SR Bancorp, Inc. (SRBK) - Q1 2026 (Ended Sept 30, 2025) Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025 (Q1 of fiscal year 2026). SR Bancorp, Inc. is the holding company for Somerset Regal Bank, a New Jersey-chartered community bank operating 14 branches in central and northern New Jersey. The company is classified as a non-accelerated filer and an emerging growth company.
Key Financial Metrics
| Metric | Q1 2026 (Sept 30, 2025) | Q1 2025 (Sept 30, 2024) | Change |
|---|---|---|---|
| Net Income | $693,000 | $1,367,000 | (49.3%) |
| Earnings Per Share (Diluted) | $0.09 | $0.16 | (43.8%) |
| Total Assets | $1.110 billion | $1.037 billion (Avg) | +2.4% (vs prior quarter) |
| Total Loans (Net) | $826.4 million | $770.6 million (Prior Year End) | +3.7% (vs prior quarter) |
| Total Deposits | $869.6 million | $846.0 million (Prior Quarter) | +2.8% |
| Net Interest Income | $7.60 million | $7.59 million | Flat |
| Net Interest Margin (NIM) | 3.05% | 3.21% | -16 bps |
| Allowance for Credit Losses | $5.53 million | $5.08 million | +0.67% of loans |
| Stockholders' Equity | $191.9 million | $193.8 million (Prior Quarter) | -1.0% |
Material Changes vs. Prior Period
- Profitability Decline: Net income dropped nearly 50% year-over-year. This was primarily driven by a significant reduction in accretion income from the 2023 Regal Bank acquisition ($303k in Q1 2026 vs. $1.0M in Q1 2025) and increased noninterest expenses.
- Expense Growth: Noninterest expenses rose 4.0% to $7.1 million. Salaries and employee benefits increased 18.9% due to stock-based compensation awards granted to directors and officers. This was partially offset by a 23.3% decrease in "other expenses" due to lower amortization of acquisition fair value adjustments and branch closure savings.
- Loan Growth: The loan portfolio grew $29.2 million (3.7%) quarter-over-quarter, driven by strong demand in residential mortgages (+$12.5M) and commercial loans (+$16.0M).
- Deposit Mix: Total deposits increased $23.6 million. Interest-bearing deposits grew significantly as the bank raised rates to remain competitive, while noninterest-bearing deposits remained stable at 13.4% of the total.
- Capital Actions: The company repurchased 198,310 shares of common stock for $2.9 million during the quarter, contributing to the decrease in total equity.
Outlook, Risks, and Contingencies
- Interest Rate Risk: The bank remains asset-sensitive. A 200 basis point increase in interest rates is projected to decrease Economic Value of Equity (EVE) by 17.40% and Net Interest Income (NII) by 4.97% in Year 1.
- Credit Quality: Asset quality remains strong with zero non-accrual loans and no charge-offs for the quarter. The allowance for credit losses covers 0.67% of total loans.
- Internal Control Weakness: Management identified a material weakness in internal controls related to the untimely recognition of income from life insurance contracts (BOLI) in the prior fiscal year. A remediation plan involving new reconciliation controls has been implemented.
- Liquidity: The bank maintains a liquidity ratio of 6.7% (liquid assets to deposits), well within the target range of 4-30%. Borrowings from the Federal Home Loan Bank increased to $35.0 million to fund loan growth.
Investor Verification Checklist
- Accretion Run-off: Verify the trajectory of accretion income from the Regal Bank acquisition, as its decline is a primary driver of the current earnings compression.
- Stock-Based Compensation: Review the sustainability of the 18.9% increase in salary/benefit expenses driven by equity awards and its impact on future margins.
- Deposit Cost Trends: Monitor the cost of interest-bearing deposits (currently 2.13%) as the bank competes for funds in a higher-rate environment.
- Remediation Status: Confirm the effectiveness of the new BOLI reconciliation controls in the next quarterly filing to ensure the material weakness is resolved.
- Loan Yield Compression: Track the yield on loans (currently 5.38%) to see if it stabilizes or continues to decline as new loans are originated at lower rates.