What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-09-29 compared with 2024-10-16 · 521 added, 434 removed, 1127 unchanged (46% of the section changed)

2 unchanged sentences

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal year (the “Evaluation Date”).

Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective because of the material weakness described below.

(b) Management’s Annual Report on Internal Control over Financial Reporting.

This annual report does not include a management report regarding internal control over financial reporting due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management, including our Principal Executive Officer and Principal Financial Officer, concluded that our internal control over financial reporting was not effective as of June 30, 2025 based on the criteria of the “Internal Control — Integrated Framework (2013).” Management 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.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

The identified

material weakness resulted in a material misstatement in the Company’s consolidated financial statements.

We are implementing remedial changes to improve our internal control over financial reporting described below.

Management 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.

(d) Attestation Report of the Registered Public Accounting Firm.

Not applicable because the Company is an emerging growth company.

(d) Changes in internal controls.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(e) Changes in internal controls.

Other than the changes described above, there were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

Not applicable.

No t applicable.

Disclo sure Regarding Foreign Jurisdictions that Prevent Inspections

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Securities Authorized for Issuance Under Equity Compensation Plans

Other than our employee stock ownership plan, SR Bancorp did not have any equity compensation plans at June 30, 2024.

The following table sets forth information regarding outstanding options and shares under the 2024 Equity Incentive Plan at June 30, 2025:

Plan Category

Number of Securities to be Issued Upon Exercise of Outstanding Options

Weighted-Average Exercise Price of Outstanding Options

Number of Securities Remaining for Future Issuance under Equity Compensation Plans

Equity Compensation Plans Approved by Security Holders

Equity Compensation Plans Not Approved by Security Holders

Certain Relationships and Related Transactions, and Director Independence.

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Consolidated Statements of Financial Condition as of June 30, 2025 and 2024

Consolidated Statements of (Loss) Income for the years ended June 30, 2024 and 2023

Consolidated Statements of Comprehensive (Loss) Income for the years ended June 30, 2024 and 2023

Consolidated Statements of Income (Loss) for the years ended June 30, 2025 and 2024

Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2025 and 2024

Consolidated Statements of Changes in Equity for the years ended June 30, 2025 and 2024

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Exhibit Index

Agreement and Plan of Merger, and Amendment thereto, By and Among SR Bancorp, Inc., Somerset Regal Bank, SLA, Regal Bancorp, Inc., and Regal Bank (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No.

333-270489) as initially filed on March 13, 2023)

Amended and Restated Articles of Incorporation of SR Bancorp, Inc.

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(Incorporated by reference to the Registrant's Annual Report on Form 10-K (File No.

001-41808) filed on September 28, 2023)

001-41808) filed on October 15, 2024)

Form of Common Stock Certificate of SR Bancorp, Inc.

1 unchanged sentence

333-270489) as initially filed on March 13, 2023)

Description of Registrant's Securities*

Description of Registrant's Securities (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No.

001-41808) filed on October 16, 2024)

Employment Agreement, dated July 25, 2022, by and between Somerset Regal Bank, SLA and William P.

10 unchanged sentences

333-270489) as initially filed on March 13, 2023)

SR Bancorp, Inc.

Policy Regarding Insider Trading*

Somerset Regal Bank Supplemental Executive Retirement Plan (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No.

001-41808) as filed on April 26, 2024)

SR Bancorp, Inc.

2024 Equity Incentive Plan (Incorporated by reference to Appendix A to the proxy statement for the Annual Meeting of Stockholders filed with the Securities and Exchange Commission on October 17, 2024)

SR Bancorp, Inc.

Policy Regarding Insider Trading (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No.

001-41808) filed on October 16, 2024)

Subsidiaries (Incorporated by reference to the Registrant's Annual Report on Form 10-K (File No.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

SR Bancorp, Inc.

Clawback Policy*

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.

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SR Bancorp, Inc.

October 15, 2024

September 29, 2025

/s/ William P.

5 unchanged sentences

(Principal Executive Officer)

October 15, 2024

September 29, 2025

/s/ Harris M.

1 unchanged sentence

(Principal Financial and Accounting Officer)

October 15, 2024

September 29, 2025

/s/ Christopher J.

Director, President and Chief Operating Officer

October 15, 2024

September 29, 2025

Christopher J.

Director (Executive Chairman)

October 15, 2024

September 29, 2025

/s/ Douglas M.

October 15, 2024

September 29, 2025

/s/ Thomas Lupo

October 15, 2024

September 29, 2025

/s/ Marc Lebovitz

October 15, 2024

September 29, 2025

Marc Lebovitz

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Consolidated Statements of Financial Condition as of June 30, 2025 and 2024

Consolidated Statements of (Loss) Income for the years ended June 30, 2024 and 2023

Consolidated Statements of Comprehensive (Loss) Income for the years ended June 30, 2024 and 2023

Consolidated Statements of Income (Loss) for the years ended June 30, 2025 and 2024

Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2025 and 202 4

Consolidated Statements of Changes in Equity for the years ended June 30, 2025 and 2024

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REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM

To the stockholders and Board of Directors of SR Bancorp Inc:

To the stakeholders and the Board of Directors of SR Bancorp Inc:

Opinion on the Financial Statements

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We believe that our audits provide a reasonable basis for our opinion.

/s/ Baker Tilly US, LLP

We have not been able to determine the specific year that we began serving as the Company’s auditor;

however, we are aware that we have served as the Company’s auditor since at least 1994.

/s/ Baker Tilly US, LLP

Iselin, New Jersey

October 15, 2024

September 29, 2025

SR Bancorp, Inc.

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June 30, 2025 and June 30, 2024

(Dollars in thousands)

(In thousands)

June 30, 2025

June 30, 2024

Cash and due from banks

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Total cash and cash equivalents

Securities available-for-sale, at fair value

Securities held-to-maturity, at amortized cost

Equity securities, at fair value

Loans receivable, net of allowance for credit losses of $ 5,229

and allowance for loan losses of $ 1,116 , respectively

Loans receivable, net of allowance for credit losses of $ 5,362 and

$ 5,229 , respectively

Premises and equipment, net

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Total liabilities

Preferred Stock, $ 0.01 par value, 5,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 50,000,000 authorized;

9,507,930 shares issued and outstanding at June 30, 2024

and no ne at June 30, 2 0 23

8,875,170 and 9,507,930 shares issued and outstanding

as of June 30, 2025, and June 30, 2024, respectively

Additional paid-in capital

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and Subsidiaries

Consolidated Statem ents of (Loss) Income

Consolidated Statem ents of Income (Loss)

For the Years Ended June 30, 2025 and 2024

(Dollars in thousands)

(In thousands)

Year Ended June 30,

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Net Interest Income After Provision For Credit Losses

Noninterest (Loss) Income

Noninterest Income (Loss)

Service charges and fees

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Gain on sale of loans

Total noninterest (loss) income

Gains from life insurance proceeds

Total noninterest income (loss)

Noninterest Expense

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Total noninterest expense

Net (Loss) Income Before Income Tax Expense

Income Tax (Benefit) Expense

Net (Loss) Income

Basic (loss) earnings per share

Diluted (loss) earnings per share

Weighted average number of common shares outstanding - basic

Weighted average number of common shares outstanding - diluted

Income (Loss) Before Income Tax Expense (Benefit)

Income Tax Expense (Benefit)

Net Income (Loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Weighted average number of common

shares outstanding - basic

Weighted average number of common

shares outstanding - diluted

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

For the Years Ended June 30, 2025 and 2024

(Dollars in thousands)

(In thousands)

Year Ended June 30,

Net (Loss) Income

Net Income (Loss)

Other Comprehensive Income (Loss)

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net loss, net of income tax (expense) benefit of $ 0 and $( 1,154 ),

Total change in unrealized gains (losses)

Total change in unrealized gains

Change in defined pension plan for unrealized actuarial gains net

1 unchanged sentence

Total other comprehensive income

Total comprehensive (loss) income

Total comprehensive income (loss)

(a) Income tax amounts on unrealized holding gains (losses) on securities available-for-sale are included in the net deferred tax asset described in Note 13.

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For the Years Ended June 30, 2025 and 2024

(Dollars in thousands)

(In thousands)

Comprehensive

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Other comprehensive income,

ESOP shares earned, 38,032

Repurchase of common shares

Cash dividends declared on common stock, $ 0.10 per share

Restricted stock awards issued

Stock-based compensation

Balance, June 30, 2025

Balance, June 30, 2023

Other comprehensive income,

Cumulative adjustment for

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9,507,930 shares

Initial funding of ESOP,

760,634 shares

ESOP shares allocated or

committed for allocation to

participants, 57,048 shares

Other comprehensive income,

Initial funding of ESOP, 760,634 shares

ESOP shares committed for

allocation to participants, 57,048 shares

Balance, June 30, 2024

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For the Years Ended June 30, 2025 and 2024

(Dollars in thousands)

(In thousands)

Year Ended June 30,

Cash Flows from Operating Activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

by operating activities:

Provision for credit losses

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Net amortization of deferred loan fees, costs and discounts

Amortization of right to use asset

Amortization of right-of-use asset

Income from cash surrender value of bank owned life insurance

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Gain on sale of premises and equipment

Noncash expense - contribution to Somerset Regal Bank Charitable Foundation

Noncash expense of common shares contributed to Somerset Regal Bank Charitable Foundation

(Increase) decrease in:

Accrued interest receivable

Other liabilities

Net cash (used in) provided by operating activities

Decrease in other liabilities

Net cash provided by (used in) operating activities

Cash Flows from Investing Activities

Proceeds from maturities, calls and principal repayments of securities available-for-sale

Proceeds from sales, maturities, and principal repayments of securities available-for-sale

Proceeds from maturities, calls and principal repayments of securities held-to-maturity

Proceeds from sale of securities available-for-sale

Proceeds from sale of securities held-to-maturity

Purchases of securities held-to-maturity

Proceeds from time deposits in other financial institutions

Proceeds from sale of time deposits in other financial institutions

Net increase in loans receivable

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Proceeds from sale of premises and equipment

Redemption (purchase) of restricted equity securities

Purchase of restricted equity securities

Cash paid for acquisition

Cash received from acquisition

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities

Net decrease in interest bearing deposits

Net decrease in non-interest bearing deposits

Net increase (decrease) in interest bearing deposits

Net increase (decrease) in non-interest bearing deposits

Net increase in advance payments by borrowers for taxes and insurance

Proceeds from short-term borrowings

Net increase in short-term borrowings

Repayment of short-term borrowings

Dividends Paid

Cash proceeds from issuance of common stock

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Repurchase of common stock

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and Cash Equivalents, Beginning of Period

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The Bank, which was formed in 1887, serves Essex, Hunterdon, Middlesex, Morris, Somerset and Union counties in New Jersey.

The Bank is a New Jersey chartered commercial bank subject to the laws and regulations of federal and state agencies.

The Bank is a New Jersey chartered commercial bank subject to federal and state laws and regulations.

As a locally managed community bank, the Bank provides retail and commercial banking services to individuals, businesses and local municipalities through its 14 full-service branch locations.

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Basis of Presentation and Use of Estimates

The financial information contained in this Annual Report on Form 10-K as of and for the year ended June 30, 2024 is for the Company and the Bank, unless indicated otherwise.

However, due to the timing of the Merger, the statement of (loss) income and related disclosures only includes operations of Regal Bancorp and Regal Bank since September 19, 2023.

Financial information as of June 30, 2023, and for the year then ended, is for Somerset Savings Bank, SLA, on a stand-alone basis.

The financial information contained in this Annual Report on Form 10-K as of and for the years ended June 30, 2025 and 2024 is for the Company and the Bank, unless indicated otherwise.

However, due to the timing of the Merger, the statement of income (loss) and related disclosures only includes operations of Regal Bancorp and Regal Bank since September 19, 2023.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

Actual results could differ significantly from those estimates.

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the evaluation of goodwill for impairment;

fair value measurements of assets and liabilities;

and income taxes.

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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 has one reportable segment, "Community Banking." Community Banking encompasses the Company's primary business, which includes providing a wide range of commercial, retail and related banking services.

The Company operates exclusively as a community banker 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 performance and profitability of our single business segment.

Consolidated net income is used to assess performance by comparing results 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 operation 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.

Concentrations of Credit Risk

The Company's lending activity is concentrated in loans secured by real estate located primarily in the State of New Jersey.

The Company's lending activity is concentrated in loans secured by real estate located primarily in New Jersey.

Credit risk exposure in this area of lending is mitigated by adhering to conservative underwriting practices and policies, and close monitoring of the loan portfolio.

The Company does not have any significant concentrations to any one industry or customer.

Notes 4 and 5 discuss the types of investment securities in which the Company invests.

Note 4 discuss 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 and the purchase of government-sponsored agency securities, backed by the full faith and credit of the United States.

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On July 1, 2023, the Company adopted ASC 326 ("CECL"), which requires the earlier recognition of credit losses on loans and other financial instruments based on an expected loss model, replacing the incurred loss model that was in use through June 30, 2023.

Under this guidance, an entity measures all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

The CECL model applies to loans and leases, unfunded lending commitments, held-to-maturity debt securities and other debt instruments measured at amortized cost.

The Company recorded the effect of implementing CECL using a modified-retrospective approach through a cumulative effect adjustment through retained earnings as of July 1, 2023, the beginning of the reporting period in which CECL became effective.

The adoption of the new standard resulted in an increase to the allowance for credit losses on loans of $ 34,000 , net of

The CECL model applies to loans and leases, unfunded lending commitments,

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

held-to-maturity debt securities and other debt instruments measured at amortized cost.

The adoption of the new standard resulted in an increase to the allowance for credit losses on loans of $ 34,000 , net of tax.

No allowances were recorded for investment securities or unfunded lending commitments at adoption, as the estimates of those losses were de minimus.

1 unchanged sentence

Debt and equity securities that are bought and held principally to sell in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings.

Debt and equity securities not classified as trading securities or as held-to-maturity securities are classified as available-for-sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income/loss component of equity.

Premiums/discounts on all securities are amortized/accreted to maturity by use of the level yield method.

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Dividends are included in interest income.

In compliance with ASC 326, the Company conducted a review of its investment portfolio to determine the appropriate level of credit losses to reserve for.

The Company did no t record an allowance for credit losses ("ACL") on its available-for-sale ("AFS") securities during the year ended June 30, 2024 or upon implementation of CECL on July 1, 2023.

As of both periods, the Company considered the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit.

In compliance with ASC 326, the Company conducted a review of its investment portfolio to determine the appropriate level of credit losses to reserve.

The Company did no t record an allowance for credit losses ("ACL") on its available-for-sale ("AFS") securities during the years ended June 30, 2025 and 2024 or upon implementation of CECL on July 1, 2023.

As of and for both periods, the Company considered the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit.

As of June 30, 2025 , the Company had no AFS securities.

2 unchanged sentences

The Company's held-to-maturity ("HTM") portfolio consists principally of highly-rated GSE residential mortgage-backed securities.

The Company segments its HTM into GSE, residential mortgage-backed securities, collateralized mortgage obligations ("CMOs"), and other debt securities to determine the ACL.

The Company segments its HTM securities into GSE, residential mortgage-backed securities, collateralized mortgage obligations ("CMOs"), and other debt securities to determine the ACL.

The ACL is determined based on the security's historical losses and the ratings of major investment securities rating services, adjusted for certain qualitative factors.

1 unchanged sentence

At both June 30, 2025 and 2024, the Company had no HTM securities that were past due 30 days or more as to principal or interest payments.

Based on its review of HTM securities, the Company deemed no ACL reserve was necessary for the years ended June 30, 2024 and 2023.

Based on its review of HTM securities, the Company deemed no ACL reserve was necessary for the years ended June 30, 2025 or 2024.

Loans Receivable

1 unchanged sentence

Interest income is accrued on the unpaid principal balance and credited to income.

Loan origination fees and costs are deferred and recognized over the life of the loans as an adjustment to yield (interest income).

Discounts and premiums on purchased loans are amortized to income using the interest method over the expected lives of the loans.

Loan origination fees

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

and costs are deferred and recognized over the life of the loans as an adjustment to yield (interest income).

Discounts and premiums on purchased loans are amortized to income using the interest method over the expected lives of the loans.

Following the completion of the Merger, the loans receivable portfolio was segmented as follows:

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Allowance for Credit Losses

The allowance for credit losses ("ACL") is a significant accounting estimate used in the preparation of the Company's consolidated financial statements.

The ACL is a significant accounting estimate used in the preparation of the Company's consolidated financial statements.

Upon adoption of ASC 326 on July 1, 2023, the Company replaced the incurred loss impairment model with a requirement to recognize lifetime expected credit losses on loans and other financial instruments immediately when a financial asset is originated or purchased.

9 unchanged sentences

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;

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;

1 unchanged sentence

changes in the experience, ability, and depth of our lending management and staff;

changes in volume and severity of past due and nonaccrual assets;

changes in amount and severity of past due and nonaccrual assets;

changes to the quality of our internal loan review system;

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Because all identified losses are immediately charged off, no portion of the allowance for credit losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all credit losses.

Mortgage loans are secured by the borrower’s residential or non-residential real estate in a first lien position.

Mortgage loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio.

Commercial real estate loans consist of multi-family real estate, owner-occupied, mixed use and other

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

commercial real estate, as well as other commercial loans.

Mortgage loans are secured by the borrower’s residential or non-residential real estate in a first lien position.

Mortgage loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio.

Commercial real estate loans consist of multi-family real estate, owner-occupied, mixed use and other commercial real estate, as well as other commercial loans.

Commercial and industrial loans are extended to businesses as either unsecured or secured by various types of collateral, such as accounts receivable, inventory, equipment and/or real estate.

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In some cases, these modifications may result in new loans.

Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, or a combination thereof, among other things.

Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things.

Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets.

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Assets (or portions of assets) classified as loss are those considered uncollectible and are charged to the ACL as their continuance as assets is not warranted.

Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as special mention.

As of June 30, 2024, we had no assets designated as special mention.

Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve closer attention, are designated as special mention.

As of June 30, 2025, we had no assets designated as loss, doubtful, substandard or special mention.

Prior to the adoption of ASC 326 on July 1, 2023, a loan was individually evaluated when the loan was considered impaired.

A loan was considered individually impaired when, based on current information and events, it was probable that the Bank would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining whether a loan was individually impaired include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Factors considered by management in determining whether a loan was individually impaired included payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as individually impaired.

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The allowance may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

In addition, Federal and state regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses and may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management.

Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for credit losses is adequate.

In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses and may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination, which may

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

not be currently available to management.

Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for credit losses is adequate.

Upon adoption of ASC 326 on July 1, 2023, the Company made the following elections regarding accrued interest receivable:

1 unchanged sentence

(ii) exclude accrued interest from the measurement of the ACL, including investments and loans;

and (iii) continue to write-off accrued interest receivable by reversing interest income when a loan is placed on non-accrual.

The Company's policy is to write-off accrued interest when a loan is placed on non-accrual.

and (iii) continue to write-off accrued interest receivable by reversing interest income when a loan is placed on non-accrual status.

The Company's policy is to write-off accrued interest when a loan is placed on non-accrual status.

Historically, the Company has not experienced uncollectible accrued interest receivable on investment debt securities.

1 unchanged sentence

Unfunded commitments to extend credit include unused portions of lines of credit, unfunded loan commitments, availability on construction and land development loans and standby and commercial letters of credit.

The process used to determine the ACL for these exposures is consistent with the process for determining the allowance for loans, as adjusted for estimated funding probabilities or loan equivalency factors.

The process used to determine the ACL for these exposures is consistent with the process for determining the ACL for loans, as adjusted for estimated funding probabilities or loan equivalency factors.

A charge (credit) to the provision for unfunded commitments on the consolidated statements of income is made to account for the change in the ACL on unfunded commitment exposures between reporting periods.

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The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment.

For all underlying classes of assets, the Company has elected to not recognize right-of-use assets and lease liabilities for leases that have a term of 12 months or less at lease commencement.

For all underlying classes of assets, the Company has elected not to recognize right-of-use assets and lease liabilities for leases that have a term of 12 months or less at lease commencement.

Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are also deemed short-term leases.

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Restricted stock, which represents a required investment in the capital stock of correspondent banks related to available credit facilities, are carried at cost.

As of those dates, restricted stock may include investments in the capital stock of the Federal Home Loan Bank of New York, Atlantic Community Bankers Bank (“ACBB”) and Bankers Compliance Group (“BCG”).

Federal law requires a member institution of the Federal Home Loan Bank ("FHLB") system to hold stock of its district bank according to a predetermined formula.

At June 30, 2024 and 2023, the Bank held $ 1.1 million and $ 726,000 , respectively, in stock of the FHLB of New York.

At June 30, 2024, the Company held $ 120,000 in stock of ACBB and BCG combined.

The Company held no investments in ACBB or BCG at June 30, 2023.

As of those dates, restricted stock may include investments in the capital stock of the Federal Home Loan Bank ("FHLB") of New York, Atlantic Community Bankers Bank (“ACBB”) and Bankers Compliance Group (“BCG”).

Federal law requires a member institution of the FHLB system to hold stock of its district bank according to a predetermined formula.

At June 30, 2025 and 2024, the Bank held $ 2.5 million and $ 1.1 million, respectively, in stock of the FHLB of New York.

At June 30, 2025 and 2024, the Company held $ 120,000 in stock of ACBB and BCG combined.

Management evaluates the stock for impairment in accordance with guidance on accounting by certain entities that lend or finance the activities of others.

6 unchanged sentences

Bank Owned Life Insurance

The Company invests in bank owned life insurance (“BOLI”) as a source of funding for employee benefit expenses.

BOLI involves the purchasing of life insurance by the Company on a chosen group of employees.

The Company invests in bank owned life insurance as a source of funding for employee benefit expenses.

Bank owned life insurance involves the purchasing of life insurance by the Company on a chosen group of employees.

The Company is the owner and beneficiary of the policies.

1 unchanged sentence

Increases in the cash surrender value of the policies, as well as proceeds, are recorded as income in the consolidated statement of income (loss).

At June 30, 2025, the Company recorded a $ 3.0 million receivable for life insurance proceeds resulting from the death of a former employee, of which $ 1.5 million was recorded as noninterest income in the consolidated statement of income (loss).

Goodwill and Other Intangible Assets

The Company acquired goodwill through the acquisition of Regal Bancorp that it tests for impairment at least annually and more frequently as conditions warrant.

The Company recorded goodwill through the acquisition of Regal Bancorp that it tests for impairment at least annually and more frequently as conditions warrant.

As of June 30, 2025 , goodwill amounted to $ 20.4 million.

The Company evaluated and concluded that goodwill was no t impaired as of that date.

The Company acquired a core deposit premium intangible through the acquisition of Regal Bancorp that is amortized on an accelerated basis over ten years .

The Company recorded a core deposit premium intangible through the acquisition of Regal Bancorp that is amortized on an accelerated basis over ten years .

At June 30, 2025, the core deposit premium intangible asset had a gross carrying amount of $ 9.1 million and accumulated amortization of $ 2.8 million.

25 unchanged sentences

The Company does not generally finance the sale of foreclosed assets.

Comprehensive (Loss) Income

Comprehensive Income (Loss)

GAAP requires comprehensive income (loss) and its components to be reported when a company presents a full set of financial statements.

3 unchanged sentences

Advertising Costs

Advertising costs are expensed in the period in which they are incurred and recorded as non-interest expense in the consolidated statement of income (loss).

Advertising costs are expensed in the period in which they are incurred and recorded as non-interest expense in the consolidated statements of income (loss).

Advertising expense was approximately $ 385,000 and $ 301,000 for years ended June 30, 2025 and 2024, respectively.

21 unchanged sentences

As a result of the Company’s evaluation, no significant income tax uncertainties were identified.

Therefore, the Company recognized no adjustment for unrecognized tax benefits at June 30, 2024 or June 30, 2023.

Therefore, the Company recognized no adjustment for unrecognized tax benefits for the years ended June 30, 2025 or June 30, 2024.

The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the consolidated statements of income.

20 unchanged sentences

Accounting Pronouncements Adopted

In February 2016, the FASB issued ASC 326 Leases (Topic 842), which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases

The Company adopted ASC 326 on July 1, 2023.

The transition to the new Accounting Standards Update ("ASU") resulted in a cumulative effect adjustment to the allowance for credit losses of $ 47,000 , an increase in

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

with lease terms of more than 12 months.

Consistent with current U.S.

GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by the lessee will primarily depend on its classification as a finance or operating lease.

However, unlike previous U.S.

GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet.

ASC 326 will also require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases.

The new disclosures will include both qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

ASC 326 and all subsequent amendments (collectively, “ASC 842”) required adoption by the Company on July 1, 2022, though early adoption was permitted.

The Company adopted ASC 842 during the first quarter of the fiscal year ended June 30, 2023 , at which time the Company maintained only one equipment lease with an initial term greater than 12 months and had determined that the impact on its consolidated financial statements was no t material.

Upon completion of the Merger, the Company acquired 10 operating leases for office space.

As of June 30, 2024, the Company had not entered into any material leases that have not yet commenced.

The Company adopted ASC 326 on July 1, 2023.

The transition to the new ASU resulted in a cumulative effect adjustment to the allowance for credit losses of $ 47,000 , an increase in deferred tax assets of $ 13,000 , and a decrease in retained earnings of $ 34,000 as of the adoption date.

deferred tax assets of $ 13,000 , and a decrease in retained earnings of $ 34,000 as of the adoption date.

The impact of the reserve for unfunded liabilities to the consolidated financial statements was not material.

The Company did not record an allowance for held-to-maturity securities on July 1, 2023 as the investment portfolio consists almost entirely of debt securities backed by the full faith of the U.S.

The Company did not record an allowance for held-to-maturity securities on July 1, 2023 as the investment portfolio consisted almost entirely of debt securities backed by the full faith of the U.S.

Government for which credit risk is deemed negligible.

2 unchanged sentences

As reported under

(Dollars in thousands)

(In thousands)

ACL on loans:

7 unchanged sentences

2022-02, Financial Instruments—Credit Losses—Troubled Debt Restructurings and Vintage Disclosures .

This standard eliminates the recognition and measurement guidance for troubled debt restructurings by creditors and enhances disclosure requirements for certain loan restructurings when a borrower is experiencing financial difficulty.

This standard eliminated the recognition and measurement guidance for troubled debt restructurings by creditors and enhances disclosure requirements for certain loan restructurings when a borrower is experiencing financial difficulty.

For public business entities, these amendments require that an entity disclose current-period gross charge-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.

1 unchanged sentence

2022-02 was effective for the Company on July 1, 2023 .

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

Recent Accounting Standards Not Yet Adopted

The adoption of this standard did no t have a material impact on the Company’s consolidated financial statements as the Company.

In March 2023, FASB issued ASU No.

2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures .

The FASB issued ASU 2023-02 using the Proportional Amortization Method.

The amendments in t his update permit exporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments.

The amendments in this update also remove certain guidance for Qualified Affordable Housing Project investments and require the application of the delayed equity contribution guidance to all tax equity investments.

The amendments in this update will be effective for fiscal years beginning after December 15, 2023 must be applied on either a modified retrospective or a retrospective basis

The Company adopted this standard on July 1, 2024 .

The adoption of this standard did no t have a material impact on the Company’s consolidated financial statements as the Company has no such investments.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280):

I mprovements to Reportable Segment Disclosures".

Improvements to Reportable Segment Disclosures .

The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

This update will be effective for financial stat em ents issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024.

This update will be

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on our consolidated financial s tate ments and is not expected to have a significant impact on our financial statements.

The Company adopted this standard on July 1, 2024 .

The adoption of this standard did no t have a material impact on the Company’s consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740):

3 unchanged sentences

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on our consolidated financial statements .

The Company is currently evaluating the impact of this standard, which is not expected to have a material impact on our consolidated financial statements.

Accounting Standards Update 2024-01, Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards ("ASU 2024-01") clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance.

2 unchanged sentences

If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle.

ASU 2024-01 is effective January 1 , 2025, including interim periods, and is not expected to have a significant impact on our financial statements.

Accounting Standards Update 2024-02 "Codification Improvements" ("ASU 2024-02") amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification.

ASU 2024-01 is effective for the Company for the fiscal year beginning on July 1, 2025, including interim periods, and is not expected to have a material impact on our financial statements.

Accounting Standards Update 2024-02, Codification Improvements ("ASU 2024-02") amends the Codification to remove references to various concept statements and impacts a variety of topics in the Codification.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on our financial statements.

ASU 2024-02 is effective for the Company for the fiscal year beginning on July 1, 2025, and is not expected to have a material impact on our consolidated financial statements.

Accounting Standards Update 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures ("ASU 2024-03") requires additional expense disclosures by public entities in the notes to the financial statements.

ASU 2024-03 outlines the specific costs that are required to be disclosed, which include costs such as:

employee compensation, depreciation, intangible asset amortization, selling costs and depreciation.

It also requires qualitative descriptions of the amounts remaining in the relevant income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses.

The disclosures are required for each interim and annual reporting period.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026.

In January 2025, the FASB issued Accounting Standards Update 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures:

Clarifying the Effective Date" ("ASU 2025-01"), clarifying the interim reporting date when an entity must adopt ASU 2024-03.

According to ASU 2025-01, ASU 2024-03 is effective for interim periods within fiscal years beginning after December 15, 2027.

The Company is currently evaluating the impact of this standard on our consolidated financial statements, which is not expected to have a material impact on our financial statements

Subsequent Events

The Company has evaluated subsequent events for recognition or disclosure through October 15, 2024, the date consolidated financial statements were available to be issued.

Business Combination

On September 19, 2023 , the Company completed its acquisition of Regal Bancorp, Inc.

and its wholly-owned subsidiary Regal Bank, under which Regal Bancorp merged with and into the Company, with the Company as the

The Company has evaluated subsequent events for recognition or disclosure through September 29, 2025, the date consolidated financial statements were available to be issued.

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

resulting entity.

Immediately following the Merger, Regal Bank merged with and into Somerset Bank, which had converted to a commercial bank charter, with Somerset Bank as the surviving entity, and was renamed Somerset Regal Bank.

Business Combination

On September 19, 2023 , the Company completed its acquisition of Regal Bancorp, Inc.

and its wholly-owned subsidiary Regal Bank, under which Regal Bancorp merged with and into the Company, with the Company as the resulting entity.

Immediately following the Merger, Regal Bank merged with and into Somerset Bank, which had converted to a commercial bank charter, with Somerset Bank as the surviving entity, which was renamed Somerset Regal Bank.

In connection with the Merger, each outstanding share of Regal Bancorp common stock converted into the right to receive $ 23.00 in cash.

5 unchanged sentences

at acquisition

(Dollars in thousands)

(In thousands)

Consideration paid ( 3,023,369 Regal Bancorp shares

24 unchanged sentences

Goodwill recorded at merger

(a) Adjustment for interest rate and credit risk to reduce loans to fair value, to be amortized as an increase to interest income over their remaining term

(b) Elimination of Regal Bank allowance for credit losses.

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

(a) Adjustment for interest rate and credit risk to reduce loans to fair value, to be amortized as an increase to interest income over their remaining term

(b) Elimination of Regal Bank allowance for credit losses.

(d) Recording of new intangible asset for the fair value of core deposits, to be amortized on an accelerated basis over the estimated average life of the deposit base.

6 unchanged sentences

In addition, the Company recorded a $ 5.4 million charitable contribution expense for the establishment of the Somerset Regal Charitable Foundation, as well as a $ 4.2 million provision for estimated credit losses in connection with the acquired loan portfolio.

The Company had no merger-related expenses incurred during the year ended June 30, 2025.

The fair value of loans acquired from Regal Bank was estimated using cash flow projections based on the remaining maturity and repricing terms.

1 unchanged sentence

Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.

There was no carryover of Regal Bank’s allowance for credit losses associated with the loans that were acquired.

There was no carryover of Regal Bank’s allowance for loan losses associated with the loans that were acquired.

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years utilizing the sum-of-the-years digits method.

1 unchanged sentence

Accordingly, the Company recognizes amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair value.

Fair value estimates are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to the closing date fair values becomes available.

At June 30, 2024, the Company finalized its review of the acquired assets and assumed liabilities and did not record any further adjustments to the carrying value.

The fair value of retail demand and interest-bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.

The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.

The fair value of borrowings was based on the FHLB calculation to prepay borrowings with associated penalties.

The following table presents unaudited pro forma results as if the Merger occurred on July 1, 2022 and includes the effects of the amortization and accretion of certain estimated purchase accounting adjustments such as intangible assets, as well as fair value adjustments to loans and deposits.

The pro forma financial information includes merger-related expenses but does not reflect any cost savings.

The table has been prepared for comparative purposes only and is not necessarily indicative of actual results that would have been attained had the Merger occurred at the beginning of the periods presented, nor is it indicative of future results.

The table also includes financial information related to the operations of the Company for the remainder of the fiscal year following the Merger.

September 19, 2023

to June 30, 2024

Pro Forma Combined

June 30, 2024

Pro Forma Combined

June 30, 2023

(Dollars in thousands)

Net interest income before provision for credit losses

Net (loss) income

Earnings (Loss) Per Share

Basic earnings (loss) per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding.

Diluted earnings per share have been calculated in a manner similar to that of basic earnings per share except that weighted-average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potential dilutive common shares (such as those resulting from the exercise of stock options and vested restricted stock awards) were issued during the period, computed using the treasury stock method.

Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

Earnings (Loss) Per Share

Basic earnings (loss) per share represent income or loss available to common stockholders divided by the weighted-average number of common shares outstanding.

Unallocated ESOP shares are not deemed outstanding for earnings (loss) per share calculations.

There were no potentially dilutive common stock equivalents outstanding for the year ended June 30, 2024.

Earnings (loss) per share data is not applicable for the year ended June 30, 2023 because the Company had not yet been formed and had no shares outstanding.

The following table presents the composition of the weighted average common shares used in the earnings per share calculation:

(Dollars in thousands, except per share data)

Net (loss) income applicable to common shares

Year Ended June 30,

Net income (loss)

Weighted average number of common shares outstanding

Average unallocated ESOP shares

Weighted average number of common shares outstanding, net

Basic (loss) per common share

Diluted (loss) earnings per share

Securities Available-for-Sale

The amortized cost and approximate fair value of securities available-for-sale at June 30, 2024 and June 30, 2023 are as follows:

June 30, 2024

Federal National Mortgage Association

Government National Mortgage Association

Federal Home Loan Mortgage Corporation

Total securities available-for-sale

June 30, 2023

(Dollars in thousands)

Federal National Mortgage Association

Federal Home Loan Mortgage Corporation

Total securities available-for-sale

The amortized cost and fair value of debt securities available-for-sale by contractual maturity at June 30, 2024 are shown in the following table.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Securities are assigned to categories based on contractual maturity except for mortgage-backed securities which are based on the estimated average life of the securities.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

June 30, 2024

Due within 1 year

Due after 1 but within 5 years

Due after 5 but within 10 years

Due after 10 years

Mortgage-backed securities

Total securities available-for-sale

The unrealized losses as of June 30, 2024 and June 30, 2023, categorized by the length of time of continuous loss position, and the fair value of related available-for-sale are as follows:

June 30, 2024

Less than 12 Months

More than 12 Months

Federal National Mortgage

Government National Mortgage

Federal Home Loan Mortgage

June 30, 2023

Less than 12 Months

More than 12 Months

(Dollars in thousands)

Federal National Mortgage Association

Federal Home Loan Mortgage

All mortgage-backed securities are collateralized by residential mortgages.

During the year ended June 30, 2024, gross gains of $ 0 and gross losses of $ 4.5 million resulting from sales of securities available-for-sale were realized.

During the year ended June 30, 2023 , gross gains of $ 0 and gross losses of $ 119,000 resulting from sales of securities available-for-sale were realized.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

Securities Held-to-Maturity

Average unvested restricted stock awards

Weighted average common shares outstanding used to calculate basic

earnings per common share

Dilutive effect of common stock equivalents

Weighted average common shares outstanding used to calculate diluted

earnings per common share

Basic income (loss) per common share

Diluted income (loss) per common share

Number of common stock equivalents excluded from the calculation of

diluted earnings as they are anti-dilutive

Investment Securities

The amortized cost and approximate fair values of securities held-to-maturity at June 30, 2025 and June 30, 2024 are as follows:

June 30, 2025

(Dollars in thousands)

(In thousands)

Federal National Mortgage Association

3 unchanged sentences

Foreign Government Bonds

Total securities held-to-maturity

June 30, 2024

(Dollars in thousands)

(In thousands)

Federal National Mortgage Association

2 unchanged sentences

Subordinated Debt

Total securities held-to-maturity

Foreign Government Bonds

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

The amortized cost and fair value of securities held-to-maturity by contractual maturity at June 30, 2025 are shown in the following table.

2 unchanged sentences

June 30, 2025

(Dollars in thousands)

(In thousands)

Due within 1 year

3 unchanged sentences

Mortgage-backed securities

Total securities held-to-maturity

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

The unrealized losses as of June 30, 2024 and June 30, 2023, categorized by the length of time of continuous loss position and the fair value of related securities held-to-maturity, are as follows:

The unrealized losses as of June 30, 2025 and June 30, 2024, categorized by the length of time of continuous loss position and the fair value of related securities held-to-maturity, were as follows:

June 30, 2025

1 unchanged sentence

More than 12 Months

(Dollars in thousands)

(In thousands)

Federal National Mortgage

Federal Home Loan Mortgage

Government National

Mortgage Association

Subordinated Debt

2 unchanged sentences

More than 12 Months

(Dollars in thousands)

(In thousands)

Federal National Mortgage

3 unchanged sentences

Subordinated Debt

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

At June 30, 2025 and June 30, 2024, the Bank had 37,000 and $ 25,000 , respectively, in equity securities recorded at fair value.

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities for the years ended June 30, 2025 and June 30, 2024:

(Dollars in thousands)

(In thousands)

Net gains recognized on equity securities

1 unchanged sentence

Net unrealized gains recognized on equity securities

Upon adoption of ASC 326, management no longer evaluates securities for other than temporary impairment.

On a quarterly basis, management evaluates whether there is a credit loss associated with any declines in fair value.

On a quarterly basis, management evaluates whether there is a credit loss associated with any declines in fair value on securities.

Management considers the nature of the collateral, default rates, delinquency rates, credit ratings and interest rate changes, among other factors.

However, the Company has determined that highly-rated issues of mortgage-backed securities of government-sponsored agencies have a zero expected credit loss.

At June 30, 2024 and June 30, 2023, mortgage-backed securities with a carrying value of approximately $ 1.8 million and $ 1,000 , respectively, were pledged as collateral to secure public funds on deposit.

At June 30, 2023, mortgage-backed securities with a total carrying value of $ 32,652 were pledged as collateral to secure a $ 20,000 advance under the Federal Reserve's Bank Term Funding Program.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

At June 30, 2025 and June 30, 2024, mortgage-backed securities with a carrying value of approximately $ 1.7 million and $ 1.8 million , respectively, were pledged as collateral to secure public funds on deposit.

Loans Receivable

Loans at June 30, 2025 and June 30, 2024 are summarized as follows:

(Dollars in thousands)

June 30, 2025

June 30, 2024

(In thousands)

Owner occupied commercial real estate loans

11 unchanged sentences

Risks associated with lending activities include economic conditions and changes in 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 in these areas of lending are minimized by the evaluation of the creditworthiness of the borrower, including debt-to-income ratios, credit scores and conservative underwriting standards that emphasize conservative loan-to-value ratios of generally no more than 75 % for commercial loans, 80 % for multifamily loans and 80 % for residential loans.

Credit risk exposure in these areas of lending are minimized by the evaluation of the creditworthiness of the borrower, including debt-to-income ratios, credit scores and conservative underwriting standards that contain loan-to-value ratios of generally no more than 75 % for multi-family and commercial loans and 80 % for residential loans.

Residential mortgage loans granted in excess of the 80 % loan-to-value ratio criterion are generally insured by private mortgage insurance.

1 unchanged sentence

Risks associated with second lien loans secured by residential properties are generally lower than commercial loans and include general economic risks, such as the strength of the job market, employment stability and the strength of the housing market.

At June 30, 2024, commercial loans represented 44.7 % of total loans receivable, net, while residential mortgage, consumer and other loans represented 55.3 % , nearly all of which was concentrated within our primary market area in New Jersey.

The Company holds 82.0 % of its commercial loan portfolio in commercial real estate, consisting of multi-family, mixed use and owner occupied loans, with less than 1 % secured by office buildings.

At June 30, 2024 , the Company had one non-accrual commercial loan in the amount of $ 50,000 .

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

At June 30, 2025, commercial loans represented 45.0 % of total loans receivable, net, while residential mortgage, consumer and other loans represented 55.0 % , nearly all of which was concentrated within our primary market area in New Jersey.

The Company holds 82.0 % of its commercial loan portfolio in commercial real estate, consisting of multi-family, mixed use and owner occupied loans, with less than 1 % secured by office buildings.

At June 30, 2025 , the Company had no non-accrual commercial loans.

The Company adopted ASC 326 on July 1, 2023.

All disclosures are presented in accordance with ASC 326 as of June 30, 2024 .

The following tables summarize the activity in the allowance for credit losses by loan class for the year ended June 30, 2024.

Information in regards to activity in the allowance for credit losses for the year ended June 30, 2023 and the recorded investment in loans receivable by loan class as of June 30, 2023, occurred prior to the adoption of ASC 326:

All disclosures are presented in accordance with ASC 326 as of June 30, 2025 and June 30, 2024 .

The following tables summarize the activity in the allowance for credit losses by loan class for the years ended June 30, 2025 and June 30, 2024.

June 30, 2025

(Dollars in thousands)

(In thousands)

Allowance for Credit Losses:

Beginning balance

Impact of ASC 326

Provisions (credits)

14 unchanged sentences

for impairment

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

June 30, 2024

(Dollars in thousands)

(In thousands)

Allowance for Credit Losses:

Beginning balance

(Credits) provisions

Impact of ASC 326

Provisions (credits)

Ending balance

17 unchanged sentences

June 30, 2025 and 2024

The following table presents the credit risk profile of loans by class and fiscal year of origination as of June 30, 2024:

The following tables present the credit risk profile of loans by class and fiscal year of origination as of June 30, 2025 and June 30, 2024:

June 30, 2025

(Dollars in thousands)

Owner Occupied Commercial Real Estate

(In thousands)

Owner Occupied Commercial

Special mention

Total Owner Occupied Commercial Real Estate

Total Owner Occupied Commercial

Other Commercial Real Estate

18 unchanged sentences

June 30, 2025 and 2024

The following table presents the recorded investment in loans receivable by major category and credit quality indicators at June 30, 2023, prior to the adoption of ASC 326:

June 30, 2024

(Dollars in thousands)

Owner occupied commercial real estate

(In thousands)

Owner Occupied Commercial

Special mention

Total Owner Occupied Commercial

Other Commercial Real Estate

Special mention

Total Other Commercial Real Estate

Special mention

Total Multi-Family

Commercial and Industrial

Special mention

Total Commercial and Industrial

Residential Mortgage

Special mention

Total Residential Mortgage

Consumer and other

The following table presents the amortized cost basis of non-accrual loans and loans 90 days or more past due and still accruing, by loan portfolio class with related allowance, as of June 30, 2024:

June 30, 2024

Non-Accrual Loans

With a Related Allowance

Without a Related Allowance

(Dollars in thousands)

Commercial and Industrial

Special mention

Total Consumer and other

Special mention

Gross charge-offs

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

The following tables provide a breakdown of impaired loans by loan portfolio class and related allowance as of June 30, 2023 prior to the adoption of ASC 326:

The following tables present the recorded investment in loans receivable by major category and credit quality indicators at June 30, 2025 and June 30, 2024:

June 30, 2025

(Dollars in thousands)

With no related allowance recorded:

(In thousands)

Owner occupied commercial real estate

3 unchanged sentences

Consumer and other

With an allowance recorded:

June 30, 2024

(In thousands)

Owner occupied commercial real estate

3 unchanged sentences

Consumer and other

Owner occupied commercial real estate

Other commercial real estate

The following table presents the amortized cost basis of non-accrual loans and loans 90 days or more past due and still accruing, by loan portfolio class with related allowance, as of June 30, 2025:

June 30, 2025

Non-Accrual Loans

With a Related Allowance

Without a Related Allowance

(In thousands)

Commercial and Industrial

Residential mortgage

Consumer and Other

The following table presents the amortized cost of collateral-dependent non-accrual loans by portfolio segment and type of collateral as of June 30, 2024:

The following tables provide a breakdown of impaired loans by loan portfolio class and related allowance as of June 30, 2024:

June 30, 2024

Type of Collateral

Commercial Real Estate

(Dollars in thousands)

Owner occupied commercial real estate

Other commercial real estate

Non-Accrual Loans

With a Related Allowance

Without a Related Allowance

(In thousands)

Commercial and Industrial

Residential Mortgage

Consumer and Other

Total collateral dependent loans

SR Bancorp, Inc.

7 unchanged sentences

Total Current

(In thousands)

Owner occupied commercial real

7 unchanged sentences

Total Current

(Dollars in thousands)

(In thousands)

Owner occupied commercial real

3 unchanged sentences

Consumer and other

As of June 30, 2024 , the Bank had made no loan modifications to creditors experiencing financial difficulty nor had it made any troubled debt restructurings as of June 30, 2023 .

As of June 30, 2025 , the Bank had made no loan modifications to creditors experiencing financial difficulty.

Premises and Equipment, net

Premises and equipment at June 30, 2025 and June 30, 2024 are summarized as follows:

(Dollars in thousands)

(In thousands)

Buildings and leasehold improvements

19 unchanged sentences

Future undiscounted minimum lease payments for operating leases with initial terms of one year or more as of June 30, 2025 are as follows:

(Dollars in thousands)

(In thousands)

June 30, 2026

7 unchanged sentences

Year Ended June 30,

(Dollars in thousands)

(In thousands)

Operating lease cost

9 unchanged sentences

The changes in the carrying amount of goodwill and core deposit intangibles are summarized as follows:

Core Deposit Intangibles

(Dollars in thousands)

Balance at June 30, 2023

June 30, 2025

June 30, 2024

(In thousands)

Balance at beginning of period

Acquisition of Regal Bancorp

Amortization expense

Balance at June 30, 2024

Balance at end of period

Goodwill and Intangible assets at June 30, 2025 and June 30, 2024:

June 30, 2025

June 30, 2024

(In thousands)

Core deposit intangible, net of amortization

Goodwill and intangible assets

As of June 30, 2025, the amortization of the core deposit intangibles in future fiscal years is as follows:

1 unchanged sentence

Deposits at June 30, 2025 and June 30, 2024 consisted of the following:

(Dollars in thousands)

(In thousands)

Demand accounts:

5 unchanged sentences

Certificates of deposit with balances in excess of the FDIC insurance limit of $250,000 at June 30, 2025 and June 30, 2024 amounted to approximately $ 58.9 million and $ 55.2 million, respectively.

At June 30, 2024, the scheduled maturities of certificates of deposit are as follows:

(Dollars in thousands)

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

At June 30, 2024 there were no borrowings from the FHLB of New York.

At June 30, 2024 and June 30, 2023, the Bank could borrow overnight funds from the FHLB-NY under a redesigned overnight advance program up to the Bank’s maximum borrowing capacity based on the Bank’s ability to collateralize such borrowings.

At June 30, 2024, the Bank’s maximum borrowing capacity was $ 100.0 million .

At June 30, 2024 and June 30, 2023 , the Bank’s Board of Directors has authorized borrowings of up to $ 25.0 million from the Federal Reserve Bank of New York (“FRB-NY”).

All borrowings are secured by pledges of the Bank’s qualifying loan portfolio and are generally on overnight terms with an interest rate quoted at the time of the borrowing.

In March 2023, the Federal Reserve established the Bank Term Funding Program (“BTFP”) to make available funding to eligible depository institutions in order to help assure they have the ability to meet the needs of their depositors following the then-recent events in the banking industry.

The program allowed for advances for up to one year secured by eligible high-quality securities at par value extended at the one-year overnight index swap rate, plus 10 basis points, as of the day the advance is made.

The interest rate was fixed for the term of the advance and there were no prepayment penalties.

At June 30, 2023 , the Bank had outstanding borrowings of $ 20.0 million under the BTFP at a borrowing rate of 4.76 % with a maturity date of March 29, 2024 .

At June 30, 2024, the Bank had no outstanding borrowings under the BTFP, nor any other outstanding borrowings.

At June 30, 2025, the scheduled maturities of certificates of deposit are as follows:

(In thousands)

Year ending June 30, 2026

Year ending June 30, 2027

Year ending June 30, 2028

Year ending June 30, 2029

Year ending June 30, 2030

At June 30, 2025 there were $ 30.0 million of borrowings from the FHLB of New York.

At June 30, 2025 and June 30, 2024, the Company could borrow overnight funds from the FHLB-NY 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 June 30, 2025, the Company's maximum borrowing capacity was $ 100.0 million .

At June 30, 2025 and June 30, 2024 , the Company's Board of Directors had authorized borrowings of up to $ 25.0 million from the Federal Reserve Bank of New York (“FRB-NY”).

All borrowings are secured by pledges of the Company's qualifying loan portfolio and are generally on overnight terms with an interest rate quoted at the time of the borrowing.

SR Bancorp, Inc.

44 unchanged sentences

Rate of return on plan assets

For the years ended June 30, 2024 and 2023, the plan’s assets realized an annual return of approximately - 2 % and - 24 % , respectively.

For the years ended June 30, 2025 and 2024, the plan’s assets realized an annual return of approximately 2 % .

The weighted-average allocation by asset category is as follows:

5 unchanged sentences

Asset Category

(Dollars in thousands)

(In thousands)

Equity securities

Mutual funds - fixed income

Mutual funds - equity

Mutual funds - fixed income

Assets at Fair Value as of June 30, 2024

Asset Category

(Dollars in thousands)

(In thousands)

Equity securities

Mutual funds - fixed income

Mutual funds - equity

Mutual funds - fixed income

SR Bancorp, Inc.

2 unchanged sentences

June 30, 2025 and 2024

The Bank did not contribute to the pension plan during the year ending June 30, 2024.

The Bank did not contribute to the pension plan during the year ended June 30, 2025.

Benefit payments, which reflect expected future service, are expected to be paid as follows:

2 unchanged sentences

As of June 30, 2025 and June 30, 2024, unrecognized net loss of $ 1.4 million and $ 1.7 million , respectively, was included in accumulated other comprehensive income.

The Company maintains the Somerset Regal Bank Employee Stock Ownership Plan ("ESOP").

Coincident with its conversion on September 19, 2023, the Company loaned the ESOP $ 7.6 million and the ESOP trust purchased 760,634 shares of the Company's common stock at $ 10.00 per share.

Shares are allocated to eligible participants on the basis of compensation, subject to federal limits, as the loan from the Company is repaid.

Under applicable accounting requirements, the Company records compensation expense for the ESOP equal to the fair market value of shares when they are earned and committed to be released to participants' accounts under the plan.

Total compensation expense recognized in connection with the ESOP was $ 515,000 for the year ended June 30, 2024.

Shares held by the ESOP were as follows:

June 30, 2024

(Dollars in thousands)

Allocated to participants

Committed to be allocated

Total ESOP shares

Fair value of unearned shares

Savings and Investment Plan

5 unchanged sentences

No additional matching contributions were made during the years ended June 30, 2025 and June 30, 2024.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

Deferred Compensation

1 unchanged sentence

Amounts deferred earn interest at rates comparable to rates the Bank pays on deposit accounts.

At June 30, 2024 and June 30, 2023, liabilities under the plans totaled approximately $ 2.4 million and $ 993,000 , respectively.

At June 30, 2025 and June 30, 2024, liabilities under the plans totaled approximately $ 1.52 million and $ 2.39 million , respectively.

Interest expense approximated $ 59,000 and $ 57,000 for the years ended June 30, 2025 and June 30, 2024 , respectively.

Stock- Based Compensation

On November 20, 2024, the Company adopted the SR Bancorp, Inc.

2024 Equity Incentive Plan ("2024 Equity Plan”).

The 2024 Equity Plan authorizes 1,331,110 shares of common stock for equity-based compensation awards including restricted stock awards, restricted stock units, non-qualified stock options, and incentive stock options.

As of June 30, 2025, there were 266,286 shares available for future grants.

Stock Options

On November 21, 2024, the Company granted 237,695 stock options to non-employee directors.

On January 29, 2025 and February 5, 2025, the Company granted 465,889 and 57,009 , respectively, of stock options to certain officers and employees of the Company.

The stock options have a contractual term of 10 years.

The stock options vest in equal annual installments over a five-year period beginning on the first anniversary of the date of grant.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model.

The following table sets forth information regarding the grants:

Date of grant

November 21, 2024

January 29, 2025

February 5, 2025

Options granted

Exercise price

Vesting period (years)

Expiration date

November 21, 2034

January 29, 2035

February 5, 2035

Expected Volatility (1)

Expected term (years) (2)

Expected dividend yield (3)

Forfeiture rate

Risk free rate of return (4)

Fair value per option

(1) Expected volatility is based on the standard deviation of the historical volatility of the daily adjusted closing price of a group of peers' shares

(2) Expected term represents the period of time that the option is expected to be outstanding, determined using the "Simplified Method"

(3) Expected dividend yield is determined based on management's expectations regarding issuing dividends in the foreseeable future

(4) The risk-free rate of return is based on the U.S.

Treasury yield curve in effect at the time of grant for a period equivalent to the expected term of the option

The following table represents stock option activities for the period indicated:

Year Ended June 30, 2025

Exercise Price

Intrinsic Value

(In thousands)

Balance at beginning of period

Forfeited or expired

Balance at end of period

Exercisable at end of period

The aggregate intrinsic value is calculated by multiplying the number of in-the-money shares by the difference between the Company’s closing price on the last trading day of the period and the exercise price.

Restricted Stock Awards

On November 21, 2024, the Company granted 95,075 restricted stock awards to non-employee directors.

On January 29, 2025 and February 5, 2025, the Company granted 186,356 and 22,800 , respectively, of restricted stock awards to certain officers and employees.

The restricted stock awards vest in equal annual installments over a five-year period.

The restricted stock awards are measured based on grant-date fair value, which reflects the closing price of the Company’s stock on the date of grant.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

The following table represents information regarding restricted stock award activities for the periods indicated:

June 30, 2025

Average Grant

Date Fair Value

Balance at beginning of period

Balance at end of period

The following table represents the compensation expense and income tax benefit recognized for stock options and restricted stock awards for the period indicated:

June 30, 2025

(In thousands)

Stock-based compensation expense

Stock options

Restricted stock awards

Total stock-based compensation expense

Related tax benefits recognized in earnings

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 June 30, 2025:

Period (years)

(In thousands)

Stock options

Restricted stock awards

The Company maintains the Somerset Regal Bank Employee Stock Ownership Plan (the "ESOP").

Coincident with its conversion on September 19, 2023, the Company loaned the ESOP $ 7.6 million and the ESOP trust purchased 760,634 shares of the Company's common stock at $ 10.00 per share.

The loan is secured by the shares purchased, which are held until allocated to participants.

Shares are released for allocation to participants as loan payments are made.

Loan payments are principally funded by discretionary cash contributions by the Bank, as well as dividends, if any, paid to the ESOP on unallocated shares.

Shares are allocated to eligible participants at the end of the plan year (December 31) on the basis of compensation, subject to federal limits.

The principal outstanding of the ESOP loan was $ 6.9 and $ 7.0 million at June 30, 2025, and 2024, respectively.

Total compensation expense recognized in connection with the ESOP was $ 438,000 and $ 515,000 for the years ended June 30, 2025, and 2024, respectively.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

Shares held by the ESOP were as follows:

June 30, 2025

June 30, 2024

(In thousands)

Allocated to participants

Committed to be allocated

Total ESOP shares

Fair value of unearned shares

Prior to the year ended June 30, 2024, the Bank qualified as a Savings Institution under the provisions of the Internal Revenue Code and, therefore, prior to January 1, 1996, was permitted to calculate its bad debt deduction using either the experience method or the specific charge off method.

3 unchanged sentences

The components of income tax expense are as follows for years ended June 30, 2025 and June 30, 2024:

(Dollars in thousands)

Current tax expense (benefit):

(In thousands)

Current tax expense:

Federal income

Total current

Deferred tax (benefit) expense:

Deferred tax expense (benefit):

Federal income

1 unchanged sentence

Change in valuation allowance

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

The following table presents a reconciliation between the effective income tax expense and the income tax expense which would be computed by applying the federal statutory tax rate of 21 % for the years ended June 30, 2025 and June 30, 2024:

(Dollars in thousands)

Federal income tax (benefit) expense, at the statutory rate

(In thousands)

Federal income tax expense (benefit), at the statutory rate

Increases (decreases) in taxes resulting from:

4 unchanged sentences

Change in valuation allowance

Effective income tax (benefit) expense

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

Effective income tax expense (benefit)

The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:

(Dollars in thousands)

(In thousands)

Deferred tax assets:

4 unchanged sentences

Allowance for credit loss

Unrealized loss on securities available-for-sale

Federal net operating loss

8 unchanged sentences

Deferred loan costs

Unrealized gain on securities available-for-sale

Total deferred tax liabilities

3 unchanged sentences

The measurement of such deferred tax items is reduced by the amount that is more likely than not to be realized based on available evidence.

The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

At June 30, 2024 and 2023, there was a valuation allowance of $ 2.2 million and $ 0 , respectively.

The ultimate realization of the deferred tax asset is

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

dependent upon the generation of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

At June 30, 2025 and 2024, there was a valuation allowance of $ 2.2 million.

A corporation may carry forward net operating losses to the succeeding 20 taxable years for New Jersey state tax purposes.

2 unchanged sentences

Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, a valuation allowance of $ 2.2 million was established for the year ended June 30, 2024 attributable to the Company's 5-year charitable contribution and capital loss carryforwards.

On the basis of this evaluation, a valuation allowance of $ 2.2 million was established for the year ended June 30, 2025 attributable to the Company's five-year charitable contribution and capital loss carryforwards.

The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income increased or if objective evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

Net deferred tax assets are included in other assets on the Consolidated Statements of Financial Condition.

At June 30, 2023 , the Company had no valuation allowance.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

At June 30, 2025 and June 30, 2024 , the Company had a $ 2.2 million valuation allowance.

Commitments and Contingencies

1 unchanged sentence

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 statements of financial condition.

Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.

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.

7 unchanged sentences

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, however the Company recorded no expense for the years ended June 30, 2024 and June 30, 2023.

A reserve for unfunded commitments is recognized and included in other liabilities in the consolidated statements of financial condition.

The balance for unfunded commitments was $ 0 at both June 30, 2025 and 2024.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

Regulatory Capital

9 unchanged sentences

The Bank can opt out of the new framework and return to the risk-weighting framework at any time.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

Market risk, credit risk, operational risk and deposits are some of the factors that can impact the capital adequacy ratio and in turn, adversely affect the performance of the Bank.

7 unchanged sentences

Action Provisions

(Dollars in thousands)

(In thousands)

June 30, 2025:

2 unchanged sentences

Tier 1 capital (to average total assets)

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

Related-Party Transactions

1 unchanged sentence

At June 30, 2025, the Bank had $ 267,000 in outstanding loans to directors, officers and their related parties.

(Dollars in thousands)

(In thousands)

Balance, beginning of year

1 unchanged sentence

Balance, end of year

Deposits from directors, officers and their related parties held by the Bank at June 30, 2024 and June 30, 2023 amounted to $ 5.4 million and $ 829,000 , respectively.

The Company leases three branch facilities under agreements with companies directly or indirectly affiliated with a director, as a result of the Merger.

Deposits from directors, officers and their related parties held by the Bank at June 30, 2025 and June 30, 2024 amounted to $ 14.1 million and $ 5.4 million, respectively.

The Company leases two branch facilities under agreements with companies directly or indirectly affiliated with a director, as a result of the Merger.

Lease expense recognized in connection with these leases since the Merger amounted to $ 236,000 for the year ended June 30, 2025 .

1 unchanged sentence

The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Bank’s securities available-for-sale are recorded at fair value on a recurring basis.

The Company's securities available-for-sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Bank 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.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

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.

10 unchanged sentences

The independent pricing service provided prices categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

For financial assets measured at fair value on a recurring basis as of June 30, 2025 and June 30, 2024, the fair value measurements by level within the fair value hierarchy used are as follows:

June 30, 2025

(Dollars in thousands)

Securities available-for-sale:

Federal National Mortgage Association

Government National Mortgage Association

Federal Home Loan Mortgage Corporation

(In thousands)

Equity securities

June 30, 2024

(Dollars in thousands)

Securities available-for-sale:

Federal National Mortgage Association

Federal Home Loan Mortgage Corporation

(In thousands)

Equity securities

2 unchanged sentences

The estimated fair values of equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs).

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

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.

13 unchanged sentences

Unobservable Inputs

(Dollars in thousands)

(In thousands)

Individually evaluated

1 unchanged sentence

Selling costs

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

June 30, 2024

4 unchanged sentences

Unobservable Inputs

(Dollars in thousands)

Impaired loans

(In thousands)

Individually evaluated

Appraisal of collateral

13 unchanged sentences

The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2025 and June 30, 2024 were as follows:

June 30, 2025

(Dollars in thousands)

Carrying Value

(In thousands)

Financial Assets:

5 unchanged sentences

Financial Liabilities:

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

June 30, 2024

(Dollars in thousands)

Carrying Value

(In thousands)

Financial Assets:

9 unchanged sentences

June 30, 2025

(Dollars in thousands)

June 30, 2024

(In thousands)

Cash held at Somerset Regal Bank

2 unchanged sentences

Investment in Somerset Regal Bank

Liabilities and equity

Other liabilities

Shareholders' equity

Total liabilities and equity

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2024 and 2023

(Dollars in thousands)

(In thousands)

Income and Expense

Interest income on ESOP loan

Contribution expense

Income before income tax expense and equity in undistributed net loss of

Somerset Regal Bank

Other expense

Contribution expense Somerset Regal Bank Charitable Foundation

Income (loss) before income tax expense and equity in undistributed net loss of Somerset Regal Bank

Income tax expense

Income before undistributed net loss of Somerset Regal Bank

Equity in undistributed net loss of Somerset Regal Bank

(Dollars in thousands)

Equity in undistributed net income (loss) of Somerset Regal Bank

Net Income (Loss)

SR Bancorp, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements — Continued

June 30, 2025 and 2024

(In thousands)

Cash Flows From Operating Activities:

Net income (loss)

Adjustments to reconcile net loss to cash provided by operating activities:

Undistributed net loss of Somerset Regal Bank

Change in other assets

Noncash expense - contribution to Somerset Regal Bank

Charitable Foundation

Net cash used in operating activities

Undistributed net (earnings) loss of Somerset Regal Bank

Stock based compensation

Change in other assets and other liabilities

Contribution expense common shares contributed to Somerset Regal Bank Charitable Foundation

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities:

3 unchanged sentences

Cash paid for acquisition

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash Flows From Financing Activities:

Repurchase of common stock

Cash dividends paid on common stock

Cash proceeds from issuance of common stock

Change in due from Somerset Regal Bank

Net cash provided from financing activities

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

2 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 9A. Controls and Procedures