SR Bancorp, Inc.

Previous wording

The following management discussion and analysis of the Company’s consolidated financial condition as of December 31, 2024 and the results of operations for the three and six months ended December 31, 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 December 31, 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 December 31, 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 wording

The following management discussion and analysis of the Company’s consolidated financial condition as of March 31, 2025 and the results of operations for the three and nine months ended March 31, 2025 and 2024 (“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 and in conjunction with the Consolidated Statements of Financial Condition as of March 31, 2025, 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 and nine months ended March 31, 2025 and 2024, which 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.

Previous wording

statements regarding our business plans, prospects, growth and operating strategies;

Current wording

statements regarding our business plans, prospects, financial performance, growth and operating strategies;

Previous wording

Certain of our accounting policies are important to the presentation of our financial condition and results of operation, 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.

Current wording

Certain of our accounting policies are important to the presentation of our financial condition and results of operation, 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 noted above in "Forward-Looking Statements." Our significant accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included elsewhere in this document.

Previous wording

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 wording

Goodwill and Other Intangible Assets: Our intangible assets consist 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.

Previous wording

Total Assets. Total assets increased $43.7 million, or 4.3%, to $1.06 billion at December 31, 2024 from $1.02 billion at June 30, 2024. The increase was primarily driven by new loan originations, resulting in a net increase of $43.9 million in loans receivable and a $7.5 million increase in cash and cash equivalents.

Current wording

Total Assets. Total assets increased $53.1 million, or 5.2%, to $1.07 billion at March 31, 2025 from $1.02 billion at June 30, 2024. The increase was primarily driven by new loan originations, resulting in a net increase of $48.9 million in loans receivable and a $16.3 million increase in cash, partially offset by a $10.7 million decrease in securities.

Previous wording

Cash and Cash Equivalents. Cash and cash equivalents increased $7.5 million, or 16.4%, to $53.4 million at December 31, 2024 from $45.9 million at June 30, 2024, due to the maturity of securities.

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $16.3 million, or 35.5%, to $62.2 million at March 31, 2025 from $45.9 million at June 30, 2024, primarily due to borrowings of $30.0 million from the Federal Home Loan Bank of New York during the nine months ended March 31, 2025, a $28.5 million increase in deposits and the maturity of securities, offset by increased loan originations.

Previous wording

Securities. Securities held-to-maturity decreased $7.3 million, or 4.7%, to $148.8 million at December 31, 2024 from $156.1 million at June 30, 2024. The decrease was primarily due to principal repayments and maturities.

Current wording

Securities. Securities held-to-maturity decreased $10.7 million, or 6.9%, to $145.4 million at March 31, 2025 from $156.1 million at June 30, 2024. The decrease was primarily due to principal repayments and maturities.

Previous wording

Loans. Loans receivable, net, increased $43.9 million, or 6.0%, to $775.8 million at December 31, 2024 from $731.9 million at June 30, 2024, primarily driven by an increase in residential mortgage loans of $19.7 million and an increase in commercial loans of $23.4 million. Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 45.2% of loans at December 31, 2024. For further information about our loans, see "Lending Activities" below.

Current wording

Loans. Loans receivable, net, increased $48.9 million, or 6.7%, to $780.8 million at March 31, 2025 from $731.9 million at June 30, 2024, driven by an increase in residential mortgage loans of $19.2 million and an increase in multi-family commercial loans of $28.3 million through an increased emphasis on this type of lending. Commercial loans (consisting of multi-family and commercial real estate loans and commercial and industrial loans) accounted for 45.5% of loans at March 31, 2025. For further information about our loans, see "Lending Activities" below.

Previous wording

Bank Owned Life Insurance. Bank owned life insurance increased $524,000, or 1.4%, to $37.6 million at December 31, 2024 from $37.1 million at June 30, 2024.

Current wording

Bank Owned Life Insurance. Bank owned life insurance increased $783,000, or 2.1%, to $37.9 million at March 31, 2025 from $37.1 million at June 30, 2024 due to an increase in the cash surrender value of the underlying assets.

Previous wording

Goodwill and Intangible Assets. Goodwill and the core deposit intangible asset recognized from the Merger totaled $27.4 million at December 31, 2024 compared to $28.1 million at June 30, 2024. The decrease was due to the amortization of the core deposit intangible.

Current wording

Goodwill and Intangible Assets. Goodwill and the core deposit intangible asset recognized from the Merger totaled $27.0 million at March 31, 2025 compared to $28.1 million at June 30, 2024. The decrease was due to the amortization of the core deposit intangible.

Previous wording

Total Liabilities. Total liabilities increased $45.0 million, or 5.5%, to $866.4 million at December 31, 2024 from $821.4 million at June 30, 2024. The increase was primarily due to a $30.0 million advance from the Federal Home Loan Bank of New York and a $17.0 million increase in deposits.

Current wording

Total Liabilities. Total liabilities increased $57.5 million, or 7.0%, to $878.8 million at March 31, 2025 from $821.4 million at June 30, 2024. The increase was primarily due to a $30.0 million advance from the Federal Home Loan Bank of New York and a $28.5 million increase in deposits.

Previous wording

Deposits. Deposits increased $17.0 million, or 2.1%, to $824.1 million at December 31, 2024 from $807.1 million at June 30, 2024 due primarily to increases in interest-bearing checking accounts that were offset by 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 December 31, 2024, $95.0 million, or 11.5%, of total deposits consisted of noninterest-bearing deposits. At December 31, 2024, $128.3 million, or 15.6%, of total deposits were uninsured.

Current wording

Deposits. Deposits increased $28.5 million, or 3.5%, to $835.6 million at March 31, 2025 from $807.1 million at June 30, 2024. Increases in interest-bearing deposit accounts resulted from the Bank raising rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. At March 31, 2025, $106.0 million, or 12.7%, of total deposits consisted of noninterest-bearing deposits. At March 31, 2025, $133.9 million, or 16.0%, of total deposits were uninsured.

Previous wording

Borrowings. During the six months ended December 31, 2024, the Bank borrowed $30.0 million from the Federal Home Loan Bank of New York to provide additional liquidity to fund new loans. Such borrowings remained outstanding at December 31, 2024. At June 30, 2024, there were no outstanding borrowings.

Current wording

Borrowings. During the nine months ended March 31, 2025, the Bank borrowed $30.0 million from the Federal Home Loan Bank of New York to provide additional liquidity to fund new loans. Such borrowings remained outstanding at March 31, 2025. At June 30, 2024, there were no outstanding borrowings.

Previous wording

Total Equity. Total equity decreased $1.3 million, or 0.7%, to $198.1 million at December 31, 2024 from $199.5 million at June 30, 2024. The decrease was primarily due to the repurchase of 347,057 shares of common stock at a cost of $3.9 million, partially offset by net earnings of $2.4 million.

Current wording

Total Equity. Total equity decreased $4.4 million, or 2.2%, to $195.1 million at March 31, 2025 from $199.5 million at June 30, 2024. The decrease was primarily due to the repurchase of 627,461 shares of common stock at a cost of $7.3 million, partially offset by net earnings of $2.9 million.

Previous wording

We offer a variety of loans, including residential, commercial real estate, multi-family, commercial and industrial and consumer loans. Historically, a significant portion of our loan portfolio was concentrated in residential loans. The Merger greatly expanded our commercial loan portfolio and commercial lending capabilities. At December 31, 2024, residential mortgage loans comprised 53.2% of our total loan portfolio and commercial loans comprised 45.2%, which largely consisted of multi-family loans.

Current wording

We offer a variety of loans, including residential, commercial real estate, multi-family, commercial and industrial and consumer loans. Historically, a significant portion of our loan portfolio was concentrated in residential loans. The Merger greatly expanded our commercial loan portfolio and commercial lending capabilities. At March 31, 2025, residential mortgage loans comprised 52.8% of our total loan portfolio and commercial loans comprised 45.5%, which largely consisted of multi-family loans.

Previous wording

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 December 31, 2024 and June 30, 2024 were maintained at levels that represent management’s best estimate of current expected losses in the loan portfolio. 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 current expected losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

Current wording

Our allowance for credit losses ("ACL") is maintained at a level necessary to absorb the lifetime expected credit losses. Management, in determining the allowance for credit losses, considers the losses in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. A description of our methodology in establishing our allowance for credit losses is set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Critical Accounting Policies-Allowance for Credit Losses” in our Form 10-K as of and for the year ended June 30, 2024 and in this Form 10-Q. The allowance for credit losses as of March 31, 2025 and June 30, 2024 were maintained at levels that represent management’s best estimate of current expected losses in the loan portfolio. 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 current expected losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

Previous wording

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 to meet liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. We monitor the balance of our investment securities portfolio based on loan demand, our interest rate risk analysis and our liquidity needs.

Current wording

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 to meet liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. We monitor the balance of our investment securities portfolio based on loan demand, our asset/liability management and interest rate risk analysis and our liquidity needs.

Previous wording

The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis at December 31, 2024:

Current wording

The following table presents the maturity distribution and weighted average yields of our investment securities portfolio on a contractual maturity basis and our residential mortgage-backed securities at March 31, 2025:

Previous wording

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 December 31, 2024 and June 30, 2024, we held $30.0 million and $22.2 million, respectively, of accounts from a variety of local municipal relationships. At December 31, 2024 and June 30, 2024, we had no brokered deposits.

Current wording

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 March 31, 2025 and June 30, 2024, we held $33.0 million and $22.2 million, respectively, of accounts from a variety of local municipal relationships, which are protected under a New Jersey supplemental insurance program with collateralized assets. At March 31, 2025 and June 30, 2024, we had no brokered deposits.

Previous wording

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 wording

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, and savings and money market accounts. We offer bill payment services through our online banking system.

Previous wording

As of December 31, 2024 and June 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance), was $128.3 million and $109.7 million, respectively. In addition, as of December 31, 2024 and June 30, 2024, the aggregate amount of all our uninsured certificates of deposit was $25.4 million and $21.9 million, respectively. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. The following table sets forth the maturity of the uninsured certificates of deposit as of the dates indicated.

Current wording

As of March 31, 2025 and June 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $133.9 million and $109.7 million, respectively. In addition, as of March 31, 2025 and June 30, 2024, the aggregate amount of all our uninsured certificates of deposit was $25.2 million and $21.9 million, respectively. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. Uninsured deposits of municipalities and local government agencies are protected under a New Jersey supplemental insurance program with collateralized assets.

Previous wording

General. Net income decreased $586,000 to $1.0 million for the three months ended December 31, 2024 from net income of $1.6 million for the three months ended December 31, 2023. Net income for the three months ended December 31, 2024 included $791,000 of net accretion income related to fair value adjustments resulting from the Merger. Net income for the three months ended December 31, 2023 included $32,000 of merger-related costs, offset by $1.4 million of net accretion income related to fair value adjustments.

Current wording

General. Net income decreased $526,000, or 49.5%, to $537,000 for the three months ended March 31, 2025 from $1.1 million for the three months ended March 31, 2024. Net income for the three months ended March 31, 2025 included $575,000 of net accretion income related to fair value adjustments resulting from the Merger. Net income for the three months ended March 31, 2024 included $242,000 of merger-related costs, offset by $1.4 million of net accretion income related to fair value adjustments.

Previous wording

Interest Income. Interest income decreased $741,000, or 6.0%, to $11.5 million for the three months ended December 31, 2024 from $12.3 million for the three months ended December 31, 2023 due to a 26 basis point decrease in the yield on interest-earning assets and a $7.3 million decrease in the average balance of interest-earning assets. The decrease resulted from a $727,000, or 58.3%, decrease in interest income on interest bearing deposits at other banks due to lower average yields and balances and a $266,000 decrease in interest income on securities, partially offset by a $252,000 increase in interest on loans driven by an increase in volume, offset by a decrease in the average yield. The decrease in interest income on securities was due to a $48.2 million decrease in the average balance of securities resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning and a 16 basis point decrease in the yield.

Current wording

Interest Income. Interest income decreased $165,000, or 1.4%, to $11.5 million for the three months ended March 31, 2025 from $11.6 million for the three months ended March 31, 2024. The decrease resulted from a $513,000, or 51.1%, decrease in interest income on interest bearing deposits at other banks and a $179,000, or 23.0%, decrease in interest income on securities, partially offset by a $527,000, or 5.4%, increase in interest income on loans. The increase in the interest income on loans was due to a $71.5 million increase in the average balance of loans from $707.1 million for the three months ended March 31, 2024 to $778.6 million for the three months ended March 31, 2025, offset in part by a 23 basis point decrease in the yield on loans in a lower interest rate environment. The decrease in interest income on securities was due to a $48.2 million decrease in the average balance of securities resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning, which resulted in a two basis point increase in the yield notwithstanding the lower interest rate environment.

Previous wording

Net Interest Income. Net interest income decreased $1.8 million, or 19.7%, to $7.2 million for the three months ended December 31, 2024 from $9.0 million for the three months ended December 31, 2023. Net interest rate spread decreased 81 basis points to 2.27% for the three months ended December 31, 2024 from 3.08% for the three months ended December 31, 2023. Net interest margin decreased 68 basis points to 2.88% for the three months ended December 31, 2024 from 3.56% for the three months ended December 31, 2023. Net interest-earning assets decreased $9.9 million, or 3.6%, to $265.4 million for the three months ended December 31, 2024 from $275.2 million for the three months ended December 31, 2023. The decrease in the Bank’s net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing while the yield on interest-earning assets decreased.

Current wording

Net Interest Income. Net interest income decreased $1.1 million, or 13.1%, to $7.2 million for the three months ended March 31, 2025 from $8.3 million for the three months ended March 31, 2024. Net interest rate spread decreased 58 basis points to 2.25% for the three months ended March 31, 2025 from 2.83% for the three months ended March 31, 2024. Net interest margin decreased 49 basis points to 2.82% for the three months ended March 31, 2025 from 3.31% for the three months ended March 31, 2024. Net interest-earning assets decreased $2.9 million, or 1.1%, to $258.8 million for the three months ended March 31, 2025 from $261.8 million for the three months ended March 31, 2024. The decrease in the Bank’s net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing while the yield on interest-earning assets decreased.

Previous wording

Provision for Credit Losses. We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. In determining the level of the allowance for credit losses, we consider, among other things, loss experience, evaluations of real estate collateral, current and reasonably supportable economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of delinquent loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for credit losses and make provisions for credit losses on a monthly basis.

Current wording

Provision for Credit Losses. The Bank establishes provisions for credit losses, which are charged to operations to maintain the allowance for credit losses at a level it considers necessary to absorb probable credit losses attributable to loans that are reasonably estimable at the balance sheet date. In determining the level of the allowance for credit losses, the Bank considers, among other things, past and current loss experience, evaluations of real estate collateral, economic conditions, the amount and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of delinquent, classified and criticized loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. The Bank assesses the allowance for credit losses and records provisions for credit losses on a quarterly basis.

Previous wording

The Bank recorded a provision for credit losses of $12,000 for the three months ended December 31, 2024 as compared to a recovery of $107,000 for the three months ended December 31, 2023. The Bank had no charge-offs for the three months ended December 31, 2024 and no non-performing loans at December 31, 2024 compared to no charge-offs for the three months ended December 31, 2023 and $145,000 of non-performing loans at December 31, 2023. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at December 31, 2024 compared to 0.74% at December 31, 2023.

Current wording

The Bank recorded a provision for credit losses of $37,000 during the three months ended March 31, 2025 reflecting the loan growth during the period, compared to a recovery for credit losses of $142,000 for the three months ended March 31, 2024. The Bank had no charge-offs for the three months ended March 31, 2025 and no non-performing loans at March 31, 2025 compared to no charge-offs for the three months ended March 31, 2024 and $220,000 of non-performing loans at March 31, 2024. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at March 31, 2025 compared to 0.72% at March 31, 2024.

Previous wording

Income Tax Expense. The provision for income taxes was $324,000 for the three months ended December 31, 2024, compared to an expense of $408,000 for the three months ended December 31, 2023. The Bank’s effective tax rate was 24.1% for the three months ended December 31, 2024 compared to 20.2% for the three months ended December 31, 2023.

Current wording

Income Tax Expense. The provision for income taxes was $89,000 for the three months ended March 31, 2025, compared to $292,000 for the three months ended March 31, 2024. The Bank’s effective tax rate was 14.2% for the three months ended March 31, 2025 compared to 21.5% for the three months ended March 31, 2024.

Previous wording

Comparison of Operating Results for the Six Months Ended December 31, 2024 and 2023

Current wording

Comparison of Operating Results for the Nine Months Ended March 31, 2025 and 2024

Previous wording

General. Net income increased $11.3 million, or 126.9%, to $2.4 million for the six months ended December 31, 2024 from a net loss of $8.9 million for the six months ended December 31, 2023. Net income for the six months ended December 31, 2024 included $1.8 million of net accretion income related to fair value adjustments resulting from the Merger. Net income for the six months ended December 31, 2023 included a $5.4 million charitable contribution and $3.9 million of merger-related costs, offset by $1.6 million of net accretion income related to fair value adjustments.

Current wording

General. Net income increased $10.7 million, or 137.4%, to $2.9 million for the nine months ended March 31, 2025 from a net loss of $7.8 million for the nine months ended March 31, 2024. Net income for the nine months ended March 31, 2025 included $2.4 million of net accretion income related to fair value adjustments resulting from the Merger. Net income for the nine months ended March 31, 2024 included a $5.4 million charitable contribution and $4.1 million of merger-related costs, offset by $2.9 million of net accretion income related to fair value adjustments.

Previous wording

Interest Income. Interest income increased $5.2 million, or 29.1%, to $23.0 million for the six months ended December 31, 2024 from $17.8 million for the six months ended December 31, 2023 due to a $144.9 million increase in the average balance of interest-earning assets and a 43 basis point increase in the yield on interest-earning assets. The increase resulted from a $6.8 million, or 48.7%, increase in interest income on loans due to the increased size of the loan portfolio as a result of the Merger as well as a higher average yield on the loan portfolio due to higher market rates and increased proportion of higher-yielding commercial real estate loans. The increase in interest on loans was offset by a $463,000 decrease in interest income on securities, and a $1.1 million decrease in interest income from other interest-earning assets due to a lower average yield and lower average balance. The decrease in interest income on securities was primarily due to a $48.5 million decrease in the average balance of securities resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning.

Current wording

Interest Income. Interest income increased $5.0 million, or 17.0%, to $34.5 million for the nine months ended March 31, 2025 from $29.5 million for the nine months ended March 31, 2024 due to a 22 basis point increase in the yield on interest-earning assets and a $103.2 million increase in the average balance of interest-earning assets. The increase resulted from a $7.3 million, or 30.8%, increase in interest income on loans due to the increased size of the loan portfolio, largely as a result of the Merger as well as subsequent loan growth, and a higher average yield on the loan portfolio due to higher market rates and an increased proportion of higher-yielding commercial real estate loans, offset by a $641,000 decrease in interest income on securities, and a $1.7 million decrease in interest income from other interest-earning assets, in each case due to lower average balances and a lower interest rate environment. The decrease in interest income on securities was due to a $48.4 million decrease in the average balance of securities, resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of a balance sheet repositioning, that resulted in only a three basis point decrease in the average yield on securities notwithstanding the lower interest rate environment.

Previous wording

Interest Expense. Interest expense increased $1.0 million or 31.8%, to $4.3 million for the three months ended December 31, 2024 from $3.3 million for the three months ended December 31, 2023 due to a $984,000 increase in interest expense on deposits, and a $55,000 increase in interest expense on borrowings. Interest expense on interest-bearing demand deposits increased $908,000 due to an increase of $89.3 million, or 46.0%, in the average balance and an increase of 106 basis points in the cost of interest-bearing deposits to 1.75% for the three months ended December 31, 2024 from 0.69% for the three months ended December 31, 2023 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. Interest expense on certificates of deposit increased $96,000 as the average rate on certificates of deposit increased 10 basis points to 3.96% for the three months ended December 31, 2024 from 3.86% for the three months ended December 31, 2023 due to the highly competitive interest rate environment in our market area. The average balance of certificates of deposit also increased $2.9 million, or 1.1%, to $277.0 million for the three months ended December 31, 2024 from $274.1 million for the three months ended December 31, 2023.

Current wording

Interest Expense. Interest expense increased $4.4 million, or 55.1%, to $12.5 million for the nine months ended March 31, 2025 from $8.0 million for the nine months ended March 31, 2024 primarily due to a $3.0 million increase in interest expense on demand accounts. Interest expense on interest-bearing demand deposits increased due to an increase of $107.9 million in the average balance and an increase of 126 basis points in the cost of interest-bearing deposits to 1.63% for the nine months ended March 31, 2025 from 0.37% for the nine months ended March 31, 2024 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. Interest expense on certificates of deposit increased $1.3 million as the average balance on certificates of deposit increased $34.0 million, or 14.0%, to $275.8 million for the nine months ended March 31, 2025 from $241.8 million for the nine months ended March 31, 2024 due to the highly competitive interest rate environment in our market area. Interest expense on borrowings also increased by $135,000 due to a higher average outstanding balance and higher average rates paid.

Previous wording

Net Interest Income. Net interest income increased $1.7 million, or 12.7%, to $14.8 million for the six months ended December 31, 2024 from $13.2 million for the six months ended December 31, 2023. Net interest rate spread decreased 30 basis points to 2.39% for the six months ended December 31, 2024 from 2.69% for the six months ended December 31, 2023. Net interest margin decreased 12 basis points to 2.98% for the six months ended December 31, 2024 from 3.10% for the six months ended December 31, 2023. Net interest-earning assets increased $35.9 million, or 15.7%, to $263.9 million for the six months ended December 31, 2024 from $228.0 million for the six months ended December 31, 2023. The decreases 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 higher rate than the yield on interest-earning assets.

Current wording

Net Interest Income. Net interest income increased $585,000, or 2.7%, to $22.0 million for the nine months ended March 31, 2025 from $21.4 million for the nine months ended March 31, 2024. Net interest rate spread decreased 40 basis points to 2.34% for the nine months ended March 31, 2025 from 2.74% for the nine months ended March 31, 2024. Net interest margin decreased 25 basis points to 2.93% for the nine months ended March 31, 2025 from 3.18% for the nine months ended March 31, 2024. Net interest-earning assets increased $22.9 million, or 9.6%, to $262.2 million for the nine months ended March 31, 2025 from $239.3 million for the nine months ended March 31, 2024. The decreases 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 higher 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 $168,000 and $250,000 for the six months ended December 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 $168,000 and $250,000 for the nine months ended March 31, 2025 and 2024, respectively.

Previous wording

Provision for Credit Losses. The Bank recorded a recovery for credit losses of $142,000 for the six months ended December 31, 2024 as compared to a provision for credit losses of $4.1 million for the six months ended December 31, 2023. The recovery reflects updates made to model assumptions in the calculation of the Bank's allowance for credit losses. The Bank had no charge-offs during the six months ended December 31, 2024 and no non-performing loans at December 31, 2024 compared to no charge-offs for the six months ended December 31, 2023 and $145,000 of non-performing loans at December 31, 2023. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at December 31, 2024 compared to 0.74% at December 31, 2023.

Current wording

Provision for Credit Losses. The Bank recorded a recovery for credit losses of $105,000 for the nine months ended March 31, 2025 as compared to a provision for credit losses of $3.9 million for the nine months ended March 31, 2024. The recovery reflects updates made to model assumptions in the calculation of the Bank's allowance for credit losses. The Bank had no charge-offs during the nine months ended March 31, 2025 and no non-performing loans at March 31, 2025 compared to no charge-offs for the nine months ended March 31, 2024 and $220,000 of non-performing loans at March 31, 2024. The Bank’s allowance for credit losses as a percentage of total loans was 0.65% at March 31, 2025 compared to 0.72% at March 31, 2024.

Previous wording

Noninterest income increased $401,000, or 45.7%, to $1.3 million for the six months ended December 31, 2024 from $878,000 for the six months ended December 31, 2023, primarily as a result of an increase of $169,000 in service charges and fees driven by $101,000 in prepayment fees on commercial loans, and an increase of $116,000 in the cash surrender value of bank owned life insurance resulting from an increase in the average balance of the underlying assets, for the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

Current wording

Noninterest income increased $571,000, or 41.0%, to $2.0 million for the nine months ended March 31, 2025 from $1.4 million for the nine months ended March 31, 2024, primarily as a result of an increase of $206,000 in service charges and fees, and a $128,000 increase in the cash surrender value of bank owned life insurance resulting from an increase in the average balance of the underlying assets, for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024.

Previous wording

Noninterest expense decreased $7.2 million, or 35.4%, to $13.2 million for the six months ended December 31, 2024 from $20.4 million for the six months ended December 31, 2023, primarily as a result of a $5.4 million decrease in other expenses due to the $5.4 million charitable contribution made during the six months ended December 31, 2023, a $1.8 million, or 21.5%, decrease in salaries and employee benefits resulting from one-time change in control payments incurred during the six months ended December 31, 2023 and a $352,000 decrease in data processing expense due to a $414,000 early termination fee incurred during the six months ended December 31, 2023, all related to the Merger.

Current wording

Noninterest expense decreased $7.6 million, or 27.2%, to $20.4 million for the nine months ended March 31, 2025 from $28.0 million for the nine months ended March 31, 2024, primarily as a result of the $5.4 million charitable contribution made during the nine months ended March 31, 2024, a $1.8 million, or 14.6%, decrease in salaries and employee benefits resulting from one-time change in control payments incurred during the nine months ended March 31, 2024 and a $750,000, or 31.4%, decrease in data processing expense due to a $414,000 early termination fee and a $242,000 deconversion fee incurred during the nine months ended March 31, 2024, all related to the Merger.

Previous wording

Income Tax Expense. The provision for income taxes was $687,000 for the six months ended December 31, 2024, compared to a benefit of $1.5 million for the six months ended December 31, 2023. The Bank’s effective tax rate was 22.3% for the six months ended December 31, 2024 compared to 14.7% for the six months ended December 31, 2023.

Current wording

Income Tax Expense. The provision for income taxes was $776,000 for the nine months ended March 31, 2025, compared to a benefit of $1.2 million for the nine months ended March 31, 2024, resulting from a net operating loss due to Merger related expenses. The Bank’s effective tax rate was 21.0% for the nine months ended March 31, 2025 compared to 13.7% for the nine months ended March 31, 2024.

Previous wording

The table above indicates that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 20.10% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 8.68% increase in EVE.

Current wording

The table above indicates that at March 31, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 20.01% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.75% increase in EVE.

Previous wording

The table above indicates that at December 31, 2024, we would have experienced an 8.05% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 7.85% 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 March 31, 2025, we would have experienced a 6.77% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 8.83% 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 December 31, 2024, this ratio was 6.5% We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of December 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 ALCO/Investment Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At March 31, 2025, this ratio was 7.4%. We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of March 31, 2025.