offset by a $641,000 decrease in interest income on securities, and a $1.7 million decrease in interest income from other interest-earning assets, in each case due to lower average balances and a lower interest rate environment. The decrease in interest income on securities was due to a $48.4 million decrease in the average balance of securities, resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning, that resulted in only a three basis point decrease in the average yield on securities notwithstanding the lower interest rate environment.
Interest Expense.
Interest expense increased $4.4 million, or 55.1%, to $12.5 million for the nine months ended March 31, 2025 from $8.0 million for the nine months ended March 31, 2024 primarily due to a $3.0 million increase in interest expense on demand accounts. Interest expense on interest-bearing demand deposits increased due to an increase of $107.9 million in the average balance and an increase of 126 basis points in the cost of interest-bearing deposits to 1.63% for the nine months ended March 31, 2025 from 0.37% for the nine months ended March 31, 2024 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. Interest expense on certificates of deposit increased $1.3 million as the average balance on certificates of deposit increased $34.0 million, or 14.0%, to $275.8 million for the nine months ended March 31, 2025 from $241.8 million for the nine months ended March 31, 2024 due to the highly competitive interest rate environment in our market area. Interest expense on borrowings also increased by $135,000 due to a higher average outstanding balance and higher average rates paid.
Net Interest Income.
Net interest income increased $585,000, or 2.7%, to $22.0 million for the nine months ended March 31, 2025 from $21.4 million for the nine months ended March 31, 2024. Net interest rate spread decreased 40 basis points to 2.34% for the nine months ended March 31, 2025 from 2.74% for the nine months ended March 31, 2024. Net interest margin decreased 25 basis points to 2.93% for the nine months ended March 31, 2025 from 3.18% for the nine months ended March 31, 2024. Net interest-earning assets increased $22.9 million, or 9.6%, to $262.2 million for the nine months ended March 31, 2025 from $239.3 million for the nine months ended March 31, 2024. The decreases in the Bank’s net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing at a higher rate than the yield on interest-earning assets.
43
Average Balances and Yields
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $168,000 and $250,000 for the nine months ended March 31, 2025 and 2024, respectively.
Nine Months Ended March 31,
2025
2024
Average
Outstanding
Balance
Interest
Average
Yield/Rate
(1)
Average
Outstanding
Balance
Interest
Average
Yield/Rate
(1)
(In thousands)
Interest-earning assets:
Loans
$
765,989
$
31,069
5.41
%
$
607,947
$
23,760
5.21
%
Securities
153,419
1,848
1.61
%
201,799
2,489
1.64
%
Other
83,665
1,578
2.51
%
90,070
3,228
4.78
%
Total interest-earning
assets
1,003,073
34,495
4.59
%
899,816
29,477
4.37
%
Noninterest-earning assets
48,887
68,098
Total assets
$
1,051,960
$
967,914
Interest-bearing liabilities:
Savings and club accounts
$
155,746
71
0.06
%
$
219,611
84
0.05
%
Interest-bearing demand
accounts
287,152
3,500
1.63
%
179,242
504
0.37
%
Certificates of deposit
275,776
8,065
3.90
%
241,804
6,750
3.72
%
Total interest-bearing
deposits
718,674
11,636
2.16
%
640,657
7,338
1.53
%
Federal Home Loan Bank
advances
22,206
842
5.06
%
—
—
—
Other borrowings
—
—
—
19,887
707
4.74
%
Total interest-bearing
liabilities
740,880
12,478
2.25
%
660,544
8,045
1.62
%
Noninterest-bearing deposits
104,975
110,281
Other noninterest-bearing
liabilities
13,921
18,832
Total liabilities
859,776
789,657
Equity
192,184
178,257
Total liabilities and
equity
$
1,051,960
$
967,914
Net interest income
$
22,017
$
21,432
Net interest rate spread
2.34
%
2.74
%
Net interest-earning
assets (2)
$
262,193
$
239,271
Net interest margin (3)
2.93
%
3.18
%
Average interest-earning
assets to interest-
bearing liabilities
135.39
%
136.22
%
(1)
Annualized.
(2)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)
Net interest margin represents net interest income divided by average total interest-earning assets.
44
Rate/Volume Analysis
The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the tables below.
Nine Months Ended March 31,
2025 vs. 2024
Increase (Decrease)
Volume
Rate
Total Change
(In thousands)
Interest-earning assets:
Loans
$
6,177
$
1,132
$
7,309
Securities
(597
)
(44
)
(641
)
Other
(230
)
(1,420
)
(1,650
)
Total interest-earning assets
5,350
(332
)
5,018
Interest-bearing liabilities:
Savings and club accounts
(24
)
11
(13
)
Interest-bearing accounts
303
2,693
2,996
Certificates of deposit
948
367
1,315
Federal Home Loan Bank advances
842
—
842
Other borrowings
(707
)
—
(707
)
Total interest-bearing liabilities
520
3,913
4,433
Change in net interest income
$
4,830
$
(4,245
)
$
585
Provision for Credit Losses.
The Bank recorded a recovery for credit losses of $105,000 for the nine months ended March 31, 2025 as compared to a provision for credit losses of $3.9 million for the nine months ended March 31, 2024. The recovery reflects updates made to model assumptions in the calculation of the Bank's allowance for credit losses. The Bank had no charge-offs during the nine months ended March 31, 2025 and no non-performing loans at March 31, 2025 compared to no charge-offs for the nine months ended March 31, 2024 and $220,000 of non-performing loans at March 31, 2024. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at March 31, 2025 compared to 0.72% at March 31, 2024.
Noninterest Income.
Noninterest income was as follows:
Nine Months Ended March 31,
Change
2025
2024
Amount
Percent
(In thousands)
Service charges and fees on deposit
$
782
$
576
$
206
35.8
%
Increase in cash surrender value of bank-
owned life insurance
783
655
128
19.5
%
Fees and service charges on loans
128
47
81
172.3
%
Unrealized gain on equity securities
7
3
4
133.3
%
Realized gain on sale of securities
—
33
(33
)
(100.0
)%
Realized gain on sale of loans
51
—
51
100.0
%
Other
214
80
134
167.5
%
Total noninterest income
$
1,965
$
1,394
$
571
41.0
%
45
Noninterest income increased $571,000, or 41.0%, to $2.0 million for the nine months ended March 31, 2025 from $1.4 million for the nine months ended March 31, 2024, primarily as a result of an increase of $206,000 in service charges and fees, and a $128,000 increase in the cash surrender value of bank owned life insurance resulting from an increase in the average balance of the underlying assets, for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024.
Noninterest Expense
.
Noninterest expense was as follows:
Nine Months Ended March 31,
Change
2025
2024
Amount
Percent
(In thousands)
Salaries and employee benefits
$
10,288
$
12,050
$
(1,762
)
(14.6
)%
Occupancy
1,681
1,674
7
0.4
%
Furniture and equipment
924
674
250
37.1
%
Data processing
1,642
2,392
(750
)
(31.4
)%
Advertising
264
204
60
29.4
%
Federal deposit insurance premiums
360
348
12
3.4
%
Directors fees
287
288
(1
)
(0.3
)%
Professional fees
1,423
1,775
(352
)
(19.8
)%
Insurance
451
389
62
15.9
%
Telephone, postage and supplies
569
391
178
45.5
%
Other expenses
2,497
7,799
(5,302
)
(68.0
)%
Total noninterest expense
$
20,386
$
27,984
$
(7,598
)
(27.2
)%
Noninterest expense decreased $7.6 million, or 27.2%, to $20.4 million for the nine months ended March 31, 2025 from $28.0 million for the nine months ended March 31, 2024, primarily as a result of the $5.4 million charitable contribution made during the nine months ended March 31, 2024, a $1.8 million, or 14.6%, decrease in salaries and employee benefits resulting from one-time change in control payments incurred during the nine months ended March 31, 2024 and a $750,000, or 31.4%, decrease in data processing expense due to a $414,000 early termination fee and a $242,000 deconversion fee incurred during the nine months ended March 31, 2024, all related to the Merger.
Income Tax Expense.
The provision for income taxes was $776,000 for the nine months ended March 31, 2025, compared to a benefit of $1.2 million for the nine months ended March 31, 2024, resulting from a net operating loss due to Merger related expenses. The Bank’s effective tax rate was 21.0% for the nine months ended March 31, 2025 compared to 13.7% for the nine months ended March 31, 2024.
Market Risk
General
.
Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our ALCO/Investment Committee, which consists of members of management, is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our Board of Directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates.
We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:
•
growing transaction deposit accounts;
•
rebalancing our loan portfolio to include higher-yielding, shorter-term commercial real estate loans;
46
•
utilizing our investment securities portfolio as part of our balance sheet asset and liability and interest rate risk management strategy to reduce the impact of movements in interest rates on net interest income and economic value of equity; and
•
continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our adjustable-rate loans as opposed to longer-term, fixed-rate loans.
By following these strategies, we believe that we are better positioned to react to changes in market interest rates.
We generally do not engage in hedging activities, such as engaging in futures or options, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.
Economic Value of Equity
.
We compute amounts by which the net present value of our cash flow from assets, liabilities and off-balance sheet items (economic value of equity “EVE”) would change in the event of a range of assumed changes in market interest rates. We measure potential change in our EVE through the use of a financial model. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100-basis point increase in the “Basis Point Change in Interest Rates” column below.
The table below sets forth, as of March 31, 2025, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.
At March 31, 2025
Change in Interest Rates
Estimated Increase (Decrease) in EVE
(basis points)
(1)
Estimated EVE
(2)
Amount
Percent
(In thousands)
+400
$
105,237
$
(88,160
)
(45.58
)%
+300
130,190
(63,206
)
(32.68
)%
+200
154,697
(38,699
)
(20.01
)%
+100
178,000
(15,397
)
(7.96
)%
—
193,397
—
—
-100
203,263
9,867
5.10
%
-200
208,389
14,992
7.75
%
-300
209,902
16,505
8.53
%
-400
208,074
14,677
7.59
%
(1)
Assumes an immediate uniform change in interest rates at all maturities.
(2)
EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
The table above indicates that at March 31, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 20.01% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.75% increase in EVE.
47
Change in Net Interest Income
. The following table sets forth, at March 31, 2025, the calculation of the estimated changes in our net interest income (“NII”) that would result from the designated immediate changes in the United States Treasury yield curve.
At March 31, 2025
Change in Interest
Rates (basis
points)
(1)
Net Interest
Income Year 1
Forecast
Year 1
Change
From Level
Net Interest
Income Year 2
Forecast
Year 2
Change
From Level
(In thousands)
+400
$
26,126
$
(6,563
)
$
31,343
$
(5,311
)
+300
28,029
(4,660
)
33,339
(3,315
)
+200
30,474
(2,215
)
36,242
(412
)
+100
33,238
550
38,344
1,690
—
32,688
—
36,654
—
-100
31,369
(1,320
)
33,302
(3,353
)
-200
29,801
(2,888
)
29,462
(7,192
)
-300
27,918
(4,771
)
25,026
(11,628
)
-400
25,688
(7,000
)
20,086
(16,568
)
The table above indicates that at March 31, 2025, we would have experienced a 6.77% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 8.83% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.
Liquidity and Capital Resources
Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of deposit inflows, loan repayments, and repayments from investment securities. In addition, we have the ability to borrow in the wholesale markets or from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our ALCO/Investment Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At March 31, 2025, this ratio was 7.4%. We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of March 31, 2025.
We regularly adjust our investments in liquid assets based upon our assessment of:
(i)
expected loan demand;
(ii)
expected deposit flows;
(iii)
yields available on interest-earning deposits and securities; and
(iv)
the objectives of our asset/liability management program.
Excess cash is invested generally in interest-earning deposits and short- and intermediate-term securities.
48
Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and investing activities during any given period. At March 31, 2025, cash and cash equivalents totaled $62.2 million.
At March 31, 2025, we had $58.7 million in outstanding loan commitments and $37.1 million of unused lines of credit. Certificates of deposit due within one year of March 31, 2025 totaled $246.8 million, or 29.5%, of total deposits. If these deposits do not remain with us, we will be required to seek other funding sources, including loan sales, other deposit products, including replacement certificates of deposit, brokered deposits, securities sold under agreements to repurchase (repurchase agreements) or advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or after March 31, 2026. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.
Our primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the nine months ended March 31, 2025, we originated $77.2 million of loans and purchased $31.0 million. We had no purchases of securities classified as held-to-maturity during the nine months ended March 31, 2025.
Financing activities consist primarily of activity in deposit accounts, borrowings and repurchases of common stock. Deposits increased $28.5 million, or 3.5%, to $835.6 million at March 31, 2025 from $807.1 million at June 30, 2024 due primarily to
increases in interest-bearing deposit accounts that were offset in part by decreases in non-maturity savings accounts due in part to the Bank having raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area.
We had outstanding borrowings of $30.0 million as of March 31, 2025 and none as of June 30, 2024. We repurchased $7.3 million of our common stock in the nine-month period ended March 31, 2025.
Somerset Regal Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2025, Somerset Regal Bank exceeded all regulatory capital requirements. Somerset Regal Bank is considered “well capitalized” under regulatory guidelines. See Note 13 of the Notes to the Consolidated Financial Statements.
The net proceeds from the offering significantly increased our capital resources. Our financial condition and results of operations were enhanced by the net proceeds from the offering, resulting in increased net interest-earning assets and net interest income. However, due to the increase in equity resulting from the net proceeds raised in the offering, our return on equity was adversely affected following the offering until such excess funds can be deployed.
Recent Accounting Pronouncements
For a discussion of the impact of recent accounting pronouncements, see Note 1 of the Notes to the Consolidated Financial Statements.
Impact of Inflation and Changing Prices
Our consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.
49
Ite
m 3. Quantitative and Qualitative Disclosures About Market Risk.
For information regarding material risk, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation—Market Risk.”
Ite
m 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management is responsible for the disclosure controls and procedures of the Company. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be so disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
50
PART II—OTHE
R INFORMATION
Ite
m 1. Legal Proceedings.
Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.
Ite
m 1A. Risk Factors.
There have been no material changes in risk factors applicable to the Company from those disclosed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.
Ite
m 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The Company did not have any unregistered sales of equity securities during the three months ended March 31, 2025. The table below summarizes the number of shares of the Company’s common stock that were repurchased during the three months ended March 31, 2025.
Total
Number
of Shares
Purchased
(1)
Average
Price Paid
per Share
Total
Shares
Purchased
as Part of
Publicly
Announced
Program
(1)
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Program
(1)
January 1 - January 31, 2025
177,992
$
11.98
177,992
425,744
February 1 - February 28, 2025
65,624
12.34
65,624
360,120
March 1 - March 31, 2025
36,788
11.77
36,788
323,332
Three months ended March 31, 2025
280,404
280,404
(1)
On September 20, 2024, the Company adopted a program to repurchase up to 950,793 shares of its common stock, which is approximately 10% of its outstanding common stock. Shares may be repurchased in open market or private transactions, through block trades or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The timing and amount of any repurchases will depend on a number of factors, including the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. Open market purchases will be made in accordance with Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements. The Company is not obligated to repurchase any particular number of shares or any shares in any specific time period. The program will expire on September 19, 2025.
Ite
m 3. Defaults Upon Senior Securities.
Not applicable
Ite
m 4. Mine Safety Disclosures.
Not applicable
51
Ite
m 5. Other Information.
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2025
, none of our directors or executive officers
adopted
or
terminated
any contract, instruction or written plan for the purchase or sale of the Corporation's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
52
SIG
NATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Insider Ownership of SR Bancorp, Inc.
company Beta
Owner
Position
Direct Shares
Indirect Shares
AI Insights
Summary Financials of SR Bancorp, Inc.
Beta
(We are using algorithms to extract and display detailed data. This is a hard problem and we are working continuously to classify data in an accurate and useful manner.)