What changed in this filing

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Item 1. Business

2026-09-25 compared with 2025-09-29 · 68 added, 101 removed, 585 unchanged (22% of the section changed)

13 unchanged sentences

Somerset Regal Bank was formed through the combination on September 19, 2023 of Somerset Bank and Regal Bank, two New Jersey chartered institutions.

The Bank operates from 14 branches in Essex, Hunterdon, Hudson, Livingston, Middlesex, Morris, Somerset and Union counties in the northern and central New Jersey.

The Bank operates from 14 branches in Essex, Hunterdon, Middlesex, Morris, Somerset and Union counties in northern and central New Jersey.

The Bank offers a variety of deposit and loan products to individuals and small businesses, most of which are located in our primary market.

Completed Stock Offering

On September 19, 2023, Somerset Savings Bank, SLA converted from the mutual to stock form of organization and SR Bancorp completed its stock offering.

SR Bancorp sold 9,055,172 shares of its common stock at a price of $10.00 per share, which included 760,364 shares sold to Somerset Regal Bank’s Employee Stock Ownership Plan.

On September 19, 2023, Somerset Savings Bank, SLA converted from the mutual to stock form of organization.

In connection therewith, SR Bancorp sold 9,055,172 shares of its common stock at a $10.00 per share, which included 760,634 shares sold to Somerset Regal Bank’s Employee Stock Ownership Plan.

Additionally, the Company contributed 452,758 shares and $905,517 in cash to the Somerset Regal Charitable Foundation, Inc., a charitable foundation formed in connection with the conversion.

7 unchanged sentences

The acquisition of Regal Bancorp and Regal Bank expanded our market presence into Essex, Morris and Union Counties, New Jersey and enhanced our market presence in Somerset County, New Jersey.

The Merger increased the combined banks’ deposit base and its loan portfolio, provided Somerset Savings Bank with greater commercial lending expertise and access to commercial loan customers and provided Regal Bank with greater residential lending expertise and access to residential loan customers.

The Merger provided Somerset Savings Bank with greater commercial lending expertise and access to commercial loan customers and provided Regal Bank with greater residential lending expertise and access to residential loan customers.

The Bank, which was formed in 1887, serves Essex, Hunterdon, Middlesex, Morris, Somerset and Union counties in New Jersey through its 14 full-service branch locations.

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

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

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

The market areas served by Somerset Regal Bank’s branches are a mix of urban and suburban markets.

Essex County is the most populous county with a total population of 896,000, while Hunterdon County is the least populous county with a total population of 132,000.

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

1 unchanged sentence

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

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

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

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

and New Jersey.

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

At June 30, 2026, Somerset Regal Bank maintained its largest balance of deposits in Somerset County, where it maintains its headquarters and maintains its largest branch presence.

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

Based on June 30, 2026 deposit data reported by the Federal Deposit Insurance Corporation, Somerset Regal Bank’s $305.5 million of deposits provided for a 3.61% market share of bank and thrift deposits in Somerset County, which was the eighth largest market share out of 25 financial institutions in the market.

We face significant competition for deposits and loans.

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We offer a variety of loans, including residential, commercial real estate, multi-family, commercial and industrial and consumer loans.

Historically, we have had a significant portion of our loan portfolio concentrated in residential loans, including one- to four-family residential loans.

Prior to the Merger in 2023, Somerset Savings Bank had a significant portion of its loan portfolio concentrated in residential loans, including one- to four-family residential loans.

Our merger with Regal Bank greatly expanded our commercial loan portfolio and commercial lending capabilities.

At June 30, 2026, residential mortgage loans comprised 52.6% of our total loan portfolio and commercial loans comprised 45.7%, which largely consisted of multi-family loans.

In the future, we intend to continue to concentrate on ways to compete for a greater share of commercial loan originations in our primary market area.

We intend to continue to concentrate on ways to compete for a greater share of commercial loan originations in our primary market area.

Loan Portfolio Composition.

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

(In thousands)

(Dollars in thousands)

Owner occupied commercial real estate loans

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Contractual Maturities.

The following tables set forth the contractual maturities of our total loan portfolio at June 30, 2025.

Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans reported as being due in one year or less.

The tables present contractual maturities and do not reflect repricing or the effect of prepayments.

The following table sets forth the contractual maturities of our total loan portfolio at June 30, 2026.

Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

The table presents contractual maturities and does not reflect repricing or the effect of prepayments.

Actual maturities may differ.

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Fixed Versus Adjustable-Rate Loans.

The following tables sets forth our fixed and adjustable-rate loans at June 30, 2025 that are contractually due after June 30, 2026.

The following table sets forth our fixed and adjustable-rate loans at June 30, 2026 that are contractually due after June 30, 2027.

Due After June 30, 2027

8 unchanged sentences

One- to Four-Family Residential Mortgage Loans .

At June 30, 2026, one- to four-family residential real estate loans totaled $475.9 million, which represented 52.6% of our loan portfolio.

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

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Adjustment periods are generally every five years.

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

At June 30, 2026, our largest multi-family real estate loan totaled $8.2 million and was secured by a non-owner-occupied multi-family apartment building located in our primary market area.

At June 30, 2026, this loan was performing in accordance with its original terms.

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

At June 30, 2026, we had $141.6 million in commercial real estate loans, representing 15.7% of our loan portfolio, consisting of $48.9 million secured by owner occupied real estate and $92.7 million secured by other commercial real estate.

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

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

A significant portion of our non-owner-occupied commercial real estate loans are comprised of mixed-use multi-family properties.

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

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

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

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

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

At June 30, 2026, our largest commercial real estate loan had an outstanding balance of $8.3 million and was secured by a non-owner-occupied commercial building located in our primary market area.

At June 30, 2026, this loan was performing according to its original terms.

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At June 30, 2026, we had $18.8 million of commercial and industrial ("C&I") loans outstanding, representing 2.1% of the total loan portfolio.

Typically, we originate C&I loans and lines of credit to small- and medium-sized companies in our market area under the Small Business Administration ("SBA") program.

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

Typically, we originate C&I loans and lines of credit to small- and medium-sized companies in our market area.

Our C&I loans, a subset of which are originated under the Small Business Administration (“SBA”) program, are generally used for working capital purposes or for acquiring real estate, equipment, inventory or furniture.

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

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

When making SBA C&I loans, we require a debt service coverage ratio of at least 1.25x and we review and consider the financial statements of the borrower, our lending history with the borrower, the borrower’s debt service capabilities, the projected cash flows of the business, and the value of collateral, accounts receivable, inventory, and equipment.

Personal guarantees are obtained from all SBA C&I borrowers.

Generally, loans secured by real estate collateral in the first lien position can have a loan-to-value ratio of up to 75%, while secured loans underwritten through the SBA program can have a loan-to-value ratio of up to 90%.

When originating C&I loans, we require a debt service coverage ratio of at least 1.25x and we review and consider the financial statements of the borrower, our lending history with the borrower, the borrower’s debt service capabilities, the projected cash flows of the business, and the value of collateral, accounts receivable, inventory, and equipment.

Personal guarantees are obtained from all C&I borrowers.

We generally seek to establish the primary deposit account relationship of our C&I business borrowers to maintain their principal deposit accounts with us, which improves our overall interest rate spread and profitability.

We may increase this type of lending in the future.

Our intent is to increase this type of lending as a percentage of our loan portfolio in the future.

The commercial loans that we offer are variable- and fixed-rate loans, generally for a one- to ten-year term.

4 unchanged sentences

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

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

At June 30, 2026, our largest C&I loan was $9.1 million drawn on a line of credit with a further available draw of $2.2 million, and was secured by an owner occupied commercial building.

At June 30, 2026, this loan was performing in accordance with its contractual terms.

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We use the same parameters in evaluating these loans as we do for our in-house loan originations of one- to four-family residential real estate loans.

For each purchased loan, we generally pay a fixed fee based on the loan balance.

For each purchased loan, we generally pay the mortgage banker a fixed fee based on the loan balance.

For the years ended June 30, 2026 and June 30, 2025, we purchased $40.5 million and $41.2 million, respectively, of loans from these mortgage brokers for our portfolio.

1 unchanged sentence

The purchased loans are acquired from these mortgage brokers without recourse or any right to require the mortgage broker to repurchase the loans.

The fixed aggregate fee we pay to acquire the loan and servicing rights are amortized over the contractual life of the loan.

The fixed fee we pay to acquire the loan and servicing rights are amortized over the contractual life of the loan.

Loan Approval Procedures and Authority.

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The Board of Directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer’s position and experience.

The Management Loan Committee, comprised of SR Bancorp Inc.'s Chairman, Somerset Regal Bank’s Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Credit Officer, Senior Mortgage Lending Officer and Senior Commercial Lending Officer, approves residential and commercial loans up to $1.0 million and builder tract loans up to $1.5 million.

Loans in excess of such amounts must be approved by the Board of Directors.

The Management Loan Committee approves commercial loans up to $3.0 million.

The management loan committee overseeing commercial loans, comprised of SR Bancorp Inc.'s Chairman, Somerset Regal Bank’s Chairman, President and Chief Executive Officer and Senior Commercial Lending Officer, approves commercial loans up to certain dollar amounts based on the loan type.

Loans in excess of such amounts must be approved by the Board of Directors.

The management loan committee overseeing residential loans, comprised of Somerset Regal Bank’s Chairman, President and Chief Executive Officer, Chief Operating Officer, Loan Originations Manager and Underwriting Specialist, approves residential loans up to $1.5 million.

Loans in excess of such amount must be approved by the Board of Directors.

Loans to One Borrower.

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Our loan policy has a $15.0 million loan to one borrower limit and $20.0 million loan to related borrowers limit.

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

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

At June 30, 2026, our largest lending relationship was comprised of six loans with an aggregate total of $13.2 million to related borrowers.

The loans consisted of three non-owner-occupied mixed-use buildings and three multi-family buildings.

These loans were performing in accordance with their terms at June 30, 2026.

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June 30, 2026

90 Days or More Past Due and Still Accruing

Total Past Due

Total Current

(In thousands)

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June 30, 2025

90 Days or More Past Due and Still Accruing

Total Past Due

Total Current

(In thousands)

5 unchanged sentences

Non-Performing Assets.

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

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

(In thousands)

Non-accrual loans:

Residential mortgage loans

Commercial loans

Total non-accrual loans

Accruing loans past due 90 days or more:

Residential mortgage loans

Total non-performing loans

Real estate owned

Total non-performing assets

Total non-performing loans to total loans

Total non-accrual loans to total loans

Total non-performing assets to total assets

The Bank had no non-performing assets as of June 30, 2026 or 2025.

The Bank had no loans with borrowers experiencing financial difficulty which were modified as of June 30, 2026 and June 30, 2025.

Our classified and special mention loans at the dates indicated were as follows:

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As of June 30, 2026, we had no assets designated as special mention.

The allowance for credit losses is the amount estimated by management as necessary to absorb credit losses in the loan portfolio that are both probable and reasonably estimable at the balance sheet date.

The allowance for credit losses is the amount estimated by management as adequate to absorb the lifetime expected credit losses in the loan portfolio at the balance sheet date.

Our determination as to the classification of our assets and the amount of our loss allowances are subject to review by the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance, which can require that we establish additional loss allowances.

We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

On the basis of our review of our assets at June 30, 2025 and June 30, 2024, we had $0 and $50,000, respectively, of loans classified as substandard, and no assets classified as doubtful or loss.

At June 30, 2026 and June 30, 2025, we had no loans classified as substandard and no assets classified as doubtful or loss.

Allowance for Credit Losses

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However, this analysis process is subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available.

Although we believe that we have established the allowance at levels to absorb current expected losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

Although we believe that we have established the allowance at levels adequate to absorb current expected losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance have authority to periodically review our allowance for credit losses.

3 unchanged sentences

(In thousands)

Allowance for Credit

Allowance for Credit Losses:

Beginning balance

3 unchanged sentences

(In thousands)

Allowance for Credit

Allowance for Credit Losses:

Beginning balance

Impact of ASC 326

Provisions (credits)

4 unchanged sentences

June 30, 2026

ACL to Total Loans

(In thousands)

7 unchanged sentences

Allowance to non-performing loans

Allowance to total loans outstanding at

the end of the year

Net (charge-offs) recoveries to average

loans outstanding during the year

Allowance to total loans outstanding at the end of the year

Non-performing loans to total loans outstanding at the end of the year

Net (charge-offs)/recoveries to average loans outstanding during the year

June 30, 2025

ACL to Total Loans

(In thousands)

7 unchanged sentences

Allowance to non-performing loans

Allowance to total loans outstanding at

the end of the year

Net (charge-offs) recoveries to average

loans outstanding during the year

Allowance to total loans outstanding at the end of the year

Non-performing loans to total loans outstanding at the end of the year

Net (charge-offs)/recoveries to average loans outstanding during the year

Investment Activities

2 unchanged sentences

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

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

certificates of deposit of federally insured institutions.

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

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

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Our Board of Directors has the overall responsibility for the investment portfolio, including approval of our investment policy, which is reviewed and approved at least annually.

The Investment Committee, consisting of the Chief Executive Officer, President and Chief Financial Officer, is responsible for implementation of the investment policy, and monitoring our investment performance.

The Investment Committee, consisting of the Bank's Chairman, President and Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, is responsible for implementation of the investment policy, and monitoring our investment performance.

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

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

At June 30, 2026, our investment portfolio consisted solely of securities held-to-maturity, including securities and obligations issued by U.S.

government-sponsored enterprises totaling $118.3 million, subordinated debentures issued by financial institutions in the Mid-Atlantic region totaling $11.0 million and collateralized mortgage obligations totaling $1.6 million.

1 unchanged sentence

As a member of the Federal Home Loan Bank of New York, we are required to purchase stock in the Federal Home Loan Bank of New York, which is carried at cost.

We sold all available-for-sale securities during the year ended June 30, 2024, and held no balance as of June 30, 2025.

The sales were part of a balance sheet restructuring in which the Company sold $35.4 million in book value of its lower-yielding investment securities for a pre-tax realized loss of approximately $4.4 million.

The Company redeployed the $30.9 million of proceeds from the sale of these securities into approximately the same amount of residential and commercial real estate mortgages.

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

The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis at June 30, 2026:

1 unchanged sentence

Held-to-Maturity

Amortized Cost

Weighted Average Yield

(In thousands)

8 unchanged sentences

United States Government and Federal Agency Obligations.

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

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

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

Mortgage-Backed Securities.

27 unchanged sentences

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

(In thousands)

Non-interest-bearing demand

(Dollars in thousands)

Non-interest-bearing demand deposits

Interest-bearing deposits

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

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

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

At June 30, 2026, the Company had $65.0 million of borrowings with the Federal Home Loan Bank of New York.

At June 30, 2025, the Company had $30.0 million of outstanding borrowings.

At June 30, 2026, we had access to Federal Home Loan Bank advances of up to $135.0 million based on our unused qualifying collateral available to support such advances.

1 unchanged sentence

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

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

At June 30, 2026 and 2025, we had no outstanding borrowings with the Federal Reserve Bank of New York.

Human Capital Resources

As of June 30, 2025, we had 119 full-time employees and two part-time employees.

As of June 30, 2026, we had 115 full-time employees and one part-time employee.

None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.

24 unchanged sentences

Bank Regulation

As a New Jersey chartered commercial bank with federally insured deposits, Somerset Regal Bank will be subject to comprehensive regulation by the NJDBI, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer.

As a New Jersey chartered commercial bank with federally insured deposits, Somerset Regal Bank is subject to comprehensive regulation by the NJDBI, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer.

New Jersey chartered commercial banks are required to file reports with, and are periodically examined by, the FDIC and the NJDBI concerning their activities and financial condition and must obtain regulatory approvals before entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions.

23 unchanged sentences

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

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

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

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

26 unchanged sentences

Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.

Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.

Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities).

1 unchanged sentence

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

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

type of asset.

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

25 unchanged sentences

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

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

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

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

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

17 unchanged sentences

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

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

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

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

In addition, extensions of credit to

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

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

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

91 unchanged sentences

Net operating loss carryforwards arising from tax years beginning after January 1, 2018 are limited to offset a maximum of 80% of a future year’s taxable income.

At June 30, 2025, Somerset Regal Bank had approximately $3.0 million in net operating loss carryovers at the federal level and approximately $7.5 million in net operating loss carryovers at the state level.

At June 30, 2026, Somerset Regal Bank had no net operating loss carryovers at the federal level and approximately $4.3 million in net operating loss carryovers at the state level.

Capital Loss Carryovers.

19 unchanged sentences

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

What changed 10-K

Item 1. Business