SR Bancorp Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
SRBK$18.95+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0000950170-24-060398
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0000950170-24-127006
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 145 previous paragraphs and 148 current paragraphs.
82 unchanged; 19 reworded; 47 added; 36 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (47)
Current report
The following management discussion and analysis of the Company’s consolidated financial condition as of September 30, 2024 and the results of operations for the three months ended September 30, 2024 and 2023 (“MD&A”) should be read in conjunction with the consolidated audited financial statements, including notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the Securities and Exchange Commission, and the other information therein. The Consolidated Statements of Financial Condition as of September 30, 2024, the Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss), the Consolidated Statements of Changes in Stockholders’ Equity and the Consolidated Statements of Cash Flows for the three months ended September 30, 2024 and 2023, are unaudited. The Consolidated Statement of Financial Condition as of June 30, 2024 was derived from the audited Consolidated Statements of Financial Condition that was included in the Company's Annual Report on Form 10-K for the year ended June 30, 2024. The consolidated financial statements include, in the opinion of management, all adjustments considered necessary for a fair presentation of such data. As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “the Bank” and “the Company” refer to SR Bancorp, Inc., and its consolidated subsidiaries, unless otherwise noted.
Current report
Forward-Looking Statements
Current report
Goodwill and Other Intangible Assets: Our intangible assets consist primarily of goodwill and core deposit intangibles. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is not amortized but is subject to annual tests for impairment, or more often if events or circumstances indicate it may be impaired. We may elect to perform a qualitative assessment as a part of the annual impairment test. If the qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we elect not to perform a qualitative assessment, then we would be required to perform a quantitative test for goodwill impairment. If the estimated fair value of the reporting unit less than the carrying value, goodwill is impaired and is written down to its estimated fair value.
Current report
During the year ended June 30, 2024, we performed a qualitative assessment of goodwill. Based on that assessment, we determined that it was more likely than not that the reporting unit's fair value was not less than its carrying amount. We concluded that our goodwill was not impaired as of June 30, 2024. As of September 30, 2024, no triggering events were identified and therefore, we did not perform an interim impairment evaluation.
Current report
Core deposit intangibles are amortized on an accelerated basis using an estimated life of ten years. The core deposit intangibles are evaluated annually for impairment in accordance with GAAP. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.
Current report
Total Assets. Total assets increased $32.1 million, or 3.1%, to $1.05 billion at September 30, 2024 from $1.02 billion at June 30, 2024. The increase was primarily driven by new loan originations, resulting in a net increase of $35.9 million in loans receivable.
Current report
Cash and Cash Equivalents. Cash and cash equivalents increased $1.4 million, or 3.0%, to $47.3 million at September 30, 2024 from $45.9 million at June 30, 2024 due to the increases in deposits and borrowings.
Current report
Securities. Securities held-to-maturity decreased $3.6 million, or 2.3%, to $152.5 million at September 30, 2024 from $156.1 million at June 30, 2024. The decrease was primarily due to principal repayments and maturities.
Current report
Loans. Loans receivable, net, increased $35.9 million, or 4.9%, to $767.7 million at September 30, 2024 from $731.9 million at June 30, 2024, primarily due to a $25.6 million, or 14.2%, increase in multi-family loans and a $11.5 million, or 2.9%, increase in residential mortgage loans. Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 45.8% of loans at September 30, 2024. For further information about our loans, see "Lending Activities" below.
Current report
Bank Owned Life Insurance. Bank owned life insurance increased $260,000, or 0.7%, to $37.4 million at September 30, 2024 from $37.1 million at June 30, 2024.
Current report
Goodwill and Intangible Assets. Goodwill and the core deposit intangible asset recognized from the Merger totaled $27.8 million at September 30, 2024 compared to $28.1 million at June 30, 2024. The decrease was due to the amortization of the core deposit intangible.
Current report
Total Liabilities. Total liabilities increased $31.1 million, or 3.8%, to $852.4 million at September 30, 2024 from $821.4 million at June 30, 2024. The increase was primarily due to a $20.0 million advance borrowing with the Federal Home Loan Bank of New York and a $12.7 million increase in deposits.
Current report
Deposits. Deposits increased $12.3 million, or 1.5%, to $819.4 million at September 30, 2024 from $807.1 million at June 30, 2024 due primarily to increases in interest-bearing checking accounts that offset decreases in non-maturity savings accounts due in part to the Bank having raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. At September 30, 2024, $102.5 million, or 12.5%, of total deposits consisted of noninterest-bearing deposits. At September 30, 2024, $137.6 million, or 16.8%, of total deposits were uninsured.
Current report
Borrowings. During the three months ended September 30, 2024, the Bank borrowed $20.0 million from the Federal Home Loan Bank of New York to provide for additional liquidity in order to fund new loans. Such borrowing remained outstanding at September 30, 2024. At June 30, 2024, there were no outstanding borrowings.
Current report
Total Equity. Total equity increased $1.1 million, or 0.5%, to $200.5 million at September 30, 2024 from $199.5 million at June 30, 2024. The increase was primarily due to net earnings of $1.4 million and a decrease in accumulated other comprehensive loss related to the funded status of the Company's pension plan of $337,000, or 27.7%, partially offset by a decrease of $737,000 due to the repurchase of 66,288 shares of Company common stock.
Current report
Lending Activities
Current report
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. The Merger greatly expanded our commercial loan portfolio and commercial lending capabilities. At September 30, 2024, residential mortgage loans comprised 52.7% of our total loan portfolio and commercial loans comprised 45.8%, which largely consisted of multi-family loans.
Current report
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.
Current report
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.
Current report
Contractual Maturities. The following tables set forth the contractual maturities of our total loan portfolio at September 30, 2024. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.
Current report
Fixed Versus Adjustable-Rate Loans. The following tables sets forth our fixed and adjustable-rate loans at September 30, 2024 that are contractually due after September 30, 2025.
Current report
Non-Performing and Problem Assets
Current report
When a loan is 15 days past due, we send the borrower a late charge notice. If the loan delinquency is not corrected, other forms of collections are implemented, including telephone calls and collection letters. We attempt personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower understands the terms of the loan and to emphasize the importance of making timely payments. If necessary, subsequent late charges and delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90 th day of delinquency, we will send the borrower a final demand for payment, after which we may refer the loan to legal counsel to commence foreclosure proceedings. Any of our loan officers can shorten these time frames in consultation with the senior lending officer.
Current report
Generally, loans are placed on non-accrual status when payment of principal or interest is 90 days or more delinquent unless the loan is considered well-secured and in the process of collection. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current and factors indicating doubtful collection no longer exist, including performance by the borrower under the loan terms for a six-month period. Our Senior Mortgage Lending Officer reports monitored loans, including all loans rated special mention, substandard, doubtful or loss, to the Board of Directors on a quarterly basis. In addition, management presents a quarterly credit loss allowance analysis to our Board of Directors.
Current report
The following table sets forth our loan delinquencies by type and amount at the dates indicated.
Current report
Non-Performing Assets. The following table sets forth information regarding our non-performing assets. The Bank had no loan modifications to borrowers experiencing financial difficulty as of September 30, 2024 and June 30, 2024.
Current report
Allowance for Credit Losses
Current report
Our allowance for credit losses ("ACL") is maintained at a level necessary to absorb credit losses that are both probable and reasonably estimable. Management, in determining the allowance for credit losses, considers the losses in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. A description of our methodology in establishing our allowance for credit losses is set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Critical Accounting Policies-Allowance for Credit Losses” in our Form 10-K as of and for the year ended June 30, 2024. The allowance for credit losses as of September 30, 2024 and June 30, 2024 was maintained at levels that represents management’s best estimate of losses in the loan portfolio, and such losses were both probable and reasonably estimable. However, this analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.
Current report
In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance have authority to periodically review our allowance for credit losses. Such agencies may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.
Current report
The following table sets forth activity in our allowance for credit losses for the years indicated.
Current report
Allocation of Allowance for Credit Losses. The following tables set forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
Current report
Investment Activities
Current report
General. The goals of our investment policy are to maximize portfolio yield over the long term in a manner that is consistent with minimizing risk, and meeting liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. Subject to loan demand and our interest rate risk analysis, we will increase the balance of our investment securities portfolio when we have excess liquidity.
Current report
At September 30, 2024 and June 30, 2024, our investment portfolio consisted solely of securities held-to-maturity, primarily of securities and obligations issued by U.S. government-sponsored enterprises, subordinated debentures issued by financial institutions in the Mid-Atlantic region, collateralized mortgage obligations and foreign government bonds.
Current report
The amortized cost and approximate fair values of securities held-to-maturity at September 30, 2024 and June 30, 2024 are as follows:
Current report
The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis at September 30, 2024:
Current report
For additional information regarding our investment securities portfolio, see Note 4 to the Notes to Financial Statements.
Current report
Deposit Accounts. Deposits are primarily attracted from within our market area through the offering of a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW accounts), savings accounts, money market accounts and certificates of deposit. At September 30, 2024 and June 30, 2024, we also held $34.5 million and $22.2 million, respectively, of accounts from a variety of local municipal relationships. At September 30, 2024 and June 30, 2024, we had no brokered deposits.
Current report
We also offer a variety of deposit accounts designed for the businesses operating in our market area. Our business banking deposit products include a business checking account designed for small businesses, savings and money market accounts. We offer bill payment services through our online banking system.
Current report
Deposit account terms vary according to the minimum balance required, the time period the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, the rates on borrowings, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has generally been to offer competitive rates on all types of deposit products, and to periodically offer special rates to attract deposits of a specific type or term.
Showing the first 40 of 47 passages. Open the source sections for the rest.
Removed paragraphs (36)
Previous report
Overview; Completed Stock Offering and Merger
Previous report
Our principal business is to acquire deposits from individuals and businesses in the communities surrounding our offices and to use these deposits to fund loans.
Previous report
The conversion of Somerset Savings Bank, SLA from the mutual to stock form of organization and related stock offering by the Company was completed on September 19, 2023. The Company’s common stock began trading on the Nasdaq Capital Market under the trading symbol “SRBK” on September 20, 2023.
Previous report
The Company sold 9,055,172 shares of its common stock at a price of $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. Upon the completion of the conversion and offering, 9,507,930 shares of Company common stock were outstanding.
Previous report
Promptly following the completion of the conversion and related stock offering, Regal Bancorp, Inc., a New Jersey corporation (“Regal Bancorp”), merged with and into the Company, with the Company as the surviving entity (the “Merger”). Immediately following the Merger, Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey and the wholly-owned subsidiary of Regal Bancorp, merged with and into Somerset Bank, which converted to a commercial bank charter, and 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. The Merger was completed on September 19, 2023.
Previous report
The financial information contained in this Form 10-Q as of and for the three and nine months ended March 31, 2024 is for SR Bancorp and Somerset Regal Bank, unless indicated otherwise. However, due to the timing of the merger noted above, the income statement only includes operations of the combined entity since September 19, 2023. Financial information as of June 30, 2023 and for the three and nine months ended March 31, 2023 is for Somerset Savings Bank, SLA, on a stand-alone basis.
Previous report
Cautionary Note Regarding Forward-Looking Statements
Previous report
Total Assets. Total assets increased $401.3 million, or 61.6%, to $1.05 billion at March 31, 2024 from $651.5 million at June 30, 2023. The increase was primarily the result of the acquisition of Regal Bancorp, and its wholly-owned subsidiary Regal Bank, on September 19, 2023, which had $428.0 million of assets at the time of the acquisition. The increase was also due to net proceeds of $86.9 million obtained from the completion of the Company’s stock offering on the same date.
Previous report
Cash and Cash Equivalents. Cash and cash equivalents increased $30.0 million, or 70.8%, to $72.5 million at March 31, 2024 from $42.4 million at June 30, 2023 due to $55.3 million of cash and cash equivalents acquired from the Regal Bancorp acquisition and the net proceeds of $86.9 million retained from the stock offering, partially offset by $69.5 million paid for the acquisition of Regal Bancorp.
Previous report
Securities Available-for-Sale. Securities available-for-sale decreased $3.4 million, or 9.6%, to $32.6 million at March 31, 2024 from $36.1 million at June 30, 2023. The Company acquired $21.3 million of available-for-sale securities from the Regal Bancorp acquisition. Following the completion of the Merger, the Company sold $19.2 million of its available-for-sale portfolio, which resulted in a gain of $17,000. The remainder of the decrease was due to maturities and repayment of securities.
Previous report
Securities Held-to-Maturity. Securities held-to-maturity decreased $9.4 million, or 5.5%, to $161.8 million at March 31, 2024 from $171.2 million at June 30, 2023 as the maturities of securities during the period more than offset the acquisition of $2.6 million of held-to-maturity securities from the Regal Bancorp acquisition.
Previous report
Loans. Loans receivable, net, increased $336.6 million, or 92.9%, to $698.9 million at March 31, 2024 from $362.3 million at June 30, 2023. The Company acquired $336.0 million of loans from the Regal Bancorp acquisition, primarily consisting of $311.9 million of multi-family and commercial real estate loans and $17.0 million of commercial and industrial loans. As a result of the acquisition, the composition of the loan portfolio changed significantly from June 30, 2023. The percentage of residential mortgage loans to total loans decreased from 97.8% at June 30, 2023 to 53.4% at March 31, 2024. Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 45.0% of loans at March 31, 2024.
Previous report
Bank Owned Life Insurance. Bank owned life insurance increased $8.1 million, or 28.3%, to $36.8 million at March 31, 2024 from $28.7 million at June 30, 2023. The increase was primarily the result of the Regal Bancorp acquisition, which had $7.5 million of bank owned life insurance at the time of acquisition.
Previous report
Goodwill and Intangible Assets. The Company acquired goodwill and a core deposit premium intangible through the acquisition of Regal Bancorp. At the time of acquisition, goodwill was $20.5 million and the core deposit premium intangible asset was $9.1 million. No impairment loss was recognized on goodwill during the nine months ended March 31, 2024. The carrying amount of the core deposit premium intangible, net of accumulated amortization, was $8.1 million at March 31, 2024.
Previous report
Total Liabilities. Total liabilities increased $324.2 million, or 61.2%, to $853.6 million at March 31, 2024 from $529.4 million at June 30, 2023. The increase was primarily the result of the Regal Bancorp acquisition, which had $379.0 million of liabilities at the time of the acquisition.
Previous report
Deposits. Deposits increased $334.1 million, or 66.3%, to $838.0 million at March 31, 2024 from $503.9 million at June 30, 2023 due primarily to the $373.2 million of deposits assumed from the Regal Bank acquisition. At the time of the acquisition, Regal Bank’s deposits consisted of $90.8 million of noninterest-bearing deposits, $162.4 million in NOW, money market and savings accounts and $119.9 million of certificates of deposit.
Previous report
Borrowings. We had no borrowings outstanding at March 31, 2024 as the $20.0 million of borrowings outstanding at June 30, 2023 was repaid during the three months ended March 31, 2024.
Previous report
Total Equity. Total equity increased $77.2 million, or 63.2%, to $199.3 million at March 31, 2024 from $122.1 million at June 30, 2023. The increase resulted from $84.0 million in stockholders’ equity from the Regal Bancorp acquisition and the net proceeds from the Company’s stock offering and other comprehensive income of $643,000, offset by a net loss of $7.8 million for the period.
Previous report
Interest Income. Interest income increased $7.6 million, or 185.1%, to $11.6 million for the three months ended March 31, 2024 from $4.1 million for the three months ended March 31, 2023. The increase resulted primarily from a $6.9 million, or 236.5%, increase in interest income on loans and a $815,000 increase in interest income on other assets, offset by a $154,000, or 16.5%, decrease in interest income on securities. The average balance of loans increased $350.9 million, or 98.5%, to $707.1 million for the three months ended March 31, 2024, compared to $356.1 million for the three months ended March 31, 2023. In addition, the average yield on the loan portfolio increased 227 basis points to 5.55% for the three months ended March 31, 2024 from 3.28% for the three months ended March 31, 2023, which reflected the higher interest rate environment and the greater proportion of commercial loans in the portfolio.
Previous report
The average balance of securities decreased $24.3 million, or 11.0%, to $197.8 million for the three months ended March 31, 2024, compared to $222.2 million for the three months ended March 31, 2023. This decrease was also the result of a decrease of ten basis points in the average yield of securities to 1.58% for the three months ended March 31, 2024 from 1.68% for the three months ended March 31, 2023.
Previous report
The increase in the interest income on other assets was due to a 33 basis point increase in the average yield of other assets from 4.15% for the three months ended March 31, 2023 to 4.48% for the three months ended March 31, 2024 and a $71.1 million, or 313.9%, increase in the average balance of other assets from $22.6 million for the three months ended March 31, 2023 to $93.7 million for the three months ended March 31, 2024 due to excess cash from the merger and the offering.
Previous report
Based on our evaluation of the above factors, we recorded a credit for credit losses of $142,000 for the three months ended March 31, 2024 compared to having no provision for the three months ended March 31, 2023. The credit for the three months ended March 31, 2024 reflected that we had no charge-offs for the period, and only two classified and non-performing loans at March 31, 2024 totaling $220,000. The absence of a provision for credit losses for the three months ended March 31, 2023 reflected that we had no charge-offs for the period, no classified loans at March 31, 2023 and only one non-performing loan in the amount of $145,000 at March 31, 2023. Our allowance for credit losses as a percentage of total loans was 0.72% at March 31, 2024 compared to 0.31% at March 31, 2023, reflecting the establishment of a general credit reserve for the acquired loan portfolio. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at March 31, 2024 and March 31, 2023.
Previous report
Noninterest income increased $306,000, or 145.7%, to $516,000 for the three months ended March 31, 2024 from $210,000 for the three months ended March 31, 2023, primarily as a result of an increase of $92,000 in the cash surrender value of bank-owned life insurance, an increase of $36,000 in service charges and fees on deposit accounts and an increase of $143,000 in other income. The increase in the cash surrender value of bank-owned life insurance was attributable to the additional bank-owned life insurance acquired in the Merger, while the increase in other income was primarily due to the loss on sales of securities during the three months ended March 31, 2023.
Previous report
Noninterest expense increased $4.2 million, or 122.1%, to $7.6 million for the three months ended March 31, 2024 from $3.4 million for the three months ended March 31, 2023, primarily as a result of an increase in salaries and employee benefits, occupancy expenses, data processing expenses and other miscellaneous expenses, all related to the Merger.
Previous report
General. Net income decreased $8.8 million to a loss of $7.8 million for the nine months ended March 31, 2024 from net income of $1.0 million for the nine months ended March 31, 2023. The decrease was caused primarily by a $5.4 million charitable contribution to the Somerset Regal Charitable Foundation established in connection with its conversion to the stock form of organization, which was funded with 452,758 shares of SR Bancorp common stock and $905,517 in cash.
Previous report
The decrease was also due to a $4.2 million provision for credit losses incurred during the three months ended September 30, 2023 related to the acquisition of Regal Bancorp. These expenses were partially offset by $1.6 million of net accretion income related to the fair value adjustments recorded in connection with the Merger during the nine months ended March 31, 2024. Excluding the merger-related expenses totaling $3.9 million, the $4.2 million provision for credit losses and the charitable contribution of $5.4 million on an after-tax basis, offset by the $1.6 million of net accretion income in connection with the Merger, the Company would have reported net income of $1.4 million for the nine months ended March 31, 2024.
Previous report
Interest Income. Interest income increased $17.8 million, or 152.0%, to $29.5 million for the nine months ended March 31, 2024 from $11.7 million for the nine months ended March 31, 2023. The increase resulted from a $15.5 million, or 187.8%, increase in interest income on loans and a $2.6 million increase in interest income on other assets, offset by a $326,000, or 11.6%, decrease in interest income on securities. The average balance of loans increased $258.9 million, or 74.2%, to $607.9 million for the nine months ended March 31, 2024, compared to $349.1 million for the nine months ended March 31, 2023. In addition, the average yield on the loan portfolio increased 206 basis points to 5.21% for the nine months ended March 31, 2024 from 3.15% for the nine months ended March 31, 2023, which reflected the higher interest rate environment and the greater proportion of commercial loans in the portfolio. The increase in the interest income on other assets was due to a 170 basis point increase in the average yield of other assets from 3.08% for the nine months ended March 31, 2023 to 4.78% for the nine months ended March 31, 2024 and a $63.0 million, or 232.9%, increase in the average balance of other assets from $27.1 million for the nine months ended March 31, 2023 to $90.1 million for the nine months ended March 31, 2024 due to excess cash from the Merger and the offering. The average balance of securities decreased $27.5 million, or 12.0%, to $201.8 million for the nine months ended March 31, 2024, compared to $229.3 million for the nine months ended March 31, 2023.
Previous report
Interest Expense. Interest expense increased $6.7 million, or 498.1%, to $8.0 million for the nine months ended March 31, 2024 from $1.3 million for the nine months ended March 31, 2023. The increase in interest expense resulted primarily from an increase in interest expense on certificates of deposit. The average rate on certificates of deposit increased 263 basis points to 3.72% for the nine months ended March 31, 2024 from 1.09% for the nine months ended March 31, 2023 and the average balance of certificates of deposit increased $95.9 million, or 65.7%, to $241.8 million for the nine months ended March 31, 2024 from $145.9 million for the nine months ended March 31, 2023.The average balance of interest-bearing demand deposits increased $34.0 million, or 23.4%, to $179.2 million for the nine months ended March 31, 2024 from $145.2 million for the nine months ended March 31, 2023. The average rate on interest-bearing demand deposits increased 30 basis points to 0.37% for the nine months ended March 31, 2024 from 0.07% for the nine months ended March 31, 2023.
Previous report
Net Interest Income. Net interest income increased $11.1 million, or 107.1%, to $21.4 million for the nine months ended March 31, 2024 from $10.4 millionfor the nine months ended March 31, 2023. The net interest rate spread increased 54 basis points to 2.74% for the nine months ended March 31, 2024 from 2.20% for the nine months ended March 31, 2023 while the net interest margin increased 90 basis points to 3.18% for the nine months ended March 31, 2024 from 2.28% for the nine months ended March 31, 2023. Net interest-earning assets increased $108.1 million, or 82.5%, to $239.3 million for the nine months ended March 31, 2024 from $131.1 million for the nine months ended March 31, 2023. The increases in the net interest rate spread and net interest margin were a result of both the acquisition of Regal Bancorp and the increasing yield on interest-earning assets outpacing the increasing cost of interest-bearing liabilities primarily due to the change in the composition of the loan portfolio.
Previous report
Average Balances and Yields
Previous report
Annualized.
Previous report
Rate/Volume Analysis
Previous report
Provision for Credit Losses. We recorded a provision for credit losses of $3.9 million, all in connection with the Merger for the nine months ended March 31, 2024, whereas we recorded no provision for the nine months ended March 31, 2023. The absence of a provision for credit losses for the nine months ended March 31, 2023 reflects that we had no charge-offs for the period, no classified loans at March 31, 2023 and only $145,000 of non-performing loans at March 31, 2023. Our allowance for credit losses as a percentage of total loans was 0.72% at March 31, 2024 compared to 0.31% at March 31, 2023, reflecting the establishment of a general credit reserve for the acquired loan portfolio. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at March 31, 2024 and March 31, 2023.
Previous report
Noninterest expense increased $18.8 million, or 203.7%, to $28.0 million for the nine months ended March 31, 2024 from $9.2 million for the nine months ended March 31, 2023, primarily as a result of a $5.4 million charitable contribution, contained within other expenses, as the Company established the Somerset Regal Charitable Foundation in connection with its conversion to the stock form of organization and funded it with 452,758 shares of SR Bancorp common stock and $905,517 in cash. The increase was also due to an increase in salaries and employee benefits for change in control payments totaling $2.6 million related to the Merger, an increase in professional fees for merger expenses totaling $760,000, an increase in data processing expenses primarily due to the payment of a $414,000 early termination fee related to the acquisition of Regal Bancorp, and additional miscellaneous expenses related to the Merger totaling $72,000.
Previous report
Financing activities consist primarily of activity in deposit accounts. Deposits increased $334.1 million, or 66.3%, to $838.0 million at March 31, 2024 from $503.9 million at June 30, 2023. At the time of the acquisition, Regal Bank’s deposits consisted of $90.8 million of noninterest-bearing deposits, $162.4 million in NOW, money market and savings accounts and $119.9 million of certificates of deposit. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.
Previous report
We had no outstanding borrowings with the Federal Reserve Bank at March 31, 2024 and a $20.0 million outstanding borrowing at June 30, 2023.
Reworded paragraphs (19)
Previous wording
Certain of our accounting policies are important to the presentation of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Our significant accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included elsewhere in this Form 10-Q.
Current wording
Certain of our accounting policies are important to the presentation of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Our significant accounting policies are discussed in detail in Note 1 to our Condensed Consolidated Financial Statements included elsewhere in this document.
Previous wording
Management believes our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: allowance for credit losses and the valuation of our deferred tax assets.
Current wording
Management believes our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: the determination of the allowance for credit losses, the assessment of the impairment of goodwill and intangible assets and the valuation of our deferred tax assets.
Previous wording
Allowance for Credit Losses: The allowance for credit losses (“allowance” or “ACL”), calculated in accordance with ASC 326, is deducted from the amortized cost basis of loans. The ACL represents an amount that, in management’s judgment, is adequate to absorb the lifetime expected credit losses that may be experienced on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The allowance for credit losses is measured and recorded upon the initial recognition of a financial asset. Determination of the adequacy of the allowance is inherently complex and requires the use of significant and highly subjective estimates. Loans are charged-off against the allowance when deemed uncollectible by management. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses.
Current wording
Allowance for Credit Losses: The allowance for credit losses (“ACL”), calculated in accordance with ASC 326, is deducted from the amortized cost basis of loans. The ACL represents an amount that, in management’s judgment, is adequate to absorb the lifetime expected credit losses that may be experienced on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of economic conditions and prepayment experience. The allowance for credit losses is measured and recorded upon the initial recognition of a financial asset. Determination of the adequacy of the allowance is inherently complex and requires the use of significant and highly subjective estimates. Loans are charged-off against the allowance when deemed uncollectible by management. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses.
Previous wording
In some cases, management may determine that an individual loan exhibits unique risk characteristics that differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk rating of the loan and economic conditions affecting the borrower, among other things.
Current wording
In some cases, management may determine that an individual loan exhibits unique risk characteristics that differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing, among other things, the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk rating of the loan and economic conditions affecting the borrower.
Previous wording
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making qualitative factor adjustments include, among other things: the impact of changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries; actual and expected changes in national, regional, and local economic and business conditions and developments that affect the collectability of the loan pools; changes in the composition and size of the loan portfolio and in the terms of the underlying loans; changes in the experience, ability, and depth of our lending management and staff; changes in volume and severity of past due and nonaccrual assets; changes to the quality of our internal loan review system; the existence, growth, and effect of any concentrations of credit; and other factors such as the regulatory, legal and environmental events. Management believes it uses relevant information available to make determinations about the allowance and that it has established the existing allowance in accordance with GAAP. However, the determination of the allowance requires significant judgment, and estimates of expected lifetime losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment and changes in the financial condition of borrowers.
Current wording
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making qualitative factor adjustments include, among other things: the impact of changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries; actual and expected changes in national, regional, and local economic and business conditions and developments that affect the collectability of the loan pools; changes in the composition and size of the loan portfolio and in the terms of the underlying loans; changes in the experience, ability, and depth of our lending management and staff; changes in volume and severity of past due and nonaccrual assets; changes to the quality of our internal loan review system; the existence, growth, and effect of any concentrations of credit; and regulatory, legal and environmental events. Management believes it uses relevant information available to make determinations about the allowance and that it has established the existing allowance in accordance with GAAP. However, the determination of the allowance requires significant judgment, and estimates of expected lifetime losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment and changes in the financial condition of borrowers.
Previous wording
General. Net income increased $803,000 to $1.1 million for the three months ended March 31, 2024 from $260,000 for the three months ended March 31, 2023. The increase was caused primarily by $1.4 million of net accretion income related to the fair value adjustments recorded in connection with the acquisition of Regal Bancorp. Excluding the aforementioned $1.4 million of net accretion income, offset by $242,000 of merger-related costs, net income would have been $258,000 for the three months ended March 31, 2024.
Current wording
General. Net income increased $11.9 million to $1.4 million for the three months ended September 30, 2024 from a net loss of $10.5 million for the three months ended September 30, 2023. Net income for the three months ended September 30, 2024 included $1.0 million of net accretion income related to fair value adjustments resulting from the Merger. The net loss for the three months ended September 30, 2023 included $3.9 million of merger-related costs, a $4.2 million provision for credit losses related to the Merger and a $5.4 million charitable contribution, offset by $161,000 of net accretion income related to the fair value adjustments. Excluding these items, net income would have been $586,000 for the three months ended September 30, 2023.
Previous wording
Interest Expense. Interest expense increased $2.8 million or 451.4%, to $3.4 million for the three months ended March 31, 2024 from $613,000 for the three months ended March 31, 2023. The increase in interest expense resulted primarily from an increase in interest expense on certificates of deposits. The average balance of certificates of deposit increased $123.3 million, or 81.6%, to $274.4 million for the three months ended March 31, 2024 from $151.1 million for the three months ended March 31, 2023 and the average rate on certificates of deposit increased 254 basis points to 4.03% for the three months ended March 31, 2024 from 1.49% for the three months ended March 31, 2023 and the average balance of interest-bearing demand deposits increased $60.3 million, or 42.2%, to $203.3 million for the three months ended March 31, 2024 from $143.0 million for the three months ended March 31, 2023. The average rate on interest-bearing demand deposits increased 62 basis points to 0.69% for the three months ended March 31, 2024 from 0.07% for the three months ended March 31, 2023.
Current wording
Interest Expense. Interest expense increased $2.5 million or 177.0%, to $3.9 million for the three months ended September 30, 2024 from $1.4 million for the three months ended September 30, 2023 due to a $2.6 million increase in interest expense on deposits, offset in part by a $77,000 decrease in interest expense on borrowings. The decrease in interest expense was due to a $20.0 million borrowing with the Federal Home Loan Bank being outstanding for only a portion of the three months ended September 30, 2024 compared to a $20.0 million Federal Reserve advance being outstanding for the full three months ended September 30, 2023, offset by a higher rate on the Federal Home Loan Bank borrowing. Interest expense on interest-bearing demand deposits increased $879,000 due to an increase of $132.9 million in the average balance and an increase of 123 basis points in the cost of interest-bearing deposits to 1.36% for the three months ended September 30, 2024 from 0.13% for the three months ended September 30, 2023. Interest expense on certificates of deposit increased $1.7 million as the average rate on certificates of deposit increased 152 basis points to 3.99% for the three months ended September 30, 2024 from 2.47% for the three months ended September 30, 2023 due to the highly competitive interest rate environment in our market area. The average balance of certificates of deposit also increased $100.9 million, or 57.3%, to $276.9 million for the three months ended September 30, 2024 from $176.1 million for the three months ended September 30, 2023.
Previous wording
Net Interest Income. Net interest income increased $4.8 million, or 138.1%, to $8.3 million for the three months ended March 31, 2024 from $3.5 million for the three months ended March 31, 2023. The net interest rate spread increased 63 basis points to 2.83% for the three months ended March 31, 2024 from 2.20% for the three months ended March 31, 2023 while the net interest margin increased 100 basis points to 3.31% for the three months ended March 31, 2024 from 2.31% for the three months ended March 31, 2023. Net interest-earning assets increased $131.7 million, or 101.3%, to $261.8 million for the three months ended March 31, 2024 from $130.1 million for the three months ended March 31, 2023. The increases in the net interest rate spread and net interest margin were a result of both the acquisition of Regal Bancorp and the increasing yield on interest-earning assets outpacing the increasing cost of interest-bearing liabilities primarily due to the change in the composition of the loan portfolio.
Current wording
Net Interest Income. Net interest income increased $3.4 million, or 83.2%, to $7.6 million for the three months ended September 30, 2024 from $4.1 million for the three months ended September 30, 2023. Net interest rate spread increased 58 basis points to 2.70% for the three months ended September 30, 2024 from 2.12% for the three months ended September 30, 2023. Net interest margin increased 80 basis points to 3.21% for the three months ended September 30, 2024 from 2.41% for the three months ended September 30, 2023. Net interest-earning assets increased $41.8 million, or 23.0%, to $223.5 million for the three months ended September 30, 2024 from $181.7 million for the three months ended September 30, 2023. The increases in the Bank’s net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing at a slower rate than the yield on interest-earning assets.
Previous wording
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $29 and $129 for the three months ended March 31, 2024 and 2023, respectively.
Current wording
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $67,000 and $24,000 for the three months ended September 30, 2024 and 2023, respectively.
Previous wording
Noninterest income increased $483,000, or 53.0%, to $1.4 million for the nine months ended March 31, 2024 from $911,000 for the nine months ended March 31, 2023, as a result of an increase of $172,000 in the cash surrender value of bank-owned life insurance, an increase of $74,000 in service charges and fees on deposit accounts and an increase of $202,000 in other noninterest income.
Current wording
Noninterest income increased $288,000, or 56.1%, to $801,000 for the three months ended September 30, 2024 from $513,000 for the three months ended September 30, 2023, primarily as a result of an increase of $125,000 in service charges and fees, due to the increase in volume as a result of the Merger, as well as an increase of $85,000 in the cash surrender value of bank owned life insurance, resulting from an increase in the average balance of the related assets.
Previous wording
Income Tax Expense. The provision for income taxes was $292,000 for the three months ended March 31, 2024, compared to a tax provision of $14,000 for the three months ended March 31, 2023. Our effective tax rate was 21.5% and 5.1% for the three months ended March 31, 2024 and 2023, respectively, reflecting lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Regal Bank’s investment company subsidiary.
Current wording
Income Tax Expense. The provision for income taxes was $363,000 for the three months ended September 30, 2024, compared to a tax benefit of $1.9 million for the three months ended September 30, 2023. The Bank’s effective tax rate was 21.0% for the three months ended September 30, 2024 compared to 15.6% for the three months ended September 30, 2023, respectively, reflecting lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Regal Bank’s investment company subsidiary.
Previous wording
rebalancing our loan portfolio through the Merger to include higher-yielding, shorter-term commercial real estate and C&I loans;
Current wording
rebalancing our loan portfolio through the Merger to include higher-yielding, shorter-term commercial real estate loans;
Previous wording
The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 19.48% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 9.71% increase in EVE.
Current wording
The table above indicates that at September 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 17.87% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 6.50% increase in EVE.
Previous wording
The table above indicates that at March 31, 2024, we would have experienced an 4.75% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 9.76% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.
Current wording
The table above indicates that at September 30, 2024, we would have experienced an 8.21% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 6.64% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.
Previous wording
Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of deposit inflows, loan repayments, and repayments from investment securities. In addition, we have the ability to borrow in the wholesale markets or from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At March 31, 2024, this ratio was 8.7% We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of March 31, 2024.
Current wording
Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of deposit inflows, loan repayments, and repayments from investment securities. In addition, we have the ability to borrow in the wholesale markets or from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At September 30, 2024, this ratio was 5.8% We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2024.
Previous wording
Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and investing activities during any given period. At March 31, 2024, cash and cash equivalents totaled $72.5 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $32.6 million at March 31, 2024.
Current wording
Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and investing activities during any given period. At September 30, 2024, cash and cash equivalents totaled $47.3 million.
Previous wording
At March 31, 2024, we had $69.4 million in outstanding loan commitments and $36.6 million of unused lines of credit. Certificates of deposit due within one year of March 31, 2024 totaled $179.9 million, or 21.5% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, other deposit products, including replacement certificates of deposit, securities sold under agreements to repurchase (repurchase agreements) or advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or after March 31, 2024. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Current wording
At September 30, 2024, we had $64.2 million in outstanding loan commitments and $36.1 million of unused lines of credit. Certificates of deposit due within one year of September 30, 2024 totaled $245.7 million, or 88.4%, of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, other deposit products, including replacement certificates of deposit, securities sold under agreements to repurchase (repurchase agreements) or advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or after September 30, 2024. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Previous wording
Our primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the nine months ended March 31, 2024, we originated $25.5 million of loans and purchased $44.0 million. We had no purchases of securities classified as held to maturity during the nine months ended March 31, 2024.
Current wording
Our primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the three months ended September 30, 2024, we originated $37.7 million of loans and purchased $14.2 million. We had no purchases of securities classified as held-to-maturity during the three months ended September 30, 2024.
Previous wording
Somerset Regal Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2024 Somerset Regal Bank exceeded all regulatory capital requirements. Somerset Regal Bank is considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements” and Note 12 of the Notes to the Consolidated Financial Statements.
Current wording
Somerset Regal Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At September 30, 2024, Somerset Regal Bank exceeded all regulatory capital requirements. Somerset Regal Bank is considered “well capitalized” under regulatory guidelines. See Note 12 of the Notes to the Consolidated Financial Statements.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Comparison of Operating Results for the nine months ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $279 and $448 for the nine months ended March 31, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
Previous report — wording carried elsewhere
Net interest margin represents net interest income divided by average total interest-earning assets.
Previous report — wording carried elsewhere
The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the tables below.
Previous report — wording carried elsewhere
Noninterest Income. Noninterest income was as follows:
Previous report — wording carried elsewhere
Noninterest Expense. Noninterest expense was as follows:
Previous report — wording carried elsewhere
Income Tax Expense. The benefit for income taxes was $1.2 million for the nine months ended March 31, 2024, compared to a tax expense of $135,000 for the nine months ended March 31, 2023. Our effective tax rate was 13.7% and 11.8% for the nine months ended March 31, 2024 and 2023, respectively, reflecting lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Regal Bank’s investment company subsidiary.