SR Bancorp, Inc.

Previous wording

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 $906,000 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.

Current wording

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 wording

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 had converted to a commercial bank charter, and was renamed Somerset Regal Bank (the “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.

Current wording

Promptly following the completion of the conversion and 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 had converted to a commercial bank charter, and was renamed Somerset Regal Bank (the “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 wording

Somerset Regal Bank is a New Jersey-chartered commercial bank that operates from 14 branches in Essex, Hunterdon, Middlesex, Morris, Somerset and Union Counties, New Jersey. Somerset Regal Bank offers a variety of deposit and loan products to individuals and small businesses, most of which are located in our primary market. The acquisition of Regal Bancorp and its wholly owned subsidiary, Regal Bank, expanded our market presence into Essex, Morris and Union Counties, New Jersey and enhanced our market presence in Somerset County, New Jersey. At June 30, 2025, SR Bancorp had total assets of $1.08 billion, deposits of $846.0 million and total equity of $193.8 million.

Current wording

Somerset Regal Bank is a New Jersey-chartered commercial bank that operates from 14 branches in Essex, Hunterdon, Middlesex, Morris, Somerset and Union Counties, New Jersey. Somerset Regal Bank offers a variety of deposit and loan products to individuals and small businesses, most of which are located in our primary market. The acquisition of Regal Bancorp and its wholly owned subsidiary, Regal Bank, expanded our market presence into Essex, Morris and Union Counties, New Jersey and enhanced our market presence in Somerset County, New Jersey. At June 30, 2026, SR Bancorp had total assets of $1.19 billion, deposits of $926.4 million and total equity of $181.8 million.

Previous wording

Our largest noninterest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, expenses for retirement plans and other employee benefits including disability insurance and health insurance and compensation expenses related to the recently implemented employee stock ownership plan.

Current wording

Our largest noninterest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, expenses for retirement plans and other employee benefits including disability insurance and health insurance and compensation expenses related to our employee stock ownership plan and equity incentive plan.

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 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 in interest rates, changes in the performance of the economy, political and global events 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 document.

Previous 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.

Current wording

Allowance for Credit Losses: The allowance for credit losses (“ACL”), calculated in accordance with the current expected credit losses concepts Accounting Standards Concept – Topic 326 – Credit Losses (“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

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 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 is less than the carrying value, goodwill is impaired and is written down to its estimated fair value.

Previous wording

In the year ended June 30, 2025, we performed a qualitative assessment of goodwill. Based on that assessment, we determined that it was more likely than not that the unit's fair value was not less than its carrying amount. We concluded that our goodwill was not impaired as of June 30, 2025.

Current wording

For the year ended June 30, 2026, the Company engaged an independent third-party appraiser to perform a qualitative assessment of goodwill. Based on that assessment, we determined that it was more likely than not that the unit's fair value was not less than its carrying amount. We concluded that our goodwill was not impaired as of June 30, 2026.

Previous wording

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 wording

Core deposit intangibles are amortized on an accelerated basis using an estimated life of ten years and are evaluated for impairment if certain events occur. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds the 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.

Previous wording

Leveraging our residential and commercial lending expertise to pursue new opportunities to increase lending in our primary market area and expand our existing loan relationships. Prior to the Merger, Somerset Savings Bank’s principal business activity historically had been the origination of residential mortgage loans, while Regal Bank’s principal business activity historically had been the origination of multi-family and commercial real estate loans. Somerset Regal Bank will continue to provide products and services that meet the needs of the existing residential lending customers and be able to offer such products, services and expertise to the former Regal Bank customers throughout its newly-expanded market area. Additionally, Somerset Regal Bank will continue to provide products and services that meet the needs of the existing commercial customers and be able to offer such products, services and expertise to the former Somerset Savings Bank customers throughout its newly-expanded market area.

Current wording

Leveraging our residential and commercial lending expertise to pursue new opportunities to increase lending and expand our existing loan relationships. Prior to the Merger, Somerset Savings Bank’s principal business activity had been the origination of residential mortgage loans, while Regal Bank’s principal business activity had been the origination of multi-family and commercial real estate loans. Somerset Regal Bank will continue to provide products and services that meet the needs of the existing residential lending customers and be able to offer such products, services and expertise to the former Regal Bank customers throughout its newly-expanded market area. Additionally, Somerset Regal Bank will continue to provide products and services that meet the needs of the existing commercial customers and be able to offer such products, services and expertise to the former Somerset Savings Bank customers throughout its newly-expanded market area.

Previous wording

The opportunity for both banks to diversify their loan portfolios and leverage their lending expertise in new markets were primary factors for the Merger. Moreover, with the additional capital raised in the stock offering, we can increase our loan originations in our market area and originate loans with larger balances. Somerset Regal Bank’s legal lending limit was $29.1 million at June 30, 2025. While Somerset Regal Bank’s credit risk management policies will result in an internal loan to one borrower limit less than Somerset Regal Bank’s regulatory limit, the legal lending limit will provide opportunities to expand existing customer relationships and reach new larger customers.

Current wording

The opportunity for both banks to diversify their loan portfolios and leverage their lending expertise in new markets were primary factors for the Merger. Moreover, with the additional capital raised in the stock offering, we can increase our loan originations and originate loans with larger balances. Somerset Regal Bank’s legal lending limit was $23.9 million at June 30, 2026. While Somerset Regal Bank’s credit risk management policies will result in an internal loan to one borrower limit less than Somerset Regal Bank’s regulatory limit, the legal lending limit will provide opportunities to expand existing customer relationships and reach new larger customers.

Previous wording

Increasing transaction deposit accounts and deposit balances. Deposits are our primary source of funds for lending and investment. We intend to focus on expanding our core deposits (which we define as all deposits except certificates of deposit). Core deposits represented 68.3% of our total deposits at June 30, 2025 compared to 66.2% of our total deposits at June 30, 2024. We believe core deposits will increase by increasing our commercial lending activities and enhancing our relationships with retail customers through our commitment to quality customer service along with the introduction of additional products and services, such as remote deposit capture and enhanced online business account services.

Current wording

***Increasing transaction deposit accounts and deposit balances.***Deposits are our primary source of funds for lending and investment. We are focused on expanding our core deposits (which we define as all deposits except certificates of deposit). Core deposits represented 69.8% of our total deposits at June 30, 2026 compared to 68.3% of our total deposits at June 30, 2025. We believe core deposits will increase by increasing our commercial lending activities and enhancing our relationships with retail customers through our commitment to quality customer service along with the introduction of additional products and services, such as remote deposit capture and enhanced online business account services.

Previous wording

Continuing to leverage technology to maintain efficient operations and enhance customer service. We have historically focused on leveraging technology to maintain efficient operations and provide our customers with secure means to conduct business outside of our traditional branch network. Customer facing applications include online banking and mobile banking with bill payment capabilities, mobile deposit and debit card control functionality. We have been a Zelle™ participant since 2019, which has allowed our customers the ability to send and receive real-time payments online and through mobile banking. Our online loan application platform affords customers the convenience of submitting a loan application online. Internally we leverage technology to achieve efficiencies for tasks such as document preparation and retention, data analytics and call report preparation. We intend to build on this foundation and have plans to add, among other services, online deposit account opening for existing customers, tokenization (meaning the process of exchanging sensitive data with a less sensitive equivalent (or token), specifically Apply Pay©, Google Pay© and Samsung Pay©), and expanded business online banking capabilities including wire transfer origination and ACH origination services. These additional services are in various stages of implementation, and we anticipate customer availability for most prior to the end of 2024. Our investment in technology allows us to remain competitive, effectively serve our customers and results in operating efficiencies.

Current wording

***Continuing to leverage technology to maintain efficient operations and enhance customer service.***We have historically focused on leveraging technology to maintain efficient operations and provide our customers with secure means to conduct business outside of our traditional branch network. Available applications include online banking and mobile banking with bill payment capabilities, mobile deposit and debit card control functionality. We have been a Zelle™ participant since 2019, which has allowed our customers the ability to send and receive real-time payments online and through mobile banking. Our online loan application platform affords customers the convenience of submitting a loan application online. Internally, we leverage technology to achieve efficiencies for tasks such as document preparation and retention, data analytics and call report preparation. Our investment in technology allows us to remain competitive, effectively serve our customers and results in operating efficiencies.

Previous wording

Total Assets. Total assets increased $63.6 million, or 6.2%, to $1.08 billion at June 30, 2025 from $1.02 billion at June 30, 2024. The increase was primarily driven by new loan originations, resulting in a net increase of $65.3 million in loans receivable and an $11.9 million increase in cash and cash equivalents, offset by a $14.3 million decrease in securities.

Current wording

***Total Assets.***Assets increased $105.7 million, or 9.7%, to $1.19 billion at June 30, 2026 from $1.09 billion at June 30, 2025. The increase was primarily driven by new loan originations, resulting in a net increase of $104.0 million in loans receivable, and a $13.7 million increase in cash and cash equivalents, partially offset by a $10.7 million decrease in securities.

Previous wording

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

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $13.7 million, or 23.7%, to $71.5 million at June 30, 2026 from $57.8 million at June 30, 2025 primarily due to an increase in deposits, a $35.0 million increase in borrowings from the Federal Home Loan Bank of New York during the year ended June 30, 2026 and funds obtained through the maturity of securities, partially offset by the use of cash to fund increased loan originations.

Previous wording

Securities Held-to-Maturity. Securities held-to-maturity decreased $14.3 million, or 9.2%, to $141.8 million at June 30, 2025 from $156.1 million at June 30, 2024. The decrease was primarily due to principal repayments and maturities.

Current wording

Securities Held-to-Maturity. Securities held-to-maturity decreased $10.7 million, or 7.5%, to $131.1 million at June 30, 2026 from $141.8 million at June 30, 2025. The decrease was primarily due to principal repayments and maturities in excess of purchases.

Previous wording

Bank Owned Life Insurance. Bank owned life insurance decreased $486,000, or 1.3%, to $36.6 million at June 30, 2025 from $37.1 million at June 30, 2024. The reduction was primarily attributable to death benefit proceeds under existing policies.

Current wording

Bank Owned Life Insurance. Bank owned life insurance increased $1.8 million, or 4.9%, to $38.4 million at June 30, 2026 from $36.6 million at June 30, 2025.

Previous wording

Goodwill and Intangible Assets. The Company recognized 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. Finalization of the purchase allocation reduced goodwill to $20.4 million at June 30, 2024. No impairment loss was recognized on goodwill during the year ended June 30, 2025. The carrying amount of the core deposit premium intangible, net of accumulated amortization, was $6.3 million at June 30, 2025.

Current wording

Goodwill and Intangible Assets. The Company recognized 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. Finalization of the purchase allocation reduced goodwill to $20.4 million at June 30, 2024. No impairment losses have been recognized since the Regal Bancorp acquisition. The carrying amount of the core deposit premium intangible, net of accumulated amortization, was $5.1 million at June 30, 2026.

Previous wording

Total Liabilities. Total liabilities increased $69.3 million, or 8.4%, to $890.6 million at June 30, 2025 from $821.4 million at June 30, 2024. The increase was primarily the result of an increase in deposits of $38.9 million and an increase in borrowings of $30.0 million.

Current wording

Total Liabilities. Total liabilities increased $117.7 million, or 13.2%, to $1.01 billion at June 30, 2026 from $892.7 million at June 30, 2025. The increase was primarily the result of an increase in deposits of $80.4 million and an increase in borrowings of $35.0 million.

Previous wording

Deposits. Deposits increased $38.9 million, or 4.8%, to $846.0 million at June 30, 2025 from $807.1 million at June 30, 2024. Increases in interest-bearing deposit accounts resulted from the Company having raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. At June 30, 2025, $114.1 million, or 13.5%, of total deposits consisted of noninterest-bearing deposits. At June 30, 2025, $145.4 million, or 17.2%, of total deposits were uninsured.

Current wording

Deposits. Deposits increased $80.4 million, or 9.5%, to $926.4 million at June 30, 2026 from $846.0 million at June 30, 2025.*** ***Increases in interest-bearing demand accounts of $70.0 million, or 21.9%, resulted from the Company having increased rates on certain interest-bearing demand products in an effort to remain competitive in the market area. At June 30, 2026, $128.2 million, or 13.8%, of total deposits consisted of noninterest-bearing deposits. At June 30, 2026, $191.6 million, or 20.7%, of total deposits were uninsured.

Previous wording

Borrowings. During the year ended June 30, 2025, the Company borrowed $30.0 million from the Federal Home Loan Bank of New York to provide for additional liquidity to fund new loans. At June 30, 2024, there were no outstanding borrowings.

Current wording

Borrowings. During the year ended June 30, 2026, the Company borrowed an additional $35.0 million from the Federal Home Loan Bank of New York to fund new loans increasing the total outstanding borrowings to $65.0 million. At June 30, 2025, there were $30.0 million of outstanding borrowings.

Previous wording

Total Equity. Total equity decreased $5.7 million, or 2.9%, to $193.8 million at June 30, 2025 from $199.5 million at June 30, 2024. The decrease was primarily due to the repurchase of 936,991 shares of common stock at a cost of $11.3 million, partially offset by net income of $5.1 million.

Current wording

Total Equity. Equity decreased $12.0 million, or 6.2%, to $181.8 million at June 30, 2026 from $193.8 million at June 30, 2025. The decrease was primarily due to the repurchase of 978,778 shares of common stock at a cost of $16.3 million and the payment of dividends at a cost of $1.6 million, partially offset by net earnings of $3.4 million and stock-based compensation of $2.3 million.

Previous wording

General. Net income increased $16.0 million to $5.1 million for the year ended June 30, 2025 from a net loss of $10.9 million for the year ended June 30, 2024. Net income for the year ended June 30, 2025 included $2.8 million of net accretion income related to fair value adjustments resulting from the Merger. Net loss for the year ended June 30, 2024 included $4.4 million of Merger-related non-interest expenses and a $4.2 million provision for credit losses related to the acquisition of Regal Bancorp, which is described in greater detail below, as well as a $5.4 million charitable contribution to establish the Somerset Regal Charitable Foundation. In addition, a $4.4 million loss on the sale of available-for-sale securities was incurred during the fourth quarter of fiscal 2024 as part of the balance sheet restructuring strategy. Excluding the aforementioned one-time expenses, offset by $4.1 million of net accretion income related to fair value adjustments, net income for the year ended June 30, 2024 would have been $1.0 million

Current wording

General. Net income decreased $1.8 million to $3.4 million for the year ended June 30, 2026 from net income of $5.1 million for the year ended June 30, 2025. Net income for the year ended June 30, 2026 included $749,000 of net accretion income related to fair value adjustments resulting from the Merger. Net income for the year ended June 30, 2025 included $1.5 million of gains from life insurance proceeds and $2.8 million of net accretion income related to fair value adjustments.

Previous wording

Interest Income. Interest income increased $5.4 million, or 13.3%, to $46.3 million for the year ended June 30, 2025 from $40.9 million for the year ended June 30, 2024 due to a 15 basis point increase in the yield on interest-earning assets and a $87.9 million increase in the average balance of interest-earning assets. The increase resulted from a $8.1 million, or 24.0%, increase in interest income on loans due to the increased size of the loan portfolio, as well as a higher average yield on the loan portfolio due to an increased proportion of higher-yielding commercial real estate loans. The increase was offset by a $762,000 decrease in interest income on securities and a $1.7 million decrease in interest income from other interest-earning assets due to lower average balances and a lower interest rate environment. The decrease in interest income on securities was due to a $44.2 million decrease in the average balance of securities, resulting primarily from the sale of $35.4 million of lower-yielding securities in the fourth quarter of fiscal year 2024 as part of the balance sheet restructuring, and a two basis point decrease in the average yield on securities due to the lower interest rate environment, which was mitigated by the balance sheet restructuring.

Current wording

***Interest Income.***Interest income increased $3.3 million, or 7.0%, to $49.6 million for the year ended June 30, 2026 from $46.3 million for the year ended June 30, 2025 due to a 24 basis point increase in the yield on interest-earning assets and a $17.6 million increase in the average balance of interest-earning assets. The increase in interest income resulted from a $3.7 million, or 8.9%, increase in interest income on loans due to a $70.2 million increase in the average balance of loans from $771.7 million for the year ended June 30, 2025 to $841.9 million for the year ended June 30, 2026. The increase in interest income was offset by a $410,000 decrease in interest income from interest bearing deposits at other banks primarily due to a $40.2 million decrease in the average balance, offset by a 136 basis point increase in the yield.

Previous wording

Interest Expense. Interest expense increased $5.2 million, or 45.6%, to $16.7 million for the year ended June 30, 2025 from $11.5 million for the year ended June 30, 2024, primarily due to a $4.9 million increase in interest expense on deposits. Interest expense on interest-bearing demand deposits increased due to an increase of $96.4 million in the average balance and an increase of 112 basis points in the cost of interest-bearing deposits to 1.68% for the year ended June 30, 2025 from 0.56% for the year ended June 30, 2024 as the Bank raised rates on certain interest-bearing deposit products in an effort to remain competitive in the market area. Interest expense on certificates of deposit increased $1.0 million due to a $24.9 million increase in the average balance and an increase in the average rate on certificates of deposit of four basis points to 3.83% for the year ended June 30, 2025 from 3.79% for the year ended June 30, 2024 due to the highly competitive interest rate environment in our market area. Interest expense on borrowings increased by $370,000 due to a higher average outstanding balance, offset by a 82 basis point decrease in the rate paid.

Current wording

Interest Expense. Interest expense increased $1.6 million, or 9.6%, to $18.3 million for the year ended June 30, 2026 from $16.7 million for the year ended June 30, 2025, primarily due to a $2.1 million increase in interest expense on interest-bearing demand deposit accounts. Interest expense on interest-bearing demand deposit accounts increased due to an increase of $60.2 million in the average balance and an increase of 30 basis points in the average rate to 1.98% for the year ended June 30, 2026 from 1.68% for the year ended June 30, 2025, as the Company raised rates on certain interest-bearing deposits in an effort to remain competitive in the market area. The increase was partially offset by a $994,000 decrease in interest expense from certificates of deposit driven by a 42 basis point decline in the average rate due to the lower interest rate environment, partially offset by a $4.4 million increase in the average balance. Interest expense on borrowings increased $534,000, or 45.3%, due to an increase of $20.7 million in the average balance, offset by a 107 basis point decrease in the average cost.

Previous wording

Net Interest Income. Net interest income increased $210,000, or 0.7%, to $29.6 million for the year ended June 30, 2025 from $29.4 million for the year ended June 30, 2024. Net interest rate spread decreased 38 basis points to 2.35% for the year ended June 30, 2025 from 2.73% for the year ended June 30, 2024. Net interest margin decreased 26 basis points to 2.93% for the year ended June 30, 2025 from 3.19% for the year ended June 30, 2024. Net interest-earning assets increased $14.9 million, or 6.0%, to $262.1 million for the year ended June 30, 2025 from $247.2 million for the year ended June 30, 2024. The decreases in net interest rate spread and net interest margin were primarily a result of the cost of interest-bearing liabilities increasing at a higher rate than the yield on interest-earning assets.

Current wording

***Net Interest Income.***Net interest income increased $1.6 million, or 5.6%, to $31.2 million for the year ended June 30, 2026 from $29.6 million for the year ended June 30, 2025. Net interest rate spread increased 22 basis points to 2.57% for the year ended June 30, 2026 from 2.35% for the year ended June 30, 2025. Net interest margin increased 11 basis points to 3.04% for the year ended June 30, 2026 from 2.93% for the year ended June 30, 2025. Net interest-earning assets decreased $46.9 million, or 17.9%, to $215.2 million for the year ended June 30, 2026 from $262.1 million for the year ended June 30, 2025. The increase in the Company’s net interest rate spread and net interest margin were primarily a result of the yield on interest-earning assets increasing at a faster rate than the cost of interest-bearing liabilities.

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

Previous wording

Based on our evaluation of the above factors, we recorded a provision for credit losses of $133,000 for the year ended June 30, 2025 compared to a provision for credit losses of $4.1 million for the year ended June 30, 2024, which was related to the Merger. The provision of $133,000 was due to provisions of $288,000 reflecting loan growth, offset by a recovery of $155,000 recorded during in the first quarter resulting from updates made to model assumptions in the calculation of the allowance for credit losses. The Bank had no charge-offs during the years ended June 30, 2025 and 2024 and no non-performing loans at June 30, 2025 compared to $50,000 of non-performing loans at June 30, 2024. The allowance for credit losses as a percentage of total loans was 0.67% at June 30, 2025 compared to 0.71% at June 30, 2024.

Current wording

The Company recorded a provision for credit losses of $575,000 for the year ended June 30, 2026 reflecting the loan growth during the period, compared to a provision for credit losses of $133,000 for the year ended June 30, 2025. The provision of $133,000 included a recovery of $155,000 recorded during the first quarter of 2025, resulting from updates made to model assumptions in the calculation of the Company's allowance for credit losses, offset by provisions of $288,000 recorded during the remainder of the 2025 fiscal year reflecting loan growth, which included an adjustment of $157,000 due to a revised calculation of the quantitative loss factor based on updated information related to historical loss factors of both Somerset Savings Bank, SLA and Regal Bank. The Company had no charge-offs during the years ended June 30, 2026 and 2025 and no non-performing loans at June 30, 2026 or June 30, 2025. The Company’s allowance for credit losses as a percentage of total loans was 0.65% at June 30, 2026 compared to 0.67% at June 30, 2025.

Previous wording

Income Tax Expense. The provision for income taxes was $991,000 for the year ended June 30, 2025, compared to a benefit of $909,000 for the year ended June 30, 2024. The Company's effective tax rate was 16.2% for the year ended June 30, 2025 compared to 7.7% for the year ended June 30, 2024.

Current wording

Income Tax Expense. The provision for income taxes was $1.0 million for the year ended June 30, 2026 compared to $991,000 for the year ended June 30, 2025. The Company’s effective tax rate was 23.8% for the year ended June 30, 2026 compared to 16.2% for the year ended June 30, 2025. The lower effective tax rate in 2025 was attributable to $1.5 million of tax-exempt income from life insurance proceeds.

Previous wording

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

Current wording

We have sought to manage our interest rate risk to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

Previous wording

The table above indicates that at June 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 18.32% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 10.24% increase in EVE.

Current wording

The table above indicates that at June 30, 2026, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 12.12% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 8.81% increase in EVE.

Previous wording

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

Current wording

The table above indicates that at June 30, 2026, after one year, we would have experienced an 3.15% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 0.81% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.

Previous wording

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

Current wording

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The table above assumes that the composition of our interest sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

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 ALCO/Investment Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At June 30, 2025, this ratio was 6.8%. We believe that we have sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2025.

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 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 15%. At June 30, 2026, this ratio was 7.7%. We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2026.

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 June 30, 2025, cash and cash equivalents totaled $57.8 million.

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 June 30, 2026, cash and cash equivalents totaled $71.5 million.

Previous wording

At June 30, 2025, we had $41.0 million in outstanding loan commitments and $38.0 million of unused lines of credit. Certificates of deposit due within one year of June 30, 2025 totaled $239.1 million, or 28.3%, 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 June 30, 2025. 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 June 30, 2026, we had $30.2 million in outstanding loan commitments and $40.8 million of unused lines of credit. Certificates of deposit due within one year of June 30, 2026 totaled $257.4 million, or 27.8% 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 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 June 30, 2026. 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 year ended June 30, 2025, we originated $97.6 million of loans and purchased $41.2 million. We had no purchases of securities during the years ended June 30, 2025 or June 30, 2024.

Current wording

Our primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the year ended June 30, 2026, we originated $155.1 million of loans and purchased $40.5 million. The Company purchased a $6.0 million fixed-to-floating rate subordinated note at 7.75% per annum for the first five years, which then floats based on a benchmark rate (as defined) for the remaining five years.

Previous wording

Financing activities consist primarily of activity in deposit accounts, borrowings, repurchases of and dividends paid on common stock. Deposits increased $38.9 million, or 4.8%, to $846.0 million at June 30, 2025 from $807.1 million at June 30, 2024. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

Current wording

Financing activities consist primarily of activity in deposit accounts, borrowings, repurchases of and dividends paid on common stock. Deposits increased $80.4 million, or 9.5%, to $926.4 million at June 30, 2026 from $846.0 million at June 30, 2025. 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 wording

We had outstanding borrowings of $30.0 million as of June 30, 2025 and none as of June 30, 2024. We had $70.0 million of additional borrowing capacity at FHLB as of June 30, 2025.

Current wording

We had outstanding borrowings of $65.0 million as of June 30, 2026 and $30.0 million as of June 30, 2025. We had $135.0 million of additional borrowing capacity at FHLB as of June 30, 2026.

Previous wording

We had no outstanding borrowings with the Federal Reserve Bank at June 30, 2025, or June 30, 2024 and did not borrow from the FRB-NY in the year ended June 30, 2025. We had $25.0 million of available borrowing capacity at FRB-NY as of June 30, 2025.

Current wording

We had no outstanding borrowings with the Federal Reserve Bank at June 30, 2026 or June 30, 2025 and did not borrow from the FRB-NY in the year ended June 30, 2026. We had $23.5 million of available borrowing capacity at FRB-NY as of June 30, 2026.