SR Bancorp, Inc.

What they do

SR Bancorp's primary business is the ownership of Somerset Regal Bank, which offers deposit and loan products to individuals and small businesses in its primary market. The bank funds its lending activities primarily with customer deposits. It operates from 14 full-service branches in Essex, Hunterdon, Hudson, Livingston, Middlesex, Morris, Somerset, and Union counties, New Jersey.

Revenue drivers

• Net interest income — Primary source of pre-tax income; difference between interest earned on loans and investments and interest paid on deposits. For the three months ended June 30, 2026, net interest income was $8.0 million.
• Noninterest income — Secondary source, mostly service charges and fees on deposit accounts and gains in cash surrender value of bank-owned life insurance. Occasionally includes gains from securities sales.
• Loan portfolio — Net loans were $901.2 million at June 30, 2026, up 13.0% from $797.2 million a year earlier; interest income on loans increased 12.8% in the quarter.
• Deposit base — Deposits fund loan growth; total deposits were $926.4 million at June 30, 2026, up 9.5% from $846.0 million at June 30, 2025.

Recent performance

For the quarter ended June 30, 2026, net income was $940,000, or $0.13 per diluted share, down from $2.2 million in the year-ago quarter, which included $1.5 million of life insurance gains. For the full fiscal year ended June 30, 2026, net income was $3.4 million, compared to $5.1 million for fiscal 2025. The loan portfolio grew 13.0% to $901.2 million, funded by an 9.5% increase in deposits and $35.0 million of additional borrowings. Interest income increased 9.8% to $12.9 million in the quarter, while interest expense rose 13.5% to $4.8 million.

Strategy

The company completed a mutual-to-stock conversion and acquired Regal Bancorp in September 2023, expanding into Essex, Morris, and Union counties and gaining commercial lending expertise. The Merger also provided Regal Bank with greater residential lending expertise, creating a combined platform for growth. Management has used deposits and additional borrowings to fund a 13% increase in net loans, indicating a focus on loan portfolio expansion. The company also established an employee stock ownership plan and a charitable foundation as part of the conversion.

Risks

• Interest rate risk — Net interest income is sensitive to interest rate changes; the company raised rates on certain deposit products to remain competitive, which could compress margins.
• Credit risk on loan portfolio — The allowance for credit losses is evaluated quarterly; a significant downturn in the New Jersey market or broader economy could lead to higher provisions and charge-offs.
• Competition for deposits — The bank increased rates on money market accounts to stay competitive, which raises funding costs and could pressure net interest income.
• Integration risk from merger — The acquisition of Regal Bancorp and the mutual-to-stock conversion were completed in 2023; any operational or cultural integration issues could affect performance.

Outlook

Management expects continued growth in the loan portfolio, funded by deposit growth and borrowings, as evidenced by recent balance sheet expansion. The company raised rates on certain deposit products to remain competitive, indicating a focus on retaining deposits while managing funding costs. No specific forward-looking guidance was provided in the excerpts.