SR BANCORP, INC. ANNOUNCES QUARTERLY FINANCIAL RESULTS
- Net income increased from a net loss of $10.5 million to $1.6 million for the respective quarters, signaling a significant improvement in financial performance.
- The total assets increased by 65.0% to $1.07 billion, and net loans increased by 92.1% to $695.8 million, reflecting substantial growth.
- The completed stock offering and merger, along with the increase in total deposits, contributed to the positive financial results.
- Net interest income increased by 117.6%, reflecting a positive impact on the company's financial performance.
- The provision for credit losses decreased from $4.2 million to $107,000 for the respective quarters, indicating improved credit quality.
- Noninterest expense decreased by 42.2%, contributing to overall cost management and efficiency.
- Interest expense increased by 133.7%, which could impact the company's overall profitability.
- Noninterest income decreased by 28.8%, which may raise concerns about diversification and additional revenue streams.
- The company's tax expense increased from a tax benefit of $1.9 million to a provision of $408,000, impacting the bottom-line financial performance.
Insights
The reported net income of $1.6 million by SR Bancorp, Inc. for Q4 2023 signifies a substantial recovery from a net loss of $10.5 million in the previous quarter. This turnaround is attributed to several factors, including a significant increase in net interest income and a decrease in provisions for credit losses, indicating improved asset quality and earnings stability. The financial performance, especially post-merger, suggests enhanced operational efficiency and potential cost synergies.
From an investor's perspective, the robust growth in total assets, net loans and total deposits, largely due to the acquisition of Regal Bank, demonstrates aggressive expansion and market penetration. However, the associated increase in interest expense due to higher deposit rates in a rising interest rate environment could pressure margins if not offset by corresponding growth in interest-earning assets.
The reported net accretion income related to fair value adjustments is a non-recurring item reflecting the accounting treatment of the merger and should be considered when evaluating the company's core operating performance. The decrease in noninterest income and expense categories also requires attention to understand the underlying operational efficiency and revenue diversification of the bank.
The financial results of SR Bancorp, Inc. post-merger indicate a strategic move to consolidate market position and capitalize on economies of scale. The significant increase in net loans points to an aggressive lending strategy, potentially capturing a larger customer base and market share. This could position the bank favorably in the competitive landscape, especially within the New Jersey market.
However, the banking industry is sensitive to macroeconomic factors such as interest rate changes and economic cycles. The substantial increase in interest expense on deposits reflects the current high-interest rate environment, which could affect consumer behavior and loan demand. Monitoring the bank's loan portfolio quality and its ability to manage interest rate risk will be critical for long-term sustainability.
Furthermore, the contribution to the Somerset Regal Charitable Foundation indicates a commitment to corporate social responsibility, which can enhance the bank's brand image and customer loyalty, although it may not have a direct impact on short-term financial performance.
The completion of the merger and subsequent stock offering by SR Bancorp, Inc. involves complex regulatory compliance and legal considerations. The successful navigation of these processes without significant legal challenges or regulatory issues is a positive indicator of the management's ability to execute strategic initiatives effectively.
The formation of the charitable foundation in connection with the conversion from mutual to stock form of organization may also have favorable tax implications, contributing to a more efficient capital structure. It is essential to ensure ongoing compliance with securities regulations, especially as the bank's common stock is now publicly traded on the Nasdaq Capital Market.
Investors should be aware that future regulatory changes or legal proceedings could impact the bank's operations and financial performance. Therefore, the bank's legal and compliance framework will be an important area to watch as the company continues to grow and operate in the public domain.
The financial information contained in this earnings release as of and for the periods ended December 31, 2023 and September 30, 2023 is for SR Bancorp and Somerset Regal Bank. However, due to the timing of the merger noted below, the income statement only includes 11 days of operations of the combined entity during the period ended September 30, 2023. Financial information as of June 30, 2023 is for Somerset Savings Bank, SLA, on a stand-alone basis.
Completed Stock Offering and Merger
The conversion of Somerset Savings Bank, SLA from the mutual to stock form of organization and related stock offering by the Company was completed on September 19, 2023. SR Bancorp, Inc.'s common stock began trading on the Nasdaq Capital Market under the trading symbol "SRBK" on September 20, 2023.
The Company sold 9,055,172 shares of its common stock at a price of
Promptly following the completion of the conversion and related stock offering, Regal Bancorp, Inc., a
December 31, 2023 Highlights:
- Net income was
$1.6 million $10.5 million $32,000 $1.4 million $605,000 $3.9 million $4.2 million $5.4 million $161,000 $586,000 - Total assets were
$1.07 billion $423.5 million 65.0% from$651.5 million - Net loans were
$695.8 million $333.5 million 92.1% from$362.3 million - Total deposits were
$843.3 million $339.4 million 67.4% from$503.9 million
Comparison of Operating Results for the Three Months Ended December 31, 2023 and September 30, 2023
General. Net income increased
Interest Income. Interest income increased
Interest Expense. Interest expense increased
Net Interest Income. Net interest income increased
Provision for Credit Losses. The Bank establishes provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level it considers necessary to absorb probable credit losses attributable to uncollectible loans that are reasonably estimable at the balance sheet date. In determining the level of the allowance for credit losses, the Bank considers, among other things, past and current loss experience, evaluations of real estate collateral, current economic conditions, amount and type of lending, adverse situations that may affect a borrower's ability to repay a loan and the levels of delinquent, classified and criticized 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. The Bank assesses the allowance for credit losses and make provisions for loan losses on a quarterly basis.
The Bank recorded a provision for credit losses of
Noninterest Income. Noninterest income decreased
Noninterest Expense. Noninterest expense decreased
Income Tax Expense. The provision for income taxes was
Comparison of Financial Condition at December 31, 2023 and June 30, 2023
Assets. Assets increased
Cash and Cash Equivalents. Cash and cash equivalents increased
Securities. Total securities (securities available-for-sale and securities held-to-maturity) decreased
Loans. Loans receivable, net, increased
Goodwill and Intangible Assets. Goodwill and intangible assets were
Deposits. Deposits increased
Borrowings. During the year ended June 30, 2023, the Bank borrowed
Equity. Equity increased
About Somerset Regal Bank
Somerset Regal Bank is a full-service
Forward-Looking Statements
Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions. Forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, inflation, general economic conditions or conditions within the securities markets, our ability to successfully integrate acquired operations and realize the expected level of synergies and cost savings, potential recessionary conditions, real estate market values in the Bank's lending area changes in the quality of our loan and security portfolios, increases in non-performing and classified loans, changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio, monetary and fiscal policies of the
SR Bancorp, Inc. and Subsidiaries | ||||
Consolidated Statements of Financial Condition | ||||
December 31, 2023 (Unaudited) and September 30, 2023 (Unaudited) | ||||
(Dollars in Thousands) | ||||
December 31, | June 30, | |||
2023 | 2023 | |||
(Unaudited) | ||||
Assets | ||||
Cash and due from banks | $ 15,160 | $ 8,657 | ||
Interest-bearing deposits at other banks | 68,737 | 33,792 | ||
Federal funds sold | 6,341 | — | ||
Total cash and cash equivalents | 90,238 | 42,449 | ||
Securities available-for-sale, at fair value | 34,783 | 36,076 | ||
Securities held-to-maturity, at amortized cost | 165,190 | 171,185 | ||
Equity securities, at fair value | 26 | 24 | ||
Loans receivable, net of allowance for credit loss of | 695,751 | 362,252 | ||
Premises and equipment, net | 5,131 | 3,546 | ||
Right-of-use asset | 3,057 | 19 | ||
Restricted equity securities, at cost | 1,274 | 726 | ||
Accrued interest receivable | 2,548 | 1,189 | ||
Bank owned life insurance | 36,594 | 28,714 | ||
Net deferred tax asset | 3,534 | — | ||
Goodwill and intangible assets | 29,032 | — | ||
Other assets | 7,782 | 5,306 | ||
Total assets | $ 1,074,940 | $ 651,486 | ||
Liabilities and Equity | ||||
Liabilities | ||||
Deposits: | ||||
Noninterest-bearing | $ 120,808 | $ 40,687 | ||
Interest-bearing | 722,503 | 463,230 | ||
Total deposits | 843,311 | 503,917 | ||
Borrowings | 20,000 | 20,000 | ||
Advance payments by borrowers for taxes and insurance | 4,161 | 4,313 | ||
Accrued interest payable | 907 | — | ||
Lease liability | 3,137 | 19 | ||
Other liabilities | 4,415 | 1,153 | ||
Total liabilities | 875,931 | 529,402 | ||
Equity | ||||
Common stock, | 95 | — | ||
Additional paid-in capital | 91,449 | — | ||
Retained earnings | 119,202 | 127,099 | ||
Unearned compensation ESOP | (7,226) | — | ||
Accumulated other comprehensive loss | (4,511) | (5,015) | ||
Total stockholders' equity | 199,009 | 122,084 | ||
Total liabilities and stockholders' equity | $ 1,074,940 | $ 651,486 | ||
SR Bancorp, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Income (Loss) | ||||||||
For the Three Months Ended December 31, 2023 (Unaudited) and September 30, 2023 (Unaudited) | ||||||||
(Dollars in Thousands) | ||||||||
Three Months Ended | ||||||||
December 31, 2023 | September 30, 2023 | |||||||
(Unaudited) | ||||||||
Interest Income | ||||||||
Loans, including fees | $ 10,186 | $ 3,755 | ||||||
Securities: | ||||||||
Taxable | 852 | 858 | ||||||
Non-taxable | — | — | ||||||
Federal funds sold | 71 | 10 | ||||||
Interest bearing deposits at other banks | 1,177 | 920 | ||||||
Total interest income | 12,286 | 5,543 | ||||||
Interest Expense | ||||||||
Deposits: | ||||||||
Demand | 335 | 47 | ||||||
Savings and time | 2,692 | 1,111 | ||||||
Borrowings | 240 | 240 | ||||||
Total interest expense | 3,267 | 1,398 | ||||||
Net Interest Income | 9,019 | 4,145 | ||||||
Provision for Credit Losses | 107 | (4,162) | ||||||
Net Interest Income (Expense) After Provision For Credit Losses | 9,126 | (17) | ||||||
Noninterest Income | ||||||||
Service charges and fees | 212 | 171 | ||||||
Increase in cash surrender value of bank owned life insurance | 233 | 175 | ||||||
Fees and service charges on loans | 6 | 5 | ||||||
Unrealized gain (loss) on equity securities | 5 | (3) | ||||||
Realized gain (loss) on sale of securities | 31 | (17) | ||||||
Other | (122) | 182 | ||||||
Total noninterest income | 365 | 513 | ||||||
Noninterest Expense | ||||||||
Salaries and employee benefits | 3,875 | 4,544 | ||||||
Occupancy | 665 | 237 | ||||||
Furniture and equipment | 228 | 161 | ||||||
Data Processing | 634 | 807 | ||||||
Advertising | 72 | 57 | ||||||
FDIC premiums | 145 | 83 | ||||||
Directors fees | 97 | 88 | ||||||
Professional fees | 564 | 854 | ||||||
Insurance | 108 | 116 | ||||||
Telephone, postage and supplies | 97 | 84 | ||||||
Other | 991 | 5,906 | ||||||
Total noninterest expense | 7,476 | 12,937 | ||||||
Income (Loss) Before Income Tax Expense | 2,015 | (12,441) | ||||||
Income Tax Expense (Benefit) | 408 | (1,943) | ||||||
Net Income (Loss) | 1,607 | (10,498) | ||||||
SR Bancorp, Inc. and Subsidiaries | ||||
Selected Ratios | ||||
(Dollars in thousands, except per share data) | ||||
Three Months Ended | ||||
December 31, 2023 | September 30, 2023 | |||
(Unaudited) | ||||
Performance Ratios: (1) | ||||
Return (loss) on average assets (2) | 0.60 % | (5.74) % | ||
Return (loss) on average equity (3) | 3.36 % | (32.39) % | ||
Net interest margin (4) | 3.56 % | 2.41 % | ||
Efficiency ratio (5) | 79.67 % | 277.74 % | ||
Total gross loans to total deposits | 83.12 % | 79.53 % | ||
Asset Quality Ratios: | ||||
Allowance for credit losses on loans as a percentage of total gross loans | 0.74 % | 0.77 % | ||
Allowance for credit losses on loans as a percentage of non-performing loans | 3598.62 % | 3697.92 % | ||
Net (charge-offs) recoveries to average outstanding loans during the period | 0.00 % | 0.00 % | ||
Non-performing loans as a percentage of total gross loans | 0.02 % | 0.02 % | ||
Non-performing assets as a percentage of total assets | 0.01 % | 0.01 % | ||
Other Data: | ||||
Tangible book value per common share (6) | ||||
Tangible common equity to tangible assets | 16.25 % | 15.29 % | ||
(1) Performance ratios for the three month periods ended December 31, 2023 and September 31, 2023 are annualized. | ||||
(2) Represents net income divided by average total assets. | ||||
(3) Represents net income divided by average equity. | ||||
(4) Represents net interest income as a percentage of average interest-earning assets. | ||||
(5) Represents non-interest expense divided by the sum of net interest income and non-interest income. | ||||
(6) Tangible book value per share is calculated based on total stockholders' equity, excluding intangible assets (goodwill and core deposit | ||||
intangibles), divided by total shares outstanding as of the balance sheet date. Goodwill and core deposit intangibles were | ||||
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SOURCE SR Bancorp, Inc.
FAQ
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