What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-09-29 compared with 2024-10-16 · 73 added, 85 removed, 317 unchanged (33% of the section changed)

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You should read this discussion in conjunction with the SR Bancorp Consolidated Financial Statements and Notes to the Consolidated Financial Statements that appear at the end of this document.

Due to the timing of the stock offering and acquisition noted below, the financial information provided herein as of and for the year ended June 30, 2023 is solely that of Somerset Savings Bank, SLA, and its subsidiaries, unless indicated otherwise.

Conversion, Stock Offering and Merger

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Business Strategy

Our business strategy is to operate and grow a profitable community-oriented financial institution.We plan to achieve this by:

Our business strategy is to operate and grow a profitable community-oriented financial institution.

We plan to achieve this by:

Leveraging our residential and commercial lending expertise to pursue new opportunities to increase lending in our primary market area and expand our existing loan relationships .

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Somerset Regal Bank’s strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate and conservative loan underwriting criteria and active credit monitoring.

At June 30, 2024, Somerset Regal Bank had $50,000 of non-performing loans.

At June 30, 2025, Somerset Regal Bank had no non-performing loans.

Building profitable business and consumer relationships through enhanced product offerings and by continuing to provide superior customer service.

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Total Assets.

Total assets increased $369.4 million, or 56.7%, to $1.02 billion at June 30, 2024 from $651.5 million at June 30, 2023.

The increase was primarily the result of the acquisition of Regal Bancorp, and its wholly-owned subsidiary Regal Bank, on September 19, 2023, which had $427.8 million of assets at the time of the acquisition.

The increase was also due to net proceeds of $86.9 million obtained from the completion of the Company’s stock offering on the same date.

These increases were offset by a $20.0 million repayment of a borrowing and a decrease in deposits due to the interest rate environment and competition in our market area.

Total assets increased $63.6 million, or 6.2%, to $1.08 billion at June 30, 2025 from $1.02 billion at June 30, 2024.

The increase was primarily driven by new loan originations, resulting in a net increase of $65.3 million in loans receivable and an $11.9 million increase in cash and cash equivalents, offset by a $14.3 million decrease in securities.

Cash and Cash Equivalents .

Cash and cash equivalents increased $3.5 million, or 8.2%, to $45.9 million at June 30, 2024 from $42.4 million at June 30, 2023 due to $55.3 million of cash and cash equivalents acquired from

the Regal Bancorp acquisition and the net proceeds of $86.9 million retained from the stock offering, partially offset by $69.5 million paid for the acquisition of Regal Bancorp, offset by a $20.0 million repayment of a borrowing and a decrease in deposits due to the interest rate environment and competition in our market area.

Securities Available-for-Sale .

Following the completion of the Merger, the Company sold $19.2 million of its available-for-sale portfolio, followed by the sale of the remaining $35.4 million of securities-available-for-sale in the fourth quarter of the year ended June 30, 2024 at a loss of $4.4 million as part of its balance sheet restructuring.

The Company held no securities available-for-sale at June 30, 2024.

The Company redeployed the proceeds from the sale of these lower yielding securities into higher yielding loans as part of a balance sheet restructuring strategy.

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.

Cash and cash equivalents increased $11.9 million, or 25.9%, to $57.8 million at June 30, 2025 from $45.9 million at June 30, 2024 primarily due to a $38.9 million increase in deposits, borrowings of $30.0 million from the Federal Home Loan Bank of New York during the year ended June 30, 2025 and the decrease in securities.

Securities Held-to-Maturity .

Securities held-to-maturity decreased $12.9 million, or 7.5%, to $158.3 million at June 30, 2024 from $171.2 million at June 30, 2023 as the maturities of securities during the period more than offset the acquisition of $2.6 million of held-to-maturity securities from the Regal Bancorp acquisition.

Loans receivable, net, increased $369.6 million, or 102.0%, to $731.9 million at June 30, 2024 from $362.3 million at June 30, 2023.

The Company acquired $321.6 million of loans from the Regal Bancorp acquisition, primarily consisting of multi-family and commercial real estate loans.

As a result of the acquisition, the composition of the loan portfolio changed significantly from June 30, 2023.

The percentage of residential mortgage loans to total loans decreased from 97.8% at June 30, 2023 to 53.7% at June 30, 2024.

Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 44.7% of loans at June 30, 2024.

Securities held-to-maturity decreased $14.3 million, or 9.2%, to $141.8 million at June 30, 2025 from $156.1 million at June 30, 2024.

The decrease was primarily due to principal repayments and maturities.

Loans receivable, net, increased $65.3 million, or 8.9%, to $797.2 million at June 30, 2025 from $731.9 million at June 30, 2024, driven by increases in residential mortgage loans of $32.6 million and multi-family loans of $40.0 million.

Bank Owned Life Insurance .

Bank owned life insurance increased $8.4 million, or 29.2%, to $37.1 million at June 30, 2024 from $28.7 million at June 30, 2023.

The increase was primarily the result of the Regal Bancorp acquisition, which had $7.5 million of bank owned life insurance at the time of acquisition.

Bank owned life insurance decreased $486,000, or 1.3%, to $36.6 million at June 30, 2025 from $37.1 million at June 30, 2024.

The reduction was primarily attributable to death benefit proceeds under existing policies.

Goodwill and Intangible Assets .

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Total liabilities increased $69.3 million, or 8.4%, to $890.6 million at June 30, 2025 from $821.4 million at June 30, 2024.

The increase was primarily the result of the Regal Bancorp acquisition, which had $378.7 million of liabilities at the time of the acquisition, offset by a $20.0 million repayment of a borrowing and a decrease in deposits due to the interest rate environment and competition in our market area.

Deposits increased $303.2 million, or 60.2%, to $807.1 million at June 30, 2024 from $503.9 million at June 30, 2023 due primarily to the $371.9 million of deposits assumed from the Regal Bank acquisition offset by a decrease in deposits due to the interest rate environment and competition in our market area.

At the time of the acquisition, Regal Bank’s deposits consisted of $90.8 million of noninterest-bearing deposits, $162.4 million in NOW, money market and savings accounts and $118.7 million of certificates of deposit.

We had no borrowings outstanding at June 30, 2024 as the $20.0 million of borrowings outstanding at June 30, 2023 were repaid during the year ended June 30, 2024.

The increase was primarily the result of an increase in deposits of $38.9 million and an increase in borrowings of $30.0 million.

Deposits increased $38.9 million, or 4.8%, to $846.0 million at June 30, 2025 from $807.1 million at June 30, 2024.

Increases in interest-bearing deposit accounts resulted from the Company having raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area.

At June 30, 2025, $114.1 million, or 13.5%, of total deposits consisted of noninterest-bearing deposits.

At June 30, 2025, $145.4 million, or 17.2%, of total deposits were uninsured.

During the year ended June 30, 2025, the Company borrowed $30.0 million from the Federal Home Loan Bank of New York to provide for additional liquidity to fund new loans.

At June 30, 2024, there were no outstanding borrowings.

Total Equity .

Total equity increased $77.4 million, or 63.4%, to $199.5 million at June 30, 2024 from $122.1 million at June 30, 2023.

The increase resulted primarily from the $86.9 million in net proceeds from the Company’s stock offering and other comprehensive income of $3.8 million, partially offset by the $7.6 million initial funding of the ESOP and a net loss of $10.9 million for the period.

Total equity decreased $5.7 million, or 2.9%, to $193.8 million at June 30, 2025 from $199.5 million at June 30, 2024.

The decrease was primarily due to the repurchase of 936,991 shares of common stock at a cost of $11.3 million, partially offset by net income of $5.1 million.

Comparison of Operating Results for the Years Ended June 30, 2025 and June 30, 2024

The Company recorded a net loss for the year ended June 30, 2024 of $10.9 million, compared to net income of $1.6 million for the year ended June 30, 2023.

The decrease was due primarily to one-time merger-related expenses of $4.4 million, a $4.2 million provision for credit losses, a $5.4 million charitable contribution to establish the Somerset Regal Charitable Foundation and a $4.5 million loss on the sale of available-for-sale securities, partially offset by $4.1 million of net accretion income related to fair value adjustments.

Net income increased $16.0 million to $5.1 million for the year ended June 30, 2025 from a net loss of $10.9 million for the year ended June 30, 2024.

Net income for the year ended June 30, 2025 included $2.8 million of net accretion income related to fair value adjustments resulting from the Merger.

Net loss for the year ended June 30, 2024 included $4.4 million of Merger-related non-interest expenses and a $4.2 million provision for credit losses related to the acquisition of Regal Bancorp, which is described in greater detail below, as well as a $5.4 million charitable contribution to establish the Somerset Regal Charitable Foundation.

In addition, a $4.4 million loss on the sale of available-for-sale securities was incurred during the fourth quarter of fiscal 2024 as part of the balance sheet restructuring strategy.

Excluding the aforementioned one-time expenses, offset by $4.1 million of net accretion income related to fair value adjustments, net income for the year ended June 30, 2024 would have been $1.0 million

Interest Income.

Interest income increased $24.7 million, or 153.5%, to $40.9 million for the year ended June 30, 2024 from $16.1 million for the year ended June 30, 2023.

The increase resulted primarily from a $22.3 million, or 197.1%, increase in interest income on loans and a $2.8 million increase in interest income on interest bearing deposits at other banks, offset by a $482,000, or 13.1%, decrease in interest income on securities.

The average balance of loans increased $282.2 million, or 80.2%, to $634.3 million for the year ended June 30, 2024, compared to $352.1 million for the year ended June 30, 2023.

In addition, the average yield on the loan portfolio increased 209 basis points to 5.30% for the year ended June 30, 2024 from 3.21% for the year ended June 30, 2023, which reflected the higher interest rate environment and the greater proportion of commercial loans in the portfolio.

The decrease in income on securities was primarily due to the sales of $54.6 million of available-for-sale securities during the year as part of a balance sheet restructuring, which resulted in the average balance of securities decreasing $29.1 million, or 13.0%, to $195.8 million for the year ended June 30, 2024, compared to $225.0 million for the year ended June 30, 2023.

The increase in the interest income on interest bearing deposits and federal funds sold was due to a 80 basis point increase in the average yield from 3.64% for the year ended June 30, 2023 to 4.44% for the year ended June 30, 2024, due to the higher interest rate environment, and a $60.4 million, or 196.1%, increase in the average balance from $30.8 million for the year ended June 30, 2023 to $91.2 million for the year ended June 30, 2024 due to excess cash from the merger and the offering.

Interest income increased $5.4 million, or 13.3%, to $46.3 million for the year ended June 30, 2025 from $40.9 million for the year ended June 30, 2024 due to a 15 basis point increase in the yield on interest-earning assets and a $87.9 million increase in the average balance of interest-earning assets.

The increase resulted from a $8.1 million, or 24.0%, increase in interest income on loans due to the increased size of the loan portfolio, as well as a higher average yield on the loan portfolio due to an increased proportion of higher-yielding

commercial real estate loans.

The increase was offset by a $762,000 decrease in interest income on securities and a $1.7 million decrease in interest income from other interest-earning assets due to lower average balances and a lower interest rate environment.

The decrease in interest income on securities was due to a $44.2 million decrease in the average balance of securities, resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of the balance sheet restructuring, and a two basis point decrease in the average yield on securities due to the lower interest rate environment, which was mitigated by the balance sheet restructuring.

Interest Expense.

Interest expense increased $9.1 million or 373.4%, to $11.5 million for the year ended June 30, 2024 from $2.4 million for the year ended June 30, 2023.

The increase in interest expense resulted primarily from an increase in interest expense on certificates of deposits.

The average balance of certificates of deposit increased $100.9 million, or 67.9%, to $249.4 million for the year ended June 30, 2024 from $148.5 million for the year ended June 30, 2023, while the average rate increased 246 basis points to 3.79% for the year ended June 30, 2024 from 1.33% for the year ended June 30, 2023 as the Company increased rates on certificates of deposit to increase deposits and liquidity.

The average balance of interest-bearing demand deposits increased $55.8 million, to $199.2 million for the year ended June 30, 2024 from $143.5 million for the year ended June 30, 2023.

The average rate on interest-bearing demand deposits increased 49 basis points to 0.56% for the year ended June 30, 2024 from 0.07% for the year ended June 30, 2023.

Interest expense increased $5.2 million, or 45.6%, to $16.7 million for the year ended June 30, 2025 from $11.5 million for the year ended June 30, 2024, primarily due to a $4.9 million increase in interest expense on deposits.

Interest expense on interest-bearing demand deposits increased due to an increase of $96.4 million in the average balance and an increase of 112 basis points in the cost of interest-bearing deposits to 1.68% for the year ended June 30, 2025 from 0.56% for the year ended June 30, 2024 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area.

Interest expense on certificates of deposit increased $1.0 million due to a $24.9 million increase in the average balance and an increase in the average rate on certificates of deposit of four basis points to 3.83% for the year ended June 30, 2025 from 3.79% for the year ended June 30, 2024 due to the highly competitive interest rate environment in our market area.

Interest expense on borrowings increased by $370,000 due to a higher average outstanding balance, offset by a 82 basis point decrease in the rate paid.

Net Interest Income.

Net interest income increased $15.7 million, or 114.5%, to $29.4 million for the year ended June 30, 2024 from $13.7 million for the year ended June 30, 2023.

The net interest rate spread increased 59 basis points to 2.73% for the year ended June 30, 2024 from 2.14% for the year ended June 30, 2023 while the net interest margin increased 94 basis points to 3.19% for the year ended June 30, 2024 from 2.25% for the year ended June 30, 2023.

The average balance of net interest-earning assets increased $116.34 million, or 88.8%, to $247.2 million for the year ended June 30, 2024 from $130.9 million for the year ended June 30, 2023.

The increases in the net interest rate spread and net interest margin were a result of both the acquisition of Regal Bancorp and the increasing yield on interest-earning assets outpacing the increasing cost of interest-bearing liabilities primarily due to the change in the composition of the loan portfolio.

Net interest income increased $210,000, or 0.7%, to $29.6 million for the year ended June 30, 2025 from $29.4 million for the year ended June 30, 2024.

Net interest rate spread decreased 38 basis points to 2.35% for the year ended June 30, 2025 from 2.73% for the year ended June 30, 2024.

Net interest margin decreased 26 basis points to 2.93% for the year ended June 30, 2025 from 3.19% for the year ended June 30, 2024.

Net interest-earning assets increased $14.9 million, or 6.0%, to $262.1 million for the year ended June 30, 2025 from $247.2 million for the year ended June 30, 2024.

The decreases in net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing at a higher rate than the yield on interest-earning assets.

Average Balances and Yields .

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For the Year Ended June 30,

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Interest-earning assets:

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Increase (Decrease) Due to

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Interest-earning assets:

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Provision for Credit Losses.

We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date.

In determining the level of the allowance for credit losses, we consider, among other things, loss experience, evaluations of real estate collateral, current and reasonably supportable economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of delinquent loans.

We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level necessary to absorb current expected credit losses in the loan portfolio at the balance sheet date.

The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change.

We assess the allowance for credit losses and make provisions for credit losses on a monthly basis.

Based on our evaluation of the above factors, we recorded a provision for credit losses of $4.1 million for the year ended June 30, 2024 compared to having no provision for the year ended June 30, 2023.

The provision recorded related to the Day 1 allowance for credit losses on Regal Bancorp's loan portfolio in the amount of $4.2 million was recorded through the provision for credit losses within the Consolidated Statements of (Loss) Income.

In 2024, we had no charge-offs and had only one classified and non-performing loan at June 30, 2024 totaling $50,000.

The absence of a provision for credit losses for the year ended June 30, 2023 reflected that we had no charge-offs for the period, no classified loans at June 30, 2023 and only one non-performing loan in the amount of $145,000 at June 30, 2023.

Our allowance for credit losses as a percentage of total loans was 0.71% at June 30, 2024 compared to 0.31% at June 30, 2023, reflecting the establishment of a $4.2 million general credit reserve for the acquired loan portfolio.

To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at June 30, 2024 and June 30, 2023.

Based on our evaluation of the above factors, we recorded a provision for credit losses of $133,000 for the year ended June 30, 2025 compared to a provision for credit losses of $4.1 million for the year ended June 30, 2024, which was related to the Merger.

The provision of $133,000 was due to provisions of $288,000 reflecting loan growth, offset by a recovery of $155,000 recorded during in the first quarter resulting from updates made to model assumptions in the calculation of the allowance for credit losses.

The Bank had no charge-offs during the years ended June 30, 2025 and 2024 and no non-performing loans at June 30, 2025 compared to $50,000 of non-performing loans at June 30, 2024.

The allowance for credit losses as a percentage of total loans was 0.67% at June 30, 2025 compared to 0.71% at June 30, 2024.

Noninterest Income.

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Years Ended June 30,

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Service charges and fees on deposit

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Gain on sale of loans

Total noninterest income

Noninterest income decreased $3.8 million, or 296.9%, to a loss of $2.5 million for the year ended June 30, 2024 from $1.3 million for the year ended June 30, 2023, primarily as a result of a decrease of $4.3 million on the sale of securities due to the $4.44 million loss incurred in connection with the sale of securities as part of the Company's balance sheet restructuring.

Offsetting this decrease were increases of $249,000 in the cash surrender value of bank-owned life insurance and $151,000 in service charges and fees on deposit accounts.

The increase in the cash surrender value of bank-owned life insurance was attributable to the additional bank-owned life insurance acquired in the Merger.

Gains from life insurance proceeds

Total noninterest income (loss)

Noninterest income increased $6.2 million, or 249.9%, to income of $3.7 million for the year ended June 30, 2025 from a loss of $2.5 million for the year ended June 30, 2024, primarily as a result of the $4.5 million loss incurred on the sale of securities as part of the Company’s balance sheet restructuring in fiscal 2024 and $1.5 million gain in life insurance proceeds gain in connection with the death benefit on a former employee.

An increase of $0.1 million in the cash surrender value of bank owned life insurance and $76,000 in service charges and fees on deposit accounts also contributed to the increase in noninterest income.

Noninterest Expense .

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Years Ended June 30,

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Salaries and employee benefits

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Data processing

Federal deposit insurance premiums

FDIC premiums

Directors fees

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Total noninterest expense

Noninterest expense increased $21.4 million, or 162.9%, to $34.6 million for the year ended June 30, 2024 from $13.2 million for the year ended June 30, 2023, primarily as a result of a $5.4 million charitable contribution, contained within other expenses, as the Company established the Somerset Regal Charitable Foundation in connection with its conversion to the stock form of organization and funded it with 452,758 shares of SR Bancorp common stock and $905,517 in cash.

The increase was also due to an increase in salaries and employee benefits for change in control payments totaling $2.6 million related to the Merger, an increase in professional fees for merger expenses totaling $760,000, an increase in data processing expenses primarily due to the payment of a $414,000 early termination fee related to the acquisition of Regal Bancorp, and additional miscellaneous expenses related to the Merger totaling $72,000.

Furthermore, the fact the Company was operating at a significantly greater asset size for the majority of the year ended June 30, 2024, as compared to the asset size for the year ended June 30, 2023, was a contributing factor to the increase in total noninterest expense.

Noninterest expense decreased $7.5 million, or 21.8%, to $27.1 million for the year ended June 30, 2025 from $34.6 million for the year ended June 30, 2024, primarily as a result of a $5.4 million charitable contribution, contained within other expenses, as the Company established the Somerset Regal Charitable Foundation in connection with its conversion to the stock form of organization and funded it with 452,758 shares of SR Bancorp common stock and $905,517 in cash.

The decrease was also due to a decrease in salaries and employee benefits for change in control payments totaling $1.2 million, or 7.9%, related to the Merger, a decrease in data processing expenses primarily due to the payment of a $414,000 early termination fee related to the acquisition of Regal Bancorp, and additional miscellaneous expenses related to the Merger totaling $72,000.

Income Tax Expense.

The benefit for income taxes was $909,000 for the year ended June 30, 2024, compared to a tax expense of $250,000 for the year ended June 30, 2023.

The benefit for the year ended June 30, 2024 was due

to the loss for the period and is net of a $2.2 million provision for an allowance against certain of the Company's deferred tax assets.

Our effective tax rate was 7.7% and 13.9% for the year ended June 30, 2024 and 2023, respectively, reflecting lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Regal Bank’s investment company subsidiary.

The provision for income taxes was $991,000 for the year ended June 30, 2025, compared to a benefit of $909,000 for the year ended June 30, 2024.

The Company's effective tax rate was 16.2% for the year ended June 30, 2025 compared to 7.7% for the year ended June 30, 2024.

Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates.

Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates.

Our ALCO/Investment Committee, which consists of members of management, is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our Board of Directors.

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.

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• growing transaction deposit accounts;

• rebalancing our loan portfolio through the Merger to include higher-yielding, shorter-term commercial real estate and commercial and industrial loans;

• emphasizing the origination of shorter-term commercial real estate and commercial and industrial loans;

• 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.

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Estimated EVE (2)

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(1) Assumes an immediate uniform change in interest rates at all maturities.

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Year 2 Change

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(In thousands)

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at June 30, 2024, after one year, we would have experienced an 7.5% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 7.0% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.

The table above indicates that at June 30, 2025, after one year, we would have experienced an 6.50% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 0.95% increase 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.

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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 Asset/Liability Management 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.

Our ALCO/Investment Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies.

We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%.

At June 30, 2024, this ratio was 5.7% We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2024.

At June 30, 2025, this ratio was 6.8%.

We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2025.

We regularly adjust our investments in liquid assets based upon our assessment of:

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During the year ended June 30, 2025, we originated $97.6 million of loans and purchased $41.2 million.

We had no purchases of securities during the year ended June 30, 2024.

Financing activities consist primarily of activity in deposit accounts.

We had no purchases of securities during the years ended June 30, 2025 or June 30, 2024.

Financing activities consist primarily of activity in deposit accounts, borrowings, repurchases of and dividends paid on common stock.

Deposits increased $38.9 million, or 4.8%, to $846.0 million at June 30, 2025 from $807.1 million at June 30, 2024.

Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

We had no outstanding borrowings with the Federal Reserve Bank at June 30, 2024 and a $20.0 million outstanding borrowing at June 30, 2023.

We had outstanding borrowings of $30.0 million as of June 30, 2025 and none as of June 30, 2024.

We had $70.0 million of additional borrowing capacity at FHLB as of June 30, 2025.

We had no outstanding borrowings with the Federal Reserve Bank at June 30, 2025, or June 30, 2024 and did not borrow from the FRB-NY in the year ended June 30, 2025.

We had $25.0 million of available borrowing capacity at FRB-NY as of June 30, 2025.

We repurchased 936,991 shares of our common stock during the year ended June 30, 2025 at a cost of $11.3 million and paid dividends on common stock of $444,000.

Regulatory Capital

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See “ Regulation and Supervision—Federal Banking Regulation—Capital Requirements ” and Note 15 of the Notes to the Consolidated Financial Statements.

The net proceeds from the offering significantly increased our liquidity and capital resources.

Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans.

Our financial condition and results of operations will be enhanced by the net proceeds from the offering, resulting in increased net interest-earning assets and net interest income.

However, due to the increase in equity resulting from the net proceeds raised in the offering, our return on equity will be adversely affected following the offering until such excess funds can be deployed.

Recent Accounting Pronouncements

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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 7. Management’s Discussion and Analysis