SR Bancorp(SRBK) - 2025 Q3 - Quarterly Results

Financial Highlights Quarterly and Nine-Month Financial Results Summary SR Bancorp reported a significant decrease in quarterly net income to $537,000 for Q1 2025 from $1.1 million in Q1 2024, while for the nine months ended March 31, 2025, net income rose sharply to $2.9 million from a net loss of $7.8 million in the prior-year period, primarily due to the absence of significant one-time expenses that impacted 2024 results, alongside growth in total assets, loans, and deposits since June 30, 2024 Net Income and EPS Summary | Period | Net Income | Basic & Diluted EPS | | :--- | :--- | :--- | | Three Months Ended Mar 31, 2025 | $537,000 | $0.06 | | Three Months Ended Mar 31, 2024 | $1.1 million | $0.12 | | Nine Months Ended Mar 31, 2025 | $2.9 million | $0.34 | | Nine Months Ended Mar 31, 2024 | ($7.8 million) | N/A | - Excluding fair value adjustments and one-time merger costs, adjusted net income for Q1 2025 was $124,000, compared to $258,000 for Q1 2024[2] - For the nine-month period, adjusted net income was $1.2 million in 2025, compared to $1.4 million in 2024 after excluding a $5.4 million charitable contribution and $4.1 million in merger costs from the 2024 results[3] Balance Sheet Highlights | Balance Sheet Item | Value at Mar 31, 2025 ($) | Change from Jun 30, 2024 ($) | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $1.07 billion | +$53.1 million | +5.2% | | Net Loans | $780.8 million | +$48.9 million | +6.7% | | Total Deposits | $835.6 million | +$28.5 million | +3.5% | Operating Results Analysis Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024 For the three months ended March 31, 2025, net income decreased by 49.5% to $537,000, driven by a 13.1% decline in net interest income due to margin compression as interest expense growth outpaced the slight decrease in interest income, and the company recorded a provision for credit losses compared to a recovery in the prior year, partially offset by a 6.7% reduction in noninterest expense mainly from the absence of prior-year merger-related costs - Net income fell by $526,000, or 49.5%, from $1.1 million in Q1 2024 to $537,000 in Q1 2025[7] - Net interest income decreased by $1.1 million (13.1%) due to a 58 basis point drop in net interest rate spread and a 49 basis point decrease in net interest margin[10] - Interest expense rose by $919,000 (27.2%), primarily driven by a 106 basis point increase in the cost of interest-bearing demand deposits to remain competitive[9] - The company recorded a $38,000 provision for credit losses, compared to a $142,000 recovery in the prior-year quarter[13] - Noninterest expense decreased by $509,000 (6.7%), largely due to the absence of $242,000 in one-time merger-related deconversion fees paid in Q1 2024 and lower occupancy costs from branch consolidation[15] Comparison of Operating Results for the Nine Months Ended March 31, 2025 and 2024 For the nine months ended March 31, 2025, the company reported net income of $2.9 million, a significant turnaround from a net loss of $7.8 million in the same period last year, primarily driven by a $7.6 million (27.2%) decrease in noninterest expense as the prior-year period included a $5.4 million charitable contribution and $4.1 million in merger-related costs, with net interest income also growing by 2.7% despite net interest margin compression - Net income increased by $10.7 million, from a loss of $7.8 million to a profit of $2.9 million[17] - Noninterest expense decreased by $7.6 million, mainly because the prior year included a $5.4 million charitable contribution and significant one-time merger-related costs[24] - Net interest income increased by $585,000 (2.7%), though the net interest margin decreased by 25 basis points to 2.93% as the cost of liabilities rose faster than asset yields[21] - A recovery for credit losses of $105,000 was recorded, compared to a $3.9 million provision in the prior-year period, reflecting updates to model assumptions[22] - Noninterest income grew by $571,000 (41.0%), driven by higher service charges and fees[23] Financial Condition Analysis Comparison of Financial Condition at March 31, 2025 and June 30, 2024 As of March 31, 2025, total assets grew by 5.2% to $1.07 billion since June 30, 2024, primarily fueled by a 6.7% increase in net loans, which was funded through a 3.5% rise in deposits and $30.0 million in new borrowings from the Federal Home Loan Bank, while total equity decreased by 2.2% to $195.1 million as $7.3 million in stock repurchases more than offset the $2.9 million in net earnings Balance Sheet Comparison | Balance Sheet Item | March 31, 2025 ($) | June 30, 2024 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Total Assets | $1.07 billion | $1.02 billion | +$53.1M | | Net Loans Receivable | $780.8 million | $731.9 million | +$48.9M | | Total Deposits | $835.6 million | $807.1 million | +$28.5M | | Borrowings | $30.0 million | $0 | +$30.0M | | Total Equity | $195.1 million | $199.5 million | -$4.4M | - Loan growth was driven by a $19.2 million net increase in residential mortgage loans and a $28.3 million net increase in total commercial loans[28] - The decrease in equity 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[31] Financial Statements and Ratios Consolidated Statements of Financial Condition This section presents the detailed unaudited balance sheets as of March 31, 2025, and June 30, 2024, providing a snapshot of the company's assets, such as cash, securities, and loans, and its liabilities and equity, including deposits, borrowings, and retained earnings - The detailed Consolidated Statements of Financial Condition are provided, showing total assets of $1.074 billion at March 31, 2025, up from $1.021 billion at June 30, 2024[37] Consolidated Statements of Income This section provides the detailed unaudited income statements for the three and nine-month periods ending March 31, 2025, and 2024, breaking down the components of revenues (interest and noninterest income) and expenses to arrive at the net income or loss for each period - The detailed Consolidated Statements of Income are presented, showing line-item breakdowns for interest income, interest expense, noninterest income, noninterest expense, and taxes for the respective three and nine-month periods[39] Selected Ratios This section provides key performance, asset quality, and other financial ratios, with profitability ratios like Return on Average Assets (0.20%) and Return on Average Equity (1.13%) declining for the three months ended March 31, 2025, compared to the prior year, and the Net Interest Margin compressing to 2.82%, while asset quality remained strong with zero non-performing loans Key Performance Ratios | Performance Ratios (Annualized) | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Return on average assets (ROA) | 0.20% | 0.39% | | Return on average equity (ROE) | 1.13% | 2.12% | | Net interest margin | 2.82% | 3.31% | | Efficiency ratio | 91.41% | 86.19% | - Asset quality ratios show non-performing loans as a percentage of total gross loans was 0.00% at March 31, 2025, an improvement from 0.03% at March 31, 2024[41] - Tangible book value per share increased to $18.29 at March 31, 2025, from $17.95 at March 31, 2024[41][43] Other Information About Somerset Regal Bank Somerset Regal Bank is a full-service commercial bank headquartered in New Jersey, operating 14 branches across six counties, and as of March 31, 2025, the bank held $1.07 billion in total assets, $780.8 million in net loans, and $835.6 million in deposits - The bank operates 14 branches in Essex, Hunterdon, Middlesex, Morris, Somerset, and Union Counties, New Jersey[32] - As of March 31, 2025, the bank had total assets of $1.07 billion and total equity of $195.1 million[32] Forward-Looking Statements This section contains a standard safe harbor disclaimer, cautioning that the report includes forward-looking statements based on current management expectations, and warns that actual results could differ materially due to various risks and uncertainties, such as competitive pressures, interest rate changes, economic conditions, and regulatory changes - This is a legal disclaimer intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[33] - It identifies several risk factors that could cause actual results to differ, including changes in the interest rate environment, inflation, real estate market values, and potential cyber attacks[34]