SR Bancorp (SRBK) grows loans to $862M and reports Q3 2026 profit
SR Bancorp, Inc. reported results for the three and nine months ended March 31, 2026, showing steady balance sheet growth and continued profitability. Total assets reached $1.14 billion, up from $1.08 billion at June 30, 2025, driven mainly by net loans increasing to $859.1 million.
For the quarter, net income was $886,000 with basic and diluted earnings per share of $0.12. Net interest income was $7.8 million as interest income rose faster than funding costs. Nine‑month net income was $2.4 million, or $0.32 basic and $0.31 diluted earnings per share.
Deposits totaled $894.3 million, including $484.1 million in demand accounts. Uninsured deposits were $164.6 million. Asset quality remained strong, with no non‑accrual or collateral‑dependent loans and no charge‑offs, while the allowance for credit losses stood at $5.7 million on $862.3 million of loans. Capital levels were robust, with a Tier 1 leverage ratio of 14.26%, well above the 9.0% threshold under the community bank leverage framework.
Positive
- None.
Negative
- None.
Key Figures
Key Terms
allowance for credit losses financial
uninsured deposits financial
Tier 1 capital financial
community bank leverage ratio framework financial
stock-based compensation financial
held-to-maturity financial
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
SR Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
|
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.
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).
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 | ☐ |
☒ | 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
As of May 12, 2026, the registrant had
Table of Contents
Table of Contents
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Page |
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PART I. |
FINANCIAL INFORMATION |
1 |
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Item 1. |
Consolidated Financial Statements (unaudited) |
1 |
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Consolidated Statements of Financial Condition |
1 |
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Consolidated Statements of Income |
2 |
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Consolidated Statements of Comprehensive Income |
3 |
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Consolidated Statements of Changes in Stockholders' Equity |
4 |
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Consolidated Statements of Cash Flows |
5 |
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Notes to Unaudited Consolidated Financial Statements |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
47 |
Item 4. |
Controls and Procedures |
47 |
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PART II. |
OTHER INFORMATION |
48 |
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Item 1. |
Legal Proceedings |
48 |
Item 1A. |
Risk Factors |
48 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
48 |
Item 3. |
Defaults Upon Senior Securities |
48 |
Item 4. |
Mine Safety Disclosures |
48 |
Item 5. |
Other Information |
48 |
Item 6. |
Exhibits |
49 |
Signatures |
50 |
|
i
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited).
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 2026 (Unaudited) and June 30, 2025
(In thousands, except for share data)
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| March 31, 2026 |
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| June 30, 2025 |
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Assets |
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Cash and due from banks |
| $ |
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Interest-bearing deposits at other banks |
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Total cash and cash equivalents |
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Securities held-to-maturity, at amortized cost |
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Equity securities, at fair value |
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Loans receivable, net of allowance for credit losses of $5,667 and $5,362, respectively |
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Premises and equipment, net |
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Right-of-use asset |
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Restricted equity securities, at cost |
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Accrued interest receivable |
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Bank owned life insurance |
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Goodwill and intangible assets |
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Other assets |
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Total assets |
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Liabilities and Equity |
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Liabilities |
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Deposits: |
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Noninterest-bearing |
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Interest-bearing |
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Total deposits |
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Borrowings |
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Advance payments by borrowers for taxes and insurance |
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Accrued interest payable |
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Lease liability |
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Other liabilities |
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Total liabilities |
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Equity |
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Preferred Stock, $0.01 par value, 5,000,000 shares authorized, none issued |
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Common stock, $0.01 par value, 50,000,000 authorized; 8,151,905 and 8,875,170 shares issued and outstanding as of March 31, 2026, and June 30, 2025, respectively |
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Additional paid-in capital |
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Retained earnings |
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Unearned compensation ESOP |
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| ( | ) |
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Accumulated other comprehensive loss |
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| ( | ) |
Total stockholders' equity |
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Total liabilities and stockholders' equity |
| $ |
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| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements
1
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
For the Three and Nine Months Ended March 31, 2026 and 2025
(In thousands, except for share data, unaudited)
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| Three Months Ended |
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| Nine Months Ended |
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| March 31, |
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| March 31, |
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| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
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Interest Income |
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Loans, including fees |
| $ |
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| $ |
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| $ |
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| $ |
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Securities: |
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Taxable |
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Interest bearing deposits at other banks |
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Total interest income |
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Interest Expense |
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Deposits: |
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Demand |
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Savings and time |
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Borrowings |
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Total interest expense |
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Net Interest Income |
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Provision (Credit) for Credit Losses |
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Net Interest Income After Provision (Credit) for Credit Losses |
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Noninterest Income |
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Service charges and fees |
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Increase in cash surrender value of bank owned life insurance |
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Fees and service charges on loans |
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Unrealized (loss) gain on equity securities |
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| ( | ) |
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Realized gain on sale of loans |
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Other |
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Total noninterest income |
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Noninterest Expense |
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Salaries and employee benefits |
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Occupancy |
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Furniture and equipment |
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Data Processing |
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Advertising |
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FDIC premiums |
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Directors fees |
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Professional fees |
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Insurance |
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Telephone, postage and supplies |
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Other |
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Total noninterest expense |
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Income Before Income Tax Expense |
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Income Tax Expense |
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Net Income |
| $ |
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| $ |
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| $ |
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| $ |
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Basic earnings per share |
| $ |
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| $ |
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| $ |
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| $ |
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Diluted earnings per share |
| $ |
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| $ |
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| $ |
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| $ |
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Weighted average number of common shares outstanding - basic |
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Weighted average number of common shares outstanding - diluted |
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The accompanying notes are an integral part of these consolidated financial statements
2
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended March 31, 2026 and 2025
(In thousands, unaudited)
| | Three Months Ended March 31, | | | Nine Months Ended March 31, | | ||||||||||
| | 2026 | | | 2025 | | | 2026 | | | 2025 | | ||||
Net Income | | $ | | | $ | | | $ | | | $ | | ||||
Other Comprehensive Income | | | | | | | | | | | | | | | | |
Change in defined pension plan for unrealized actuarial gains (losses) net of income tax benefit of $67, $71, $3 and $90, respectively | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) |
Total other comprehensive (loss) income | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) |
Total comprehensive income | | $ | | | $ | | | $ | | | $ | | ||||
The accompanying notes are an integral part of these consolidated financial statements
3
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the Three and Nine Months Ended March 31, 2026 and 2025
(In thousands, except for share data, unaudited)
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| Accumulated |
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| Common |
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| Common |
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| Additional |
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| Unearned |
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| Other |
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| Stock |
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| Stock |
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| Paid in |
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| Retained |
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| ESOP |
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| Comprehensive |
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| Shares |
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| Amount |
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| Capital |
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| Earnings |
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| Compensation |
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| Loss |
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| Total |
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Balance, December 31, 2025 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Net income |
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| — |
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Other comprehensive (loss), net of tax |
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| — |
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| ( | ) |
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| ( | ) | ||||
Repurchase of common shares |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) | |||
Cash dividends declared on common stock, $0.05 per share |
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| — |
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| ( | ) |
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| ( | ) | ||||
ESOP shares earned, 9,508 shares |
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| — |
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Stock-based compensation |
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| — |
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Restricted stock awards issued |
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Shares issued upon exercise of stock options, net |
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Shares withheld for taxes on share-based awards |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
Balance, March 31, 2026 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Balance, June 30, 2025 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Net income |
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| — |
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Other comprehensive (loss), net of tax |
|
| — |
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| ( | ) |
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| ( | ) | ||||
Repurchase of common shares |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) | |||
Cash dividends declared on common stock, $0.15 per share |
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| — |
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| ( | ) |
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| ( | ) | ||||
ESOP shares earned, 28,524 shares |
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| — |
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Stock-based compensation |
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| — |
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Restricted stock awards issued |
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Shares issued upon exercise of stock options, net |
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Shares withheld for taxes on share-based awards |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
Balance, March 31, 2026 |
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| ( | ) |
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| ( | ) |
| $ |
| |||||
Balance, December 31, 2024 |
|
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
Net income |
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| — |
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Other comprehensive (loss), net of tax |
|
| — |
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| ( | ) |
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| ( | ) | ||||
Repurchase of common shares |
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| ( | ) |
|
| ( | ) |
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| ( | ) |
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| ( | ) | |||
ESOP shares earned, 9,508 shares |
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| — |
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Cash dividends declared on common stock, $0.05 per share |
|
| — |
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| ( | ) |
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| ( | ) | ||||
Stock-based compensation |
|
| — |
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Restricted stock awards issued |
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| ( | ) |
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| ||||||
Balance, March 31, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
Balance, June 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
Net income |
|
| — |
|
|
|
|
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| ||||||
Other comprehensive (loss), net of tax |
|
| — |
|
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|
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|
|
|
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|
|
| ( | ) |
|
| ( | ) | ||||
Repurchase of common shares |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
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| ( | ) | |||
ESOP shares earned, 28,524 shares |
|
| — |
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|
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|
|
|
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|
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|
|
|
| ||||||
Cash dividends declared on common stock, $0.05 per share |
|
| — |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Stock-based compensation |
|
| — |
|
|
|
|
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| ||||||
Restricted stock awards issued |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, March 31, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
The accompanying notes are an integral part of these consolidated financial statements
4
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2026 and 2025
(In thousands, except for share data, unaudited)
|
| Nine Months Ended March 31, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Cash Flows from Operating Activities |
|
|
| |
|
|
| |
Net income |
| $ |
|
| $ |
| ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| |
|
|
| |
Provision (Credit) for credit losses |
|
|
|
|
| ( | ) | |
Depreciation |
|
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|
| ||
Deferred income tax benefit |
|
| ( | ) |
|
| ( | ) |
Accretion of acquisition fair value adjustments, net |
|
| ( | ) |
|
| ( | ) |
Amortization of core deposit intangible asset |
|
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| ||
Net amortization of premiums and discounts on securities |
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| ||
Net amortization of deferred loan fees, costs and discounts |
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| ||
Income from cash surrender value of bank owned life insurance |
|
| ( | ) |
|
| ( | ) |
Stock-based compensation expense |
|
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| ||
Unrealized loss (gain) on equity securities |
|
|
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| ( | ) | |
Gain on sale of loans held for sale |
|
| ( | ) |
|
| ( | ) |
Proceeds from sales of loans held for sale |
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| ||
Originations of loans held for sale |
|
| ( | ) |
|
| ( | ) |
(Increase) decrease in: |
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| |
|
|
| |
Accrued interest receivable |
|
| ( | ) |
|
| ( | ) |
Other assets |
|
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| ||
Increase in other liabilities |
|
|
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|
| ( | ) | |
Net cash provided by operating activities |
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| ||
Cash Flows from Investing Activities |
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| |
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| |
Proceeds from maturities, calls and principal repayments of securities held-to-maturity |
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| ||
Purchase of securities held-to-maturity |
|
| ( | ) |
|
|
| |
Net increase in loans receivable |
|
| ( | ) |
|
| ( | ) |
Purchase of bank owned life insurance |
|
| ( | ) |
|
|
| |
Purchase of premises and equipment |
|
| ( | ) |
|
| ( | ) |
Purchase of restricted equity securities |
|
| ( | ) |
|
| ( | ) |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
Cash Flows from Financing Activities |
|
|
| |
|
|
| |
Net increase in interest bearing deposits |
|
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|
|
| ||
Net decrease in noninterest bearing deposits |
|
| ( | ) |
|
| ( | ) |
Net decrease in advance payments by borrowers for taxes and insurance |
|
|
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|
| ||
Net increase in short-term borrowings |
|
|
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|
| ||
Dividends paid |
|
| ( | ) |
|
|
| |
Repurchase of common stock |
|
| ( | ) |
|
| ( | ) |
Cash paid for excise taxes on repurchased shares |
|
| ( | ) |
|
|
| |
Exercise of stock options |
|
|
|
|
|
| ||
Receipts from equity plan participants for withholding taxes on share-based awards |
|
|
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| ||
Cash paid for withholding taxes on share-based awards |
|
| ( | ) |
|
|
| |
Net cash provided by financing activities |
|
|
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|
|
| ||
Net increase in cash and cash equivalents |
|
|
|
|
|
| ||
Cash and Cash Equivalents, Beginning of Period |
|
|
|
|
|
| ||
Cash and Cash Equivalents, End of Period |
| $ |
|
| $ |
| ||
Supplementary Cash Flow Information |
|
|
| |
|
|
| |
Cash paid during the period for: |
|
|
| |
|
|
| |
Interest paid |
| $ |
|
| $ |
| ||
Income taxes paid |
|
|
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements
5
Table of Contents
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 (“GAAP”) 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 was originally formed to sell annuity products and is currently inactive.
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 month periods ended March 31, 2026 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 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, 2025.
Business
SR Bancorp, Inc., a Maryland corporation, is the holding company for Somerset Regal Bank. The Bank, a New Jersey chartered commercial bank which was formed in 1887, serves Essex, Hunterdon, Hudson, Middlesex, Morris, Somerset and Union counties in New Jersey. As a locally managed commercial bank, the Bank provides retail and commercial banking services to individuals, businesses and local municipalities through its
On September 19, 2023, Somerset Savings Bank, SLA converted from the mutual to stock form of organization at which point, the Company became the holding company for Somerset Regal Bank. On that same date, SR Bancorp, Inc. completed its stock offering. The Company’s common stock began trading on the Nasdaq Capital Market under the trading symbol “SRBK” on September 20, 2023. Somerset Regal Bank was formed through the combination of Somerset Savings Bank, SLA and Regal Bank, two New Jersey chartered institutions, on September 19, 2023.
6
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
Note 3 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.
Segment Reporting
Accounting Standards Codification ("ASC") Topic 280, Segment Reporting, establishes standards for the way business enterprises report information about operating segments in annual Consolidated Financial Statements. The Company operates exclusively as a community bank within the "Community Banking" financial services industry. Community Banking encompasses the Company's primary business, which includes providing a wide range of commercial, retail and related banking services. The Company's primary focus within Community Banking is to grow loans using deposits generated by the Company's branches. Our business is generated principally in central and northern New Jersey.
The Company’s CEO is the chief operating decision maker who uses consolidated net income to assess the performance and profitability of our single business segment. The Company assesses consolidated net income on a monthly basis, including variances to budget and prior period results. Consideration is given to performance of components of the business, such as branches and geographic regions, which are then aggregated. This information is used to achieve strategic initiatives by allowing the chief operating decision maker to manage resources that drive our business and earnings. Additionally, consolidated net income is used to benchmark the Company against its banking peers.
Recently Adopted Accounting Changes
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This update requires public entities with reportable segments to provide additional and more detailed disclosures. The Company adopted ASU 2023-07 on June 30, 2025, which did not have a material impact on its Consolidated Financial Statements.
In March 2024, the FASB issued ASU 2024-01 Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards ("ASU 2024-01"). This update provides guidance for profits interest and similar awards. The Company adopted ASU 2024-01 on July 1, 2025, which did not have a material impact on its Consolidated 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. The Company adopted ASU 2024-02 on July 1, 2025, which did not have a material impact on its Consolidated Financial Statements.
Recent Accounting Standards Not Yet Adopted
In December 2023, the 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 annual 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, which is not expected to have a material impact on our financial statements.
7
Table of Contents
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, which is not expected to have a material impact on our financial statements.
Accounting Standards Update 2025-06, “Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”) to modernize the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software (referred to as “internal-use software”). The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of this standard, which is not expected to have a material impact on our financial statements.
Subsequent Events
The Company has evaluated subsequent events occurring after March 31, 2026 up to the date these financial statements were issued and filed with the Securities and Exchange Commission and has not identified any subsequent events.
2. | Earnings Per Share |
Basic earnings 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 unvested 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. For the three and nine months ended March 31, 2026, there were
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, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
Net income |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: Average unallocated ESOP shares |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Less: Average unvested restricted stock awards |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Weighted average common shares outstanding used to calculate basic earnings per common share |
|
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| ||||
Add: Dilutive effect of common stock equivalents |
|
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| ||||
Weighted average common shares outstanding used to calculate diluted earnings per common share |
|
|
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|
|
| ||||
Basic income per common share |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Diluted income per common share |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
8
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
3. | Investment Securities |
The Company owned
|
| March 31, 2026 |
| |||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
| (In thousands) |
| |||||||||||||
Federal National Mortgage Association |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||
Federal Home Loan Mortgage Corporation |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Government National Mortgage Association |
|
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| ||||
Subordinated Debt |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
CMO |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Foreign Government Bonds |
|
|
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|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||
| | June 30, 2025 | | |||||||||||||
| | | | | | Gross | | | Gross | | | | | | ||
| | Amortized | | | Unrealized | | | Unrealized | | | Fair | | ||||
| | Cost | | | Gains | | | Losses | | | Value | | ||||
| | (In thousands) | | |||||||||||||
Federal National Mortgage Association | | $ | | | $ | | | $ | ( | ) | | $ | | |||
Federal Home Loan Mortgage Corporation | | | | | | | | | ( | ) | | | | |||
Government National Mortgage Association | | | | | | | | | | | | | ||||
Subordinated Debt | | | | | | | | | ( | ) | | | | |||
CMO | | | | | | | | | ( | ) | | | | |||
Foreign Government Bonds | | | | | | | | | | | | | ||||
Total | | $ | | | $ | | | $ | ( | ) | | $ | | |||
The amortized cost and fair value of securities held-to-maturity by contractual maturity at March 31, 2026 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, 2026 |
| |||||
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
| (In thousands) |
| |||||
Due within 1 year |
| $ |
|
| $ |
| ||
Due after 1 but within 5 years |
|
|
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| ||
Due after 5 but within 10 years |
|
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| ||
Due after 10 years |
|
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| ||
Mortgage-backed securities |
|
|
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|
| ||
Total |
| $ |
|
| $ |
| ||
During the three and nine months ended March 31, 2026, the Company purchased a $
9
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
On a quarterly basis, management evaluates whether there is a credit loss associated with any declines in fair value on its securities portfolio. Management considers the nature of the collateral, default rates, delinquency rates, credit ratings and interest rate changes, among other factors. The Company's held-to-maturity portfolio predominantly consists of mortgage-backed securities issued by the U.S. government and government-sponsored agencies for which management has determined to have no expected credit loss. The Company's held-to-maturity portfolio also included three investment grade subordinated notes issued by bank holding companies located in New Jersey. At March 31, 2026 and June 30, 2025, the Company had no securities held-to-maturity that were past due 30 days or more with respect to principal or interest payments.
Equity securities consisted of several equity investments in consumer banking and financial services companies. At March 31, 2026 and June 30, 2025, the Company had $
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Net (loss) gains recognized on equity securities |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Less: Net gains recognized on equity securities sold/acquired |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net unrealized (loss) gains recognized on equity securities |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||
At March 31, 2026 and June 30, 2025, mortgage-backed securities with a carrying value of $
4. | Loans Receivable |
Loans at March 31, 2026 and June 30, 2025 are summarized as follows:
| | March 31, 2026 | | | June 30, 2025 | | ||
| | (In thousands) | | |||||
Owner occupied commercial real estate loans | | $ | | | $ | | ||
Other commercial real estate loans | | | | | | | ||
Multi-family loans | | | | | | | ||
Commercial and industrial loans | | | | | | | ||
Total commercial loans | | | | | | | ||
Residential mortgage loans | | | | | | | ||
Consumer and other loans | | | | | | | ||
Total loans | | | | | | | ||
Allowance for credit losses | | | ( | ) | | | ( | ) |
Deferred loan costs, net | | | | | | | ||
Loans receivable, net | | $ | | | $ | | ||
The Company engages primarily in the lending of fixed-rate and adjustable-rate residential mortgage loans and adjustable-rate commercial and multifamily real estate 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
10
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At March 31, 2026 and June 30, 2025, commercial loans represented
The following tables summarize the activity in the allowance for credit losses by loan class for the three and nine months ended March 31, 2026 and 2025.
| | Three Months Ended March 31, 2026 | | |||||||||||||||||||||||||
| | Owner | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Occupied | | | Other | | | | | | | Commercial | | | | | | | | | | | | | | |||
| | Commercial | | | Commercial | | | Multi- | | | and | | | Residential | | | Consumer | | | | | | ||||||
| | Real Estate | | | Real Estate | | | Family | | | Industrial | | | Mortgage | | | and Other | | | Total | | |||||||
| | (In thousands) | | |||||||||||||||||||||||||
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Charge-offs | | | | | | | | | | | | | | | | | | | | | | |||||||
Recoveries | | | | | | | | | | | | ( | ) | | | | | | | | | ( | ) | |||||
Provisions (credits) | | | ( | ) | | | ( | ) | | | ( | ) | | | | | | | | | | | | | ||||
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Loans Receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
| | Three Months Ended March 31, 2025 | | |||||||||||||||||||||||||
| | Owner | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Occupied | | | Other | | | | | | | Commercial | | | | | | | | | | | | | | |||
| | Commercial | | | Commercial | | | Multi- | | | and | | | Residential | | | Consumer | | | | | | ||||||
| | Real Estate | | | Real Estate | | | Family | | | Industrial | | | Mortgage | | | and Other | | | Total | | |||||||
| | (In thousands) | | |||||||||||||||||||||||||
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Charge-offs | | | | | | | | | | | | | | | | | | | | | | |||||||
Recoveries | | | | | | | | | | | | | | | | | | | | | | |||||||
Provisions (credits) | | | ( | ) | | | ( | ) | | | | | | | | | ( | ) | | | | | | | ||||
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Loans Receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
11
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
| | Nine Months Ended March 31, 2026 | | |||||||||||||||||||||||||
| | Owner | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Occupied | | | Other | | | | | | | Commercial | | | | | | | | | | | | | | |||
| | Commercial | | | Commercial | | | Multi- | | | and | | | Residential | | | Consumer | | | | | | ||||||
| | Real Estate | | | Real Estate | | | Family | | | Industrial | | | Mortgage | | | and Other | | | Total | | |||||||
| | (In thousands) | | |||||||||||||||||||||||||
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Charge-offs | | | | | | | | | | | | | | | | | | | | | | |||||||
Recoveries | | | | | | | | | | | | ( | ) | | | | | | | | | ( | ) | |||||
Provisions (credits) | | | ( | ) | | | | | | ( | ) | | | | | | | | | | | | | |||||
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Loans Receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
| | Nine Months Ended March 31, 2025 | | |||||||||||||||||||||||||
| | Owner | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Occupied | | | Other | | | | | | | Commercial | | | | | | | | | | | | | | |||
| | Commercial | | | Commercial | | | Multi- | | | and | | | Residential | | | Consumer | | | | | | ||||||
| | Real Estate | | | Real Estate | | | Family | | | Industrial | | | Mortgage | | | and Other | | | Total | | |||||||
| | (In thousands) | | |||||||||||||||||||||||||
Allowance for Credit Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Charge-offs | | | | | | | | | | | | | | | | | | | | | | |||||||
Recoveries | | | | | | | | | | | | | | | | | | | | | | |||||||
Provisions (credits) | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) | | | | | | | | | ( | ) | ||
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Loans Receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Ending balance, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
12
Table of Contents
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, 2026 and June 30, 2025:
| | March 31, 2026 | | |||||||||||||||||||||||||||||
| | 2026 | | | 2025 | | | 2024 | | | 2023 | | | 2022 | | | Prior | | | Revolving | | | Total | | ||||||||
| | (In thousands) | | |||||||||||||||||||||||||||||
Owner Occupied Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Owner Occupied Commercial Real Estate | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Other Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Other Commercial Real Estate | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Multi-Family | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Multi-Family | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Commercial and Industrial | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Commercial and Industrial | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Residential Mortgage | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Residential Mortgage | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Consumer and Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Consumer and Other | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Total Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Loans | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Gross charge-offs | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
13
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
| | June 30, 2025 | | |||||||||||||||||||||||||||||
| | 2025 | | | 2024 | | | 2023 | | | 2022 | | | 2021 | | | Prior | | | Revolving | | | Total | | ||||||||
| | (In thousands) | | |||||||||||||||||||||||||||||
Owner Occupied Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Owner Occupied Commercial Real Estate | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Other Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Other Commercial Real Estate | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Multi-Family | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Multi-Family | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Commercial and Industrial | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Commercial and Industrial | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Residential Mortgage | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Residential Mortgage | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Consumer and Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Rating | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Consumer and Other | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Total Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Special mention | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Substandard | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Loss | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Total Loans | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
Gross charge-offs | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | ||||||||
14
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of March 31, 2026 and June 30, 2025, the Company had no collateral-dependent or non-accrual loans.
The following tables present the classes of loans summarized by past due status as of March 31, 2026 and June 30, 2025:
|
| March 31, 2026 |
| |||||||||||||||||||||||||
|
| Delinquency Status |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| 90 Days or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| More Past |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Due and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Still |
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
| ||
|
| 30-59 Days |
|
| 60-89 Days |
|
| Accruing |
|
| Non- |
|
| Past |
|
| Total |
|
|
|
|
| ||||||
|
| Past Due |
|
| Past Due |
|
| Past Due |
|
| Accrual |
|
| Due |
|
| Current |
|
| Total |
| |||||||
|
| (In thousands) |
| |||||||||||||||||||||||||
Owner occupied commercial real estate |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
Other commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
| | June 30, 2025 | | |||||||||||||||||||||||||
| | Delinquency Status | | |||||||||||||||||||||||||
| | | | | | | | | | 90 Days or | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | More Past | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Due and | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Still | | | | | | | Total | | | | | | | | | | ||
| | 30-59 Days | | | 60-89 Days | | | Accruing | | | Non- | | | Past | | | Total | | | | | | ||||||
| | Past Due | | | Past Due | | | Past Due | | | Accrual | | | Due | | | Current | | | Total | | |||||||
| | (In thousands) | | |||||||||||||||||||||||||
Owner occupied commercial real estate | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
Other commercial real estate | | | | | | | | | | | | | | | | | | | | | | |||||||
Multi-family | | | | | | | | | | | | | | | | | | | | | | |||||||
Commercial and industrial | | | | | | | | | | | | | | | | | | | | | | |||||||
Residential mortgage | | | | | | | | | | | | | | | | | | | | | | |||||||
Consumer and other | | | | | | | | | | | | | | | | | | | | | | |||||||
Total | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |||||||
At March 31, 2026 and June 30, 2025, the Company had
15
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
5. | Premises and Equipment |
Premises and equipment at March 31, 2026 and June 30, 2025 are summarized as follows:
| | March 31, 2026 | | | June 30, 2025 | | ||
| | (In thousands) | | |||||
Land | | $ | | | $ | | ||
Buildings and leasehold improvements | | | | | | | ||
Furniture, fixtures and equipment | | | | | | | ||
Total | | | | | | | ||
Accumulated depreciation | | | ( | ) | | | ( | ) |
Net | | $ | | | $ | | ||
Depreciation expense amounted to $
6. | 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, 2026, 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, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating lease cost |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Cash paid for amounts included in the measurement of lease liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
| March 31, 2026 |
|
| June 30, 2025 |
| ||
|
| (In thousands) |
| |||||
Right-of-use asset |
| $ |
|
| $ |
| ||
Lease liability |
| $ |
|
| $ |
| ||
Weighted-average remaining lease term, in years |
|
|
|
|
|
| ||
Weighted-average discount rate |
|
| % |
|
| % | ||
16
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Future undiscounted minimum lease payments for operating leases with initial terms of one year or more as of March 31, 2026 are as follows:
|
| (Dollars in |
| |
March 31, 2026 |
| thousands) |
| |
2027 |
| $ |
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
2031 |
|
|
| |
Thereafter |
|
|
| |
Total future minimum lease payments |
|
|
| |
Less: imputed interest |
|
| ( | ) |
Total |
| $ |
| |
7. | Goodwill and Intangible Assets |
Goodwill and core deposit intangibles resulted from the Company's acquisition of Regal Bancorp in September 2023, which was accounted for under FASB ASC 805, Business Combinations. As of March 31, 2026, the carrying amount of goodwill was $
The changes in the carrying amount of goodwill and core deposit intangibles for the nine months ended March 31, 2026 and 2025 are summarized as follows:
| | Nine Months Ended March 31, | | |||||
| | 2026 | | | 2025 | | ||
| | (In thousands) | | |||||
Balance at beginning of period | | $ | | | $ | | ||
Amortization expense | | | ( | ) | | | ( | ) |
Balance at end of period | | $ | | | $ | | ||
Goodwill and intangible assets at March 31, 2026 and June 30, 2025:
|
| March 31, 2026 |
|
| June 30, 2025 |
| ||
|
| (In thousands) |
| |||||
Goodwill |
| $ |
|
| $ |
| ||
Core deposit intangibles, net of amortization |
|
|
|
|
|
| ||
Goodwill and intangible assets |
| $ |
|
| $ |
| ||
17
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of March 31, 2026, the amortization of the core deposit intangibles in future fiscal years is as follows:
|
| Amount |
| |
|
| (In thousands) |
| |
2027 |
| $ |
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
2031 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
8. | Deposits |
Deposits at March 31, 2026 and June 30, 2025 consisted of the following:
|
| March 31, 2026 |
|
| June 30, 2025 |
| ||
|
| (In thousands) |
| |||||
Demand accounts: |
|
|
|
|
|
|
|
|
Interest-bearing |
| $ |
|
| $ |
| ||
Noninterest-bearing |
|
|
|
|
|
| ||
Total demand accounts |
|
|
|
|
|
| ||
Savings and club |
|
|
|
|
|
| ||
Certificates of deposit |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
As of March 31, 2026 and June 30, 2025, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $
At March 31, 2026, the scheduled maturities of certificates of deposit are as follows:
|
| (In thousands) |
| |
Year ending March 31, 2027 |
| $ |
| |
Year ending March 31, 2028 |
|
|
| |
Year ending March 31, 2029 |
|
|
| |
Year ending March 31, 2030 |
|
|
| |
Year ending March 31, 2031 |
|
|
| |
Total |
| $ |
| |
9. | Borrowings |
The Company can borrow overnight funds from the Federal Home Loan Bank (the "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, 2026 and June 30, 2025, the Company's maximum borrowing capacity at the FHLB was $
At March 31, 2026, the Company had advances of $
18
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of March 31, 2026 and June 30, 2025, the Company's Board of Directors had authorized borrowings of up to $
10. |
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, 2026, total unfunded loan-related commitments, including lines of credit, amounted to $
At June 30, 2025, total unfunded loan-related commitments, including lines of credit, amounted to $
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 adjustments to either increase or decrease the reserve are recognized in non-interest expense in the Consolidated Statements of Income. The Company recorded $
11. | Stock-Based Compensation |
The Company has several compensation and benefit arrangements involving shares of the Company’s stock. Stock-based compensation expense involves the following components for the three and nine month periods ended March 31, 2026, and 2025:
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
| (In thousands, except for share data) |
| |||||||||||||
Fair value of 9,508 and 28,524 shares earned by ESOP participants |
| $ |
|
|
|
|
|
|
|
|
|
| ||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total stock-based compensation expense |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
On November 20, 2024, the Company adopted the SR Bancorp, Inc. 2024 Equity Incentive Plan ("2024 Equity Plan”). The 2024 Equity Plan authorizes
19
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Stock Options
On November 21, 2024, the stockholders of the Company approved the grant of
The following table sets forth information regarding options granted December 17, 2025:
Date of grant | | December 17, 2025 | | |
Options granted | | | | |
Exercise Price | | $ | | |
Vesting period (years) | | | | |
Expiration date | | | ||
Expected Volatility(1) | | | % | |
Expected term (years)(2) | | | | |
Expected dividend yield(3) | | | % | |
Forfeiture rate | | | % | |
Risk free rate of return(4) | | | % | |
Fair value per option | | $ | | |
The following table represents stock option activities for the nine months ended March 31, 2026 and 2025, respectively:
|
| Nine Months Ended March 31, 2026 |
| |||||||||||||
|
|
|
| |
|
|
| |
| Weighted- |
|
|
|
| | |
|
|
|
| |
| Weighted- |
|
| Average |
|
|
|
| | ||
|
|
|
| |
| Average |
|
| Remaining |
|
| Aggregate |
| |||
|
|
|
| |
| Exercise |
|
| Contractual |
|
| Intrinsic |
| |||
|
| Shares |
|
| Price |
|
| Term (years) |
|
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
Balance at beginning of period |
|
|
|
| $ |
|
|
| — |
|
| $ | — |
| ||
Granted |
|
|
|
|
|
|
|
| — |
|
|
| — |
| ||
Exercised |
|
| ( | ) |
|
|
|
|
| — |
|
|
| — |
| |
Forfeited or expired |
|
|
|
|
|
|
|
| — |
|
|
| — |
| ||
Balance at end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
Exercisable at end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
| Nine Months Ended March 31, 2025 |
| |||||||||||||
|
|
|
| |
|
|
| |
| Weighted- |
|
|
|
| | |
|
|
|
| |
| Weighted- |
|
| Average |
|
|
|
| | ||
|
|
|
| |
| Average |
|
| Remaining |
|
| Aggregate |
| |||
|
|
|
| |
| Exercise |
|
| Contractual |
|
| Intrinsic |
| |||
|
| Shares |
|
| Price |
|
| Term (years) |
|
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (In thousands) |
|
Balance at beginning of period |
|
|
|
| $ |
|
|
| — |
|
| $ | — |
| ||
Granted |
|
|
|
|
|
|
|
| — |
|
|
| — |
| ||
Exercised |
|
|
|
|
|
|
|
| — |
|
|
| — |
| ||
Forfeited or expired |
|
|
|
|
|
|
|
| — |
|
|
| — |
| ||
Balance at end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
Exercisable at end of period |
|
|
|
| $ |
|
|
| — |
|
| $ |
| |||
20
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The aggregate intrinsic values in the preceding tables represent the pre-tax intrinsic values calculated by multiplying the number of in the-money shares by the difference between the Company’s closing stock price on the last trading day of the current reporting period and the exercise price.
Restricted Stock Awards
On November 21, 2024, the Company granted
The following table represents information regarding restricted stock award activities for the nine months ended March 31, 2026, and 2025, respectively:
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| March 31, 2026 |
|
| March 31, 2025 |
| ||||||||||
|
|
|
| |
| Weighted- |
|
|
|
| |
| Weighted- |
| ||
|
|
|
| |
| Average |
|
|
|
| |
| Average |
| ||
|
|
|
| |
| Grant Date |
|
|
|
| |
| Grant Date |
| ||
|
| Number |
|
| Fair Value |
|
| Number |
|
| Fair Value |
| ||||
|
| of Shares |
|
| Per Share |
|
| of Shares |
|
| Per Share |
| ||||
Balance at beginning of period-non-vested |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Vested |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at end of period-non-vested |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
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, 2026:
|
|
|
| |
| Weighted |
| |
|
|
|
| |
| Average |
| |
|
|
|
| |
| Period |
| |
|
| Amount |
|
| (years) |
| ||
|
| (In thousands) |
| |||||
Stock options |
| $ |
|
|
|
| ||
Restricted stock awards |
|
|
|
|
|
| ||
Total |
| $ |
|
|
|
| | |
21
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
12. | 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
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
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, 2026, the Bank met all capital adequacy requirements to which it is subject. As of March 31, 2026, 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:
|
|
|
|
|
|
|
|
|
| To be Well |
| |||||
|
|
|
|
|
|
|
|
|
| Capitalized |
| |||||
|
|
|
|
|
|
|
|
|
| under Prompt |
| |||||
|
|
|
|
|
|
|
|
|
| Corrective |
| |||||
|
| Actual |
|
| Action Provisions |
| ||||||||||
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||
|
| (In thousands) |
| |||||||||||||
March 31, 2026: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to average total assets) |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
June 30, 2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to average total assets) |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
22
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
13. | 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. 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.
For financial assets measured at fair value on a recurring basis as of March 31, 2026 and June 30, 2025, the fair value measurements by level within the fair value hierarchy used are as follows:
|
| March 31, 2026 |
| |||||||||||||
Description |
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
|
| Total |
| ||||
|
| (In thousands) |
| |||||||||||||
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| | June 30, 2025 | | |||||||||||||
Description | | (Level 1) | | | (Level 2) | | | (Level 3) | | | Total | | ||||
| | (In thousands) | | |||||||||||||
Equity securities | | | | | | | | | | | | | ||||
Total | | $ | | | $ | | | $ | | | $ | | ||||
23
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Equity 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).
There were no transfers between levels within the fair value hierarchy during the nine months ended March 31, 2026 and 2025.
Financial Assets Measured at Fair Value on a Nonrecurring Basis
There were no financial assets measured at fair value on a nonrecurring basis at March 31, 2026 and June 30, 2025.
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.
Carrying amounts and estimated fair value measurements by level within the fair value hierarchy of the Company's financial instruments used at March 31, 2026 and June 30, 2025 were as follows:
|
| March 31, 2026 |
| |||||||||||||||||
|
| Carrying |
|
| Fair |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Description |
| Value |
|
| Value |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| |||||
|
| (In thousands) |
| |||||||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Securities held-to-maturity, at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Restricted equity securities, at cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans receivable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accrued interest receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
24
Table of Contents
SR Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
| | June 30, 2025 | | |||||||||||||||||
| | Carrying | | | Fair | | | | | | | | | | | | | | ||
Description | | Value | | | Value | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |||||
| | (In thousands) | | |||||||||||||||||
Financial Assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | | $ | | | $ | | | $ | | |||||
Securities held-to-maturity, at amortized cost | | | | | | | | | | | | | | | | |||||
Restricted equity securities, at cost | | | | | | | | | | | | | | | | |||||
Loans receivable, net | | | | | | | | | | | | | | | | |||||
Accrued interest receivable | | | | | | | | | | | | | | | | |||||
Financial Liabilities: | | | | | | | | | | | | | | | | | | | | |
Deposits | | | | | | | | | | | | | | | | |||||
Borrowings | | | | | | | | | | | | | | | | |||||
Securities Held-to-Maturity
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.
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 market interest rates for loans with similar terms to borrowers of similar quality and incorporates estimates of future loan prepayments.
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.
25
Table of Contents
Item 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, 2026 and the results of operations for the three and nine months ended March 31, 2026 and 2025 should be read in conjunction with the Consolidated audited Financial Statements, including notes thereto, and the other information therein included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2025, as filed with the Securities and Exchange Commission, and in conjunction with the Consolidated Statements of Financial Condition as of March 31, 2026, the Consolidated Statements of Income, the Consolidated Statements of Comprehensive Income, the Consolidated Statements of Changes in Stockholders’ Equity and the Consolidated Statements of Cash Flows for the nine months ended March 31, 2026 and 2025. The Consolidated Statement of Financial Condition as of June 30, 2025 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, 2025. As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” 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 condition and 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, and/or increase the level of defaults, losses and prepayments on loans we have made and make; |
|
• |
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; |
|
• |
fluctuations in real estate values and both residential and commercial real estate market conditions; |
26
Table of Contents
|
• |
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 and any retaliatory responses; |
|
• |
the impact of any federal government shutdown; |
|
• |
changes in the quality or composition of our loan or investment portfolios; |
|
• |
technological changes that may be more difficult or expensive than expected to implement; |
|
• |
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.
27
Table of Contents
Critical Accounting Policies
Certain of our accounting policies are material 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.
Management believes our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are 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 asset.
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 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 on 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 amount 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.
28
Table of Contents
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, then goodwill is impaired and written down to its estimated fair value. If the estimated fair value of the reporting unit less than the carrying value, then goodwill is impaired and is written down to its estimated fair value.
During the year ended June 30, 2025, 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, 2025. As of March 31, 2026, 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, 2026 and June 30, 2025
Total Assets. Total assets increased $59.0 million, or 5.4%, to $1.14 billion at March 31, 2026 from $1.08 billion at June 30, 2025. The increase was driven by new loan originations, resulting in a net increase of $61.9 million in loans receivable, as well as an increase in cash and cash equivalents of $5.9 million primarily due to an increase in deposits and borrowings, partially offset by a decrease of $7.0 million in securities held-to-maturity.
Cash and Cash Equivalents. Cash and cash equivalents increased $5.9 million, or 10.2%, to $63.7 million at March 31, 2026 from $57.8 million at June 30, 2025 due to an increase in deposits and borrowings from the Federal Home Loan Bank of New York.
Securities. Securities held-to-maturity decreased $7.0 million, or 5.0%, to $134.8 million at March 31, 2026 from $141.8 million at June 30, 2025. The decrease was primarily due to principal repayments and maturities, partially offset by the purchase of a $6.0 million subordinated note issued by another financial institution.
Loans. Loans receivable, net, increased $61.9 million, or 7.8%, to $859.1 million at March 31, 2026 from $797.2 million at June 30, 2025, driven by commercial loan growth of $33.9 million, residential mortgage loan growth of $27.0 million and consumer loan growth of $1.0 million as a result of strong market demand.
29
Table of Contents
Bank Owned Life Insurance. Bank owned life insurance increased $1.5 million, or 4.1%, to $38.1 million at March 31, 2026 from $36.6 million at June 30, 2025 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 acquisition of Regal Bancorp in September 2023 totaled $25.8 million at March 31, 2026 compared to $26.7 million at June 30, 2025. The decrease was due to the amortization of the core deposit intangible asset.
Total Liabilities. Total liabilities increased $68.4 million, or 7.7%, to $959.0 million at March 31, 2026 from $890.6 million at June 30, 2025. The increase was primarily due to a $48.3 million increase in deposits and a $20.0 million increase in borrowings from the Federal Home Loan Bank of New York.
Deposits. Deposits increased $48.3 million, or 5.7%, to $894.3 million at March 31, 2026 from $846.0 million at June 30, 2025. Increases in interest-bearing deposit accounts were driven by the Bank having raised rates on certain interest-bearing deposit accounts in an effort to remain competitive in the market area, resulting in increases in the balances of demand deposits and certificates of deposit, while the balance of savings and club accounts decreased. At March 31, 2026, $111.3 million, or 12.4%, of total deposits consisted of noninterest-bearing deposits. At March 31, 2026, $164.6 million, or 18.4%, of total deposits were uninsured.
Borrowings. During the nine months ended March 31, 2026, the Company borrowed an additional $20.0 million from the Federal Home Loan Bank of New York to provide additional liquidity to fund new loans. At March 31, 2026 and 2025, the Company had $50.0 million and $30.0 million in outstanding borrowings, respectively.
Total Equity. Total equity decreased $9.3 million, or 4.8%, to $184.5 million at March 31, 2026 from $193.8 million at June 30, 2025. The decrease was primarily due to the repurchase of 761,229 shares of common stock at a cost of $12.3 million and cash dividends of $0.15 per share at a cost of $1.2 million, partially offset by net earnings of $2.4 million.
Lending Activities
We offer a variety of loans, including residential, commercial real estate, multi-family, commercial and industrial and consumer loans. At March 31, 2026, residential mortgage loans comprised 52.7% of our total loan portfolio and commercial loans comprised 45.7%, which consisted largely 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, 2026 |
|
|
June 30, 2025 |
|
||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Owner occupied commercial real estate loans |
|
$ | 52,240 |
|
|
|
6.06 |
% |
|
$ | 55,127 |
|
|
|
6.89 |
% |
Other commercial real estate loans |
|
|
91,822 |
|
|
|
10.65 |
% |
|
|
72,542 |
|
|
|
9.07 |
% |
Multi-family loans |
|
|
233,285 |
|
|
|
27.05 |
% |
|
|
219,934 |
|
|
|
27.48 |
% |
Commercial and industrial loans |
|
|
16,418 |
|
|
|
1.90 |
% |
|
|
12,253 |
|
|
|
1.53 |
% |
Total commercial loans |
|
|
393,765 |
|
|
|
45.66 |
% |
|
|
359,856 |
|
|
|
44.97 |
% |
Residential mortgage loans |
|
|
454,463 |
|
|
|
52.70 |
% |
|
|
427,345 |
|
|
|
53.40 |
% |
Consumer and other loans |
|
|
14,076 |
|
|
|
1.64 |
% |
|
|
13,038 |
|
|
|
1.63 |
% |
Total loans |
|
|
862,304 |
|
|
|
100.00 |
% |
|
|
800,239 |
|
|
|
100.00 |
% |
Allowance for credit losses |
|
|
(5,667) |
|
|
|
|
|
|
|
(5,362 |
) |
|
|
|
|
Deferred loan costs, net |
|
|
2,416 |
|
|
|
|
|
|
|
2,289 |
|
|
|
|
|
Loans receivable, net |
|
$ | 859,053 |
|
|
|
|
|
|
$ | 797,166 |
|
|
|
|
|
30
Table of Contents
Contractual Maturities. The following tables set forth the contractual maturities of our total loan portfolio at March 31, 2026. 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 |
|
|
Other |
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Commercial |
|
|
Commercial |
|
|
Multi- |
|
|
and |
|
|
Residential |
|
|
Consumer |
|
|
|
|
|
||||||
|
|
Real Estate |
|
|
Real Estate |
|
|
Family |
|
|
Industrial |
|
|
Mortgage |
|
|
and Other |
|
|
Total |
|
|||||||
|
|
(In thousands) |
|
|||||||||||||||||||||||||
Amounts due in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less |
|
$ | — |
|
|
$ | 1,195 |
|
|
$ | 3,717 |
|
|
$ | 1,929 |
|
|
$ | 285 |
|
|
$ | 8,677 |
|
|
$ | 15,803 |
|
After one through five years |
|
|
599 |
|
|
|
4,220 |
|
|
|
20,530 |
|
|
|
10,141 |
|
|
|
9,620 |
|
|
|
701 |
|
|
|
45,811 |
|
After five through 15 years |
|
|
14,711 |
|
|
|
29,805 |
|
|
|
71,622 |
|
|
|
2,145 |
|
|
|
68,227 |
|
|
|
4,438 |
|
|
|
190,948 |
|
More than 15 years |
|
|
36,930 |
|
|
|
56,602 |
|
|
|
137,416 |
|
|
|
2,203 |
|
|
|
376,331 |
|
|
|
260 |
|
|
|
609,742 |
|
Total |
|
$ | 52,240 |
|
|
$ | 91,822 |
|
|
$ | 233,285 |
|
|
$ | 16,418 |
|
|
$ | 454,463 |
|
|
$ | 14,076 |
|
|
$ | 862,304 |
|
Fixed Versus Adjustable-Rate Loans. The following tables set forth our fixed and adjustable-rate loans at March 31, 2026 that are contractually due after March 31, 2027.
|
|
Due After March 31, 2027 |
|
|||||||||
|
|
Fixed |
|
|
Adjustable |
|
|
Total |
|
|||
|
|
(In thousands) |
|
|||||||||
Owner occupied commercial real estate loans |
|
$ | — |
|
|
$ | 52,240 |
|
|
$ | 52,240 |
|
Other commercial real estate loans |
|
|
— |
|
|
|
90,627 |
|
|
|
90,627 |
|
Multi-family loans |
|
|
— |
|
|
|
229,568 |
|
|
|
229,568 |
|
Commercial and industrial loans |
|
|
— |
|
|
|
14,489 |
|
|
|
14,489 |
|
Total commercial loans |
|
$ | — |
|
|
$ | 386,924 |
|
|
$ | 386,924 |
|
Residential mortgage loans |
|
|
337,308 |
|
|
|
116,870 |
|
|
|
454,178 |
|
Consumer and other loans |
|
|
2,964 |
|
|
|
2,435 |
|
|
|
5,399 |
|
Total loans |
|
$ | 340,272 |
|
|
$ | 506,229 |
|
|
$ | 846,501 |
|
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 90th 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. All monitored loans, including those rated special mention, substandard, doubtful or loss, are reported to the Board of Directors on a quarterly basis. In addition, management presents a quarterly credit loss allowance analysis to our Board of Directors.
31
Table of Contents
The following table sets forth our loan delinquencies by type and amount at the dates indicated.
|
|
March 31, 2026 |
|
|||||||||||||||||||||||||
|
|
Delinquency Status |
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
90 Days or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More Past |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Still |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
||
|
|
30-59 Days |
|
|
60-89 Days |
|
|
Accruing |
|
|
Non- |
|
|
Past |
|
|
Total |
|
|
|
|
|
||||||
|
|
Past Due |
|
|
Past Due |
|
|
Past Due |
|
|
Accrual |
|
|
Due |
|
|
Current |
|
|
Total |
|
|||||||
|
|
(In thousands) |
|
|||||||||||||||||||||||||
Owner occupied commercial real estate |
|
$ | — |
|
|
$ | — |
|
|
$ | — |
|
|
$ | — |
|
|
$ | — |
|
|
$ | 52,240 |
|
|
$ | 52,240 |
|
Other commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91,822 |
|
|
|
91,822 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
233,285 |
|
|
|
233,285 |
|
Commercial and industrial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,418 |
|
|
|
16,418 |
|
Residential mortgage |
|
|
1,149 |
|
|
|
733 |
|
|
|
112 |
|
|
|
— |
|
|
|
1,994 |
|
|
|
452,469 |
|
|
|
454,463 |
|
Consumer and other |
|
|
88 |
|
|
|
— |
|
|
|
64 |
|
|
|
— |
|
|
|
152 |
|
|
|
13,924 |
|
|
|
14,076 |
|
Total |
|
$ | 1,237 |
|
|
$ | 733 |
|
|
$ | 176 |
|
|
$ | — |
|
|
$ | 2,146 |
|
|
$ | 860,158 |
|
|
$ | 862,304 |
|
|
|
June 30, 2025 |
|
|||||||||||||||||||||||||
|
|
Delinquency Status |
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
90 Days or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More Past |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Still |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
||
|
|
30-59 Days |
|
|
60-89 Days |
|
|
Accruing |
|
|
Non- |
|
|
Past |
|
|
Total |
|
|
|
|
|
||||||
|
|
Past Due |
|
|
Past Due |
|
|
Past Due |
|
|
Accrual |
|
|
Due |
|
|
Current |
|
|
Total |
|
|||||||
|
|
(In thousands) |
|
|||||||||||||||||||||||||
Owner occupied commercial real estate |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
55,127 |
|
|
$ |
55,127 |
|
Other commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
72,542 |
|
|
|
72,542 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
219,934 |
|
|
|
219,934 |
|
Commercial and industrial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,253 |
|
|
|
12,253 |
|
Residential mortgage |
|
|
1,467 |
|
|
|
478 |
|
|
|
— |
|
|
|
— |
|
|
|
1,945 |
|
|
|
425,400 |
|
|
|
427,345 |
|
Consumer and other |
|
|
67 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67 |
|
|
|
12,971 |
|
|
|
13,038 |
|
Total |
|
$ |
1,534 |
|
|
$ |
478 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,012 |
|
|
$ |
798,227 |
|
|
$ |
800,239 |
|
The Bank had no loan modifications to borrowers experiencing financial difficulty as of March 31, 2026 or June 30, 2025.
Non-Performing Assets. The Bank had no non-performing assets as of March 31, 2026 and June 30, 2025.
32
Table of Contents
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 historic losses 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 for the year ended June 30, 2025 and in this Form 10-Q. The allowance for credit losses as of March 31, 2026 and June 30, 2025 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, 2026 |
|
|||||||||||||
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL |
|
|
Percent |
|
|
|
|
|
||
|
|
|
|
|
|
in Each |
|
|
of Loans |
|
|
|
|
|
||
|
|
|
|
|
|
Category |
|
|
in Each |
|
|
|
|
|
||
|
|
|
|
|
|
to Total |
|
|
Category |
|
|
|
|
|
||
|
|
|
|
|
|
Allocated |
|
|
to Total |
|
|
ACL to |
|
|||
|
|
ACL |
|
|
Allowance |
|
|
Loans |
|
|
Total Loans |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Owner occupied commercial real estate loans |
|
$ | 519 |
|
|
|
9.16 |
% |
|
|
6.06 |
% |
|
|
0.06 |
% |
Other commercial real estate loans |
|
|
189 |
|
|
|
3.34 |
|
|
|
10.65 |
|
|
|
0.02 |
|
Multi-family loans |
|
|
1,618 |
|
|
|
28.55 |
|
|
|
27.05 |
|
|
|
0.19 |
|
Commercial and industrial loans |
|
|
178 |
|
|
|
3.14 |
|
|
|
1.90 |
|
|
|
0.02 |
|
Residential mortgage loans |
|
|
2,841 |
|
|
|
50.13 |
|
|
|
52.70 |
|
|
|
0.33 |
|
Consumer and other loans |
|
|
322 |
|
|
|
5.68 |
|
|
|
1.64 |
|
|
|
0.04 |
|
Total allocated allowance |
|
|
5,667 |
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
0.66 |
% |
Allowance to non-performing loans |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans outstanding at the end of the period |
|
|
0.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net (charge-offs) recoveries to average loans outstanding during the period |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Table of Contents
|
|
June 30, 2025 |
|
|||||||||||||
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL |
|
|
Percent |
|
|
|
|
|
||
|
|
|
|
|
|
in Each |
|
|
of Loans |
|
|
|
|
|
||
|
|
|
|
|
|
Category |
|
|
in Each |
|
|
|
|
|
||
|
|
|
|
|
|
to Total |
|
|
Category |
|
|
|
|
|
||
|
|
|
|
|
|
Allocated |
|
|
to Total |
|
|
ACL to |
|
|||
|
|
ACL |
|
|
Allowance |
|
|
Loans |
|
|
Total Loans |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Owner occupied commercial real estate loans |
|
$ |
675 |
|
|
|
12.59 |
% |
|
|
6.89 |
% |
|
|
0.08 |
% |
Other commercial real estate loans |
|
|
179 |
|
|
|
3.34 |
|
|
|
9.07 |
|
|
|
0.02 |
|
Multi-family loans |
|
|
1,830 |
|
|
|
34.13 |
|
|
|
27.48 |
|
|
|
0.23 |
|
Commercial and industrial loans |
|
|
135 |
|
|
|
2.52 |
|
|
|
1.53 |
|
|
|
0.02 |
|
Residential mortgage loans |
|
|
2,308 |
|
|
|
43.04 |
|
|
|
53.40 |
|
|
|
0.29 |
|
Consumer and other loans |
|
|
235 |
|
|
|
4.38 |
|
|
|
1.63 |
|
|
|
0.03 |
|
Total allocated allowance |
|
|
5,362 |
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
0.67 |
% |
Allowance to non-performing loans |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance to total loans outstanding at the end of the period |
|
|
0.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net (charge-offs) recoveries to average loans outstanding during the period |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2026 and June 30, 2025, our investment portfolio consisted entirely 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, 2026:
|
|
March 31, 2026 |
|
|||||||||
|
|
Held to Maturity |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Amortized |
|
|
Fair |
|
|
Average |
|
|||
|
|
Cost |
|
|
Value |
|
|
Yield |
|
|||
|
|
(In thousands) |
|
|||||||||
Due within one year |
|
$ | 5,200 |
|
|
$ | 4,875 |
|
|
|
2.93 |
% |
Due after one year through five years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Due after five years through ten years |
|
|
6,000 |
|
|
|
6,028 |
|
|
|
7.75 |
% |
Due after ten years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issued by FNMA and FHLMC |
|
|
121,669 |
|
|
|
104,459 |
|
|
|
1.64 |
% |
Issued by GNMA |
|
|
183 |
|
|
|
186 |
|
|
|
5.63 |
% |
CMO |
|
|
1,729 |
|
|
|
1,639 |
|
|
|
2.50 |
% |
Total |
|
$ | 134,781 |
|
|
$ | 117,187 |
|
|
|
1.98 |
% |
For additional information regarding our investment securities portfolio, see Note 3 to the Notes to Financial Statements.
34
Table of Contents
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, 2026 and June 30, 2025, we held $28.9 million and $31.8 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, 2026 and June 30, 2025, 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, our profitability, 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, 2026 |
|
|
June 30, 2025 |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
||
|
|
Amount |
|
|
Percent |
|
|
Rate |
|
|
Amount |
|
|
Percent |
|
|
Rate |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Noninterest-bearing demand deposits |
|
$ | 111,260 |
|
|
|
12.44 |
% |
|
|
— |
% |
|
$ | 114,107 |
|
|
|
13.49 |
% |
|
|
— |
% |
Interest-bearing demand deposits |
|
|
372,800 |
|
|
|
41.68 |
|
|
|
2.10 |
|
|
|
319,829 |
|
|
|
37.80 |
|
|
|
1.88 |
|
Savings and club accounts |
|
|
127,768 |
|
|
|
14.29 |
|
|
|
0.06 |
|
|
|
143,881 |
|
|
|
17.01 |
|
|
|
0.07 |
|
Time deposits |
|
|
282,512 |
|
|
|
31.59 |
|
|
|
3.31 |
|
|
|
268,205 |
|
|
|
31.70 |
|
|
|
3.52 |
|
Total |
|
$ | 894,340 |
|
|
|
100.00 |
% |
|
|
|
|
|
$ | 846,022 |
|
|
|
100.00 |
% |
|
|
|
|
As of March 31, 2026 and June 30, 2025, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $164.6 million and $145.3 million, respectively. In addition, as of March 31, 2026 and June 30, 2025, the aggregate amount of all our uninsured certificates of deposit was $31.1 million and $24.9 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 totaling $26.5 million and $31.8 million at March 31, 2026, and June 30, 2025, respectively, 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, 2026 |
|
|
June 30, 2025 |
|
||
|
|
(In thousands) |
|
|||||
Maturity Period: |
|
|
|
|
|
|
|
|
Three months or less |
|
$ | 5,425 |
|
|
$ | 8,473 |
|
Over three through six months |
|
|
8,352 |
|
|
|
6,530 |
|
Over six through twelve months |
|
|
16,087 |
|
|
|
7,479 |
|
Over twelve months |
|
|
1,201 |
|
|
|
2,467 |
|
Total |
|
$ | 31,065 |
|
|
$ | 24,949 |
|
35
Table of Contents
Comparison of Operating Results for the Three Months Ended March 31, 2026 and 2025
General. Net income increased $349,000, or 65.0%, to $886,000 for the three months ended March 31, 2026 compared to net income of $537,000 for the three months ended March 31, 2025. Net income for the three months ended March 31, 2026 and 2025 included $142,000 and $575,000, respectively, of net accretion income related to fair value adjustments resulting from the acquisition of Regal Bancorp in September 2023.
Interest Income. Interest income increased $992,000, or 8.6%, to $12.5 million for the three months ended March 31, 2026 from $11.5 million for the three months ended March 31, 2025, due to a $21.5 million increase in the average balance of interest-earning assets and a 29 basis point increase in the yield. These increases resulted from a $1.0 million, or 9.9%, increase in interest income on loans and a $43,000, or 7.2%, increase in interest income on securities, partly offset by a $77,000, or 14.3%, decrease in interest income on interest-bearing deposits at other banks. The increase in interest income on loans was primarily due to a $70.0 million increase in the average balance of loans from $778.5 million for the three months ended March 31, 2025 to $848.5 million for the three months ended March 31, 2026. The increase in interest income on securities was due to a 23 basis point increase in the yield, partially offset by a $9.4 million decrease in the average balance. The decrease in interest income on interest-bearing deposits at other banks was due to a $39.0 million decrease in the average balance of deposits.
Interest Expense. Interest expense increased $363,000, or 8.4%, to $4.7 million for the three months ended March 31, 2026 from $4.3 million for the three months ended March 31, 2025, due to a $68.4 million increase in the average balance of interest-bearing liabilities. The increase in the average balance was primarily due to an increase of $61.0 million, or 20.0%, in the average balance of interest-bearing demand deposits and a $20.0 million, or 66.7%, increase in the average balance of borrowings for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, partially offset by a decrease of $23.2 million in the average balance of savings and club accounts. The increase in interest expense was offset by a one basis point decrease in the average cost of interest-bearing deposits, which was primarily due to a 40 basis point decrease in the average rate of certificates of deposit offset by 22 basis point increase in the average rate of interest-bearing demand deposits to 1.97% for the three months ended March 31, 2026 from 1.75% for the three months ended March 31, 2025, resulting from competitively priced rates.
Net Interest Income. Net interest income increased $629,000, or 8.8%, to $7.8 million for the three months ended March 31, 2026 from $7.2 million for the three months ended March 31, 2025. Net interest rate spread increased 30 basis points to 2.55% for the three months ended March 31, 2026 from 2.25% for the three months ended March 31, 2025. Net interest margin increased 18 basis points to 3.00% for the three months ended March 31, 2026 from 2.82% for the three months ended March 31, 2025. Net interest-earning assets decreased $46.9 million, or 18.1%, to $211.9 million for the three months ended March 31, 2026 from $258.8 million for the three months ended March 31, 2025. The increase in the Company’s net interest rate spread and net interest margin were primarily a result of an increase in the yield on interest-earning assets and the decrease in the cost of interest-bearing liabilities.
36
Table of Contents
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 $59,000 and $101,000 for the three months ended March 31, 2026 and 2025, respectively.
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
||||
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
||||
|
|
Balance |
|
|
Interest |
|
|
Rate(1) |
|
|
Balance |
|
|
Interest |
|
|
Rate(1) |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ | 848,537 |
|
|
|
11,372 |
|
|
|
5.36 |
% |
|
$ | 778,572 |
|
|
|
10,346 |
|
|
|
5.32 |
% |
Securities |
|
|
140,205 |
|
|
|
643 |
|
|
|
1.83 |
% |
|
|
149,628 |
|
|
|
600 |
|
|
|
1.60 |
% |
Other |
|
|
51,389 |
|
|
|
460 |
|
|
|
3.58 |
% |
|
|
90,478 |
|
|
|
537 |
|
|
|
2.37 |
% |
Total interest-earning assets |
|
|
1,040,131 |
|
|
|
12,475 |
|
|
|
4.80 |
% |
|
|
1,018,678 |
|
|
|
11,483 |
|
|
|
4.51 |
% |
Noninterest-earning assets |
|
|
90,133 |
|
|
|
|
|
|
|
|
|
|
|
47,157 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ | 1,130,264 |
|
|
|
|
|
|
|
|
|
|
$ | 1,065,835 |
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and club accounts |
|
$ | 128,529 |
|
|
|
19 |
|
|
|
0.06 |
% |
|
$ | 151,684 |
|
|
|
23 |
|
|
|
0.06 |
% |
Interest-bearing demand accounts |
|
|
365,857 |
|
|
|
1,798 |
|
|
|
1.97 |
% |
|
|
304,808 |
|
|
|
1,332 |
|
|
|
1.75 |
% |
Certificates of deposit |
|
|
283,855 |
|
|
|
2,380 |
|
|
|
3.35 |
% |
|
|
273,339 |
|
|
|
2,561 |
|
|
|
3.75 |
% |
Total interest-bearing deposits |
|
|
778,241 |
|
|
|
4,197 |
|
|
|
2.16 |
% |
|
|
729,831 |
|
|
|
3,916 |
|
|
|
2.15 |
% |
Federal Home Loan Bank advances |
|
|
50,000 |
|
|
|
465 |
|
|
|
3.72 |
% |
|
|
30,000 |
|
|
|
383 |
|
|
|
5.11 |
% |
Total interest-bearing liabilities |
|
|
828,241 |
|
|
|
4,662 |
|
|
|
2.25 |
% |
|
|
759,831 |
|
|
|
4,299 |
|
|
|
2.26 |
% |
Noninterest-bearing deposits |
|
|
103,743 |
|
|
|
|
|
|
|
|
|
|
|
104,850 |
|
|
|
|
|
|
|
|
|
Other noninterest-bearing liabilities |
|
|
4,329 |
|
|
|
|
|
|
|
|
|
|
|
11,715 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
936,313 |
|
|
|
|
|
|
|
|
|
|
|
876,396 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
193,951 |
|
|
|
|
|
|
|
|
|
|
|
189,439 |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ | 1,130,264 |
|
|
|
|
|
|
|
|
|
|
$ | 1,065,835 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
|
7,813 |
|
|
|
|
|
|
|
|
|
|
|
7,184 |
|
|
|
|
|
Net interest rate spread (1) |
|
|
|
|
|
|
|
|
|
|
2.55 |
% |
|
|
|
|
|
|
|
|
|
|
2.25 |
% |
Net interest-earning assets (2) |
|
$ | 211,890 |
|
|
|
|
|
|
|
|
|
|
$ | 258,847 |
|
|
|
|
|
|
|
|
|
Net interest margin (3) |
|
|
|
|
|
|
|
|
|
|
3.00 |
% |
|
|
|
|
|
|
|
|
|
|
2.82 |
% |
Average interest-earning assets to interest-bearing liabilities |
|
|
125.58 |
% |
|
|
|
|
|
|
|
|
|
|
134.07 |
% |
|
|
|
|
|
|
|
|
(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. |
37
Table of Contents
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, |
|
|||||||||
|
|
2026 vs. 2025 |
|
|||||||||
|
|
Increase (Decrease) |
|
|||||||||
|
|
Volume |
|
|
Rate |
|
|
Total Change |
|
|||
|
|
(In thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ | 930 |
|
|
$ | 96 |
|
|
$ | 1,026 |
|
Securities |
|
|
(38 |
) |
|
|
81 |
|
|
|
43 |
|
Other |
|
|
(232 |
) |
|
|
155 |
|
|
|
(77 |
) |
Total interest-earning assets |
|
|
660 |
|
|
|
332 |
|
|
|
992 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Savings and club accounts |
|
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
Interest-bearing accounts |
|
|
267 |
|
|
|
199 |
|
|
|
466 |
|
Certificates of deposit |
|
|
99 |
|
|
|
(280 |
) |
|
|
(181 |
) |
Federal Home Loan Bank advances |
|
|
255 |
|
|
|
(173 |
) |
|
|
82 |
|
Total interest-bearing liabilities |
|
|
617 |
|
|
|
(254 |
) |
|
|
363 |
|
Change in net interest income |
|
$ | 43 |
|
|
$ | 586 |
|
|
$ | 629 |
|
Provision for Credit Losses. The Company 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 Company considers, among other factors, past and current loss experience, evaluations of real estate collateral, economic conditions, the type and amount of lending, adverse situations that may affect a borrower’s repayment capacity, while adjusting for delinquency trends, classified or criticized loans, and other risk factors. The allowance is developed using reasonable and supportable forecasts and quantitative modeling techniques, combined with qualitative factors to address risks not captured in historical data, including emerging loan products or localized economic changes. Actual losses may vary from such estimates as more information becomes available or conditions change. The Company assesses the allowance for credit losses and records provisions for credit losses in the income statement on a quarterly basis.
The Company recorded a provision for credit losses of $84,000 during the three months ended March 31, 2026 reflecting the loan growth during the period, compared to a provision for credit losses of $37,000 for the three months ended March 31, 2025. The Company had no charge-offs for the three months ended March 31, 2026 or 2025, respectively. The Company had no non-performing loans at March 31, 2026 or March 31, 2025. The Company’s allowance for credit losses as a percentage of total loans was 0.66% at March 31, 2026 compared to 0.65% at March 31, 2025.
38
Table of Contents
Noninterest Income. Noninterest income was as follows:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Service charges and fees on deposits |
|
$ | 218 |
|
|
$ | 230 |
|
|
$ | (12 |
) |
|
|
(5.2 |
)% |
Increase in cash surrender value of bank-owned life insurance |
|
|
263 |
|
|
|
259 |
|
|
|
4 |
|
|
|
1.5 |
% |
Fees and service charges on loans |
|
|
35 |
|
|
|
35 |
|
|
|
— |
|
|
|
— |
|
Unrealized (loss) gain on equity securities |
|
|
(9) |
|
|
|
3 |
|
|
|
(12 |
) |
|
|
(400.0 |
)% |
Realized gain on sale of loans |
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Other |
|
|
26 |
|
|
|
14 |
|
|
|
12 |
|
|
|
85.7 |
% |
Total noninterest income |
|
$ | 545 |
|
|
$ | 541 |
|
|
$ | 4 |
|
|
|
0.7 |
% |
Noninterest income increased $4,000, or 0.7%, to $545,000 for the three months ended March 31, 2026 from $541,000 for the three months ended March 31, 2025 primarily due to an increase in the cash surrender value of bank owned life insurance of $4,000 and an increase in the gain on sale of loans of $12,000, offset by a decrease in service charges and fees of $12,000.
Noninterest Expense. Noninterest expense was as follows:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Salaries and employee benefits |
|
$ | 3,999 |
|
|
$ | 3,681 |
|
|
$ | 318 |
|
|
|
8.6 |
% |
Occupancy |
|
|
590 |
|
|
|
557 |
|
|
|
33 |
|
|
|
5.9 |
% |
Furniture and equipment |
|
|
325 |
|
|
|
346 |
|
|
|
(21 |
) |
|
|
(6.1 |
)% |
Data processing |
|
|
516 |
|
|
|
552 |
|
|
|
(36 |
) |
|
|
(6.5 |
)% |
Advertising |
|
|
119 |
|
|
|
97 |
|
|
|
22 |
|
|
|
22.7 |
% |
FDIC premiums |
|
|
120 |
|
|
|
120 |
|
|
|
— |
|
|
|
— |
|
Directors fees |
|
|
100 |
|
|
|
93 |
|
|
|
7 |
|
|
|
7.5 |
% |
Professional fees |
|
|
421 |
|
|
|
467 |
|
|
|
(46 |
) |
|
|
(9.9 |
)% |
Insurance |
|
|
115 |
|
|
|
133 |
|
|
|
(18 |
) |
|
|
(13.5 |
)% |
Telephone, postage and supplies |
|
|
166 |
|
|
|
197 |
|
|
|
(31 |
) |
|
|
(15.7 |
)% |
Other |
|
|
635 |
|
|
|
819 |
|
|
|
(184 |
) |
|
|
(22.5 |
)% |
Total noninterest expense |
|
$ | 7,106 |
|
|
$ | 7,062 |
|
|
$ | 44 |
|
|
|
0.6 |
% |
Noninterest expense increased $44,000, or 0.6%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to a $318,000, or 8.6%, increase in salaries and employee benefits expense driven by annual merit increases and the recognition of employee stock-based compensation during the three months ended March 31, 2026 compared to a partial period of expense during the three months ended March 31, 2025, offset by decreases in professional fees of $46,000 and other expenses of $184,000, primarily driven by a decrease of $65,000 in the amortization expense of the core deposit intangible asset.
Income Tax Expense. The provision for income taxes was $282,000 for the three months ended March 31, 2026 compared to $89,000 for the three months ended March 31, 2025. The Company’s effective tax rate was 24.1% for the three months ended March 31, 2026 compared to 14.2% for the three months ended March 31, 2025. The higher effective rate was due to the non-deductibility of expenses related to incentive stock options.
39
Table of Contents
Comparison of Operating Results for the Nine Months Ended March 31, 2026 and 2025
General. Net income decreased $512,000, or 17.5%, to $2.4 million for the nine months ended March 31, 2026 compared to net income of $2.9 million for the nine months ended March 31, 2025. Net income for the nine months ended March 31, 2026 and 2025 included $647,000 and $2.4 million, respectively, of net accretion income related to fair value adjustments resulting from the acquisition of Regal Bancorp in September 2023.
Interest Income. Interest income increased $2.2 million, or 6.5%, to $36.7 million for the nine months ended March 31, 2026 from $34.5 million for the nine months ended March 31, 2025 due to a $15.1 million increase in the average balance of interest-earning assets, and a 22 basis point increase in the yield. The increase resulted from a $2.5 million, or 8.0%, increase in interest income on loans, offset by a $181,000, or 11.5%, decrease in interest income on interest-bearing deposits at other banks and an $87,000, or 4.7%, decrease in interest income on securities. The increase in interest income on loans was due to a $64.1 million increase in the average balance of loans from $765.9 million for the nine months ended March 31, 2025 to $830.0 million for the nine months ended March 31, 2026. The decrease in interest income on securities was primarily due to a $12.8 million decrease in the average balance of securities resulting from maturities and repayments. The decrease in interest income on interest-bearing deposits at other banks was due to a $36.1 million decrease in the average balance, offset by a 141 basis point increase in the yield.
Interest Expense. Interest expense increased $1.0 million, or 8.4%, to $13.5 million for the nine months ended March 31, 2026 from $12.5 million for the nine months ended March 31, 2025, due to a $61.0 million increase in the average balance of interest-bearing liabilities. The increase in the average balance was due to an increase of $63.5 million, or 22.1%, in the average balance of interest-bearing demand deposits and a $20.3 million, or 91.3%, increase in the average balance of borrowings for the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025, partially offset by a decrease of $23.7 million in the average balance of savings and club accounts. The increase in interest expense was offset by a 49 basis point decrease in the average rate of certificates of deposits offset by a 30 basis point increase in the average rate of interest-bearing demand deposits to 1.93% for the nine months ended March 31, 2026 from 1.63% for the nine months ended March 31, 2025 resulting from competitively priced rates.
Net Interest Income. Net interest income increased $1.2 million, or 5.4%, to $23.2 million for the nine months ended March 31, 2026 from $22.0 million for the nine months ended March 31, 2025. Net interest rate spread increased 22 basis points to 2.56% for the nine months ended March 31, 2026 from 2.34% for the nine months ended March 31, 2025. Net interest margin increased 11 basis points to 3.04% for the nine months ended March 31, 2026 from 2.93% for the nine months ended March 31, 2025. Net interest-earning assets decreased $45.9 million, or 17.5%, to $216.3 million for the nine months ended March 31, 2026 from $262.2 million for the nine months ended March 31, 2025. The increase in the Company’s net interest rate spread and net interest margin were primarily a result of an increase in the yield on interest-earning assets.
40
Table of Contents
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 $226,000 and $168,000 for the nine months ended March 31, 2026 and 2025, respectively.
|
|
Nine Months Ended March 31, |
|
|||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
||||
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
||||
|
|
Balance |
|
|
Interest |
|
|
Rate(1) |
|
|
Balance |
|
|
Interest |
|
|
Rate(1) |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ | 830,039 |
|
|
|
33,563 |
|
|
|
5.39 |
% |
|
$ | 765,989 |
|
|
|
31,069 |
|
|
|
5.41 |
% |
Securities |
|
|
140,661 |
|
|
|
1,761 |
|
|
|
1.67 |
% |
|
|
153,419 |
|
|
|
1,848 |
|
|
|
1.61 |
% |
Other |
|
|
47,518 |
|
|
|
1,397 |
|
|
|
3.92 |
% |
|
|
83,665 |
|
|
|
1,578 |
|
|
|
2.51 |
% |
Total interest-earning assets |
|
|
1,018,218 |
|
|
|
36,721 |
|
|
|
4.81 |
% |
|
|
1,003,073 |
|
|
|
34,495 |
|
|
|
4.59 |
% |
Noninterest-earning assets |
|
|
91,709 |
|
|
|
|
|
|
|
|
|
|
|
48,887 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ | 1,109,927 |
|
|
|
|
|
|
|
|
|
|
$ | 1,051,960 |
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and club accounts |
|
$ | 132,028 |
|
|
|
107 |
|
|
|
0.11 |
% |
|
$ | 155,746 |
|
|
|
71 |
|
|
|
0.06 |
% |
Interest-bearing demand accounts |
|
|
350,646 |
|
|
|
5,080 |
|
|
|
1.93 |
% |
|
|
287,152 |
|
|
|
3,500 |
|
|
|
1.63 |
% |
Certificates of deposit |
|
|
276,765 |
|
|
|
7,085 |
|
|
|
3.41 |
% |
|
|
275,776 |
|
|
|
8,065 |
|
|
|
3.90 |
% |
Total interest-bearing deposits |
|
|
759,439 |
|
|
|
12,272 |
|
|
|
2.15 |
% |
|
|
718,674 |
|
|
|
11,636 |
|
|
|
2.16 |
% |
Federal Home Loan Bank advances |
|
|
42,481 |
|
|
|
1,248 |
|
|
|
3.92 |
% |
|
|
22,206 |
|
|
|
842 |
|
|
|
5.06 |
% |
Total interest-bearing liabilities |
|
|
801,920 |
|
|
|
13,520 |
|
|
|
2.25 |
% |
|
|
740,880 |
|
|
|
12,478 |
|
|
|
2.25 |
% |
Noninterest-bearing deposits |
|
|
106,225 |
|
|
|
|
|
|
|
|
|
|
|
104,975 |
|
|
|
|
|
|
|
|
|
Other noninterest-bearing liabilities |
|
|
7,677 |
|
|
|
|
|
|
|
|
|
|
|
13,921 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
915,822 |
|
|
|
|
|
|
|
|
|
|
|
859,776 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
194,105 |
|
|
|
|
|
|
|
|
|
|
|
192,184 |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ | 1,109,927 |
|
|
|
|
|
|
|
|
|
|
$ | 1,051,960 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
|
23,201 |
|
|
|
|
|
|
|
|
|
|
|
22,017 |
|
|
|
|
|
Net interest rate spread (1) |
|
|
|
|
|
|
|
|
|
|
2.56 |
% |
|
|
|
|
|
|
|
|
|
|
2.34 |
% |
Net interest-earning assets (2) |
|
$ | 216,298 |
|
|
|
|
|
|
|
|
|
|
$ | 262,193 |
|
|
|
|
|
|
|
|
|
Net interest margin (3) |
|
|
|
|
|
|
|
|
|
|
3.04 |
% |
|
|
|
|
|
|
|
|
|
|
2.93 |
% |
Average interest-earning assets to interest-bearing liabilities |
|
|
126.97 |
% |
|
|
|
|
|
|
|
|
|
|
135.39 |
% |
|
|
|
|
|
|
|
|
(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. |
41
Table of Contents
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, |
|
|||||||||
|
|
2026 vs. 2025 |
|
|||||||||
|
|
Increase (Decrease) |
|
|||||||||
|
|
Volume |
|
|
Rate |
|
|
Total Change |
|
|||
|
|
(In thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ | 2,598 |
|
|
$ | (104 |
) |
|
$ | 2,494 |
|
Securities |
|
|
(154 |
) |
|
|
67 |
|
|
|
(87 |
) |
Other |
|
|
(682 |
) |
|
|
501 |
|
|
|
(181 |
) |
Total interest-earning assets |
|
|
1,762 |
|
|
|
464 |
|
|
|
2,226 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Savings and club accounts |
|
|
(11 |
) |
|
|
47 |
|
|
|
36 |
|
Interest-bearing accounts |
|
|
774 |
|
|
|
806 |
|
|
|
1,580 |
|
Certificates of deposit |
|
|
29 |
|
|
|
(1,009 |
) |
|
|
(980 |
) |
Federal Home Loan Bank advances |
|
|
769 |
|
|
|
(363 |
) |
|
|
406 |
|
Total interest-bearing liabilities |
|
|
1,561 |
|
|
|
(519 |
) |
|
|
1,042 |
|
Change in net interest income |
|
$ | 201 |
|
|
$ | 983 |
|
|
$ | 1,184 |
|
Provision for Credit Losses. The Company recorded a provision for credit losses of $305,000 during the nine months ended March 31, 2026 reflecting the loan growth during the period, compared to a recovery for credit losses of $105,000 for the nine months ended March 31, 2025, which reflected updates made to certain qualitative factors in the calculation of the Company’s allowance. The Company had no charge-offs for the nine months ended March 31, 2026 or 2025, respectively. The Company had no non-performing loans at March 31, 2026 or March 31, 2025. The Company’s allowance for credit losses as a percentage of total loans was 0.66% at March 31, 2026 compared to 0.65% at March 31, 2025.
Noninterest Income. Noninterest income was as follows:
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Service charges and fees on deposits |
|
$ | 672 |
|
|
$ | 782 |
|
|
$ | (110 |
) |
|
|
(14.1 |
)% |
Increase in cash surrender value of bank-owned life insurance |
|
|
796 |
|
|
|
783 |
|
|
|
13 |
|
|
|
1.7 |
% |
Fees and service charges on loans |
|
|
90 |
|
|
|
128 |
|
|
|
(38 |
) |
|
|
(29.7 |
)% |
Unrealized (loss) gain on equity securities |
|
|
(13 |
) |
|
|
7 |
|
|
|
(20 |
) |
|
|
(285.7 |
)% |
Realized gain on sale of loans |
|
|
29 |
|
|
|
51 |
|
|
|
(22 |
) |
|
|
(43.1 |
)% |
Other |
|
|
117 |
|
|
|
214 |
|
|
|
(97 |
) |
|
|
(45.3 |
)% |
Total noninterest income |
|
$ | 1,691 |
|
|
$ | 1,965 |
|
|
$ | (274 |
) |
|
|
(13.9 |
)% |
42
Table of Contents
Noninterest income decreased $274,000, or 13.9%, to $1.7 million for the nine months ended March 31, 2026 from $2.0 million for the nine months ended March 31, 2025, primarily due to a decrease in service charges and fees of $110,000 and a decrease in other income of $97,000 during the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025.
Noninterest Expense. Noninterest expense was as follows:
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Salaries and employee benefits |
|
$ | 11,776 |
|
|
$ | 10,288 |
|
|
$ | 1,488 |
|
|
|
14.5 |
% |
Occupancy |
|
|
1,657 |
|
|
|
1,681 |
|
|
|
(24 |
) |
|
|
(1.4 |
)% |
Furniture and equipment |
|
|
990 |
|
|
|
924 |
|
|
|
66 |
|
|
|
7.1 |
% |
Data processing |
|
|
1,565 |
|
|
|
1,642 |
|
|
|
(77 |
) |
|
|
(4.7 |
)% |
Advertising |
|
|
361 |
|
|
|
264 |
|
|
|
97 |
|
|
|
36.7 |
% |
FDIC premiums |
|
|
360 |
|
|
|
360 |
|
|
|
— |
|
|
|
— |
% |
Directors fees |
|
|
298 |
|
|
|
287 |
|
|
|
11 |
|
|
|
3.8 |
% |
Professional fees |
|
|
1,366 |
|
|
|
1,423 |
|
|
|
(57 |
) |
|
|
(4.0 |
)% |
Insurance |
|
|
366 |
|
|
|
451 |
|
|
|
(85 |
) |
|
|
(18.8 |
)% |
Telephone, postage and supplies |
|
|
535 |
|
|
|
569 |
|
|
|
(34 |
) |
|
|
(6.0 |
)% |
Other |
|
|
2,162 |
|
|
|
2,497 |
|
|
|
(335 |
) |
|
|
(13.4 |
)% |
Total noninterest expense |
|
$ | 21,436 |
|
|
$ | 20,386 |
|
|
$ | 1,050 |
|
|
|
5.2 |
% |
Noninterest expense increased $1.1 million, or 5.2%, to $21.4 million for the nine months ended March 31, 2026 from $20.3 million for the nine months ended March 31, 2025 predominantly due to a $1.5 million, or 14.5%, increase in salaries and employee benefits expense driven by the recognition of stock-based compensation during the nine months ended March 31, 2026 compared to a partial period of expense during the nine months ended March 31, 2025, as well annual merit increases in employee compensation. The increase in salaries and employee benefits was partially offset by decreases of $77,000 in data processing expenses, $85,000 in insurance expenses and $335,000 in other expenses, primarily driven by a decrease of $204,000 in the amortization expense of the core deposit intangible asset.
Income Tax Expense. The provision for income taxes was $738,000 for the nine months ended March 31, 2026, compared to $776,000 for the nine months ended March 31, 2025. The Company’s effective tax rate was 23.4% for the nine months ended March 31, 2026 compared to 21.0% for the nine months ended March 31, 2025.
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 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.
43
Table of Contents
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; |
|
• |
emphasize higher-yielding, shorter-term commercial real estate loans; |
|
• |
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, 2026, 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, 2026 |
|
||||||||||||
Change in Interest Rates |
|
|
|
|
|
|
Estimated Increase (Decrease) in EVE |
|
|||||
(basis points)(1) |
|
|
Estimated EVE(2) |
|
|
Amount |
|
|
Percent |
|
|||
(In thousands) |
|
||||||||||||
+400 |
|
|
$ | 139,950 |
|
|
$ | (72,559) |
|
|
|
(34.14 |
)% |
+300 |
|
|
|
160,912 |
|
|
|
(51,597) |
|
|
|
(24.28 |
)% |
+200 |
|
|
|
180,096 |
|
|
|
(32,414) |
|
|
|
(15.25 |
)% |
+100 |
|
|
|
197,384 |
|
|
|
(15,126) |
|
|
|
(7.12 |
)% |
— |
|
|
|
212,509 |
|
|
|
— |
|
|
|
— |
|
-100 |
|
|
|
224,419 |
|
|
|
11,910 |
|
|
|
5.60 |
% |
-200 |
|
|
|
232,069 |
|
|
|
19,560 |
|
|
|
9.20 |
% |
-300 |
|
|
|
236,248 |
|
|
|
23,739 |
|
|
|
11.17 |
% |
-400 |
|
|
|
232,741 |
|
|
|
20,231 |
|
|
|
9.52 |
% |
(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, 2026, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 15.25% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 9.20% increase in EVE.
44
Table of Contents
Change in Net Interest Income. The following table sets forth, at March 31, 2026, 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, 2026 |
|
||||||||||||||||
Change in Interest |
|
|
Net Interest |
|
|
Year 1 |
|
|
Net Interest |
|
|
Year 2 |
|
||||
Rates |
|
|
Income Year 1 |
|
|
Change |
|
|
Income Year 2 |
|
|
Change |
|
||||
(basis points)(1) |
|
|
Forecast |
|
|
From Level |
|
|
Forecast |
|
|
From Level |
|
||||
(In thousands) |
|
||||||||||||||||
+400 |
|
|
$ | 28,852 |
|
|
$ | (4,664) |
|
|
$ | 32,779 |
|
|
$ | (2,555) |
|
+300 |
|
|
|
30,301 |
|
|
|
(3,215) |
|
|
|
34,036 |
|
|
|
(1,299) |
|
+200 |
|
|
|
31,559 |
|
|
|
(1,956) |
|
|
|
34,864 |
|
|
|
(471) |
|
+100 |
|
|
|
32,630 |
|
|
|
(885) |
|
|
|
35,285 |
|
|
|
(49) |
|
— |
|
|
|
33,515 |
|
|
|
— |
|
|
|
35,334 |
|
|
|
— |
|
-100 |
|
|
|
33,731 |
|
|
|
216 |
|
|
|
34,181 |
|
|
|
(1,153) |
|
-200 |
|
|
|
33,641 |
|
|
|
125 |
|
|
|
32,474 |
|
|
|
(2,860) |
|
-300 |
|
|
|
33,250 |
|
|
|
(266) |
|
|
|
30,350 |
|
|
|
(4,985) |
|
-400 |
|
|
|
32,055 |
|
|
|
(1,461) |
|
|
|
27,157 |
|
|
|
(8,177) |
|
The table above indicates that at March 31, 2026, we would have experienced a 6.19% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 0.37% 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 and security repayments and maturity of 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 15%. At March 31, 2026, this ratio was 7.1%. We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of March 31, 2026.
We regularly adjust our investments in liquid assets based upon our assessment of:
|
• |
expected loan demand; |
|
• |
expected deposit flows; |
|
• |
yields available on interest-earning deposits and securities; and |
|
• |
the objectives of our asset/liability management program. |
Excess cash is invested generally in interest-earning deposits and short- and intermediate-term securities.
45
Table of Contents
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, 2026, cash and cash equivalents totaled $63.7 million.
At March 31, 2026, we had $29.5 million in outstanding loan commitments and $43.0 million of unused lines of credit. Certificates of deposit due within one year of March 31, 2026 totaled $258.6 million, or 28.9% 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, 2027. 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 securities. During the nine months ended March 31, 2026, we originated $102.5 million of loans and purchased an additional $26.7 million. During the nine months ended March 31, 2026, we purchased a $6.0 million fixed-to-floating rate subordinated note from another financial institution classified as a security held-to-maturity.
Financing activities consist primarily of activity in deposit accounts, borrowings and repurchases of common stock. Deposits increased $48.3 million, or 5.7%, to $894.3 million at March 31, 2026 from $846.0 million at June 30, 2025 due primarily to increases in interest-bearing deposit accounts resulting from the Bank having raised rates on certain interest-bearing deposit accounts in an effort to remain competitive in the market area, offset in part by decreases in non-maturity savings accounts.
We had outstanding borrowings of $50.0 million as of March 31, 2026 and $30.0 million as of June 30, 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, 2026, Somerset Regal Bank exceeded all regulatory capital requirements. Somerset Regal Bank is considered “well capitalized” under regulatory guidelines. See Note 12 of the Notes to the Consolidated Financial Statements.
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 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.
46
Table of Contents
Item 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.”
Item 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, expect as discussed below, the Company's Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Previously Identified Material Weakness
As reported in our Annual Report on Form 10-K filed with the SEC on September 29, 2025, we identified a material weakness in internal controls related to the untimely recognition of income from life insurance contracts resulting from the death of a former employee. The identified material weakness resulted in a material misstatement in the Company’s consolidated financial statements for the year ended June 30, 2025. We have implemented remedial changes to improve our internal control over financial reporting as described below.
Remediation Plan
Since identifying the material weakness, management, under the oversight of the Audit Committee, has instituted a new reconciliation control to address the above control deficiency. The deficiency originated from differences in the contract balances reported by our bank-owned life insurance (“BOLI”) administrator as compared to the underlying insurance carriers. The new control requires that in the event of a death of an individual insured by any active BOLI policies, management will obtain the death benefit information for which it is contractually entitled to receive from the insurance carriers and reconcile such information to the BOLI administrator records. All required entries will be recorded in the period in which the death occurred. Management believes the foregoing efforts will effectively remediate the material weakness. As management continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.
Changes in Internal Control over Financial Reporting
Other than as noted above, 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, 2026 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
47
Table of Contents
PART II—OTHER INFORMATION
Item 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.
Item 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, 2025.
Item 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, 2026. The table below summarizes the number of shares of the Company’s common stock that were repurchased during the three months ended March 31, 2026.
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Shares |
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Number of |
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Purchased |
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Shares that |
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as Part of |
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May Yet Be |
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Number |
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Publicly |
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Purchased |
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of Shares |
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Average |
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Announced |
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Under the |
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Purchased |
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Price Paid |
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Program |
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Program |
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(1) |
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per Share |
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(1) |
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(1) |
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January 1 - January 31, 2026 |
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78,701 |
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$ | 16.41 |
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78,701 |
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355,536 |
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February 1 - February 28, 2026 |
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118,409 |
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17.21 |
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118,409 |
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237,127 |
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March 1 - March 31, 2026 |
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98,417 |
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16.71 |
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98,417 |
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138,710 |
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Three months ended March 31, 2026 |
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295,527 |
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295,527 |
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(1) |
On July 8, 2025, the Company’s Board of Directors approved the repurchase of 886,137 shares, or approximately 10.0% of the Company’s common stock outstanding. The stock repurchase plan has a one-year expiration term. The Board of Directors has the right to suspend or discontinue the plan at any time. |
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2026, 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.
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Table of Contents
Item 6. Exhibits.
Exhibit Number |
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Description |
3.1 |
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Amended and Restated Articles of Incorporation of SR Bancorp, Inc. (Incorporated by reference to the Registrant's Registration Statement on Form S-1/A (File No. 333-270489) as filed on July 10, 2023) |
3.2 |
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Amended and Restated Bylaws of SR Bancorp, Inc. (Incorporated by reference to the Registrant's Annual Report on Form 10-K (File No. 001-41808) filed on September 28, 2023) |
31.1* |
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Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
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Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
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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 |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
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Table of Contents
SIGNATURES
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.
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SR Bancorp, Inc. |
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Date: May 15, 2026 |
By: |
/s/ Christopher J. Pribula |
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Christopher J. Pribula |
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President and Chief Executive Officer |
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Date: May 15, 2026 |
By: |
/s/ Harris M. Faqueri |
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Harris M. Faqueri |
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Senior Vice President and |
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Chief Financial Officer |
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