8-K: SR Bancorp Reports Q4 2025 Earnings, Net Income Down

SR Bancorp, Inc. announced a decrease in net income for the three and six months ended December 31, 2025, despite growth in assets, loans, and deposits.

Summary

• Net income for the three months ended December 31, 2025, was $834,000, or $0.11 per basic and diluted share, an 18.3% decrease from $1.0 million in the same period of 2024.
• Excluding $202,000 of net accretion income, net income for Q4 2025 would have been $689,000, compared to $452,000 (excluding $791,000 accretion income) in Q4 2024.
• Net income for the six months ended December 31, 2025, was $1.5 million, or $0.20 per basic and diluted share, a 36.1% decrease from $2.4 million in the same period of 2024.
• Excluding $505,000 of net accretion income, net income for the six months ended December 31, 2025, would have been $1.2 million, compared to $1.1 million (excluding $1.8 million accretion income) in the same period of 2024.
• Total assets increased by $58.6 million, or 5.4%, to $1.14 billion at December 31, 2025, from $1.08 billion at June 30, 2025.
• Net loans increased by $38.2 million, or 4.8%, to $835.4 million at December 31, 2025, from $797.2 million at June 30, 2025.
• Total deposits increased by $45.5 million, or 5.4%, to $891.5 million at December 31, 2025, from $846.0 million at June 30, 2025.
• Net interest income increased by $552,000, or 7.6%, to $7.8 million for the three months ended December 31, 2025, from $7.2 million in the prior year.
• The net interest margin increased 18 basis points to 3.06% for the three months ended December 31, 2025.
• Noninterest income decreased by $46,000, or 7.3%, to $581,000 for the three months ended December 31, 2025.
• Noninterest expense increased by $726,000, or 11.2%, to $7.2 million for the three months ended December 31, 2025, primarily due to higher salaries and employee benefits.
• The company repurchased 465,702 shares of common stock at a cost of $7.1 million during the six months ended December 31, 2025.

Sentiment

Score: 4

Explanation: While the company achieved growth in assets, loans, and deposits, and improved its net interest margin, the significant decline in GAAP net income and key profitability ratios (ROA, ROE, efficiency ratio) indicates a challenging period for profitability. The increase in noninterest expense, particularly salaries and benefits, outpaced revenue growth, leading to a negative overall sentiment despite some operational positives.

Positives

• Net interest income increased by 7.6% to $7.8 million for Q4 2025 and 3.7% to $15.4 million for the six months ended December 31, 2025.
• Net interest margin improved by 18 basis points to 3.06% for Q4 2025 and 7 basis points to 3.05% for the six months ended December 31, 2025.
• Total assets grew by 5.4% to $1.14 billion at December 31, 2025.
• Net loans increased by 4.8% to $835.4 million, driven by commercial loan growth of $24.2 million, residential mortgage loan growth of $12.7 million, and consumer loan growth of $1.3 million.
• Total deposits increased by 5.4% to $891.5 million, with the Bank offering competitive rates to attract deposits.
• No charge-offs were recorded for the three or six months ended December 31, 2025 or 2024.
• Allowance for credit losses as a percentage of total loans slightly increased to 0.66% at December 31, 2025, from 0.65% at December 31, 2024.
• Tangible book value per share increased to $19.25 at December 31, 2025, from $18.45 at December 31, 2024.

Negatives

• Net income decreased by 18.3% for Q4 2025 and 36.1% for the six months ended December 31, 2025, compared to the prior year periods.
• Noninterest income decreased by 7.3% for Q4 2025 and 10.4% for the six months ended December 31, 2025, primarily due to lower service charges and fees on deposits and loans.
• Noninterest expense increased by 11.2% for Q4 2025 and 8.7% for the six months ended December 31, 2025, mainly due to higher salaries and employee benefits and stock-based compensation.
• The efficiency ratio worsened to 86.42% for Q4 2025 from 82.75% for Q4 2024, and to 86.67% for the six months ended December 31, 2025, from 81.80% for the same period in 2024.
• Return on average assets decreased to 0.30% for Q4 2025 from 0.39% for Q4 2024, and to 0.28% for the six months ended December 31, 2025, from 0.46% for the same period in 2024.
• Return on average equity decreased to 1.68% for Q4 2025 from 2.16% for Q4 2024, and to 1.57% for the six months ended December 31, 2025, from 2.47% for the same period in 2024.
• Equity decreased by $5.3 million, or 2.8%, to $188.5 million at December 31, 2025, primarily due to the repurchase of 465,702 shares of common stock at a cost of $7.1 million.
• One non-performing loan of $176,000 was reported at December 31, 2025, compared to no non-performing loans at December 31, 2024.

Risks

• Increased competitive pressures in the banking market.
• Changes in the interest rate environment, which could impact net interest margin.
• Inflation and general economic conditions, including potential recessionary conditions.
• Impact of a potential government shutdown on economic activity.
• Fluctuations in real estate market values in the Bank's lending area.
• Changes in the quality of loan and security portfolios, potentially leading to increases in non-performing and classified loans.
• Economic assumptions or changes in methodology that may impact the allowance for credit losses calculation.
• Changes in liquidity, including the size and composition of the deposit portfolio and the percentage of uninsured deposits.
• Availability of low-cost funding sources.
• Monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System.
• The imposition of tariffs or other domestic or international governmental policies and retaliatory responses.
• A failure in or breach of the Company's operational or security systems or infrastructure, including cyber attacks.
• The failure to maintain current technologies.
• Failure to retain or attract employees.
• Legislative, accounting, and regulatory changes that could adversely affect the business.

Future Outlook

The filing contains standard forward-looking statements regarding potential risks such as increased competitive pressures, changes in the interest rate environment, inflation, general economic conditions, and operational risks like cyber attacks. It does not provide specific financial guidance or projections for future periods, stating that actual future results may be materially different from indicated expectations.

Management Comments

• Net income for the three months ended December 31, 2025, was $834,000, or $0.11 per basic and diluted share, compared to $1.0 million for the three months ended December 31, 2024.
• The increase in loans and cash and cash equivalents was funded primarily through increased deposits and an additional $20.0 million of borrowings.
• The increase in net interest rate spread and net interest margin was primarily a result of a decrease in the cost of interest-bearing liabilities while the yield on interest-earning assets increased.
• Salaries and employee benefits expense increased due to annual merit increases and the recognition of stock-based compensation.

Industry Context

The bank operates in a competitive market, actively adjusting deposit rates to remain competitive and attract funding. Strong loan growth across commercial, residential mortgage, and consumer segments indicates robust demand in its service areas. The improvement in net interest margin suggests effective management of interest-earning assets and interest-bearing liabilities in a dynamic rate environment. The closure of a retail branch reflects ongoing efforts to optimize operational efficiency and potentially adapt to evolving customer preferences for banking channels.

Stakeholder Impact

• Shareholders: Experienced lower net income and EPS, decreased return on equity, and a decrease in total equity due to share repurchases, which could negatively impact shareholder value. However, the share repurchase itself could be viewed as a positive for remaining shareholders, and tangible book value per share increased.
• Employees: Benefited from annual merit increases and stock-based compensation, though the closure of a retail branch suggests potential workforce adjustments.
• Customers: Depositors are benefiting from competitive rates offered by the Bank, while borrowers continue to access loans given the reported growth in lending.
• Creditors: The increase in borrowings from the Federal Home Loan Bank of New York indicates reliance on external funding, but the overall asset growth supports the bank's financial position.

Next Steps

• Continue to manage the allowance for credit losses based on evolving economic conditions and loan portfolio quality.
• Monitor and adjust competitive rates on interest-bearing deposit products to manage funding costs and attract deposits.
• Manage noninterest expenses, particularly salaries and employee benefits, to improve the efficiency ratio.
• Continue to fund loan growth through deposits and borrowings.

Key Dates

Recommendation

SR Bancorp demonstrates healthy growth in core banking activities like loans and deposits, and an improved net interest margin. However, the significant decline in GAAP net income and profitability ratios (ROA, ROE, efficiency ratio) is a notable concern. While adjusted net income figures show some improvement, the overall reported earnings trend is negative. The share repurchase program is a positive for capital management, but it also contributed to the decline in total equity. Investors should hold to observe if the company can translate its asset growth and improved net interest margin into stronger bottom-line profitability in future periods, especially as the impact of acquisition-related accretion income diminishes and noninterest expenses stabilize. The emergence of a non-performing loan, though small, warrants monitoring.

Keywords

SR Bancorp, Somerset Regal Bank, SRBK, financial results, earnings, net income, assets, loans, deposits, net interest income, net interest margin, credit losses, noninterest income, noninterest expense, stock-based compensation, share repurchase, banking, regional bank, community bank, financial services