What changed in this filing

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Item 1. Business

2025-09-29 compared with 2024-10-16 · 90 added, 111 removed, 596 unchanged (25% of the section changed)

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SR Bancorp does not own or lease any property but instead uses the premises, equipment and other property of Somerset Regal Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement.

At June 30, 2024, SR Bancorp had total assets of $1.02 billion, deposits of $807.1 million and total equity of $199.5 million.

At June 30, 2025, SR Bancorp had total assets of $1.08 billion, deposits of $846.0 million and total stockholders' equity of $193.8 million.

The Company became the holding company for Somerset Regal Bank as part of the mutual-to-stock conversion of Somerset Savings Bank, SLA as described below.

However, as of June 30, 2023, the conversion had not been completed.

Accordingly, the financial and other information contained in this document at and for the year ended June 30, 2023 is for Somerset Savings Bank, SLA, unless indicated otherwise.

In the future, SR Bancorp may acquire or organize other entities or operating subsidiaries;

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Our website address is www.somersetregalbank.com.

We plan to make available on our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Information on our website should not be considered a part of this document.

We make available on our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Information on our website is not to be considered a part of this document.

Somerset Regal Bank.

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The market areas served by Somerset Regal Bank have highly developed and diverse economies.

Pharmaceutical, financial services, professional services and retail companies are among the largest employers in the counties served by Somerset Regal Bank.

Employment data shows that jobs in services and education/healthcare/social services accounted for the largest and second largest employment sectors, respectively, in the counties and in New Jersey.

Wholesale/retail trade was the third largest employment sector for the counties followed by manufacturing jobs in the counties of Hunterdon, Morris and Somerset.

Finance/insurance/real estate was the fourth largest employment sector for the counties of Essex, Middlesex and the State of New Jersey.

Transportation/utility jobs were the fourth largest employment sector for Union County.

Pharmaceutical, life sciences, financial services, technology and transportation and logistics companies are among the largest employment sectors in the counties served by Somerset Regal Bank.

Population and household data indicate that the market areas served by Somerset Regal Bank’s branches are a mix of urban and suburban markets.

Middlesex County is the most populous county with a total population of 890,000, while Hunterdon County is the least populous county with a total population of 132,000.

For the 2017 to 2022 period, Essex County recorded the strongest population growth with an annual growth rate of 0.9%.

Comparatively, Middlesex County recorded the slowest population growth over the past five years, with an annual growth rate of 0.3%.

Five-year annual population growth rates for the U.S.

and New Jersey equaled 0.6% and 0.7%, respectively.

Income measures show that the counties of Hunterdon, Morris and Somerset are relatively affluent markets, with household and per capita income measures that are well above the comparable U.S.

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Comparatively, household and per capita income measures for Essex County are the lowest among the primary area counties, which were also lower than the comparable New Jersey measures and similar to the comparable U.S.

The primary market area counties experienced income growth rates that were slightly lower than the comparable state and national growth rates for the 2017 through 2022 period.

A comparison of household income distribution measures provides another indication of the relative affluence of Hunterdon, Morris and Somerset Counties, which maintained significantly higher percentages of households with incomes above $100,000 compared to the U.S and New Jersey.

None of the primary market area counties maintained a lower percentage of households with incomes above $100,000 compared to the U.S, while Essex County and Union County maintained a lower percentage of households with incomes above $100,000 compared to New Jersey.

None of the primary market area counties maintained a lower percentage of households with incomes above $100,000 compared to the U.S, while Essex, Middlesex and Union Counties maintained a lower percentage of households with incomes above $100,000 compared to New Jersey.

At June 30, 2025, Somerset Regal Bank maintained its largest balance of deposits in Somerset County, where it maintains its headquarters and maintains its largest branch presence.

Based on June 30, 2024 deposit data, Somerset Regal Bank’s $353.1 million of deposits provided for a 2.0% market share of bank and thrift deposits in Somerset County, which was the tenth largest market share out of 20 financial institutions in the market.

We face significant competition for the attraction of deposits and origination of loans.

Based on June 30, 2025 deposit data, Somerset Regal Bank’s $364.6 million of deposits provided for a 2.1% market share of bank and thrift deposits in Somerset County, which was the nineth largest market share out of 20 financial institutions in the market.

We face significant competition for deposits and loans.

Our most direct competition for deposits has historically come from the many financial institutions operating in our market area, including commercial banks, savings banks, savings and loan associations and credit unions, and from other financial service companies such as brokerage firms and insurance companies.

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At June 30, 2025, residential mortgage loans comprised 53.4% of our total loan portfolio and commercial loans comprised 45.0%, which largely consisted of multi-family loans.

We did not participate in the Paycheck Protection Program administered by the U.S.

Small Business Administration.

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.

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The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate loans

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Actual maturities may differ.

(Dollars in thousands)

(In thousands)

Amounts due in:

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Due After June 30, 2026

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate loans

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One- to Four Family-Residential Mortgage Loans .

We offer two types of residential mortgage loans:

fixed-rate loans and adjustable-rate loans.

We offer fixed-rate mortgage loans with terms of up to 30 years.

We offer fixed- and adjustable-rate residential mortgage loans with terms of up to 30 years.

We offer adjustable-rate mortgage loans with interest rates and payments that adjust annually after an initial fixed period of three, five or six years.

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The relative amount of fixed-rate and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment.

The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

The loan fees, interest rates and other provisions of mortgage loans are determined based on our own pricing criteria and competitive market conditions.

While one- to four-family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan.

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We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser.

We require title insurance on all first mortgage loans, and borrowers

must obtain hazard insurance.

We require title insurance on all first mortgage loans, and borrowers must obtain hazard insurance.

Additionally, we require flood insurance for loans on properties located in a flood zone and may require such insurance on properties not located in a flood zone.

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An increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment, however, could cause an increase in delinquencies and defaults.

To mitigate the risk of an increase to a monthly mortgage payment of an adjustable-rate loan, which could result in an increase to delinquencies and defaults, we adhere to strict underwriting guidelines by initially qualifying a borrower at a higher interest rate.

To mitigate this risk, we adhere to strict underwriting guidelines by initially qualifying a borrower at a higher interest rate.

The marketability of the underlying property also may be adversely affected in a high interest rate environment.

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Multi-Family and Commercial Real Estate Loans .

At June 30, 2024, we had $316.1 million in multi-family and commercial real estate loans, representing 43.0% of our total loan portfolio.

At June 30, 2025, multi-family real estate loans totaled $219.9 million, which represented 27.5% of our total loan portfolio.

Our multi-family real estate loans are generally secured by properties consisting of five or more rental units within our market area.

We originate multi-family real estate loans with adjustable interest rates with maturities and amortization periods generally of up to 30 years.

Interest rates on our multi-family real estate loans are generally indexed to the five-year United States Treasury Note rate, plus a margin, subject to an interest rate floor.

Adjustment periods are generally every five years.

2025, our largest multi-family real estate loan totaled $7.9 million and was secured by a non-owner-occupied multi-family apartment building located in our primary market area.

At June 30, 2025, this loan was performing in accordance with its original terms.

At June 30, 2025, we had $127.7 million in commercial real estate loans, representing 16.0% of our total loan portfolio.

Our commercial real estate loans are secured primarily by office buildings, industrial facilities, retail facilities and other commercial properties, substantially all of which are located in our primary market area.

At June 30, 2024, commercial real estate loans totaled $135.8 million, of which $60.0 million was owner-occupied real estate and $75.8 million was secured by income producing, or non-owner-occupied real estate.

At June 30, 2025, $55.1 million of our commercial real estate loans was secured by owner occupied real estate and $72.5 million was secured by other commercial real estate.

We generally originate commercial real estate loans with maximum maturities and amortizations of up to 30 years and loan-to-value ratios of up to 75% of the appraised value of the collateral property on purchases and up to 70% of the appraised value of the collateral property on refinances.

Our commercial real estate loans are offered with adjustable interest rates, which generally adjust every three, five, seven and ten years with the interest rate indexed to the five-year United States Treasury Note rate, plus a margin, subject to an interest rate floor.

Our commercial real estate loans are offered with adjustable interest rates, which generally adjusts every five years with the interest rate indexed to the five-year United States Treasury Note rate, plus a margin, subject to an interest rate floor.

All of our commercial real estate loans are subject to our underwriting procedures and guidelines, including requiring borrowers to generally establish a deposit relationship with us typically in the form of an operating account and/or tenant security accounts.

At June 30, 2024, our largest commercial real estate loan totaled $6.0 million and was secured by a non-owner-occupied multi-family apartment building located in our primary market area.

At June 30, 2024, this loan was performing in accordance with its original terms.

At June 30, 2025, our largest commercial real estate loan totaled had an outstanding balance of $4.7 million and was secured by a non-owner-occupied commercial building located in our primary market area.

At June 30, 2025, this loan was performing according to its original terms.

We consider a number of factors in originating commercial real estate loans.

We evaluate the qualifications, experience and financial condition of the borrower (including credit history), the value and condition of the mortgaged property securing the loan, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions.

In evaluating the property securing the loan, among other factors, we consider the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 1.25x of the monthly debt service, and the ratio of the loan amount to the appraised value of the mortgaged property.

We evaluate the qualifications, experience and financial condition of the borrower (including credit history), the value and condition of the property securing the loan, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions.

In evaluating the property securing the loan, among other factors, we consider the net operating income of the property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 1.25x of the monthly debt service, and the ratio of the loan amount to the appraised value of the property.

Our commercial real estate loans are generally appraised by outside independent appraisers approved by the board of directors.

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Each borrower’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates.

At June 30, 2024, multi-family real estate loans totaled $180.4 million, which represented 24.5% of our total loan portfolio.

Our multi-family real estate loans are generally secured by properties consisting of five or more rental units within our market area.

We originate multi-family real estate loans with adjustable interest rates with maturities and amortization periods generally of up to 30 years.

Interest rates on our multi-family real estate loans are generally indexed to the 5-year United States Treasury Note rate, plus a margin, subject to an interest rate floor.

Adjustment periods are generally every three, five, seven and ten years.

At June 30, 2024, our largest multi-family real estate loan had an outstanding balance of $6.0 million and was secured by a non-owner-occupied multi-family apartment building located in our primary market area.

At June 30, 2024, this loan was performing according to its original terms.

In underwriting multi-family real estate loans, we require a debt service coverage ratio of at least 1.25x and consider several factors, including the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties.

Multi-family residential real estate purchase loans have loan-to-value ratios of up to 75% of the appraised value of the property securing the loans and up to 70% of the appraised value of the collateral property on refinances.

Multi-family real estate loans have loan-to-value ratios of up to 75% of the appraised value of the property securing the loans and up to 70% of the appraised value of the collateral property on refinances.

All of our multi-family real estate loans are subject to our underwriting procedures and guidelines, including requiring borrowers to generally establish a deposit relationship with us typically in the form of an operating account and/or tenant security accounts.

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Our C&I loans, specifically SBA loans, are generally used for working capital purposes or for acquiring real estate, equipment, inventory or furniture.

Our C&I loan portfolio consists of a mix of secured loans and unsecured loans.

Our C&I loan portfolio consists of a mix of secured and unsecured loans.

Generally, secured loans underwritten through the SBA program can have a loan-to-value ratio of up to 90% of the real estate collateral securing the loan.

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Commercial loans typically have shorter terms to maturity and higher interest rates than commercial real estate loans.

When making C&I loans outside of the SBA program, we require a debt service coverage ratio of at least 1.25x and, for C&I loans secured by real estate, a loan-to-value ratio of up to 75% of the real estate collateral securing the loan.

We review and consider the financial statements of the borrower, our lending history with the borrower, the borrower’s debt service capabilities, and the value of the collateral.

We generally do not make unsecured C&I loans and, if unsecured, typically we secure real estate collateral as an abundance of caution.

Personal guarantees are obtained from C&I borrowers.

At June 30, 2024, our largest C&I loan totaled $1.3 million on a line of credit with a total available draw of $1.5 million, and was secured by an owner-occupied commercial building.

We generally do not make unsecured C&I loans and, if unsecured, personal guarantees are typically obtained from C&I borrowers.

At June 30, 2025, our largest C&I loan totaled $1.5 million on a line of credit with a total available draw of $212,000, and was secured by an owner occupied commercial building.

At June 30, 2025, this loan was performing in accordance with its contractual terms.

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Unsecured loans generally entail greater risk than do residential mortgage loans.

Such loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors,

including job loss, divorce, illness or personal bankruptcy.

Such loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy.

Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

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At June 30, 2025, our largest lending relationship was comprised of five loans with an aggregate total of $12.5 million to related borrowers.

The loans consisted of one non-owner occupied commercial building, one commercial and industrial term loan, and three multi-family buildings.

These loans were performing in accordance with their terms at June 30, 2025.

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If necessary, subsequent late charges and delinquency notices are issued and the account will be monitored on a regular basis thereafter.

By the 90 th day of delinquency, we will send the borrower a final demand for payment, after which we

may refer the loan to legal counsel to commence foreclosure proceedings.

By the 90 th day of delinquency, we will send the borrower a final demand for payment, after which we may refer the loan to legal counsel to commence foreclosure proceedings.

Any of our loan officers can shorten these time frames in consultation with the senior lending officer.

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June 30, 2025

Delinquency Status

90 Days or More Past Due and Still Accruing

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Total Current

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate

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June 30, 2024

Delinquency Status

90 Days or More Past Due and Still Accruing

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Total Current

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate

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Non-Performing Assets.

The following table sets forth information regarding our non-performing assets.The Bank had no troubled debt restructurings as of June 30, 2024 and June 30, 2023.

(Dollars in thousands)

The following table sets forth information regarding our non-performing assets.

The Bank had no troubled debt restructurings as of June 30, 2025 and June 30, 2024.

(In thousands)

Non-accrual loans:

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June 30, 2025

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate

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June 30, 2024

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate

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Allowance for Credit Losses

Our allowance for credit losses ("ACL") is maintained at a level necessary to absorb credit losses that are both probable and reasonably estimable.

Our allowance for credit losses ("ACL") is maintained at a level necessary to absorb current expected credit losses.

Management, in determining the allowance for credit losses, considers the losses in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions.

A description of our methodology in establishing our allowance for credit losses is set forth in the section “ Management’s Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Critical Accounting Policies-Allowance for Credit Losses .” The allowance for credit losses as of June 30, 2024 was maintained at a level that represents management’s best estimate of losses in the loan portfolio, and such losses were both probable and reasonably estimable.

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 probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

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 .” The allowance for credit losses as of June 30, 2025 was maintained at a level that represents management’s best estimate of current expected losses in the loan portfolio.

However, this analysis process is 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.

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Year Ended June 30, 2025

(Dollars in thousands)

(In thousands)

Allowance for Credit

Beginning balance

Impact of ASC 326

Provisions (credits)

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Year Ended June 30, 2024

(Dollars in thousands)

(in thousands)

Allowance for Credit

Beginning balance

Impact of ASC 326

Provisions (credits)

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ACL to Total Loans

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate loans

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ACL to Total Loans

(Dollars in thousands)

(In thousands)

Owner occupied commercial real estate loans

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We have authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various U.S.

government sponsored enterprises and federal agencies, mortgage-backed securities and certificates of deposit of federally insured institutions.

government sponsored enterprises and federal agencies, mortgage-backed securities and

certificates of deposit of federally insured institutions.

Within certain regulatory limits, we also may invest a portion of our assets in corporate securities (equity as well as debt) and mutual funds.

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Our Board of Directors reviews the status of our investment portfolio on a quarterly basis.

At June 30, 2024, our investment portfolio consisted solely of securities held-to-maturity, primarily of securities and obligations issued by U.S.

At June 30, 2025, our investment portfolio consisted solely of securities held-to-maturity, primarily securities and obligations issued by U.S.

government-sponsored enterprises totaling $131.9 million, subordinated debentures issued by financial institutions in the Mid-Atlantic region totaling $7.8 million and collateralized mortgage obligations totaling $2.0 million.

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The loans originated had a positive spread differential of approximately 472 basis points over the securities that were sold, which is expected to result in $1.4 million in additional pre-tax earnings, on an annualized basis.

As such, the Company estimates that the loss on the sale of securities will be recouped within approximately 3.23 years.

The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis at June 30, 2025:

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Weighted Average Yield

(Dollars in thousands)

(In thousands)

Due within one year

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Issued by GNMA

For additional information regarding our investment securities portfolio, see Notes 2 and 3 to the Notes to Financial Statements.

For additional information regarding our investment securities portfolio, see Note 4 to the Notes to Financial Statements.

United States Government and Federal Agency Obligations.

While United States Government and federal agency securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

While United States Government and federal agency securities generally provide lower yields than other investments in our securities investment portfolio, we

maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

Mortgage-Backed Securities.

We invest in mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

We invest in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.

We invest in mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.

Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages.

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The following table sets forth the distribution of total deposits by account type at the dates indicated.

(Dollars in thousands)

(In thousands)

Non-interest-bearing demand

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The following table sets forth the maturity of the uninsured certificates of deposit as of June 30, 2025.

(Dollars in thousands)

(In thousands)

Maturity Period:

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Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.

At June 30, 2024 and 2023, we had no outstanding advances from the Federal Home Loan Bank of New York.

At June 30, 2025, the Company had a $30.0 million advance with the Federal Home Loan Bank of New York at a fixed rate of 4.42%, which matured on July 7, 2025.

At June 30, 2024, the Company had no outstanding borrowings.

At June 30, 2025, we had access to Federal Home Loan Bank advances of up to $100.0 million based on our unused qualifying collateral available to support such advances.

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All borrowings are secured by pledges of qualifying loans and investment securities and are generally on overnight terms with interest rates quoted at the time of the borrowing.

At June 30, 2024, we had a no outstanding borrowings with the Federal Reserve Bank of New York.

At June 30, 2023 we had a $20.0 million borrowing with the Federal Reserve Bank under the Bank Term Funding Program.

At June 30, 2025 and 2024, we had a no outstanding borrowings with the Federal Reserve Bank of New York.

Human Capital Resources

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Our management team and employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.

All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and are required to attend annual training to help prevent, identify, report and stop any type of discrimination and harassment.

All our employees must adhere to a code of conduct that sets standards for appropriate behavior and are required to attend annual training to help prevent, identify, report and stop any type of discrimination and harassment.

Recruitment, hiring, development, training, compensation and advancement at our company are based on qualifications, performance, skills and experience without regard to gender, race and ethnicity.

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We sponsor a 401(k) plan and we match employee contributions up to a certain limit.

In addition, nearly all of our employees are stockholders of SR Bancorp through participation in our Employee Stock Ownership Plan, which aligns stockholder interests by providing stock ownership on a tax-deferred basis at no cost to the employee.

In addition, nearly all our employees are stockholders of SR Bancorp through participation in our Employee Stock Ownership Plan, which aligns stockholder interests by providing stock ownership on a tax-deferred basis at no cost to the employee.

Employee Development and Training

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The New Jersey Banking Act imposes conditions and limitations on the liabilities to a bank of its directors and executive officers and of corporations and partnerships controlled by such persons, that are comparable in many respects to the conditions and limitations imposed on the loans and extensions of credit to insiders and their related interests under federal law, as discussed below.

The New Jersey Banking Act also provides that a bank that is in compliance with the Federal Reserve’s Regulation, as discussed below, is deemed to be in compliance with such provisions of the New Jersey Banking Act.

The New Jersey Banking Act also provides that a bank that is in compliance with the Federal Reserve’s Regulation O, as discussed below, is deemed to be in compliance with such provisions of the New Jersey Banking Act.

Under the New Jersey Banking Act, a stock bank may not pay a cash dividend unless, following the payment, the bank’s capital stock will be unimpaired, and the bank will have a surplus of no less than 50% of its capital stock or, if not, the payment of the dividend will not reduce the surplus of the bank.

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Supervision and Enforcement Authority .

Somerset Regal Bank will be subject to extensive regulation, examination and supervision by the FDIC as its primary federal prudential regulator and the insurer of its deposits.

Somerset Regal Bank is subject to extensive regulation, examination and supervision by the FDIC as its primary federal prudential regulator and the insurer of its deposits.

State nonmember banks must file reports with the FDIC concerning their activities and financial condition.

State nonmember banks must also obtain prior FDIC approval before entering into certain corporate transactions such as establishing new branches and mergers with, or acquisitions of, other financial institutions.

There are periodic examinations by the FDIC to evaluate state nonmember bank's safety and soundness and compliance with various regulatory requirements.

There are periodic examinations by the FDIC to evaluate state nonmember banks' safety and soundness and compliance with various regulatory requirements.

The FDIC maintains substantial enforcement authority over regulated institutions.

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Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital.

Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries.

Additional Tier 1 capital generally includes certain non cumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries.

Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital.

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Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset.

type of asset.

Higher levels of capital are required for asset categories believed to present greater risk.

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In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but also qualitative factors.

The FDIC has the authority to establish higher capital requirements for individual institutions were deemed necessary.

The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary.

At June 30, 2025, Somerset Regal Bank exceeded each of its capital requirements.

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The agencies have also established standards for safeguarding customer information.

If the appropriate federal banking agency determines that an institution fails to meet any

standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

Activities and Investments.

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An institution is considered “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater, and a common equity Tier 1 capital ratio of 6.5% or greater.

An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater.

An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 capital ratio of less than 4.5%.

An institution is “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 capital ratio of less than 3.0%.

An institution is “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%.

An institution is considered “adequately capitalized” if it has a total risk-based

capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater, and a common equity Tier 1 capital ratio of 4.5% or greater.

An institution is considered “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0%, or a common equity Tier 1 capital ratio of less than 4.5%.

An institution is considered “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0%, or a common equity Tier 1 capital ratio of less than 3.0%.

An institution is considered “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%.

At June 30, 2025, Somerset Regal Bank was classified as a “well capitalized” institution.

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Loans or other extensions of credit by a bank to an affiliate are required to be collateralized according to the requirements set forth in Section 23A of the Federal Reserve Act.

Section 23B of the Federal Reserve Act applies to “covered transactions,” as well as to certain other transactions, and requires that all such transactions be on terms and under circumstances that are substantially the same, or at least as favorable, to the bank or its subsidiary as those prevailing at the time for comparable transactions with or involving a non-affiliate.

Section 23B of the Federal Reserve Act and Regulation W apply to “covered transactions,” as well as to certain other transactions with or involving affiliates, and requires that all such transactions be on terms and under circumstances that are substantially the same, or at least as favorable, to the bank or its subsidiary as those prevailing at the time for comparable transactions with or involving a non-affiliate.

Transactions covered by Section 23B also include the provision of services and selling of assets by a bank to an affiliate.

Somerset Regal Bank’s loans to its and its affiliates' directors, executive officers and owners of 10% or more of its stock (each, an insider) and entities controlled by such persons (each, a related interest) are subject to the conditions and limitations imposed by Sections 22(g) and 22(h) of the Federal Reserve Act and the Federal Reserve’s Regulation, as made applicable to the Bank by Section 18(j) of the Federal Deposit Insurance Act and FDIC regulations.

Among other things, these provisions generally require that extension of credit to insiders be made on terms that are substantially the same as and follow credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with unaffiliated persons and that such extensions of credit do not involve more than the normal risk of repayment or present other unfavorable features.

In addition, extensions of credit to insiders may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based on a bank’s unimpaired capital and unimpaired surplus.

Somerset Regal Bank’s loans to its directors, executive officers and owners of 10% or more of its stock (each, an insider) and entities controlled by such persons (each, a related interest) are subject to the conditions and limitations imposed by Sections 22(g) and 22(h) of the Federal Reserve Act and the Federal Reserve’s Regulation O, as made applicable to the Bank by Section 18(j) of the Federal Deposit Insurance Act and FDIC regulations.

Among other things, these provisions generally require that extensions of credit to insiders be made on terms that are substantially the same as and follow credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with unaffiliated persons and that such extensions of credit do not involve more than the normal risk of repayment or present other unfavorable features.

In addition, extensions of credit to

insiders may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based on a bank’s unimpaired capital and unimpaired surplus.

Extensions of credit in excess of certain limits must be approved by a majority of the bank’s entire Board of Directors.

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Federal Insurance of Deposit Accounts.

Deposit accounts in Somerset Regal Bank are insured up to a maximum of $250,000 per depositor.

Deposit accounts in Somerset Regal Bank are insured up to a maximum of $250,000 per depositor for each account ownership category.

The FDIC assesses all insured depository institutions.

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The CRA requires the FDIC, in connection with its examination of each state non-member bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to establish branches and acquire other financial institutions.

The CRA and its current regulations require the FDIC to provide a written

evaluation of an institution’s CRA performance utilizing a four- tiered descriptive rating system.

Somerset Regal Bank's most recent FDIC CRA rating, dated May 31, 2022, was “Satisfactory.”

On October 24, 2023, the FDIC and the other federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.

Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank.” The agencies will evaluate intermediate banks under the Retail Lending Test and either the current community development test, referred to in the final rule as the Intermediate Bank Community Development Test, or, at the bank’s option, the Community Development Financing Test.

The applicability date for the majority of the provisions set out in the CRA regulations is January 1, 2026, and additional requirements will be applicable under the regulations on January 1, 2027.

The CRA and its current regulations require the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system.

Somerset Regal Bank's most recent FDIC CRA rating, dated April 7, 2025, was “Satisfactory.”

Federal Home Loan Bank System.

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Acquisition of Holding Company.

Under the Change in Bank Control Act, no person, or group of persons acting in concert, may acquire control of a bank holding company, such as SR Bancorp, unless the Federal Reserve has been given 60 days’ prior written notice and not disapproved the proposed acquisition.

Control, as defined under the Change in Bank Control Act and applicable regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company.

Under the Change in Bank Control Act and its implementing regulations, no person, or group of persons acting in concert, may acquire control of a bank holding company, such as SR Bancorp, unless the Federal Reserve has been given 60 days’ prior written notice and not disapproved the proposed acquisition.

Control, as defined under the Change in Bank Control Act and its regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company.

Acquisition of more than 10% of any class of a bank holding company’s voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as is the case with SR Bancorp, the issuer has registered securities under Section 12 of the Exchange Act.

53 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business